Thread by @JKempEnergy

SOME INFORMAL reflections on the U.S. decision to end all waivers for Iran sanctions:

UNITED STATES, SAUDI ARABIA and UAE have now gone “all-in” on their campaign of maximum financial pressure on Iran through oil sanctions. Few if any more rungs left on the diplomatic escalation ladder

PRESIDENT TRUMP has staked his personal credibility on Saudi Arabia making up barrels lost to sanctions AND avoiding a sustained increase in oil prices (White House can no longer complain that “OPEC” is driving prices higher)

SAUDI ARABIA has in effect promised the White House it can and will keep prices down in exchange for much tougher sanctions on its regional enemy Iran (subordinating budgetary need for higher prices to diplomatic goal of isolating Iran)

NUCLEAR AGREEMENT between P5+1 (subsequently P4+1) is now dead. The deal promised sanctions relief in exchange for nuclear inspections and controls on possible proliferation activities. End of sanctions relief likely to mean end of inspections and controls soon

WHITE HOUSE has undercut U.K./FR/DE efforts to keep nuclear accord alive. With oil revenues likely to fall to de minimis levels, Iran has no sanctions relief, and no incentive to adhere to inspections. E3 has so far failed to implement practical alternative to keep Iran in deal

IRAN’s likely alternative now is (a) to complain formally about failure of other signatories to adhere to deal and then (b) to scale back or end nuclear inspections

IRAN has no incentive to continue accepting inspections in exchange for diplomatic “goodwill” it cannot turn into concrete support

IRAN’s leaders will think about future nuclear and diplomatic negotiations. Scrapping inspections now preserves their restoration as something to be discussed in future. Not rational to continue them if sanctions are fully restored

KEY PRINCIPLE of international negotiations is you don’t get something (continued inspections) for nothing (no sanctions relief). So no relief, no inspections

WHITE HOUSE may calculate it has full escalation dominance over Iran especially on military side, ensuring inspections continue despite end of sanctions relief. Probably true but fairly risky strategic move

PAST EXPERIENCE suggests EU3 will prioritise U.S. alliance over misgivings about White House strategy (e.g. Iraq war). White House counting on EU3 blustering but doing nothing in practice. EU remains paper tiger in foreign policy

WHITE HOUSE probably also calculates Russia will not risk rapprochement with United States and China will not risk trade deal, so neither likely to defy U.S. sanctions to help Iran

U.S./SAUDI deal marks the de facto end of OPEC.

OPEC has always insisted it doesn’t do politics (e.g. Iran-Iraq war, Gulf war 1)

For a long time, “OPEC” market management has really been Saudi Arabia+UAE+Kuwait

BUT NOW two OPEC members (SA+UAE) are openly cooperating with a non-OPEC member (USA) to reduce production and revenues of two other OPEC members (IR and VE)

If OPEC hadn’t become meaningless before in terms of market management and coordinating policies of members it has now

WHITE HOUSE has undercut Iran’s foreign minister Zarif and president Rouhani who continued to support the nuclear accord, and emboldened hardliners who thought it was worthless, which is likely to push Iran into more hardline position, at least in short term