š¤ The Iran-US Nuclear Deal Explained
Finally, we have an international development that is helping calm down oil prices.
Oil is the blood of the world economy.Ā
It is so important that just by looking at oil prices you can understand whether or not there is a conflict going on in the world. It is the mercury that measures the severity of international issues.
Look at the current scenario: Oil breached the $100/barrel mark yesterday thanks to the Russia-Ukraine crisis and other international issues.
But it is down 2% on reports that the US and Iran may strike a nuclear deal again.
What's this deal that has cooled off oil which has been going hot and high for the last few months?
International Relations 101
Back in 2015, the US, the UK, France, China, Russia and Germany all came together for a super important purpose: to stop Iran from becoming a nuclear superpower.
These countries had already issued sanctions to stop Iran's nuclear development but that didn't work. So, they decided to go the compromise route. And the Joint Comprehensive Plan of Action was born.
Under this plan, the world powers told Iran they would remove the trade sanctions placed on it. In turn, Iran would have to slow down nuclear development.
Iran agreed as its economy had suffered majorly. A lot of its trade had stopped thanks to the sanctions and its financial assets had also been frozen. The deal would immediately free $100 billion in funds stuck in other countries.
So, everyone was happy. But of course, there's a twist, or we wouldn't be writing this story.
In 2016, the US elected a new President: Donald Trump. He backed out of the Iran nuclear agreement.
Why?Ā
He thought the deal gave Iran too much leeway and didn't curtail its missile programme. He thought he could negotiate a better deal.
Before that could happen, he was out of office. And President Biden entered the scene.Ā
Biden was the Vice President of the US when the deal was first struck with Iran, so many hoped that he would renegotiate the deal.Ā
And Biden had several reasons to do so.
Deal or No Deal?
For starters, Iran was mad that the US had backed out of the deal. What's worse, the US had imposed all the old restrictions and added new ones. The other countries participating in the deal couldn't do much to counter these sanctions.Ā
So, once again, Iran was a pariah no one could trade with.
And it decided that if it was going to be a pariah, it might as well be a powerful pariah with nuclear weapons.
So, it restarted its nuclear programme.
In fact, its nuclear programme is going so well that many fear if a deal is not struck soon Iran may refuse to cooperate at all. After all, it would then have a nuclear weapon to negotiate much much better terms.
But this is not the only reason Biden is eager to proceed with the deal.
You see, the demand for oil has recovered quickly after Covid. But OPEC countries cannot keep up. So, supply is low and prices are high.
The world needs Iran's oil. The country is sitting on 8.8% of the world's oil reserves that are currently useless for most countries except China.
Huh?
Because of the US' sanctions, Iran's regular customers have stopped importing oil from it.Ā
But China is still importing oil by disguising the shipments.
So, not only is the US not getting its hand on this oil, one of its biggest enemies is.
And with the Russia-Ukraine crisis ongoing, the US needs another oil source.
The deal is the perfect solution for all these problems.
Now, the negotiations regarding the deal have been ongoing for almost a year. In essence, it will be similar to the 2015 deal. But Iran has a lot of new demands thanks to its nuclear advancement.Ā
Nevertheless, it now seems that the deal could be struck soon.
And this is good news for India.Ā
Once Iranian oil is ready for sale again, the global oil supply will rise again and prices will drop. And India will once again be able to source oil from its third-largest supplier.Ā
Plus, India could once again begin to export tools, automobile parts, and machinery to Iran, like it used to.
But the deal is not yet finalised. And if talks fail, we will once again see a rally in oil prices, which will make life difficult for all.
Will Iran and the US strike a deal soon?
Let us know what you think.
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