WASHINGTON/PARIS (Reuters) – U.S. President Donald Trump is expected to announce on Tuesday that he is pulling out of an international nuclear deal with Iran, in a move that would raise the risk of conflict in the Middle East, upset America’s European allies and disrupt global oil supplies.
Trump administration officials called key members of the U.S. Congress on Tuesday and told them he had decided to withdraw from the agreement but would not reimpose sanctions on Iran for up to six months, congressional aides said.
One senior European official closely involved in Iran diplomacy told Reuters that U.S. officials had indicated late on Monday that Trump would withdraw from the 2015 agreement, the signature foreign policy achievement of Trump’s predecessor Barack Obama.
The deal eased sanctions on Iran in exchange for Tehran limiting its nuclear program to prevent it from being able to make an atomic bomb.
Trump is to make an announcement on the future of the Iran deal at 2 p.m. on Tuesday. Under U.S. law, Trump has until May 12 to decide whether to reimpose U.S. sanctions on Iran, which would deal a heavy blow to the accord.
A senior White House official denied a New York Times report that Trump had told French President Emmanuel Macron on Tuesday that he was going to pull out of the agreement.
“The president did not tell Macron those things,” the official said.
Trump has frequently criticized the accord because it does not address Iran’s ballistic missile program, its nuclear activities beyond 2025, nor its role in conflicts in Yemen and Syria.
Iran has ruled out renegotiating the agreement and threatened to retaliate, although it has not said exactly how, if Washington pulled out.
EYEING OIL MARKETS
Abandoning the Iran pact would be in line with Trump’s high-stakes “America First” policy, which has seen the United States announce its withdrawal last year from the Paris climate accord and come close to a trade war with China.
Renewing sanctions would make it much harder for Iran to sell its oil abroad or use the international banking system.
Oil prices dived as much as 4 percent on Tuesday as media reports rattled markets with doubts about whether Trump would withdraw Washington.
U.S. stocks were whipsawed on conflicting reports about Iran.
The Iran deal may remain partially intact, even without the United States. Iranian President Hassan Rouhani suggested on Monday that Iran could remain in the accord with the other signatories that remain committed to it.
“Iran is monitoring U.S. and European stance closely and will react to U.S. decision based on its own national interests,” Iran’s deputy foreign minister, Abbas Araqchi, was quoted as saying by Iranian news agency IRNA.
Trump’s move is a snub to European allies such as France, Britain and Germany, who are also part of the Iran deal and tried hard to convince him to preserve it. The Europeans must now scramble to decide their own course of action with Tehran.
China and Russia are also signatories to the Iran pact.
“It sounds like Trump’s going to reinstate all the sanctions, rescind all the waivers and begin the process of taking the United States out of the deal,” said Mark Dubowitz, chief executive officer of the Foundation for Defense of Democracies, a conservative Washington think tank.
“There will be a 180-day wind-down period for companies to wind down their business deals with Iran and for countries to reduce oil purchases,” said Dubowitz, who did not say whether he had first-hand knowledge of Trump’s decision.
FEAR OF ESCALATION
Iran’s growing military and political power in Yemen, Syria, Lebanon and Iraq worries the United States, Israel and U.S. Arab allies such as Saudi Arabia.
Israel has traded blows with Iranian forces in Syria since February, stirring concern that major escalation could be looming.
Financial markets were watching news of Trump and Iran closely on Tuesday.
A CNN report first raised doubts about whether Trump would impose sanctions as quickly as the market had expected, a decision that would reduce global crude supplies. That was followed by the New York Times story about Macron.
“There’s been some conflicting comments come out of CNN that were bearish and then countered by the New York Times that were less bearish,” said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates.
“So we’re just getting a lot of this pre-meaning noise that we often get when things … kind of get leaked ahead of time.”
Crude oil prices have been rallying in recent days, largely on expectations the United States would withdraw from the Iran pact and reinstate sanctions. Since the deal was put in place, Iran has increased exports to about 2.5 million barrels a day, up from around 1 million bpd in 2015.
The belief among oil investors has been that financial sanctions that restrict other countries’ ability to invest in or do business with Iran will cut off supply – although these effects would likely not be felt until late 2018 or early 2019.
Multiple sets of U.S. sanctions were suspended as a result of the Iran agreement and some will take longer than others to kick in once reimposed.
Additional reporting by Tim Ahmann, Makini Brice, Warren Strobel and Arshad Mohammed in Washington, Ayenat Mersie in New York, Sybille de La Hamaide, John Irish and Tim Hepher in Paris, Parisa Hafezi in Ankara, Bozorgmehr Sharafedin in London, Andrew Torchia in Dubai; Writing by William Maclean and Alistair Bell; Editing by Peter Graff, Yara Bayoumy and Bill Trott