Shinzo Abe, Japan’s prime minister, speaks during a meeting with council members of the Keidanren business lobby in Tokyo, Japan, on Wednesday, Dec. 26, 2018.
Tomohiro Ohsumi | Bloomberg | Getty Images
Japanese Prime Minister Shinzo Abe is in Iran for a two-day mission with clear goals: to secure his country’s energy supply, and to bring adversaries Iran and the U.S. to the negotiating table.
Both are challenging feats, and they require Abe — an ally of President Donald Trump and the first Japanese prime minister to visit Iran since its 1979 Islamic Revolution — to walk a thin tightrope between Japan’s economic needs and its maintenance of geopolitical relationships.
Japan imports nearly all of its oil, and most of it from the Middle East, so sanctions on Iranian crude and potential instability in the region threaten its economy. But it also doesn’t want to anger the U.S., its most powerful ally and security partner.
Abe is slated to meet with Iranian Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani, and may well attempt to persuade them not to abandon the Iranian nuclear deal, from which the U.S. withdrew in May of last year. Trump gave Abe the green light for his visit, saying last month, “I know for a fact that the prime minister is very close with the leadership of Iran, and we’ll see what happens. That would be fine.”
Henry Rome, an Iran analyst and political risk consultancy Eurasia Group is skeptical of progress.
“While the meetings may help ease tensions in the short term, Abe will likely fail to convince Iranian leaders to negotiate directly or indirectly with Washington,” he said in a research note Monday.
Economically cornered, Iranians still largely remain “firmly opposed” to talks with the Trump administration, Rome added. Trump has openly suggested talks with Iranian leaders, who criticize the U.S. for being insincere and engaging in what they describe as provocative escalation.
“As we have argued over the past year, the main barrier to talks between the US and Iran is Tehran,” Rome said. “Abe has little shot at convincing Iranian leaders to abandon this policy.” Khamenei has vocally urged against negotiating with Washington, stressing in recent speeches that to negotiate would mean “losing absolutely.”
A clean slate: Japan’s track record of diplomacy
Tensions have escalated rapidly between Tehran and Washington after the White House blamed a number of regional attacks in recent weeks on Iran. The U.S. is deploying additional military hardware and troops to the Gulf region while economic sanctions have crippled parts of Iran’s economy, including oil exports.
Trump withdrew from the 2015 Iranian nuclear deal in May of last year and has been tightening sanctions on the country ever since. Now that Iran sees dwindling benefit to the deal that was supposed to give it economic relief in exchange for limits to its nuclear program, it has threatened to return to higher levels of uranium enrichment, sparking acute concern across the international community.
The Nimitz-class aircraft carrier USS Abraham Lincoln transits the Indian Ocean in this U.S. Navy handout photo dated January 18, 2012. The carrier sailed through the Strait of Hormuz and into the Gulf without incident on Sunday, a day after Iran backed away from an earlier threat to take action if an American carrier returned to the strategic waterway.
U.S. Navy | Chief Mass Communication Specialist Eric S. Powell/Handout | Reuters
In addition to pursuing some sort of path to de-escalation, Abe seeks to showcase Japan’s diplomatic influence on the world stage.
In 1983, Abe’s father, then Japan’s Foreign Minister Shintaro Abe, visited Tehran in an attempt to mediate between Iran and Iraq during the two countries’ brutal war, and the younger Abe accompanied him as a secretary. Iran and Japan have a long history of cooperation, even during that war against the U.S.’s wishes — meaning it has something of a clean slate diplomatically.
The ball for negotiations in Iran’s court?
There are obvious economic interests too. Oil makes up 97% of Japan’s imports from Iran, according to the Japanese finance ministry. But Iranian crude made up only 4% of Japan’s total oil imports last year, dwarfed by imports from Saudi Arabia, the United Arab Emirates and Qatar. Market forecasters expect Japan to fully cease its Iran imports as required by U.S. sanctions.
Still, the energy dynamic remains a part of Abe’s outreach. Tokyo’s considerations include “its own energy policy, stability in the region, a diversified source of oil imports,” Waqas Adenwala, an analyst at the Economist Intelligence Unit, told CNBC’s Capital Connection on Wednesday.
“But it also has the short-term goal of having a very successful foreign policy page front.”
By that measure, Adenwala said, Abe hopes to boost support at home ahead of his hosting of the G20 Summit in Osaka at the end of June and parliamentary elections scheduled for late July.
And despite Tehran’s apparent unwillingness to engage with the White House, “Iran does want to lower tensions with the US,” Rome said. “It has little to lose by engaging with Abe.”
Mnuchin says there’s no deadlines for ‘phase two’ trade deal
Steven Mnuchin, U.S. Treasury secretary, speaks during a press briefing at the White House in Washington, D.C., U.S., on Monday, July 15, 2019.
Al Drago | Bloomberg | Getty Images
There is no deadline for the “phase two” China deal, U.S. Treasury Secretary Steven Mnuchin said while speaking at a CNBC panel during the World Economic in Davos, Switzerland on Wednesday.
“As it relates to phase 2, I would say there’s no deadlines,” Mnuchin told CNBC’s Geoff Cutmore. “So the first issue we’re very focused on the next 30 days is implementing phase 1.”
The secretary added that the deal can be concluded before or after the U.S. election in November, suggesting there was no rush to get it done before the vote.
“There’s also, as part of this, a real implementation office as part of enforcement, and we’ll start on phase 2,” the secretary added. “If we get that done before the election, great — if it takes longer, that’s fine.”
The comment comes just a day after Mnuchin told press that the long-anticipated trade deal may not remove all of the American tariffs imposed on China.
The U.S. and China officially signed the first phase of the trade deal last week in Washington, D.C. after 22 months of tit-for-tat tariffs and negotiations.
This is a breaking news story, please check back later for more.
Trump claims the EU has ‘no choice’ but to agree a new trade deal
The European Union has “no choice” but to negotiate a new trade deal with the U.S., President Donald Trump told CNBC on Wednesday.
The president met with European Commission President Ursula von der Leyen at the World Economic Forum in Davos, Switzerland on Tuesday, and told CNBC’s Joe Kernen that the pair had a “great talk.”
Amid ongoing trade negotiations, Trump has threatened to slap tariffs on European cars in a bid to strong-arm EU leaders. In yesterday’s meeting, he claimed to have told von der Leyen that absent a trade deal, he would need to “take action” in the form of “very high tariffs on their cars and other things.”
Trump said that Europe has been “very tough to deal with” and had “taken advantage” of the U.S., but suggested that the bloc now has “no choice” but to make a deal.
“We’ve had a tremendous deficit for many, many years — over $150 billion with Europe,” he said, adding that he would be “very surprised” if he did have to implement the tariffs.
The U.S. goods and services trade deficit with the EU was $109 billion in 2018, according to the Office of the U.S. Trade Representative.
U.S. exports of Goods and Services to the EU supported an estimated 2.6 million jobs in 2015, the latest available data, according to the U.S. Department of Commerce.
Russia pinning ‘a lot of hopes’ on relationship reset with the US
Russia’s President Vladimir Putin and U.S. President Donald Trump walk during the G20 leaders summit in Osaka, Japan, June 28, 2019.
Kevin Lamarque | Reuters
Despite the awkwardness of President Donald Trump‘s impeachment trial and a dispute over Russia’s mega gas pipeline to Europe that could shut out U.S. natural gas imports, chief executives in the country are hopeful that Moscow and Washington could reset relations this year.
That hope stems from an apparent rapprochement between Russia and its immediate neighbors in Ukraine and Europe, coupled with an increasing weariness among most western nations regarding the continuation of sanctions on Russia for its 2014 annexation of Crimea from Ukraine.
President Vladimir Putin’s announcement of constitutional reforms last week, which many hope will revamp Russia’s economy, have also added to optimism regarding political and economic change in the country.
Russian CEOs told CNBC at the World Economic Forum in Davos that they hoped Putin’s reforms, that hand more power to Russia’s parliament and led to the installation of a new technocrat Prime Minister Mikhail Mishustin, can lead to improvements not only to Russia but to its relations with other global powers, especially the U.S.
“I very much hope that it would also lead to changes in relations (with the U.S.) but the problem is that this is a two-way street,” Herman Gref, the chief executive and chairman of Sberbank, told CNBC Tuesday.
“So it is also about trust, a lot would depend on the U.S. elections. So if the relations between the leaders (of our two countries) are based on mutual trust nothing would stand in the way of such a reset. We pin a lot of hopes on such a reset and businesses need it badly,” he told CNBC in Davos, Switzerland.
Recently, relations have also been strained over Russia’s Nord Stream 2 gas pipeline to Germany. The U.S. sees the pipeline as a way for Russia, already the predominant natural gas supplier to Europe, to cement its control on the region’s energy market. Many see the U.S.’ objections to the pipeline as coming from the fact that it wants to increase its own liquefied natural gas (LNG) exports to Europe, however. Nonetheless, the U.S. president gave the green light to sanctions on the pipeline in December.
Arguing that those kinds of restrictions were “politically motivated” and unhelpful, Kirill Dmitriev, the chief executive of Russia’s $10 billion sovereign wealth fund RDIF, told CNBC that 2020 could still be a good year to reset U.S.-Russia relations.
“We actually believe that this year could be a good year to improve relations with the U.S. Frankly, we can solve lots of anti-terrorism fighting together, we can do lots of things together so, of course, there will be lots of geopolitical and political attacks inside the U.S. but we believe the backdrop is good to improve Russia-U.S. relations this year.”
Dmitriev said there were signs of a rapprochement between Russia and its neighbor Ukraine after several years of frosty relations following Moscow’s annexation of Crimea and its support for a pro-Russian uprising in the east of the country. That action led to a protracted conflict in the region and thousands of deaths and peace talks have only recently re-started between Russia and Ukraine, brokered by France and Germany.
“Europe already has given lots of signs that it wants to reconcile with Russia and we see lots of progress on Ukraine and Mr Zelensky (Ukraine’s president) wants to have some compromises with Russia so we believe that that creates a very positive geopolitical backdrop,” Dmitriev noted.
General optimism was tempered by Andrey Kostin, the chairman and president of Russia’s second-largest lender VTB Bank.
He told CNBC Tuesday that the 2020 U.S. election — and the thorny issue of Trump’s impeachment trial (the president is accused of abuse of power although he denies wrongdoing) — could prevent Putin and the U.S. president from ironing out problems in the relationship.
“I think the big obstacle is the domestic problem in America, because I don’t think Mr Trump can hardly talk to Mr Putin while there’s impeachment (inquiry) in America,” Kostin said. “So we just wait and see.”
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