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.”
Elon Musk not liable in Vern Unsworth ‘pedo guy’ defamation trial
A jury decided that Elon Musk had not defamed British caver Vernon Unsworth in a Los Angeles federal court on Friday.
“My faith in humanity is restored,” said Musk in court after the verdict was delivered. The jury deliberated for less than three hours in the case, which started earlier this week.
Unsworth brought the suit against Musk in September 2018, after the Tesla and SpaceX CEO had called him “sus” (suspicious) and a “pedo guy” on Twitter earlier that summer. Musk also characterized the spelunker as a “child rapist” in e-mails to Buzzfeed reporter Ryan Mac, and practically requested the lawsuit in August 2018 with a tweet that said, “Don’t you think it’s strange he hasn’t sued me?”
In his testimony during the defamation trial this week, Musk apologized to Unsworth and said he did not believe the cave explorer was a pedophile.
Musk and his defense team, led by attorney Alex Spiro, argued that “pedo guy” was simply heated rhetoric and not meant as a statement of fact. They also argued that the phrase “pedo guy” is widely known as slang for “creepy old guy.” And they suggested that Unsworth was looking for a payday in court, and had not sincerely been harmed by the “pedo guy” label.
The clash between the two men began when Unsworth criticized Musk for involving himself, and his employees, in an effort to rescue 12 boys and their soccer coach from flooded caves in Thailand in July 2018.
Unsworth’s expertise and knowledge of the caves proved instrumental in extracting the soccer team. He is credited as being a leader of the rescue effort.
Musk and his employees developed a device that they billed as a mini-submarine or escape pod, and which they thought could transport the kids out of the caves. On July 8, 2018, Musk wrote in a tweet, “Mini-sub arriving in about 17 hours. Hopefully useful. If not, perhaps it will be in a future situation.” The device was never used in the effort, however.
Before the rescue was completed, Musk had directed employees to compel Thai officials to say nice things about him and his mini-sub, even as storms continued to bear down.
After the rescue, Unsworth was asked during a television interview on CNN about the mini-sub and Musk. He said Musk could “stick his submarine where it hurts,” and viewed the escape pod as “just a PR stunt.”
Lashing back, Musk called the caver a “pedo guy” in his now infamous public tweets.
The verdict could set a precedent where free speech online, libel and slander are concerned. Vernon Unsworth vs. Elon Musk was one of the first major defamation lawsuits –brought by a private individual over a tweet– to ever go to trial.
In closing arguments, Unsworth’s attorney, L. Lin Wood, made an emotional appeal to the jury, calling Musk a “liar” while standing just a few feet away from the CEO. He also referred to Musk as “the billionaire bully,” and said that by labeling Unsworth a “pedo guy” on Twitter, where Musk had tens of millions of followers, “He dropped a nuclear bomb on Vernon Unsworth,” and the fallout would last for decades.
Wood, who is well-known for representing Richard Jewell in his defamation case (and who will be portrayed by Sam Rockwell in an upcoming film about that) sought damages of $190 million in total for Unsworth. That included: $5 million in actual damages, $35 million in assumed damages and punitive damages of $150 million. That amounts to less than a percent of Elon Musk’s estimated net worth including approximately $20 billion in SpaceX and Tesla holdings.
Musk’s lead attorney, Alex Spiro, in closing arguments characterized Musk’s offensive tweets as merely insulting and not statements of fact. Spiro also said that Unsworth was telling the court, “I’ve been horribly damaged. Pay me lots of money,” but then failed to prove he had been damaged at all. Referencing the fact that Unsworth had earned a little money for speaking engagements since the cave rescue, he asked, “You wanna award damages? How about one dollar?” And he implored the court not to engage in policing speech.
— CNBC correspondents Jane Wells and Paul McNamara contributed to this report.
Hit China with new tariffs or hold off?
U.S. President Donald Trump poses for a photo with China’s President Xi Jinping before their bilateral meeting during the G20 leaders summit in Osaka, Japan, June 29, 2019.
Kevin Lamarque | Reuters
In this multifront, multiyear trade war, with shifting deadlines and political headwinds, it has paid for investors to beware the ides of March. May. August. October. And now, December.
In less than two weeks, President Donald Trump must decide whether to slap tariffs on $156 billion in consumer goods made in China — including toys, phones, laptops and clothes, right before the holidays — or move the goal post yet again in lieu of the comprehensive trade deal he’s been seeking.
“If enough substantive progress had been made, he might” be willing to delay, Commerce Secretary Wilbur Ross told CNBC this week. Treasury Secretary Steven Mnuchin said Thursday the two sides were still “on track,” for a deal and still talking, but he did not say whether the tariffs would be shelved.
During the Oval Office announcement of the latest truce, Mnuchin assured the public there would be more than enough time to finish the deal and permanently avert further tariffs.
That was two months ago.
Trump now has a complicated calculus to consider: Postponing the tariffs would avoid a market sell-off and higher holiday prices — and the ire of CEOs like Tim Cook and Jamie Dimon whom Trump has come to not only trust but revere. But doing so with anything short of a deal-signing — which Trump said in October was the next step — would mark the fifth instance this year that he delayed or canceled tariffs as a gesture of goodwill, further exposing him to criticism that the “phase one” deal exists only as a talking point.
Enacting the tariffs would cause its own problems. Republicans and Democrats alike would worry the White House was gambling with a U.S. economy already seeing some cracks in its strength. American farmers, many in swing states, would see exports further shrink and endure deeper financial suffering, not to mention continued retaliation.
And Chinese negotiators, already frustrated with Washington doublespeak and insisting that tariffs be removed would likely walk from negotiations, says Stephen Myrow, managing partner at Beacon Policy Advisors.
“Most people around President Trump are telling him that’s a big risk,” the former Treasury official told CNBC. “Throwing everything on right now would be a pretty big political miscalculation.”
Dan DiMicco, a former steel executive who shares Trump’s propensity for tariffs and often shares trade advice with him, said the president will win in either outcome.
“Going into this date, President Trump has a lot of latitude depending on where the talks are really at, which no one outside of him and his team know,” DiMicco said. “He really is in a no-lose situation.”
Since the October truce, information about the state of talks has been nearly impossible to glean. U.S. readouts of principal-level calls stopped in early November, leaving interested parties to rely on information funneled to Chinese state media.
U.S. officials have used phrases like “short strokes” and “millimeters away” to emphasize that a deal is in the home stretch — without indicating what, exactly, is left to negotiate of the deal that was announced as complete on Oct. 11.
Larry Kudlow, the president’s top economic advisor, said Friday that there are a “few buttons that have to be buttoned” to wrap up talks, but acknowledged that there could be a watershed mid-month.
“The fact remains that Dec. 15 is a very important date with respect to a ‘go,’ or a ‘no-go,'” Kudlow said on Squawk on the Street.
And Trump has given mixed signals about his inclination to do a deal: Within the space of one day this week, he suggested a deal could be more than a year away, then after a 400-point market sell-off, he suggested the talks were going well.
Dan Clifton of Strategas Research Partners says Trump stands to benefit politically if a deal is reached in the near-term that solves a limited number of low-hanging issues, like rolling back tariffs and restoring export markets. American incomes would rise – and the manufacturing- and ag-heavy states would see their fortunes reverse.
“Not coincidentally, these are the states Trump needs to win the most in the electoral college,” Clifton tells CNBC.
Positive signs emerging
Business groups have leaned on their executive members to provide dispatches from the ground. Anna Ashton, director of business advisory at the US-China Business Council, says positive signs have been emerging.
“We hear from both sides that the negotiators are close to a deal, so there is reason for optimism that we will not see new tariffs this month,” Ashton said. “But as you know, they’ve been close to a deal before, only to have intractable differences resurface.”
Officials have acknowledged the pain this particular round of tariffs could exact on the U.S. economy. Originally set to go into effect Sept. 1, White House officials urged Trump to delay them to limit the economic impact going into the Christmas season. They are now set for Dec. 15.
The list includes items that were excluded from prior tariffs primarily because of a potential impact on consumers and voters. In May, Mnuchin told lawmakers that the U.S. economy had been largely insulated from the tariffs because of this structure but acknowledged that would change if the goods in the December list were hit by tariffs.
“The way these tariffs were designed was, the last tranche is really the consumer issue,” Mnuchin told the House Financial Services Committee. “The last tranche is subject to the president’s approval.”
Oil rises as OPEC and allies announce deep production cut
Oil moved higher on Friday as OPEC and its allies agreed to deepen oil production cuts to 500,000 barrels a day through to March 2020. This brings the total production cut to 1.7 million barrels a day.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told reporters on Friday that the oil-rich kingdom’s quota would be an additional 167,000 barrels per day. He also said that the kingdom would continue to exceed its quota by 400,000 barrels a day, which means the overall production cut will actually be closer to 2.1 million barrels a day.
The country is OPEC’s de facto leader, and has been adamant that those who were previously overproducing — such as Iraq and Nigeria — comply with the group’s quota. Prince Abdulaziz bin Salman said that the country’s additional and voluntary cut would be contingent on other countries abiding by their allocation.
Russian Energy Minister Alexander Novak said Moscow’s quota would be 300,000 b/d during the first three months of 2020. This measurement excludes gas condensate — a high-value light crude extracted as a by-product of gas production.
The energy alliance said it plans to review the policy at an extraordinary meeting on March 5-6.
Ahead of the decision
On Thursday the 14-member cartel, as well as its allies, which is known as OPEC+ and includes Russia, agreed in principle to reduce output by an additional 500,000 barrels per day.
But as day two of meetings in Vienna kicked off Friday, there were still many questions, including how the quota would be allocated, and how long the agreement would stretch for. Friday’s meeting followed a tumultuous and marathon session Thursday. Talks stretched on for hours, and the customary press conference held after the meeting wraps was abruptly cancelled.
The duration of the deal was one of the key unknowns. On Friday OPEC said it would meet again on March 5-6. The cartel typically meets every six months, so the announcement had led some on the Street to believe the increased cut would only extend through the first quarter.
“It remains unclear what would occur in 2Q20, potentially reflecting Saudi’s new stance that they could walk away from this deal if other countries did not comply fully,” Goldman Sachs analyst Damien Courvalin said in a note to clients Thursday.
Another key factor was compliance. Currently several members including Iraq, Nigeria and Russia are over-producing. Saudi Arabia, on the other hand, exceeds its current target cut, and signaled ahead of OPEC’s meeting that stricter rules should be implemented.
“The Saudi message is compliance,” Mizuho managing director Paul Sankey said in a note to clients Friday.
The deeper-than-expected cut might not have all that much of an impact on oil prices, however, since ahead of Thursday’s meeting OPEC+, as a whole, was not even pumping as much as allotted.
“While we await full details from OPEC and non-OPEC, we think a 0.5MMbls/d announced cut relative to existing quotas is just enough to keep markets balanced for 2020,” Bernstein analyst Neil Beveridge said Friday. “Overall, a satisfactory outcome but investors will likely want to see evidence cuts are being delivered before getting too excited.”
Russia had also reportedly asked that condensates no longer be quoted as part of output for countries, a move which would reduce the total impact of the cuts.
“Everyone’s starting to do math. Between the condi [condensates] exemption and the current rate of over compliance, it’s not really a new larger cut,” Again Capital’s John Kilduff said to CNBC Thursday.
– CNBC’s Brian Sullivan, Patti Domm, Michael Bloom and Sam Meredith contributed reporting.
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