(RNN) – As promised, President Donald Trump ended U.S. involvement in the Iran nuclear deal.
The agreement, officially called the Joint Comprehensive Plan of Action, put extensive limits on Middle East country's nuclear program in exchange for the lifting of crippling economic sanctions, primarily the oil and banking sectors.
The White House promises to reimpose the sanctions soon. The potential fallout from the exit is wide-ranging.
Here’s what could happen:
Oil prices
It’s no secret that oil prices have been on the rise lately. The U.S. decision to pull out of the Iranian deal won’t help.
Iran increased oil production 1 million barrels per day after sanctions were lifted in 2016. At least some of that oil will likely be pulled from the market.
"Withdrawing from the Iran nuclear deal will support higher oil prices," Canary CEO Dan Eberhart told CNNMoney. Canary is an oilfield services company.
Even before the president’s announcement, oil prices were already up more than 10 percent over the last month and more than 50 percent for the year.
Production cuts by OPEC and Russia, along with instability in Venezuela, are the reason. Should Iranian oil go off the market, things will only get tighter.
Still, there’s no reason to lose hope. Saudi Arabia has already indicated it’s "committed to supporting the stability of oil markets."
Oil markets are volatile. A relative shortfall in oil now could turn into a surplus with lower prices six months from now if production comes back online.
Economy
The impact of higher oil and gas prices will ripple throughout the world.
If companies and people are spending more for fuel, they have less to spend on other things.
U.S. sanctions will directly hurt companies like Boeing and Airbus. Both aircraft manufacturers had big deals to sell planes to Iranian airlines.
Airbus is based in Europe but has a plant in Alabama.
More than 200 jets were a part of the deals.
Iran’s economy may take the biggest hit as sanctions take hold again.
The nation’s economy has grown since sanctions were lifted in early 2016, but the recovery has been fragile.
Still, the governor of Iran’s central bank, Valiollah Seif, said the renewed sanctions aren’t a big deal.
“The US decision … will have no significant effect on our economy,” he said, according to the semi-official Mehr news agency.
But Iran’s currency has been sliding on world markets, making the cost of imports more expensive for Iranians. Sanctions won’t help.
The nation’s uncertain business climate will hurt investment, even if U.S. allies continue to do business with Tehran.
Allies
There’s no doubt that American allies in the Iran nuclear deal are disappointed with Trump’s decision.
In a joint statement, they urged Iran “to show restraint in response to the decision by the U.S.”
“France, Germany, and the UK regret the U.S. decision to leave the JCPOA,” said France President Emmanuel Macron on Twitter. “The nuclear non-proliferation regime is at stake.”
Macron had pleaded with Trump to remain in the deal.
France, Germany, and the UK regret the U.S. decision to leave the JCPOA. The nuclear non-proliferation regime is at stake.
— Emmanuel Macron (@EmmanuelMacron) May 8, 2018
China and Russia were also a part of the deal. Either could decide to take advantage of Washington’s absence in Iran.
Thank you President Trump for your bold decision and your commitment to prevent Iran from ever getting nuclear weapons. @realDonaldTrump pic.twitter.com/F8lldwqhID
— Benjamin Netanyahu (@netanyahu) May 8, 2018
Nuclear weapons
Iran President Hassan Rouhani said they will remain in the nuclear deal, for now. He said they will negotiate with the remaining countries in the agreement on how to movement forward.
But he put a time limit of “a few weeks” on those negotiations. Otherwise, Iran appears ready to get back into the uranium enrichment business.
“I have directed the Atomic Energy Agency to prepare for the next steps, if necessary, to begin our own industrial enrichment without restriction,” Rouhani said.
The Iran deal capped enrichment at about 4 percent. A 90 percent level is needed for a nuclear weapon.
Under the terms of the nuclear deal, Iran had to agree to reduce its stockpiles of uranium. It also pledged never to “seek, develop or acquire any nuclear weapons.”
It also allowed more intrusive inspections by international inspectors to help better determine if any efforts were underway to build a bomb.
Saudi Arabia has already said that it will build a bomb if Iran restarts its nuclear program. That could spark an arms race across the region.
Copyright 2018 Raycom News Network. All rights reserved.
