What as he believes that Iran supports terrorism

What
is the Iran Nuclear Deal?

Officially called the “Joint
Comprehensive Plan of Action”, the landmark deal was crystallized between
world powers including Russia, EU and US in July 2015. As said by the US
Secretary of State of the time John Kerry “the parties have taken a
measurable step away from the prospect of nuclear proliferation, towards
transparency and cooperation”.

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A joint statement was designed in
Switzerland in which it was decided that Iran would reduce, convert and
redesign their nuclear arms, and comply to an Additional Protocol to lift all
nuclear based economic sanctions, thus freeing many billions of dollars in oil
revenue and frozen assets.

Bulldozing what Obama built on and
calling it ‘the worst deal ever’ as he believes that Iran supports terrorism . It’s
no secret that republicans have a tiff with Iran and many economists believe
that this is Trump planting a seed in everyone’s mind to vilify Iran and start and
control war.

What
it means to be Sanctioned?

Economic Sanctions is a political force
that is as powerful as military force as it lets a country bleed out in of
itself. When Sanctioned, Iran is restricted to maintain trade relations with
any other country. This consists of purchase and sale of products, technology
and other factors of production. This situation sucks dry all Export and Import
activities in the country. Not only are EX-IM of trade affected but also its
international financial relations. All international investments and financial
exchanges are sanctioned, even with Insurance companies and Banks.

Impact
on a Global Macroeconomic level

On the most general level, as every
country’s currency appreciates with the depreciating dollar, imports of the
respective countries will improve, but dampen its export performance.

But as Countries have to pay more for
oil, they will lead to production levels in countries to dip leading to job losses,
thus leading to higher crime rates. Unemployment will have adverse effects on
demand for goods, bringing down supply along with it.

As Trump decertifies the Iran deal,
Russia will have  a less than favorable
relationship with US. Russia. This could lead to imposing tariffs on US Imports
or high tariffs on Russian Oil Exports.

Since USA is a debt economy, banks will
be stressed out with lending to Oil Companies and increasing to its exposure to
possible depressed assets. This in turn will increase the LIBOR rate, leading
to economic instability as LIBOR and Treasury bills will have a wider gap.

As demand and supply gets stagnant, unemployment
rise, and overall economy goes in a rut- The Central Bank will infuse money
supply to the economy by reducing SLR thus stimulating productivity into the
hands of people.

 

Impact
on Iran’s Economy

With the whole post-sanctions scenario,
Iran’s long-term economic pathway is affected as it is overtly dependant on
oil, which also hampers  its country’s
day-to-day functioning since it is very sensitive to the fluctuating oil prices.

This disruption, has affected the
country’s foreign exchange reserve which puts their whole balance of payment on
halt.

It is rightfully said by Economist
Spencer Dale that it is better to have money in the bank than to have oil
underground, as value of oil is meaningless on a macro scale if it cannot be
exported. And so Iran will be going through a state of depression in its
economy.

Impact
on India’s Economy

Since price of Oil has spiked making USD
price dip, It’ll lead to appreciation of Indian Rupee. This makes India boost
up its Imports with its power-risen foreign exchange reserves. With the
inclusion of Foreign goods and services, it’ll lead to stiffer competition with
domestic Indian goods leading to better customer experience due to sheer
variety. This will lead to purchasing of foreign technology by Indian companies
to curb the competition and enhance market share.

But since the price of oil has spiked
up, this will lead to a  hit in the
automobile space. Since petrol prices are already higher in India, the citizens
will be the most to lose and will affect in less automobile purchasing and more
stress in Public Transport leading to Government Expenditure. This massive hit
might open doors for people to be more responsive and adopt newer technologies like
electricity driven automobiles. And for the Government to be less dependent on oil
and petrol sensitivity faced by its citizens might provide incentives to
adopters of this new technology leading to even more Government expenditure.

With India having to pay more now for
Oil and its operations, there will be more stress on Banks. Oil drillers and
Imports will be more indebted with banks, leading to higher lending and higher
exposure to bad debts. With rising Oil prices, demand drops, making the grounds
even shakier of banks and increasing probability of owning more depressed
assets if Oil companies go bankrupt.

With Indian citizens having to pay a lot
more for petrol and the commodities surrounding oil prices, cost of living
becomes much higher. With this, Indians will have a harder time investing, even
in real estate. This drop in demand of real estate, will lead to lower prices
to stimulate demand. And not only will this sect of investments take a halt,
but there will be lesser capital formation leading to stagnant cash flow
circulation in the economy.

 

 

 

Impact
on China’s Economy

China being one of the biggest importer
of oil with around 9+ barrels per day, will be hit the hardest in terms of high
oil prices. China will be paying extra for transportation of oil, thus
aggravating the problem. This problem makes their Belt and Road Initiative make
more sense for streamlining their transportation to reduce cost.

China is a manufacturing powerhouse, but
with rising oil prices and higher cost of living, demand of goods will take a
dip, which will reduce supply. This reduction of production will have its
ripple effects on its abundant manforce, thus aggravating their cost of living
problem.

With production taking a hit, it will
have a drastic fall in its GDP and also affect its relations with countries
outsourcing their manufacturing in China as they need to pay higher to keep the
lights on in these plants. Especially in Airline industry, where almost all assembly
is done in China, lesser orders will be given for assembly, leading to bigger
hit in their employment.

China will soon spend more resources
finding new oil fields in China to reduce dependence on imports.

 

Impact
on UAE’s Economy

For the most part, UAE has the most to
gain from the decertification of the Iran Deal. As it captures a big chunk of
the lost Iran market share. This further strengthens their oil production
landscape. Since it is taking over a bigger market share, they will be
capitalizing on the untapped demand left over by Iran.

Since Oil production ramps up, more jobs
are produced. This will raise employment levels, ramping up demand from its
citizens which is going to improve the production landscape, making it even
rosier for employment levels as supply needs boost.

UAE with its potential healthy economy
will lead to more investments further improving market conditions by creating
jobs and enhancing cash flow within the economy resulting in potential capital
formation.

With a healthy economy, crime rates will
reduce and so will government expenditure as it will deal with unemployment to
a lesser degree.