Earlier this week, U.S. President Donald Trump declared the country’s withdrawal from the Iran nuclear deal.
This untied former president Barack Obama’s signature foreign policy and further isolated the U.S.
Trump Hated the Deal
This is only the latest among the many efforts Trump has made to systematically unravel accomplishments of the previous administration. The withdrawal from the Iran nuclear deal was a step Trump had long wanted to make. It has now taken the United States yet another step into isolation from its Western allies. Moreover, it has established an environment of uncertainty immediately ahead of a precarious nuclear negotiation with North Korea.
The agreement had been in place since 2015 and involved seven countries. It took over two years of arduous negotiations to come to the deal. Now, the U.S. is exiting that agreement in favor of the strict sanctions that had been in place before the deal. Moreover, additional penalties are also being considered.
Iran to Stick to the Agreement
Iran has stated that it will continue to comply with the agreement which had imposed tight restrictions to the country’s nuclear ambitions for at least a decade in exchange for the removal of economically crippling sanctions.
Iranian President Hassan Rouhani declared the country’s intention to continue abiding by the deal’s terms. He rebuked Trump for his trend of failing to uphold international treaties.
Other participants in the deal, China and Russia, are expected to take Iran’s side in accusing the United States of being in violation of their side of the agreement.
As a result, Trump’s decision may bolster Iranian hard-line forces, boosting the risk of retaliation from that country against the United States or Israel. There has already been speculation regarding a potential Middle Eastern arms race. It may also add fuel to the fires of conflicts such as those in Yemen and Syria.
Saudi Arabia and Israel both voiced strong support for Trump’s decision. Israeli Prime Minister Benjamin Netanyahu applauded the American president for a “historic move” and for his “courageous leadership.”
Trans-Atlantic Clash Possible
France, Germany and Great Britain have also all stated their intentions to remain within the deal. This suggests that European companies may face American sanctions if they continue to do business with Iran.
European leaders were quick to voice their strong opposition to Trump’s decision to withdraw the United States from the Iranian nuclear agreement. A number of them had been fervently lobbying for Trump to change his mind and cease his intentions to pull out of the deal. France, the United Kingdom and Germany were among the most outspoken in their opposition to American withdrawal. They worked hard to find potential options that would satisfy Trump enough to keep him on board.
French President Emmanuel Macron, German Chancellor Angela Merkel and British Prime Minister Theresa May released a joint statement underscoring that the United Nations Security Council resolution which endorsed the Iran nuclear agreement was the “binding international legal framework for the resolution of the dispute.” This statement suggests that the United States may find itself in violation in the Security Council.
Even former president Obama made a rare public criticism of Trump’s withdrawal from the deal. Obama’s statement said that this move would make the world less safe, adding “a losing choice between a nuclear-armed Iran or another war in the Middle East.”
That said, Trump patted himself on the back for fulfilling this central promise from his presidential election campaign. He had been direct about his intentions from the start. He wanted to eliminate an agreement that he felt was critically flawed and become the dealmaker instead. He forecasts that this will only give him a stronger position when he meets Kim Jong Un, North Korea’s leader. There, he will negotiate North Korea’s surrender of its nuclear arsenal.
“This was a horrible one-sided deal that should have never, ever been made,” said Trump in the White House’s Diplomatic Reception Room, in which he made an eleven minute address. “It didn’t bring calm, it didn’t bring peace, and it never will.”
Trump’s aides had previously convinced him to leave the Iran nuclear deal in place. However, this time, the president made it clear that he had lost his patience with the agreement. As both the Secretary of State and the National Security Advisor had been replaced since the last time Trump was dissuaded from dismantling the deal, the ecosystem had greatly changed.
This time, Mike Pompeo is Secretary of State and John R. Bolton is National Security Advisor. They presented the president with considerably less resistance than former Secretary of State Rex Tillerson – whom Trump dismissed on March 13, 2018 – and H.R. McMaster – whom Trump dismissed on April 9, 2018.
Stock Prices Fall
Companies have been monitoring the impact of Trump’s decision. Certain major companies have already watched their stock prices tumbling due to the impact of their Iranian affiliation. Among those to feel immediate struggles were Airbus and Airbus, which stand to lose billions. Boeing’s $9.5 billion contract with Iran is now on indefinite hold.
Wall Street stocks, on the whole, were down as energy stocks managed to cut earlier losses. The S&P energy sector was able to skim off some of its previous losses as oil prices also declined at a lower rate.
The increased risk of a conflict in the Middle East as a result of Trump’s decision is causing tensions between the United States and its European allies. Moreover, it is also disrupting worldwide oil supplies. That said, Trump still says he is willing to work with Iran to negotiate a new deal.
While investors aren’t entirely surprised at Trump’s move, raised global uncertainty has been left behind. After Trump’s initial announcement, major stock indexes started recovering from their initial drop. However, once Trump made his speech, they fell once again to their prior levels.
There is some hope that a new deal will be established, but whether or not that will be accomplished and what that deal will entail is leaving the entire situation open to speculation. As a risk that cannot be measured, the uncertainty sends stock prices downward.
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