Iran Nuclear Issue As An Oil Price Mover Has Been Postponed

It looks like the Iran nuclear stand-off as an oil price mover has been pushed out a few weeks. I wrote on Tuesday that the risk of military action against Iran by either the US, Israel, or both is growing, and that such action would cause oil prices to spike.

The Geneva talks concluded yesterday. Iran will admit inspectors from the International Atomic Energy Agency (IAEA) to look at its previously secret enrichment facility near Qom by the middle of this month. While some are pointing to that as major progress, it’s not too impressive when you consider that as a signatory to the Nuclear Nonproliferation Treaty (NPT) Iran was already obligated to allow such inspections.

Nonetheless, to get Iran to merely comply with the terms of the NPT that it signed, the P-5+1 nations (UN Security Council plus Germany) granted Iran the right to transfer low-enriched (about 4%) uranium to a third country for enrichment to the 20% level needed to make medical isotopes. That mixture will be shipped back to Iran for medical usage. Nuclear weapons require 90% enrichment levels, so the idea here is that the third party can guarantee that Iran is not using anything that would enable it to make a nuclear weapon.

Yet, the whole reason we came to this moment of truth is that Iran was not cooperating on inspections. Where’s the guarantee that it will this time? Rather than having solved anything or put down any firm deadlines for progress, the talks appear to have just postponed the day of reckoning.

For countries far from the hot zone around Iran, ignoring the lack of real progress is a luxury that Israel does not share. It has said repeatedly that it can’t survive a nuclear engagement of any kind because of its small size. It can’t bear even a tiny risk of attack by nations that want it to disappear, so it cannot be as patient with Iran’s maneuverings as other members of the UN can be. Thus, we need to see how Israel reacts to the situation. Remember, its decision to strike would cause Iran to disrupt shipping traffic in the Strait of Hormuz, thereby drawing in the US and bringing about the oil price spike previously discussed.

The granting of full IAEA access for inspection was one of Israel’s requirements. That part should make it happy for now. Whether it believes the validity of the results of the inspections for a variety of reasons, such as whether Iran really showed all of its facilities, is another matter.

It all comes down to how Israel reacts. So far, it has said nothing, and that’s worrisome. It might be willing to give diplomacy a chance, but probably not much of one.

This entry was posted in Uncategorized. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Bestselling Financial Author