By Mahmood Khaghani for Trend
The nuclear deal between Iran and P5+1 Group (the United States, Britain, Germany, France, Russia and China), enabling Iran to continue a peaceful nuclear program, has been threatened by the US president-elect Donald Trump in his campaigns. This is while the EU governments continue to take the lead in accessing what many observers regard as one of the most significant and expanding new markets based upon Iran’s unique combination of massive natural and human resources.
In a recent Berlin workshop, organized on the sidelines of the EU-Iran Oil, Gas & Energy Summit, participants were amused by Trump’s statement that the deal “gave back to Iran $150 billion and gave us absolutely nothing -- it will go down in history as one of the worst deals ever negotiated.”
The consensus of the workshop was that the effect of any further US sanction would be minimal and counter-productive for the US.
Indeed, as I write this article, I observe that US legislators are already trying to sabotage the recent agreement by the US to re-equip Iran's fleet of Boeing aircraft. This is ironic when it is considered that earlier this year Trump was heavily critical of Secretary of State Clinton and President Obama for allowing Airbus to enter what he regarded as a US market.
Trump and the oil market
The immediate oil market reaction to the election was a price fall which soon recovered. But there is a broad market consensus that the market is heavily over-supplied and that in the absence of a meaningful production cut by OPEC/non-OPEC the price will fall, probably substantially.
I exchanged views with market observer and commentator Chris Cook, who is a senior research fellow at University College London. He expects that the oil market strategy of the Trump administration – which is focused upon the US domestic physical market – will be very different to that of the Obama administration which was concerned with the financial market in oil.
Mr Cook believes that financial demand for oil was maintained by skilful and opaque manipulation of the global oil market by Obama's Wall Street advisers, and that the Trump administration will have neither the will nor the skill and experience to continue this strategy.
Trump’s foreign policy
The Persian Gulf states are all suffering from low oil prices in a way that Iran is not and see that their massive investments in Hillary Clinton’s campaign have been wasted. They are fearful both of Trump policies for further US energy independence and of any changes to Trump's Iran policy.
Trump has already made clear that the US military umbrella will no longer come cheaply and can be expected to renegotiate historic NATO or US agreements – written and unwritten – with Persian Gulf states generally and Saudi Arabia specifically.
Trump and Iran’s nuclear deal
We are learning more by the day of Trump's policies, and indeed it's fair to say that these are a work in progress at this point two months before he takes office. Walid Phares, one of Trump’s top foreign policy advisers, highlighted that the Trump administration’s foreign policy on Iran is in a state of flux. Speaking to BBC Radio on Thursday, Nov. 10, Phares said the nuclear deal, which Trump has vowed to dismantle, would instead be renegotiated.
As CNN reported:
“Ripping up is maybe a too strong of word, he’s going to take that agreement, it’s been done before in international context, and then review it,” he added. “He will take the agreement, review it, send it to Congress, demand from the Iranians to restore a few issues or change a few issues, and there will be a discussion. It could be a tense discussion...”
What will President Trump mean for Iran?
I asked Chris Cook for his view as to the best way for Iran to deal with the new US president. He told me that his intuition was for over a year that Donald Trump was likely to become US president and that his view was confirmed by the UK referendum Brexit decision in May this year to leave the European Union.
Cook observed that both these major political surprises had the same root cause, which is the concentration of wealth in few hands due to increasing automation and globalization.
A mere 60 individuals now possess as much wealth as over 50 percent of the global population, and the impoverished majority is increasingly unhappy with those they hold responsible.
Firstly, any US president is restricted in what he can achieve: firstly by the US legislature, secondly by a powerful executive branch and thirdly by a central bank (the Federal Reserve Bank) which is ruled not by the interests of the US but by the interests of global finance capital.
Secondly, many commentators are worried about Trump's rationality and his finger on the nuclear button. Chris Cook is further of the opinion that he is not in the least worried because Trump's theatrical performance in the campaign will bear no relationship to his actions in office. Trump is – like President Putin – a pragmatic businessman who is aware that global nuclear war is bad for business, and also understands that no-one undertakes suicide bombing for profit.
Finally, Mr Cook suggested that unlike previous presidents in recent times, president-elect Trump is not motivated by religion, by ideology or even by money. He is a business man and real estate developer motivated by ego and by the need to be seen to win. His approach was outlined in 1987 in his book The Art of the Deal, which is a combination of a business book and his early memoirs.
The Art of the Deal
Cook observed that Trump's approach to business – and hence to negotiation – is the precise opposite of that in Iran. Whereas Iranians are among the toughest negotiators in the world, his experience is that once an agreement is reached it tends to be honoured.
For Trump this is not the case – his companies have defaulted on their obligations (gone bankrupt) no less than five times, and he is notorious for the ruthless way in which he deals with suppliers and other counterparties. Trump trusts no-one and it is unwise for Iran, EU and others to trust him.
Cook pointed out that the 5+1 agreement cannot be negotiated without the agreement of the other parties, which he believes is completely out of the question. This means that any US-Iran deal must be an additional bilateral agreement which is complementary to the JCPOA.
I asked Mr Cook what kind of policies and structure Iran could consider in dealing with president-elect Trump which would firstly meet Trump's business criteria and secondly survive Trump's practice of tearing up agreements in response to future events and adverse market circumstances.
The Art of Winning
Chris Cook's view is that the best way to deal with the US led by Trump is to create economic relations which represent a 'win' for both the US and Iran. This can never be the case for any purchase of equipment or technology from the US which is financed by dollar debt or (as with recent proposed aircraft deals) by leases payable in dollars, since the dollars printed by the US do not represent value, but merely a claim over value manufactured by the US banking system.
Indeed, today's news in relation to US legislator's actions in respect of the proposed Boeing deal confirm Mr Cook's pessimistic view and I asked him what Iran can possibly do to create a win/win outcome.
Mr Cook suggested that the solution lies with a simple swap transaction: Boeing or Airbus would supply aircraft not for dollars or euros but in exchange for a flow of the value of energy. This would be yet another innovative energy swap - essentially Air Transport as a Service – to add to the new wave of swap transactions led by Iran. Here I should point out the recent announcement by the NIGC Managing Director that Turkmen gas supplied (through a private sector initiative) to Iran is being exchanged for a supply of Iranian gas to the Republic of Azerbaijan.
So, if Iran were to propose to the US a swap of the use of US technology and hardware against Iranian energy flow this creates a win/win solution. The key is the issuance by Iran of promises (credits) returnable in payment for Iranian oil, gas or electricity.
Any US company, such as Boeing supplying Iran with technology would know that even if it is illegal to receive Iranian physical energy, or impossible to be paid through the US dollar clearing system, they would nevertheless be able to exchange Iran's energy credits for goods and services from international companies who could themselves use these energy credits to pay for Iranian energy supply.
Energy Diplomacy equals Energy Cooperation
Chris Cook believes that the UK’s Brexit vote and Trump’s accession destroy the old ideological certainties of Left (Public) and Right (Private). He says that while constructive engagement with the US and the EU is possible, it cannot take place within the failed commodity and financial market paradigm which have led to this global economic and political turning point – indeed have led to Brexit and Trump – but requires simple new additional agreements.
At the recent Oil, Gas & Energy Berlin Summit in my presentation in association with Chris Cook, we offered a window of opportunity that has opened for a new services market paradigm based upon energy cooperation and the principle of resource resilience – that is to say that for any given use of energy as a service – transport, heat/cooling, or power the use of finite resources such as oil, gas and water will be minimized.
This approach of course is not an alternative to the existing dollar economy, but it is complementary to it and enables the kind of mutually beneficial (win/win) relations, which are necessary for Iran in its new policy to engage safely with Trump.
In my experience of international negotiations, the true Art of the Deal is that no agreement is sustainable which has been imposed by one side on the other. Moreover, I confidently expect that in the same way that only the Republican President Richard Nixon could travel to China to transform the US relationship with China, so it is that a historic invitation to President Trump from Iran to negotiate a new US-Iran deal would be irresistible to his ambitions for a historic Trump presidency.
Mahmood Khaghani, now retired, has over 33 years of work experience at senior international positions of Iran's petroleum industry, including as the head of the Oil Ministry's Caspian Sea and Central Asia Department, as well as business development and joint ventures advisor of Iran's North Drilling Company. He was also the director for energy, minerals and environment at the ECO Secretariat in 1996-2000.