Trump's Dangerous Desperation

Why Trump is escalating to get an unattainable deal, and how that may blow up energy and credit markets.

There can be no deal between the Americans and Iranians, despite the negotiations. There are several reasons for this:

1. Iran cannot give up its nuclear programme, even though it may agree to dilute its stockpile or even transfer it abroad. For the Americans, and especially for the Israelis, retaining the ability to enrich uranium is unacceptable. The Iranians can agree a ten year freeze on enrichment, but not longer. For the Israelis especially, this is not enough. Moreover, it is not a given that Iran would give up or even dilute its nuclear stockpile. The regime’s survival is at stake, and that requires a nuclear deterrent.

2. Iran will not compromise on its control of Hormuz - this is the only means to recover economically and solidify the regime’s grip. It is also a matter of national pride, and a prelude to further Iranian expansionism. Conversely, the Americans cannot compromise on stopping Iran from collecting fees for passage through Hormuz Strait. The fees act as a sort of imperial tribute. However, Gulf Arab states already pay imperial tribute to the USA in the form of weapons purchases, building up reserves in dollars, and the dollar peg itself. Countries typically pay imperial tribute to one imperial master, not two. If the Gulf states have to pay Iran for their security, there is no reason to pay the Americans as well.