AGF Management : Joe Biden’s First Crisis? It Could be Iran

Insights and Market Perspectives

Author: 8

January 5, 2021

Joe Biden's First Crisis? It Could be Iran
January 5, 2021
A FULL PLATE: President-elect Biden has no shortage of headaches: the surging Covid virus, a soft economy, and an angry minority of voters who think he lost the election. But Biden's biggest initial crisis could come in the Persian Gulf, where Iran seems eager to provoke a confrontation.

WITH TWO WEEKS LEFT IN THE TRUMP ADMINISTRATION, we don't rule out a U.S. strike on Iran, which has resumed aggressively enriching uranium. Trump and his top advisers have a deep antipathy for Iran's radical ayatollahs, who have funded Hezbollah and sponsored terrorist attacks in the region.

A MAJOR CONCERN is a spark in the Persian Gulf - perhaps a miscalculation - that leads to a wider conflict. Iran seized a South Korean tanker near the Strait of Hormuz yesterday, claiming that the vessel violated environmental standards.

BUT MOST EXPERTS believe the Iranian seizure was an attempt by Tehran to free up $7 billion in revenues that have been frozen in Seoul, where officials want to comply with strict U.S. sanctions that forbid virtually all commerce between American allies and Iran.

EVEN IF THERE'S A DEAL on the the tanker, a bigger issue is Iran's uranium enrichment in its Fordow nuclear facility, buried in the mountains about two hours south of Tehran. The enrichment could lead to the production of a crude nuclear weapon by summer - which is unacceptable, according to Israeli Prime Minister Benjamin Netanyahu.

WITH ISRAEL BROKERING DEALS with Arab countries in the Mideast, seemingly isolating Persian Iran, tensions are on the rise - especially since Israel is widely assumed to be responsible for the assassination of an Iranian nuclear official late last year.

BIDEN REPORTEDLY IS INCLINED to resume nuclear talks with Iran, as his aide Jake Sullivan has stated. But a quick resolution seems very unlikely, as Iranian hard-liners seem unwilling to deal with Biden, just as they were unwilling to deal with Trump.

AN UNEASY STALEMATE is likely in the Persian Gulf, with a persistent threat of more tanker seizures and rising tension between now and Biden's inauguration on Jan. 20. U.S. sanctions won't end quickly - not until there's a clear quid pro quo from the ayatollahs, who seem reluctant to compromise.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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