The Iran Deal Is a Tragic Failure
* While the price of oil is retreating, the stock futures’ Pavlovian reaction to the deal makes little sense to me
* I am adding to my short book based on the outsized response to a terrible (framework of a) deal…
The Iranian deal, as announced, is a tragic failure and shows how badly out-negotiated the U.S was.
The major U.S. asset in the negotiations was the blockade yet amazingly it was the first concession the U.S. made. This destroys our negotiating position as Tehran knows that once the blockade ends and the ships routed away, it is highly unlikely that it will ever be reconstituted. In contrast, Iran can reinstate a blockade of Hormuz at any time it wishes and the issue of control and fees was not even conceded by Iran. At a time when the U.S. initially said benefits to Iran would be based on performance, the reverse has occurred. It is the U.S. which must act first. The Iranians demanded the end of the blockade before allowing free passage.
With all the focus on Iran’s nuclear program, it is totally absent in this agreement, no commitments regarding removing the enriched material, no dismantling the enriching infrastructure, no inspections—all to rediscussed later.
There is nothing regarding curtailing extensive missile production.
There are no commitments for Iran to stop supporting resistance groups like Hezbollah and the Houthis. Indeed, Lebanon was included in the plans for cessation of military activity which, in essence, confirms Iran’s commitment to Hezbollah. This restricts Israel’s ability to defend itself and creates enormous pressures for Netanyahu.
This agreement hands the Revolutionary Guards a great victory and cements their governance in Iran. The Iranian people, who we claimed to stand by, have been abandoned. Regime change is gone.
The 60-day negotiating period is meaningless as it can be extended and likely will be. Iran knows that President Trump’s desperate to stop the war despite his bluster and knows he will not take any military action before the midterms. Thus, the big issues, which were the basis of the original strike, will likely go unresolved for a very long time and many never be resolved as Iran loves to play the long game.
The coexistence of this terrible agreement with the spectacle of a cage fight on the White House lawn is hard to take — but the markets apparently feel different and are rejoicing.
I am fading that response by adding to my short book.
Position: None
