Unilateralism

It was not surprising that Donald Trump withdrew the US from the multilateral deal with Iran intending to wean away the Islamic State from the development of nuclear weapons. The withdrawal was made despite strong appeals issued by America’s closest allies Britain, France and Germany.

This is not the first time Trump indulges in unilateral action, defying the global community. Among his first act in office was to withdraw from the Trans-Pacific Partnership, a US initiative. He withdrew from the Paris Accord on Climate Change, making the US the only country standing outside the global effort to curb rising temperatures.

Disregarding international commitments, Trump announced he would withdraw US troops deployed in the Syria-Iraq theater. Until saner minds prevailed upon him to go slow on the matter, Trump nearly caused a trade war by suddenly imposing tariffs on steel and aluminum imports. Saner minds also prevailed on the tempestuous American president to rein in the build-up toward military confrontation on the Korean peninsula.

Those saner minds able to knock some sense on Trump are dwindling alarmingly. Many have fallen by the wayside, replaced by their incompetent boss one after the other.

Now comes the Iran deal.

French President Macron and German Premier Merkel have personally met with Trump to make their case on behalf of the deal. The British foreign minister travelled to Washington in a last ditch effort to dissuade Trump from the calamitous course he is taking. All the top-level efforts bore no fruit.

It did not matter that the Iran deal bore the imprimatur of the UN Security Council. Trump seems hell-bent to defy global opinion. He would rather please his backwater political base than just improve on an existing framework to ensure peace in the world’s most volatile region.

Fatal flaw

Trump’s decision on the Iran nuclear deal has one fatal flaw: it offers no alternative plan for continued international engagement to keep Iran from building nuclear weapons.

The reasons Trump offers for his decision are Iran’s continued support to the radical Hezbollah in Lebanon and its military support for the Assad regime in Syria. Neither matter is encompassed by the nuclear deal.

The deal allows international experts to continuously monitor Iran’s nuclear capabilities. It also lifts some of the sanctions imposed on the Islamic state.

Apart from ensuring Iran does not become a nuclear power, the deal has had a profound effect on the country’s domestic politics. In the last elections, moderates led by Hassan Rouhani prevailed over hardline factions. There is a distinct openness in the air, a readiness to institute reforms that will enable Iran to rejoin the global mainstream.

With Trump’s withdrawal, a political backlash could happen within Iran. There now seems greater likelihood for the hardliners to gain the upper hand. Domestic politics in Iran could return to the status quo ante, making the country a rouge state the international community could not influence.

Should the US begin enforcing harsh economic sanctions on Iran, the return to hardline rule becomes almost certain. The continued endorsement of the deal by the UK, France, Germany, Russia and China might not be enough to hold back the bad consequences. A hardline Washington could punish companies seen skirting around US economic sanctions.

The first victim of Trump’s decision appears to be Boeing and Airbus. After sanctions were lifted, Iran began procuring hundreds of civilian aircraft to refurbish its aged fleet. Cancellation of Iran’s orders will harm both Boeing, an American company, and Airbus, which manufactures its aircraft destined for Iran from its American factory.

American withdrawal from the Iran deal is cheered by both Israel and Saudi Arabia. Both countries fear an Iranian nuclear weapons buildup. But they do not seem to realize that without a deal that provides a framework for international monitoring, the likelihood for an Iranian buildup actually increases.

Moscow might also be quietly cheering Trump’s decision even as its articulated foreign policy may run otherwise. Shunned by the US, a closer partnership between Iran and Russia becomes more likely. Both countries are effectively allies in their support for the Assad regime in Syria.

Should the diplomatic breakthrough in the Korean peninsula continue apace, Iran might need an alternative to North Korea as supplier of nuclear technologies. Russia or China may step in. A new axis of global and regional powers then emerges.

In a word, the future becomes a lot murkier after Trump’s unilateral decision on the Iran deal.

Oil

We may not have any leverage on the political outcomes in the Middle East, but we cannot avoid the unhealthy fallout.

Should the US decide to restore economic sanctions in Iran, events there will impact the total supply of oil in the market. Iran holds a fifth of confirmed oil deposits. Its deposits of natural gas are even more significant.

In the hours after he announced his withdrawal from the Iran deal, oil prices dipped in the markets – perhaps indicating relief that the matter is no longer in suspense. But if sanctions prevent Iran from exporting as much oil as it wants to, the tightening global supply will push prices up.

Oil prices have climbed up to well over $75 per barrel, the highest they have been in about four years. The strength of the dollar magnifies that price, especially for those like us who have weakened currencies.

Volatility in the Middle East can only boost oil prices further over the next several months. That is not good news.