23 May 2018   Leave a comment

There are dueling ultimatums between the US and Iran.  US Secretary of State Mike Pompeo issued his list of demands for an agreement between the US and Iran and Iran’s Supreme Leader Ali Khamenei has issued his own set of demands, not to the US, but rather to Europe, as a condition for continued Iranian adherence to the nuclear agreement even without US participation.   Those demands include:

  • European powers should protect Iranian oil sales from the US sanctions and continue buying Iranian crude
  • European banks should safeguard trade with Iran
  • The UK, France and Germany should pledge not to seek negotiations on Iran’s ballistic missile programme and regional activities, both demanded by Washington

The demands put the US and Europe on a collision course.  The Europeans do not wish to alienate the US, but they also know that Russia and China will continue their participation in the agreement even without the US.  So the dilemma is whether Europe should placate the US knowing that their cooperation with the US will change nothing or whether Europe should risk the wrath of the Trump Administration and continue to support the agreement.  As the chart below indicates, Europe does not have significant interests in buying Iranian oil, but Europe is definitely interested in Iran buying European products.

Graph showing Iran's largest customers, November 2017 to April 2018

 

The US has decided to “disinvite” China from joint naval exercises in the Pacific.   The exercise, the biennial “Rim of the Pacific” exercise involves 26 states and China has marginally participated in earlier exercises.  The move comes as the US wants to express its dissatisfaction with the military buildup in the South China Sea by the Chinese.  According to Politico:

“’As an initial response to China’s continued militarization of the South China Sea we have disinvited the PLA Navy from the 2018 Rim of the Pacific,’ Pentagon spokesman Lt. Col. Christopher Logan of the Marine Corps said in a statement.

“The United States, he added, has ‘strong evidence’ China has deployed anti-aircraft and anti-ship missiles and electronic jamming systems on artificial islands in the Spratly Islands chain that Vietnam and Taiwan also claim as their territory. ‘China’s landing of bomber aircraft at Woody Island has also raised tensions.'”

The Chinese expressed anger and disappointment, but I suspect that they do not care very much.

 

One of the founding members of the European Union, Italy, has selected Giuseppe Conte to lead a new government composed of a slim majority of the Euro skeptic Five Star Movement and the anti EU League party.  Conte is relatively unknown and undistinguished and the odd coalition promises virtually nothing in terms of an effective government.  Both parties have a strong anti-German bias which augurs ill for the future of the Union.  We should all keep a close eye on the health of Italian banks–they are not especially strong and could pose a serious risk to the European Central Bank which is forbidden bu EU rules to bail out national banks directly.  The coalition government is likely to spend freely and tax lightly, a bad combination for an economy that is essentially sclerotic.

Giuseppe Conte

 

Posted May 23, 2018 by vferraro1971 in World Politics

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