U.S. shakeup could be bad news for Iran

New State De­part­ment hawk helps lower bar­ri­ers to break­ing deal, Joe Chi­d­ley says.

Vancouver Sun - - FP VANCOUVER -

The re­volv­ing door at the Trump White House puts me in mind of some­thing a cer­tain close ob­server of a cer­tain cor­po­rate leader once said about the lat­ter’s man­age­ment style: “He sur­rounds him­self with weak peo­ple, be­cause he thinks it makes him strong.”

It was not a com­pli­ment. Granted, Gary Cohn, Trump’s re­cently de­parted eco­nomic ad­viser, and more re­cently Rex Tiller­son, the be­lea­guered and now for­mer sec­re­tary of state, might not ex­actly be fod­der for any pro­files in com­pe­tence. But at least on cer­tain sub­stan­tive is­sues (trade pro­tec­tion­ism, for Cohn; Iran and Rus­sia and some other things, for Tiller­son), they had the co­jones to dis­agree with the pres­i­dent. Now they have paid the price for in­de­pen­dent thought.

Oth­ers are on the rise. Trade ad­viser Peter Navarro, the het­ero­dox econ­o­mist who favours pro­tec­tion­ism (he calls it fair trade) and thinks value-added taxes are ex­port sub­si­dies, is re­port­edly as­cen­dant now that Cohn is gone. To re­place Tiller­son, the White House has scoured the best-and-the-bright­est to peg Mike Pom­peo, cur­rently CIA di­rec­tor, as the next sec­re­tary of state, even though the for­mer Tea Partier and Kansas politi­cian has lit­tle diplo­matic ex­pe­ri­ence. Never mind — nei­ther did Tiller­son. And Pom­peo fits the job de­scrip­tion in the most im­por­tant way: He agrees with Trump on al­most ev­ery is­sue.

All this in­trigue in the royal court of the White House makes for fas­ci­nat­ing bath­room read­ing, but will it have an im­pact in the real world, in­clud­ing fi­nan­cial mar­kets? Bond yields fell and ma­jor in­dexes sold off, al­beit marginally, af­ter the Tiller­son/ Pom­peo news, which added yet an­other desta­bi­liz­ing el­e­ment to the geopo­lit­i­cal land­scape. How big an el­e­ment re­mains to be seen. At the least, Tiller­son’s de­par­ture re­moves one more bar­rier to Pres­i­dent Trump’s usu­ally ill-ad­vised im­pulses and prej­u­dices.

As for Pom­peo, he might be even more of a for­eign-pol­icy hard­liner than his boss is. Granted, as CIA di­rec­tor, he hasn’t shared Trump’s blind spot on Rus­sia (give him time), but else­where they seem to be in per­fect har­mony. On China, the soonto-be sec­re­tary re­cently said it is as big a threat to U.S. in­ter­ests as Rus­sia is, and on Iran, Pom­peo has con­demned its proxy war with Saudi Ara­bia in Ye­men and its role in sup­port­ing the regime of Bashar As­sad in Syria.

Iran — and specif­i­cally, the Obama-era deal with western pow­ers to cease its nu­clear pro­gram in re­turn for re­lief from eco­nomic sanc­tions — is likely to be the first ma­jor flash­point for the state de­part­ment’s new di­rec­tion. Even though in­ter­na­tional mon­i­tors say Iran is com­ply­ing, Pom­peo has been as crit­i­cal of the agree­ment as Trump. By con­trast, Tiller­son broke with the boss on the deal, at least ac­cord­ing to the boss him­self: “I thought it was ter­ri­ble,” Trump told re­porters Tues­day. “He thought it was OK.”

Now, with an Iran hawk soon to be in­stalled as sec­re­tary of state, the bar­ri­ers to Trump do­ing what he wants on the Iran deal — “ei­ther break it or do some­thing,” as he said Tues­day — are get­ting lower.

Trump’s next chance to scup­per the deal (or at least “do some­thing ”) is in May. Given that he only re­luc­tantly agreed to waive sanc­tions at his last re­view, in Jan­uary, don’t bet on him do­ing it again.

So what hap­pens next? The sim­ple sto­ry­line is that should Trump with­draw, Iran’s re­cently re­vived oil in­dus­try (ex­ports hit a bil­lion bar­rels last year, just two years af­ter in­ter­na­tional sanc­tions were lifted in Jan­uary 2016) would be in jeop­ardy. That would limit global sup­ply and add to in­sta­bil­ity in the Mideast, putting pres­sure on oil prices — which, by the way, rose in the im­me­di­ate wake of the Tiller­son news.

But it might not be that sim­ple. Af­ter all, not just the U.S. and Iran, but also the Euro­pean Union, China, Rus­sia, Ger­many and the United King­dom signed the deal (also known as the Joint Com­pre­hen­sive Plan of Ac­tion). Those coun­tries, by and large, agree with the ex­perts that JCPOA is do­ing what it was sup­posed to do: limit Iran’s nu­clear ca­pa­bil­i­ties. If Trump breaks the deal, pre­sum­ably with Pom­peo’s full sup­port, it could iso­late the U.S. from three al­lies, while ag­gra­vat­ing the chill with Rus­sia and China.

And it might not do much more than that. JCPOA, or some form of it, could sur­vive be­tween Iran and the rest of the in­ter­na­tional com­mu­nity. Even with­out an agree­ment, it might not hurt Iran’s oil pro­duc­tion much. About 60 per cent of Iran’s oil ex­ports go to Asia, with the re­main­der ship­ping to Europe. If the other JCPOA sig­na­to­ries break with the U.S. and don’t re­in­state sanc­tions — some­thing that Trump’s pro­tec­tion­ist rhetoric to­ward them will do noth­ing to pre­vent — he will have a hard time pun­ish­ing Iran eco­nom­i­cally. There will be lit­tle im­pact, at least di­rectly, on global sup­ply or prices.

The fate of the Iran deal, how­ever, is just part of the risk; the wider desta­bi­liz­ing im­pact of a harder and more iso­lated Amer­i­can line on for­eign af­fairs is more dif­fi­cult to gauge. Even with a team of yes-men at his side, Trump might find that tak­ing on the world is a very lonely and dan­ger­ous game.

JONATHAN ERNST/AFP/GETTY IM­AGES

U.S. Sec­re­tary of State Rex Tiller­son leaves the Nige­rian cap­i­tal of Abuja on Mon­day. CIA di­rec­tor Mike Pom­peo, who re­placed Tiller­son on Tues­day, could pave the way to end­ing the Iran deal, which he and U.S. Pres­i­dent Don­ald Trump op­posed, says Joe Chi­d­ley.

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