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Josh Owens

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“Defective At Its Core”: Trump Scraps The Iran Deal

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Trump has announced that the United States will withdraw from the Iran nuclear deal, calling it “defective at its core”. He has also allegedly vowed to initiate new sanctions, CNN reported, citing an unnamed U.S. official.

“I am announcing today that the United States will withdraw from the Iran nuclear deal,” Trump said. "It is clear to me that we cannot prevent an Iranian nuclear bomb under the decaying and cotton structure of the current agreement," he said. "The Iran deal is defective at its core. If we do nothing we know exactly what will happen."

"The so-called Iran deal was supposed to protect the United States and our allies from the lunacy of an Iranian nuclear bomb, a weapon that will only endanger the survival of the Iranian regime," the President said. "In fact, the deal allowed Iran to continue enriching uranium and over time reach the brink of a nuclear breakout."

As for sanctions, this won’t be an immediate shock because nothing can proceed without detailed guidance from the government for the private sector—and no one even knows what the sanctions will be.

While Trump has a tendency to deliver announcements in black-and-white terms because he believes his voters understand policy only in these terms, a withdrawal from the Iran nuclear deal isn’t as simple as this.

This is exactly why the market shouldn’t take a doom or gloom approach to Trump policy announcements.

We still haven’t heard about whether Trump plans specifically to renew the waiver on oil sanctions from 2012. If he removes that waiver, there will be new sanctions—yes—but everyone would have half a year to prepare. It wouldn’t mean an immediate, significant reduction in Iranian oil. This specific decision must be made by May 12. Related: Cybercrime Is Soaring In Emerging Markets

There are other potential sanctions to consider, as well, and so far, we have only a vague statement by an unnamed official that sanctions will be initiated.

On July 11, the waivers for sanctions renewal on other activities such as insurance, shipping, transportation and finance comes up—and we also don’t know what will happen here.

And a lot can happen in between: Including an Iranian interpretation of all of this as carte blanche to relaunch its nuclear program. Therein lies the biggest danger in Trump’s policy. It largely incentivizes Iran to keep working on its nuclear weapons program.

That is the most horrifying prospect for Europe, which will do whatever it can to keep this deal alive without the U.S. Likewise, Europe could also refuse to honor U.S. sanctions against Iran, though in the past, Brussels hasn’t show much by way of teeth in dealing with Washington.

Iran has already intimated that Europe has a shot at keeping this deal going. On Tuesday, Deputy Speak of Parliament Ali Motahari told Iranian media that “If the Europeans are willing to give us sufficient guarantees, it makes sense for us to stay in the deal.”

By 2:52p.m. EST, the Dow was falling on the news, having lost 86 points.

(Click to enlarge)

Oil prices, which had shown a fair amount of volatility over speculation on the Iran announcement, appear to be heading back upwards on the news.

By Josh Owens for Safehaven.com

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