Committee for the Abolition of Illegitimate Debt

Trump hailed the MoU as a victory, because after more than two and half months of conflict, the Strait of Hormuz is set to reopen, prompting oil to flow again. In reality, the proposed MoU between the US and Iran merely returns the status of the Strait of Hormuz and Iran’s nuclear capability to where they were before the US and Israel launched their ‘war of choice’ on Iran on 28 February with ‘epic fury’.

About a week into that war, Donald Trump pledged that there would be no deal with Tehran except “unconditional surrender!” However, Iran’s resistance, its missile attacks on the Gulf states and its strangehold on the Hormuz Strait turned that demand into dust. Meanwhile the global crude oil and gas prices rocketed by 50% and strategic reserves of oil globally fell towards the bare minimum for continued operations. The US strategic oil reserves are currently at their lowest level since 1983. If the war had continued into the summer, it would have caused an energy catastrophe and economic slump in many economies. On signing the MoU in Versailles Palace in France at the G7 summit, Trump admitted as much. “There is nothing as smart as the market – and the market loves it,” he said. Without the agreement, “the alternative would be a worldwide depression.”

The ceasefire deal harks back to Versailles in 1918, when the German high command signed an armistice with French-British-US alliance that amounted to total surrender and huge reparations. This time, it appears that Trump has signed a deal that in no way means Iran’s surrender – on the contrary, it appears that the deepening crisis of energy prices in the US and globally has forced Trump to make significant concessions to Iran in order get the Strait of Hormuz open again.

The ceasefire plan may eventually lead to agreement on reducing Iran’s nuclear stockpile. Iran has a stockpile of more than 9,000kg of the material, including 440kg at levels close to weapons grade that Trump previously demanded Tehran hand over to the US. The MoU sets out a “minimum” for the diluting of the stockpile on site, under the supervision of the International Atomic Energy Agency. Actually, Iran has already pledged on many occasions that it does not seek to have a nuclear weapon. President Trump acknowledges that Tehran can keep its ballistic missiles. As he said: ‘They have to have some, because other people have some.”

All trade and financial sanctions on Iran are to be removed and Iran will be able to sell its oil in international markets. As for the seizure of Iranian reserves and funds, Trump said. “We have taken their money, it’s their money,. If we didn’t give it back, nobody would ever invest in the dollar again.” Also, “if we did not remove the sanctions, there would be poverty. Then 91mn people would starve”.

In addition, it has been agreed to end conflict on all fronts, including between Israel and Lebanon. There is a US pledge to respect Iran’s sovereignty and not interfere in its internal affairs. US forces will withdraw from the region within 30 days after the final agreement. And subject to progress on reducing Iran’s nuclear stockpile, the US has agreed to set up $300 billion reconstruction and development fund for Iran.

But there are many caveats to the prospect of a final deal in the next two months and the maintenance of any permanent agreement beyond August. First, will Israel obey Trump and cease its attacks on Lebanon? If it does not, Iran says it will not sign any final agreement. The interim agreement calls for a cessation of hostilities on all fronts, including Lebanon. But neither Israel nor Hezbollah are signatories to the deal. It has been fiercely criticised by Israeli ministers, who argue that it stops Israel countering threats posed by Hezbollah. Israeli forces have continued operations in Lebanon despite the MoU terms. As a result, Iran is threatening to close the strait of Hormuz again after the latest wave of Israeli strikes in Lebanon and will refuse to discuss a permanent agreement during the 60-day ceasefire.

Israel will hold elections in October and Prime Minister Benjamin Netanyahu is in severe danger of losing because the deal is widely perceived in Israel as favouring Iran. Israel has been in a state of continuous, multifront conflict since the 7 October Hamas attack. Now it is trying to establish a permanent military footprint and buffer zones in Gaza, Lebanon and Syria. That will only drive Hamas and Hezbollah to continue their resistance and lead to a breakdown in the agreement.

Second, if no agreement is reached on Iran’s nuclear capability, then the US will revoke the MoU. Intensive negotiations over Iran’s nuclear program, the most contentious problem, are only just beginning, and the gap between the two countries remains wide, and the situation is still highly uncertain. The interim deal gives negotiators 60 days to come up with a nuclear agreement but that can be extended. But it will be very hard to reach an agreement on such a complex issue within two months. The 2015 nuclear deal, which Trump scrapped during his first term, took more than 18 months to negotiate.

Third, even if a full agreement is reached and sustained after August, the pressure for renewed conflict is high. It is not only the Israelis who are furious about Trump’s capitulation; the ‘globalists’ in the US ‘deep state’, like the CIA and other security forces, along with a sizeable section of Republicans and Democrats in Congress, want to renew the war and ‘finish off Iran’. Such is their pressure on Trump that he continually swings between claiming a deal to threatening more bombing and even the assassination of the current Iran negotiators! There is every possibility that, once the US Congress mid-term elections are over, Trump may revoke the agreement and take ‘revenge’ on Iran before he leaves the scene in 2028.

But for now, the tankers are finally starting to move through the Strait of Hormuz, crude oil prices are falling (from $100/b during the crisis to about $75/b now – that’s still well above the $60/b before the war started, but the downward direction is clear).

Indeed, with the build-up of blocked supplies being released, there is every prospect of the global glut in oil rather than a shortage! It may take months for things to get back to full speed given the fragility of the US-Iran accord, snarled-up logistics and damaged infrastructure. But once flows resume properly, there will actually be a lot of extra oil in the system. The production boost from the Middle East would come on top of an already oversupplied world: a veritable flood of new projects, largely in Brazil, the US and Guyana, which will add 2.8mn b/d in 2027, according to Wood Mackenzie analysis.

However, the world economy is not likely to recover from this energy shock as quickly as it happened. The global energy supply chain will take considerable time before energy shortages, particularly in Asia, return to pre-conflict conditions. So energy prices could take several months to ‘normalize’, if ever. Clearing mines laid by Iran will be a time-consuming process, while vessels stranded around the strait will not immediately resume normal operations. Repairing infrastructure damaged during the conflict also poses a major challenge. And we must not forget the cost in human lives and civilian infrastructure in Iran. At least 3500 Iranians have been killed, with thousands more injured, and schools and water facilities have been destroyed. Israel’s operations in Lebanon have also killed thousands of people there and have displaced close to a fifth of the population.

Most important for the global economy, the lasting effects of this war will be felt for some time in rising inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. of consumer prices and weakening economies (particularly in Europe and also in Asia). This will only accelerate the trend to stagflation. Annual consumer price inflation in Europe, the US and Asia is still accelerating (US: 4.2%, Eurozone 3.2%, India 3.9%). American vehicle drivers are now paying $1 a gallon more for petrol than a year ago– news that Trump greeted by claiming: “I love the inflation”!

Trump’s newly appointed pick as Federal Reserve FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ chair, Kevin Warsh, was chosen in the hope he would deliver a string of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rate cuts. Instead, Warsh is likely to face pressure to raise borrowing costs in the coming months. Dario Perkins, the head of global research at the consultancy TS Lombard, said that of the leading central banks, “as the economy has remained strong and inflation has increased, the Fed is probably going to increase rates the most, maybe as much as four times (to a range of 4.5% to 5%) by the end of next year.”

In the EU, which is heavily reliant on gas imports, the European Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx (ECB ECB
European Central Bank The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html ) has already raised interest rates for the first time since 2023, in the hope of choking off surging inflation. As I have explained before, central bank monetary tightening will do little to ‘control’ inflation’ especially driven by supply-side energy shortages. But rising interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. could trigger a financial crash and puch economies into recession. Europe and Japan are already virtually stagnating.

The US economy is somewhat stronger. Corporate profit margins are highand profits continue to grow, while AI investment bubble drives on financial markets. But if inflation stays high and rises further and the Fed launches a series of rate hikes, that could change the picture. Elon Musk’s Space X share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. offer (IPO) provides an early indicator. In the huge IPO launched last week, SpaceX shares were listed at $135 each. They rocketed to $175 within hours. However, yesterday, the share price plummeted by over 16% to $154. Why? Because of the increased talk of Fed action on rates, rising inflation and higher borrowing costs, as represented in bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. yields.

And the squeeze on energy and other key products caused by the war will continue to exert downward pressure on economic expansion in the major economies.In its latest June report on global economic prospects, the World Bank paints a very dismal forecast.

Global growth will slow to 2.5% this year, the slowest rate of growth since the pandemic. “The 2020s is turning out to be a lost decade.” Growth in advanced economies is forecast to slow this year, to 1.5 percent from 1.8 percent in 2025, mainly due to the lasting impact of substantially higher energy prices. “The emerging market and developing economies (EMDEs) face the weakest per capita income growth since the pandemic. The level of per capita income across EMDEs excluding China and India, relative to advanced economies, is not expected to return to the pre-pandemic level until after 2028, implying nearly a decade of lost income convergence.” The Gulf economies, which have seen exports of their main revenue-raiser choked off and found themselves the target of Iranian bombs, are heading into slump now, with GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. in the region expected to decline by 2.6% this year. Amid one of the densest clusters of global shocks since the 1970s, nearly one out of every two developing economies has failed since 2019 to advance on the most rudimentary promise of development: narrowing the income gap with the world’s most prosperous economies. “For light at the end of the tunnel, you’d have to look to the 2030s.”!

This short war may also change permanently the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of forces in the Middle East. States in the Middle East are coalescing on two opposing sides. On one side is the Abrahamic coalition, anchored by Israel and the United Arab Emirates, which is aligned closely with the US. On the other side is an Islamic coalition, which is anchored by Sunni heavyweights such as Saudi Arabia, Turkey, Pakistan, and increasingly Egypt. These regional middle powers are still compliant with US imperialism, but they have moved closer together in response to perceived threats coming not just from Iran but also from Israel, as it projects its power beyond its borders in Gaza and the West Bank. So one geopolitical outcome of this war is a more polarized and fragmented Middle East in which rival coalitions harden. Meanwhile, both Trump and the globalists will turn back to their main geopolitical strategy: strangling China’s economy and its influence globally, with the ultimate aim of regime change in that country.