By Eric Vandenbroeck and co-workers

Oil falls 11% after Iran declares Strait of Hormuz open

Negotiations to end the war between Iran and the US and Israel appeared to show signs of progress after Iranian Foreign Minister Abbas Araghchi announced that the Strait of Hormuz would be “completely open” as long as the current ceasefire in the Gulf remains in force.

Although President Donald Trump claims that his naval blockade on Iran continues unabated, the US leader has also expressed hope that the Middle East war is reaching its conclusion.

“I think we’ll reach an agreement within a day or two,” Trump told Axios, the US-based news agency, on April 15. Similar remarks by the US President were reported by other news agencies, with Trump asserting that there were “no sticking points” outstanding between the two countries.

However, despite the optimism now spreading through global financial and commodities markets, oil prices have dropped to their lowest price in a month, and the situation remains confused and precarious.

Notwithstanding Trump’s grand claims, there is little likelihood that the US and Iran can reach a comprehensive peace agreement that settles their disputes or the broader question of Iran’s nuclear aspirations.

What we may witness will, at best, amount to a longer ceasefire and a set of narrow and unspoken security understandings between Iran and the US. The mistrust between the two is far too deep for anything more substantial.

 

Is the Strait of Hormuz open?

To start with, it’s not clear whether Iranian Foreign Minister Araghchi spoke for his government when he announced the opening of the Hormuz Strait.

Mohammad Bagher Ghalibaf, Iran’s Parliament speaker and chief negotiator, said early on April 18 morning that the strait will not remain open if the US blockade continues.

US President Donald Trump announced on April 16 that Lebanon and Israel had agreed on a 10-day ceasefire and said the next meeting between the US and Iran may take place over the weekend, adding to optimism that the Iran war could be nearing an end.

Trump said Iran had offered not to have nuclear weapons for more than 20 years.

 

Will Trump Betray Netanyahu?

Beyond that, there is the question of Israel. There is no doubt that the ceasefire between Israel and Hezbollah, the Iranian-funded militia in Lebanon, which came into effect on April 16, represents a diplomatic victory for Iran.

“They did not win the war with these lies, and they will certainly not get anywhere in negotiations either,” he also said of Mr Trump’s statement that Tehran had agreed to transfer its uranium stockpiles, among other concessions.

Shortly after Araghchi made his announcement in a tweet, Iran’s Fars news agency, which is close to the country’s hardline Islamic Revolutionary Guard Corps (IRGC), expressed “surprise” over what it described as “an unexpected tweet” by the foreign minister.

Another IRGC-linked media outlet, Tasnim News Agency, echoed a similar sentiment and termed Araghchi’s tweet “bad and incomplete”, which led to “ambiguous and false” assumptions about Iran’s intentions.

April 17 was soon halted, with some turning back, MarineTraffic data showed. It is unclear why the ships stopped.

Ships test Strait of Hormuz after opening, seek assurances on safety. 20 ships attempted to exit on April 17 but soon halted, with some turning back.

Furthermore, even if the Iranian Foreign Minister spoke authoritatively, Iran’s reopening is limited to one shipping lane through Hormuz, one that hugs the Iranian coastline. Before the latest war, most cargo ships and oil tankers sailed further south, through shipping lanes close to the Gulf Arab monarchy of Oman.

There are also reports that Iran intends to limit the number of tankers that can pass each day to only 15.

Around 20 ships, which began sailing towards the Strait of Hormuz on the evening of April 17 were soon halted, with some turning back, MarineTraffic data showed. It is unclear why the ships stopped.

Iran’s apparent insistence on continuing to direct the seaborne traffic remains unacceptable to other Gulf states because it implies Iranian control over what is an international waterway. And there are indications that, despite claiming to have “reopened” the strait, Iran intends to continue levying a fee from every passing tanker, yet again something neither the US nor any Middle East government will accept.

The Iranians have long insisted that no ceasefire can continue between themselves and the US unless it also includes Lebanon, which the Israelis invaded on March 13, intending to destroy Hezbollah bases.

Initially, both the US and Israel rejected this Iranian demand, claiming that the two conflicts are quite different. But Trump suddenly reversed himself, telling Israeli Prime Minister Benjamin Netanyahu to stop fighting.

Iran's reopening of the Strait of Hormuz is limited to one shipping lane, and there are reports that only 15 tankers can pass through each day.

 

Release of frozen funds for freezing the nuclear program?

Beyond this, the fog of claims and counterclaims about what the US and Iran could agree on is getting only more impenetrable.

Trump continues to insist that, as a precondition for removing the threat of further US air strikes, Iran must agree to dismantle its nuclear program and hand over its estimated 440kg of highly enriched uranium. This remains, US Vice-President J.D. Vance said when he conducted direct talks with Iranian leaders in the Pakistani capital of Islamabad on April 11, a “red line” for Washington.

Reports from sources close to the White House suggest that Trump may offer the Iranians a financial inducement in return for handing over the uranium; around US$20 billion (S$25 billion) worth of Iranian funds currently frozen in various bank accounts around the world are allegedly on offer.

Trump has formally denied that such a deal is in the offing, and for good reason. Since he launched his bid for the US presidency more than a decade ago, Trump has constantly attacked former president Barack Obama for agreeing to give Iran US$1.7 billion of its frozen funds in 2016 in return for a deal freezing Iran’s nuclear program.

The US airlifted part of that money to Iran in crates of cash, something Trump claimed was proof of  Obama’s inability to negotiate a “smart deal” with the Iranians. It is therefore likely that, even if the US now agrees to hand over money in return for an agreement over nuclear material, that won’t be an explicit deal, if only to save Trump’s face.

The shift shocked the Israeli government; the mass circulation Yedioth Ahronot daily newspaper in Tel Aviv reported that Israeli leaders described Trump’s action as a “betrayal,” and claimed that it supposedly condemned Israel to “waiting for the next massacre” from Hezbollah.

For Netanyahu, the US-imposed ceasefire in Lebanon is thoroughly bad news at two levels. First, the US now explicitly accepts that Iran should act as a protector of Hezbollah, and that the security of Lebanon is a matter of concern for Iran, something no previous US administration ever publicly admitted.

And, secondly, Mr Trump’s message to Mr Netanyahu to stop fighting was delivered in a humiliating manner, leaving no doubt that it was an order, rather than a request. “Israel will not be bombing Lebanon any longer. They are PROHIBITED from doing so by the USA,” Mr Trump wrote on Truth Social, his preferred social media platform.

Israel had no choice but to comply. But Mr Netanyahu remains determined to regain the political initiative, so he can be relied upon to do everything possible to derail the diplomatic feelers between the US and Iran, either by resuming the war in Lebanon, or by using all his influence in Washington to prevent any meaningful US concessions.

None of this precludes the continuation of diplomatic contacts between the US and Iran. Chances are still better than ever that Iran and the US will meet again for further talks in Islamabad. And Mr Trump continues to hint at the possibility that he may wish to attend such talks in person.

Still, prospects of an all-out peace deal between Iran and the US remain very slim.

The US is unlikely to give Iran a guarantee of no future military attacks.

Iran is unlikely to agree to a complete ban on its nuclear efforts. An Iran destroyed by US military strikes is unlikely to suddenly turn into a cooperative Middle Eastern actor. And the Arab states of the Gulf are unlikely to forget what Iran had done to them during the latest war.

In short, even if a ceasefire agreement is concluded between the US and Iran, that will merely represent the continuation of the old confrontation, through other means.

 

 

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