- Peace!…
- Not so fast…
- Brace yourself for the biggest price drop in 150 years. 150 years? Really? Click here for details
Dear Reader,
Announced a triumphing President Trump last evening — his chest out — his chin triumphantly elevated:
- The Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!…
- This Great Deal will bring Peace and Security to the whole Region. Many presidents have tried to make Peace with Iran, and all have failed before me. The Leaders of the Region have, for the first time, found a President who can help them achieve real Peace.
- With the opening of the Strait upon the signing of the Deal on Friday, for purposes of mine removal, oil will flow on both ends again for the Region, and the World!
Thus heaven is additionally joyful today. All is peace.
Or so it appears.
Israel Nearly Threw a Wrench in the Works
Mr. Netanyahu nearly negated the agreement yesterday by bombarding Hezbollah positions around Beirut… in violation of the agreement.
The Israeli claimed it came in response to Hezbollah aggression against his nation.
Yet President Trump was… toweringly unamused. Thus he informed Axios that:
“I passed this message on to him — that I am very unhappy with the attack in Beirut.”
Iran was evidently planning a retaliatory missile assault upon Israel. Any peace agreement would have subsequently died the death.
My spies inform me that the president offered Iran substantial financial incentives if they harnessed the missiles.
That is, the president bribed the Iranians into non-retaliation. The Iranians evidently agreed to the arrangement.
Of course I cannot confirm the transaction. Yet my spies rarely send me off course.
And so the truce is scheduled to proceed.
It’s All Seashells and Balloons Again
How did the markets digest yesterday’s news?
The answer, as you certainly would expect, is very, very easily.
The price of West Texas Intermediate crude for July delivery tumbled to some $80 the barrel following the announcement.
Dow Jones Industrial Average futures leapt 466 ecstatic points last evening. S&P 500 and Nasdaq Composite futures undertook similar leaps — with Nasdaq Composite futures outleaping both other indexes.
Yet as a somewhat sinister fellow who delights emptying buckets of ice water upon parades… who enjoys illustrating gray edgings where others perceive silver linings… may I issue a note of caution?
The United States and Iran have agreed upon a “memorandum of understanding.”
A memorandum of understanding is not a treaty of peace.
It is rather a sort of window — 60 days in this instance — during which the two nations agree to negotiate friction points, including Iran’s nuclear ambitions.
Have the U.S. and Iran Even Reached a Common Understanding?
Yet have the two nations even attained agreement upon the memorandum of understanding, upon the basis of the truce?
It is far from obvious that they have, no.
The Iranians evidently insist upon their own terms. The Americans evidently insist upon their own.
Reports Fortune:
- Iran circulated competing versions of a proposed interim agreement with the US, even as President Donald Trump stuck to his Sunday timeline to sign a deal.
- All of the competing texts — there were at least three — include similar elements around reopening the vital Strait of Hormuz waterway, giving Iran sanctions relief and opening the door to longer-term negotiations around its nuclear program.
- But they diverge in key respects, making it hard to assess how much of a win the deal will be for either side. A major discrepancy hinged on how much financial relief Iran would get immediately or in the future — a concern for Iran hawks in the US who don’t want Trump to give away too much.
Where the Devil Lives
Where does the devil dwell? The answer is within the details. And in the details of the memorandum of understanding you will find the Old Boy lurking:
- The differing versions have several things in common. The Strait of Hormuz would reopen quickly and Iran would get sanctions relief to sell oil. A deal would start the clock ticking on weeks of negotiations around the future of Iran’s nuclear program.
- But they differ in important ways. A version of the text seen by Bloomberg News suggests the US and “regional partners” create a program for the reconstruction and economic development of Iran with minimum funding of $300 billion, if a final deal is reached.
- Iran’s nuclear program will be the subject of the later talks, according to the draft.
- Reuters, citing an unidentified Iranian official, reported that a draft of the MOU includes the US allowing the release of $25 billion of frozen assets. The version seen by Bloomberg contained no such stipulation.
More Details Which House the Devil
Here the evil one finds additional lodging within the details:
- And on Friday, Iran’s semi-official Mehr news agency said any final negotiations wouldn’t begin until half of Iran’s frozen funds are released, oil sanctions are suspended, and the naval blockade is lifted.
- Reconciling the competing claims was made more difficult by the fact that the Trump administration, while talking about timing of a deal, has so far declined to give many details about what it would look like.
It is true — specific details remain slim. Fortune, in conclusion:
- That reflects the challenge faced by the US president — he is eager to bring the war to an end yet has been unwilling so far to agree to Iranian demands — such as sanctions relief, releasing frozen Iranian funds, and a promise not to attack again — that Iran hawks at home have argued would mark a major victory for Tehran.
A Prediction
I hazard this pending truce will prove but a temporary truce.
It may not, I fear, endure the week — “The Iranians agreed to this, now they say that,” may argue the president this week.
And if the truce does endure the week? Well, additional mines strew its path.
I would be mildly surprised if the truce endures the 60 days — it is shot through with fragility.
What is more, I do not expect Iran to yield upon its nuclear intentions. Thus the two nations… and Israel… will find themselves where they stood on Fed. 27… the day before hostilities commenced.
That is, the previous 100+ days of hostilities have merely returned us to pre-war conditions.
All sides will consecrate the coming months to the restocking of war chests and the redrawing of war plans.
That is because neither side believes it has been defeated, Iran included. And conflicts do not often resolve until one party is so thoroughly trounced it concedes defeat.
Here is my forecast:
Hostilities will resume within 12 months — and possibly within six.
As the phrase has it… you have heard it here first.
Regards,
Brian Maher
for Freedom Financial News
