US disregard for allies over Iran decision will have China wringing its hands in glee

Breaking with allies may not look so bold if things start to unravel in the Middle East

Can Donald Trump make a difference in the Middle East?

With the honourable exception of oil, commodities prices were largely unmoved on the news that Donald Trump has withdrawn US participation from the Iran nuclear deal.

Gold did tick upwards a day or so later, but most commentators put this move down to a slight pullback of the recently strong US dollar, rather than any heavier inflows into the world’s number one safe haven.

That being said, anecdotally in the UK gold buying by retail investors did spike this week as property prices weakened and the appeal of the other traditional safe haven decreased.

But with Israel bombing significant Iranian targets on Wednesday, as with so many of President Trump’s gambits, it’s unclear what will happen next.

What’s largely unprecedented is the decision by the US to blatantly and publicly ignore the wishes of some of its closest and most powerful allies, Britain, France and Germany. These powers, apparently side-lined, will now see what they can salvage of the deal on their own.

But if Israel and Iran do indeed end up coming to blows in a full-scale war and the US then asks for European support in backing Israel, how forthcoming is it likely to be?

Early cracks in the 75 year-old system of transatlantic alliances are beginning to show, albeit that the US is reactivating its North Atlantic fleet to counter a perceived rising threat from Russia.

At the same time though, the US economy is running particularly strong, and the European numbers aren’t too far behind. Britain is the laggard, but for Brexit reasons which have been well-flagged and which aren’t a major concern to those forecasting global economic trends.

Britain’s desperation for friends in the wake of Brexit may lead it to continue to support the US where other countries falter, but on that score it will be interesting to see what sort of reception Donald Trump receives when he visits the UK in a couple of months’ time.

If public opinion comes right out against him, as it might after inflammatory comments made about crime in London, then Theresa May may find her options limited. Her government is structurally weak anyway, backing an adventurous US President in nuclear gambits in the Middle East is not likely to endear her to voters or her own backbenchers.

So where will the US find friends in its bid to shut down Iran? This is actually not an easy question to answer if you set Israel to one side. US leadership in the Middle East has produced little that’s been of tangible benefit to anyone since the Camp David accords more than forty years ago.

Since then we’ve had the humiliating retreat from Lebanon, the first unfinished Iraq war, and then the ongoing quagmires of Iraq and Afghanistan. Going further back, it was CIA meddling in Iran that turfed out the country’s only truly democratically elected government.

It’s not a track record to be proud of, and it’s hardly surprising that US allies sound alarm bells when a US policy decision leads directly to an announcement from Iran that it will recommence the enrichment of uranium.

The Chinese must be looking at all this with great interest and some satisfaction. It’s true that the Chines buy a lot of Iranian oil and will now be subject to sanctions if they carry on. But there are ways around sanctions for a country like China that still isn’t fully tied into the US stranglehold on the global economic networks that has almost everyone else dancing to the US tune.

Because if this US policy goes wrong, the European allies will wipe their hands of it and say I told you so. China’s One Road One Belt policy is already reaching round the globe through Central Asia to connect directly to Europe. Trains from Beijing are now arriving in London.

One of these days, the US will threaten to lock some undesirable out of the global financial system and the object of its ire will simply cock a snook and buy into the Chinese networks and carry on as before.

At the moment, the US is still too powerful for that to make sense economically for any country. But it won’t be long. And alienating existing allies ahead of time over the issue of nuclear weapons is hardly playing the long game. That’s what the Chinese do. But with the US it’s hard to know what decisions will be from day-to-day, let alone from year to year or decade to decade.









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