President Donald Trump - Photo by White House

JAKARTA (TheInsiderStories) – United State President Donald Trump decision to terminate the participation in the Joint Comprehensive Plan of Action (JCPOA) with Iran and re-imposing sanctions lifted under the deal threatens global community.

This leaves the country with no agreement, and leaves the rest of the world like the United Kingdom, France, Germany, Russia, and China all signed onto the deal.

Furthermore, U.S’s decision also will have a significant impact on Iranian domestic policy cause the country has influence in all the conflict regions in the Middle East, and it could be a beginning of a nuclear arms race again in the region.

Speaking in a televised address to the people on the JCPOA President Hassan Rouhani stressed it that if Iran’s goals are met by other siders, the JCPOA will stand. He said, people must not be worried at all caused according to himn since long ago that Trump cannot be “trusted”.

On Tuesday (08/05), President Trump is terminating U.S participation in the JCPOA, as it failed to protect America’s national security interests. The JCPOA enriched the Iranian regime and enabled its malign behavior, while at best delaying its ability to pursue nuclear weapons and allowing it to preserve nuclear research and development.

The President has directed his Administration to immediately begin the process of re-imposing sanctions related to the JCPOA. The re-imposed sanctions will target critical sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors.

Trump said, U.S withdrawal from the JCPOA will pressure the Iranian regime to alter its course of malign activities and ensure that Iranian bad acts are no longer rewarded.  As a result, both Iran and its regional proxies will be put on notice. As importantly, this step will help ensure global funds stop flowing towards illicit terrorist and nuclear activities.

According to him, The JCPOA failed to deal with the threat of Iran’s missile program and did not include a strong enough mechanism for inspections and verification. Instead of using the money from the JCPOA to support the Iranian people at home, the regime has instead funded a military buildup and continues to fund its terrorist proxies, such as Hizballah and Hamas.

Iran violated the laws and regulations of European countries to counterfeit the currency of its neighbor, Yemen, to support the Islamic Revolutionary Guard Corps (IRGC) Quds Force’s destabilizing activities.

The Impact for Global Economy

Followed the decision, Trump administration has gave 90 to 180 days to wind down existing contracts for the companies has receive U.S Treasury licenses to begin conducting business in Iran under strict oversight after sanctions were lifted in the 2015 accord.

Among the companies two aerospace giants Boeing and Airbus, General Electric also its alleys European countries and Japan. As an example, Boeing agreed to sell planes at a price of almost US$20 billion to Iran.

We assume that the regulatory uncertainty could cause some importers of Iranian oil to cut shipments immediately. Iran’s share of global oil output is less than 5 percent and any sizable cut in Iranian oil production could exacerbate what has been a tightening global oil supply.

World crude oil prices traded more expensive on Wednesday morning after Trump resigned from a nuclear deal with allies and Iran. Brent oil futures climbed to $76.21 a barrel, up 1.8 percent from a year earlier while the price of West Texas Intermediate oil futures in the multi-million dollar market rose 1.7 percent to $70.24 per barrel. It was close to the highest level in four years.

Iran is again one of the world’s biggest oil exporters by 2016, the U.S and its allied allies lift economic sanctions in exchange for restrictions on Iran’s nuclear program. With exports reaching 2.6 million barrels per day to Asia and Europe, as of April, Iran became the third oil exporter among the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia and Iraq.

ANZ bank rate, with the new sanction Trump, the market will experience tightening the supply of oil significantly starting the second semester until the end of the year. Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo added, there were concerns that Iran’s exports would drop by 1 million barrels per day compared to its current position.

“This could lead to a decline in global oil supplies, which could be at least $10 a barrel, with Brent prices close to $90,” he said.

Global oil prices are one of the factors taken into account while formulating the Indonesian Crude Oil Price (ICP). As is known, the assumption of the price of ICP in the State Budget 2018 is set at $48 per barrel.

The government has just run the State Budget for Year 2018 for about two weeks. However, some macroeconomic indicators are already moving high from what is set, one of which is the world’s crude oil prices.
The current price of CPI has surpassed government estimates. In the 2018 State Budget, the Indonesian government set its oil price assumption at $48 per barrel. With that budget assumption, the risk is clearly towards a higher subsidy bill if there is resistance to altering retail prices ahead of key elections.
Taken together with increasing tensions on trade, with large tariffs possibly coming against China, there is growing wariness among some investors. Analysts expect that will be reflected in commodities and financial markets. For us, were going to have a lot of volatility in the market and its going to be a roller coaster in coming months.
Indonesia’s Finance Minister Sri Mulyani Indrawati admitted the oil price and exchange rate have changed compared to what the government has set in the 2018 State Budget. Currently, she said, the government will continue to monitor the macroeconomic developments, including matters that are related with the basic assumptions that have been stated in the 2018 State Budget.
Indrawati itself recently has criticized Trump’s protectionist trade policies, warning from their potential implications on global economic growth. The former World Bank Director pointed out that openness and global trade are supporting several economies and reinforcing their efforts to overcome issues like poverty.
TheInsiderStories suggest the Indonesian government should creating the right policy so as not to disrupt the economy. Economic minister and the central bank should thinking of out ordinary and not use the populist policy to provide a sense of security to the economic and the society at large. For an example have a gut to raise the fuel price benchmark and take unusual monetary policy.
Email: linda.silaen@theinsiderstories.com
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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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