US to lift sanctions on Iran after shipment of enriched uranium to Russia confirmed

Iran is shipping its stockpile of enriched uranium to Russia, a major step to comply with the nuclear deal struck between the P5+1 Powers and Iran. According experts and diplomats following and overseeing the deal, this will leave Iran with too little fuel to manufacture a nuclear weapon. The shipment was announced by US Secretary of State John Kerry and confirmed by Rosatom, the Russian civilian nuclear company handling the shipment. American officials said that it may be only weeks before the deal’s sanctions relief measures go into effect on “implementation day.”

This will unfreeze almost $100 billion in Iranian assets and the country will be able to sell oil in world markets, as well as participate in global capital markets. While the Iranian government is still disassembling centrifuges at a snail’s pace and disabling a plutonium reactor, this is the first positive commitment to the deal since last July. However, many conservatives from the US are decrying the apparent milestone on account of the fact that the uranium shipment is a “fuel swap,” which is to say that Iran is receiving unenriched uranium from Kazakhstan in exchange for its enriched materials. Obama Administration officials and most analyst believe this measure is to save face, as the unenriched material would require substantial processing in order to be viable fissile material for a weapon.

This raises the so-called “breakout time” or the time it would take for Iran to produce a nuclear weapon from 2-3 months to 6-9 months. Before “implementation day” can be fully enacted, that breakout period must be an entire year. The effect of implementation day is seen as both a blessing, in the opening of the world’s largest remaining frontier market on the one hand, and the flooding of global markets with even more barrels of oil on the other.

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News Briefs:

  • Ukrainian Prime Minister Arseny Yatseniuk said that the country is expecting some $10 billion from international lenders in 2016 from the International Monetary Fund, the World Bank, and other institutions. The announcement came at the annual end-of-year news conference in Kiev earlier today, addressing needs for next year and recapping events of the previous year.
  • Azerbaijan’s Central Bank has cut its capital adequacy ratio (or reserve ratio, or the amount of cash a bank must hold in reserve of its deposits) from 12% to 10%, roughly a week after devaluing the manat currency. Azerbaijan’s devaluation sent the currency crashing almost 32% against the dollar after the CB burned through half of its foreign currency reserves to defend it against the impact of falling oil prices.
  • The Diplomat has two article of interest today – one is on Turkmenistan’s opening ceremony of the East-West pipeline that has the capacity to transfer some 30 billion cubic meters of natural gas per year. Turkmenistan was rebuffed from selling its natural gas re-exported from Russian, meaning that passage over the Caspian Sea is the only option, and even with European support from EU Commission Energy VP Marcos Sefcovic – the idea is contingent on more meetings of the Caspian littoral states to define the sea as either a “lake” or a “sea” which bears differing maritime rules and differing claims to mineral and petroleum reserves.
  • The Diplomat also reported on the apparent withdrawal of Russian support from the construction of two Kyrgyz hydropower projects after years of promises and delays from Moscow, prompting the search for new investment partners. The two projects – the massive Kambarata-1 dam and the Upper Naryn cascade are still in their planning and financing stages, with very little progress made for either goal. Together, financing needs for these infrastructure projects are worth over $3.2 billion in total.
  • Kazakhstan’s enormous sovereign wealth fund, Samryk, is estimated to be around $93 billion dollars. During his last visit to New York, Kazakh President Nursultan Nazarbayev met with KKR founder Henry Kravis, Blackstone Chairman Stephen Schwarzmann and Carlyle Group founder David Rubenstein in order to get a piece of the pie, all promising a large return on Kazakhstan’s substantial accumulated wealth. Sovereign Wealth Funds from all over the world have been hit particularly hard by the dual effects of the oil crash as well as the rout in fixed income yields which has largely reduced returns across the investment management community globally to either negatively or flat.
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