Iran: New Congress and demands strain upcoming talks

The 114th US Congress convened for the first time last week, casting a new series of doubts on the potential for an Iranian nuclear deal. Republicans have come under control of both houses of Congress, and the tough-on-Iran, (mostly) pro-Israel group of representatives have started eyeing fresh rounds of sanctions should the talks fail and a full congressional review of any potential deal. This would not only undermine the faith that Iranian negotiators have with US negotiators, it would also potentially derail any deal that was agreed to after the fact. A new bill proposed by Senators Mark Kirk and Bob Menendez, would slap additional sanctions on Iran if a deal was not reached, and is likely to be picked up once again during the new session.

Pressure is also growing on the Iranian side. Iran’s atomic agency chief, Ali Akbar Salehi, issued a public statement insisting on the resumption of uranium enrichment just days before new talks begin in Geneva. The enrichment process has been the main stumbling block between the P5+1 Coalition and the Iranian government. He added that they will need 30 tons of enriched materials eventually. Additionally, government revenue for Iranian oil prices has dropped off significantly, causing more strains and reducing the outlook for a flurry of foreign direct investment in the country by foreign multinationals (of which many European and Japanese companies have indicated interest).

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News Briefs:

  • Ratings Agency Fitch has downgraded Russian sovereign debt to BBB-, just one grade above junk, last week. The official released outlook was also negative, indicating the agency could downgrade it again over the medium to long term. The report indicated that a sharp decline in the value of the ruble and oil prices as well as sharply rising interest rates as negative indicators of economic health.
  • Russia announced that it may seek an early repayment of a $3-billion loan to Ukraine, as the country courts the IMF to secure another loan to avoid an upcoming default. Ukraine’s public debt to Moscow at present exceeds 60 percent of gross domestic product, and Finance Minsiter Anton Siluanov said that Moscow has “every reason to demand early repayment of the loan” due this coming December (2015). The threats come after bondholders and observers like Moody’s Investors Service say that they will have to restructure their debt.
  • Kazakhstan is capitalizing on its enormous cattle market, seeing development both in beef and dairy products. 43 Companies are planning to utilize western technologies to allow for full mechanization and automation to meet the resurgent demand from Russia and globally, where beef prices are at all time highs. Despite high government subsidies, milk and associated dairy products are still highly expensive, due to the fact that most are marked for export.
  • A universal slump in commodity prices over the past six months has strongly affected the outlook for foreign direct investment in Central Asia. The price of the Brent crude benchmark has nearly halved in value, with the most lavish expectations for a resurgence in value to stabilize around $70. The appreciation of the dollar relative to all other currencies is also to blame, due to its use as the standard currency for the Brent and WTI indices, the two standards by which most oil prices are set globally. In any case, prices for almost all associated commodities like wheat bushels and metals, staple products of underdeveloped Central Asian economies, have fallen as well with no signs or optimism that they will pick up again.

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