Atop the Wall of Worry — Iran, Determined to Provoke a Crisis
Author: Greg Valliere
September 20, 2019
THIS HAS BEEN AN EXTRAORDINARY WEEK: The explosive “whistle blower” mystery; Justin Trudeau’s descent; Elizabeth Warren’s surge; the Fed’s promise to provide more liquidity; the Brexit madness; a resumption of trade talks, etc. But one story looms over all the others: an emboldened Iran, determined to provoke a crisis.
WHAT WE KNOW: First, Iran obviously planned and coordinated the attacks on Saudi Arabia, perhaps conducted by proxies. Second, even an attack of this magnitude was not enough to persuade isolationist U.S. President Donald Trump to retaliate — a troubling sign of timidity that sends a signal to the region. And third, there’s a high likelihood that Iran or its proxies will strike again. Why?
THE MOST IMPORTANT FACTOR is Iran’s desperate attempt to wiggle out of sanctions that have crippled its economy — sanctions that the radical Iranian leadership considers an act of war. Their response will be to destabilize the region, forcing global powers to eventually seek a truce via negotiations that could include an easing of the sanctions.
A SIGNAL TO ALLIES: The oil field attacks showed that billions of dollars of weapons sold by the U.S. to Saudi Arabia can’t stop drone strikes. Second, Trump reportedly is asking: “Why can’t the Saudis retaliate? Why should we do all the work?” Trump believes in America first, and he can quickly throw allies under the bus, as Benjamin Netanyahu discovered this week.
BOTTOM LINE: Eventually there will have to be a response (a Mideast expert cracked this week: “Where’s Dick Cheney when we need him?”). A belated Trump response could be military, or it could be an escalation of cyber warfare, or it could be the imposition of even more sanctions. This could prompt more aggression from Iran, which warned yesterday that war in the region is likely if the U.S. does retaliate.
THIS IS TRUMP’S WORST NIGHTMARE, not a limp impeachment attempt or Jay Powell’s monetary policy. There are two likely scenarios: the U.S. staying passive and emboldening Iran to strike the Saudis again; or U.S. air strikes that could quickly escalate this crisis. An intermediary — Emmanuel Macron, perhaps? — could help, but Iran has dismissed that option, at least for now.
WE WROTE EARLIER THIS WEEK that this crisis will get worse before it gets better, and that conclusion still seems likely. Iran wants to drag the U.S. into a major Mideast conflict; the issue may become whether the Saudis are willing and able to defend themselves, and whether sophisticated U.S. cyberattacks will be sufficient to cool this crisis.
LEST WE FORGET, Iran was largely responsible for making Jimmy Carter a one-term president, which Trump undoubtedly realizes as he faces some very unpalatable options.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.
