Trump's US-Iran Deal Talks: A Rollercoaster of Threats and Promises

What we know

President Donald Trump has declared that the United States and Iran are on the verge of a peace agreement, causing oil prices to drop and stock markets to rise. This announcement came just hours after Trump warned that Iran was about to be struck “VERY HARD,” a threat that had sent oil prices up and stocks down. The rapid shift has been described as another ride on the “Trump rollercoaster,” keeping traders on edge and affecting global markets.

This marks the 39th time Trump has declared US-Iranian talks to be on the point of fruition, though other counts put the figure higher depending on what is considered a prediction. On five of those occasions, the promise of peace has involved walking back threats of mass devastation, including the destruction of critical civilian infrastructure, which would be a near-certain war crime if carried out.

The situation

On Thursday night, Trump menaced Iran with “very hard” strikes and also pledged the US would take over “total control” of the country’s oil and gas markets and seize the island of Kharg, a focal point of Iran’s hydrocarbon industry. He has threatened the capture of Kharg several times before, but this instance occurred while actually bombing Iran in a tit-for-tat exchange that badly damaged a critical reservoir and water tanks in the drought-stricken south—a war crime if intentional.

By Thursday afternoon, the prospect of mass destruction had evaporated. Trump announced on his Truth Social platform that he had “cancelled the scheduled strikes and bombings against Iran this evening.” The air of optimism was reinforced on Friday by a White House briefing that a text was in place which both the US and Iran could live with, and US officials predicted a signing ceremony could be held in a matter of days.

Key details

Iran’s foreign ministry was less definite, saying the proposed agreement was being studied by the country’s “decision-making bodies.” Nonetheless, the oil price fell below $90 a barrel. The talks are focused on a limited memorandum of understanding (MoU) that would put off nuclear negotiations for later and focus on opening the Strait of Hormuz, a vital route for global trade.

The most immediate impasse has been about cash. Tehran has no confidence Trump would keep his word in any deal, so it wants to be paid up front from a $24bn tranche of an estimated $100bn of its assets frozen around the world, in return for lifting its blockade on the Strait of Hormuz. The US wants rewards to follow tangible progress, but the administration has a fundamental problem with releasing Iranian assets, as Trump and other top Republicans have spent years lambasting Barack Obama for providing unfrozen assets to Iran as part of a 2015 nuclear deal.

Public impact

The constant whiplash between fear and hope keeps traders on edge, making most of the world poorer and affecting people across the Middle East. Markets react obediently to Trump’s rhetoric, with a recent BBC investigation finding that multimillion-dollar trades have been made just before major administration announcements, particularly involving oil futures. Economist Justin Wolfers suggests a “known liar problem”: markets know Trump is an unreliable narrator and heavily discount his statements, but the economic implications of war or peace in the Gulf are so enormous that even a discounted reaction still moves the dial.

What comes next in the case

The workaround being discussed, according to a source briefed on the talks, involves a line of credit from a bank in a Gulf state issued against Iran’s $100bn of frozen assets as collateral. The second major sticking point is how much detail about nuclear issues should be included in the MoU. The US wants concrete parameters including a moratorium on uranium enrichment of 15 years or so, and arrangements for the disposal of Iran’s stockpile of highly enriched uranium. However, when Iranians have briefed diplomats and experts lately, they have said such matters have hardly been mentioned and are pressing for only vague references to nuclear issues.

Source: The Guardian.