In light of Donald Trump’s dramatic withdrawal from the Iran Nuclear Deal, Katina Hristova examines how the pullout can affect the global economy.
As with anything that he isn’t fond of, US President Donald Trump hasn’t been hiding his feelings towards the Joint Comprehensive Plan of Action between Iran and the five permanent members of The United Nations Security Council plus Germany. Pulling the US out of the agreement on the nuclear programme of Iran, which was signed during Obama's time in office, is something that Trump has been threatening to do since his 2016 election campaign. And he’s only gone and done it. Earlier this month, he announced America’s immediate withdrawal, saying that the US will reimpose sweeping sanctions on Iran’s oil sector and that “Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States”. And as if this isn’t alarming enough, President Trump has also said that the US will require companies to ‘wind down’ existing contracts with Iran, which currently ranks second in the world in natural gas reserves and fourth in proven crude oil reserve, in either 90 days or 180 days. This would hinder new contracts with Iran, as well as any business operations in the country.
Since Washington’s announcement, signatories of the Iran Nuclear Deal, still committed to the agreement, have embarked on a diplomatic marathon to keep the deal alive. On 25 May, Iran, France, Britain, Germany, China and Russia met in Vienna in a bid to save the agreement.
So how will this hurt the global economy?
Deals worth billions of dollars signed by international companies with Iran are currently hanging by a thread. The main concern on a global scale is that the US’ decision threatens to cut off a proportion of the world’s crude oil supply, which has already resulted in an increase in oil prices, with crude topping $70 a barrel for the first time in four years.
Additionally, European companies like Airbus, Total, Renault and Siemens could face fines if they continue doing business with Iran. Royal Dutch Shell, who is investing in the Iranian energy sector, is potentially one of the biggest companies to be affected by Trump’s withdrawal which could put billions of dollars’ worth of trade in jeopardy. As The Guardian points out: “In December 2016, Royal Dutch Shell signed a provisional agreement to develop the Iranian oil and gas fields in South Azadegan, Yadavaran and Kish. While drilling is still a long way off, sanctions are likely to put any preparations already being made on ice.”
French company Total, who’s involved in developing the South Pars field, the world’s largest gas field in Iran, is in a similar situation.
Airbus and Boeing, two of the key players in the international aviation industry, have signed contracts worth $39 billion to sell aircraft to Iran. As The Guardian reports, the most significant deal is an agreement by IranAir to buy 100 aircraft from Airbus.
A spokesman from Airbus said that jobs would not be affected. “Our [order] backlog stands at more than 7,100 aircraft, this translates into some nine years of production at current rates. We’re carefully analysing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations. This will take some time”. Rolls Royce is also expected to be indirectly affected if Airbus loses its IranAir order, as the company is the key engines provider to many of those aircraft models.
Another European company that will be hurt by the sanctions announcement is French Renault and PSA, who owns Peugeot, Citroën and Vauxhall. When sanctions were lifted back in 2016, Renault signed a joint venture agreement with the Industrial Development & Renovation Organization of Iran (IDRO) and local vehicle importer Parto Negin Naseh, worth $778 million, to make up to 150,000 cars in Iran every year. This is one of the largest non-oil deals in Iran since sanctions on the country were lifted. Last year, local firm Iran Khodro also signed a deal with the trucks division of Mercedes-Benz, with car production scheduled for this year.
Iranian firm HiWEB has been working alongside Vodafone to modernise the country’s internet infrastructure, but it looks like the partnership will have to be reconsidered.
The consequences
The White House and President Trump appear aware of the danger that a rise in oil prices on an international level pose to the economic growth of the Trump era, however, they also seem ready to embrace the economic and geopolitical challenges that are to follow. Although the consequences of US’ Iran Deal pullout are not perfectly clear in the short term, they will undoubtedly become more visible as sanctions take effect. The deal has its flaws, however, completely withdrawing from it and threatening the US’ closest allies can only compound those issues and create new ones. It is hard to predict what will unfold from here and where Trump’s strategy will take us. The one thing that is certain though is that the world doesn’t need more hostility.
Brexit, Trump and the chaos in Catalonia are driving demand for multi-currency accounts – and within 10 years they will be the norm, affirms the boss of one of the world’s largest independent financial advisory organisations.
The comments from Nigel Green, founder and CEO of deVere Group, come as deVere E-Money’s global money app, deVere Vault, which has 27 different currency wallets, reveals that it expects to surpass 40,000 downloads and users by the end of the year.
Mr Green asserts: “We’re living in an increasingly uncertain world. Serious, far-reaching and ongoing geopolitical developments are driving internationally-minded people to concentrate on political risk and currency risk.
“Issues such as the deadlocked Brexit talks and what the post-Brexit era will look like, the unpredictability of the Trump presidency, and the chaos in Catalonia as it potentially moves towards independence from Spain, amongst many other geopolitical factors, present huge and sobering questions marks.
“This uncertainty is resulting in more and more people beginning to look at the possible impact such issues have on their wealth and how they can mitigate this risk. Understandably, this is spiking huge interest in and demand for accounts in which you can hold money in different currencies.”
He continues: “Ever since the major and sustained drop in the pound immediately after the Brexit referendum, people have become more focused that they could have currency risk.
“It was a wake-up call to many across the world; it was a watershed moment.”
The deVere CEO concludes: “Multi-currency accounts will be the norm within 10 years – most people within a decade will have the ability to access, use and manage their money in different currencies - for three main reasons.
“First, people have woken up to the fact that even ‘remote’ political risks can be linked to currency risk.
“Second, each year there are more and more expatriates and internationally-mobile people and businesses.
“Third, holidaymakers are increasingly aware of and unwilling to accept the rip-off charges their traditional banks impose on them for using their own money overseas.”
(Source: deVere group)
Every NATO country contributes to the costs of running the Alliance. By far the biggest contribution comes from Allies’ taking part in NATO-led missions and operations. For example, one country might provide fighter jets, while another provides ships or troops. NATO Allies also pay directly to NATO to cover the costs of NATO staff and buildings, its Command Structure, and its jointly-owned equipment, like its AWACS aircraft.
In recent news Donald Trump praised Saudi Arabia for fighting extremism in the region and said he was the one to make North Atlantic Treaty Organisation (Nato) members spend more on defence.
In addition, cyber-attacks are becoming more common, sophisticated and damaging. Cyber defence is now a top priority for NATO. NATO now recognises cyberspace as an ‘operational domain’ – just like land, sea and air. NATO helps Allies to boost their cyber defences by sharing information about threats, investing in education and training, and through exercises. NATO also has cyber defence experts that can be sent to help Allies under attack.
