The Iran Deal; What Will Trump Do? $XOM $CVX

President Trump is set to make a very important decision regarding the Nuclear deal President Obama and other countries struck with Iran years ago.  Everyone wants to know if you will scrap the deal, oil traders seem to think that is an absolute, but it is not as simple as that.

Trump has vocalized his criticism of the deal, but his criticisms were more related to cash payments that have already been made.  Approximately $1.7 billion was paid to Iran by the United States when the deal was initially struck by president Obama.

There is nothing that President Trump can do about the cash payments that have already been made.

Absolutely, the deal was horrible given that cash payment, but if we put that aside, is the deal currently as bad as his rhetoric has previously portrayed?

The way it currently stands, sanctions are not being imposed on to Iran so long as they do not pursue their nuclear weapons program.  Over time they will be allowed to do this, according to the deal, so that may be a sticking point, but currently they are not.

Furthermore, nothing suggests that they are.  The data collected by Palantir, owned by Peter Thiel (a Trump supporter), which supplies the IAEA with data on Iran’s nuclear actions, does not seem to suggest that Iran is breaking their promises.

Therefore, if Iran is sticking to their end of the bargain it will be very difficult for president Trump to justify scrapping the deal completely.  Almost every other country who participated in the deal wants it to be continued, so this decision has additional ramifications.

Although President Trump has been able to resist political pressures domestically, the collective international pressure to support the continuation of the existing Iran Nuclear agreement is probably the most significant political pressure he has faced.  This time the pressure comes from countries who trade with the United States too, business partners in the mind of Trump if you will, and it is usually a bad idea to upset almost all of your business partners at the same time.  If this deal is scrapped, that is essentially what would happen.

In summary, the worst part of this deal was the cash portion, and there’s nothing we can do about that anymore.  The current deal is not bad unless Iran is pursuing nuclear weapons and breaking the agreement, and the global community largely supports the continuation of this agreement.

The major sticking point, as a result, is the eventual relaxation of the restrictions imposed on to Iran in the future.  Instead of scrapping the deal completely, President Trump is much more likely to replace it with a new one.  That would also give him political clout in the ability to say that he dismantled what he has called a horrible deal from the start.

Instead of scrapping the deal altogether, we expect President Trump to replace the Deal Instead. 

How to play oil?  Sign up for a Free Trial

share_linkedin