Memorandum of Misunderstandings

Will the MOU hold? If not, why not?

When the text for the memorandum of understanding between Iran and the US was released I got to work on a blog post which was going to be called ‘Art of the Kneel’ all about how the US conditionally surrendered to Iran, but now that the deal is on thin ice just a few days after being signed I’ve had to revise my writings. The deal is/was embarrassingly bad for the US, and given that the US basically gave Iran everything Teheran wanted we should not be surprised that Israel won’t abide by the terms. What’s the point of a patron if it doesn’t help?

The US will almost certainly have to strike Iran now that the strait is closed again. There is a limit to how much humiliation a Great Power can take, and accepting the memorandum of understanding terms only for Iran to exert pressure on the US for not complying with the terms of their surrender is over the line. As I keep saying, the US has not lost badly enough to be committed to ending the conflict yet.

The US mistake, which it has repeated over and over since day one, is to not acknowledge that Iran is an actor with agency. Trump was sure that Iran could not do anything to hurt the US, then Iran closed the strait. Trump was sure that the only thing which was required for peace was that the US ask for it, and then Iran demanded terms and reacted when those terms were not respected. The world is not the US’ oyster, and Trump seems unable to grasp that.

Perhaps the memorandum of understanding can be salvaged, but Israel is an actor with agency too, and given how weak the US has consistently appeared in negotiations there is reason to believe that Israel could derail negotiations and force a return to a shooting war. Israel has little to lose; it is already on shaky terms with the US, and the deal Washington and Teheran reached could be disastrous for Benjamin Netanyahu and his far-right allies.

Still may sound like it will mean a prolonged war, should it start back up, but I don’t think that will be the case. As long as the strait stays closed the world’s oil stockpiles are drawn down and sooner or later there will come a point where the world of traders and paper oil collide head-first with the world of mariners and physical oil, at which point the price will start reflecting the bind the world is in.

The real story is about energy flows, and on a longer time horizon energy mixes. If Iran wins this war and gains permanent control over the strait, as looks likely, there is a new uncertainty in global energy markets which will make alternatives to oil more enticing. Even if we avoid the type of price Armageddon I’ve predicted (incorrectly), bureaucrats from Madrid to Manila will have drawn up worst case scenarios and had some time to reflect on how secure their energy supplies really are.

Iran, Israel, and the US will have much more incentives to make an agreement stick when oil prices are higher. Until then there is breathing room for dramatics involving memoranda, meetings, and missiles.

If you liked this post you can read a previous post about the Iran war here or the rest of my writings here. I also have a section for longer reads I call essays here, I particularly recommend my series called The Bird & The Technoking exploring Elon Musk's takeover of Twitter, and its political and cultural implications. It'd mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!

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I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.

Written by Karl Johansson

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Cover photo by Tima Miroshnichenko from Pexels, edited by Karl Johansson