What will Trump do about the Iran nuclear deal? - BBC News

What will Trump do about the Iran nuclear deal?

Jonathan Marcus

Diplomatic correspondent

12 October 2017

All the indications are that President Trump will refuse to recertify the present Iran nuclear deal some time before the due date of 15 October. This would light a fuse that could potentially explode the agreement. It raises questions about how Iran will respond. And it creates huge diplomatic difficulties between the US and many of its key European allies who wholeheartedly back the deal.

The agreement, negotiated with Iran by the five permanent members of the UN Security Council together with Germany and the European Union, was reached in July 2015. Its aim was to ensure that Iran's nuclear programme was entirely peaceful.

The deal, known as the Joint Comprehensive Plan of Action (JCPOA), began to be implemented in January 2016. In return for the progressive lifting of a range of economic sanctions, Iran halted some of its activities and reduced others within strict limits, all open to verification by international inspectors.

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There are four crucial things to remember about the deal.

It was not perfect.

Military escalation

Forcing Iran to halt its nuclear activities altogether was not feasible. Many of the restrictions imposed by the JCPOA contain "sunset clauses", which run out after a number of years. What happens then is a valid question, but it was felt by all the parties that constraining Iran's nuclear programme for the immediate future was a deal worth taking.

It is easy to forget that there was a real concern at the time the deal was being negotiated that without an agreement there could be a military conflict.

Tea Party supporters gather on the West Front Lawn for a rally against the Iran nuclear dealImage copyrightGETTY IMAGES

Image caption

Donald Trump spoke at rallies criticising the Iran nuclear deal, during the presidential campaign

Israel was pressing for military action. Many of Iran's Arab enemies in the Gulf quietly backed such a step and there were questions as to whether the US itself might have to use force to prevent Iran developing the capability to manufacture and deliver a nuclear weapon.

Sound familiar? It is much like the position that the US is in today with North Korea. The JCPOA was intended to manage Iran's nuclear activities, avoiding a recourse to war.

The JCPOA was about Iran's nuclear programme and nothing else. Iran does many things that the US, and its European and Middle Eastern allies, believe are damaging to security in the region.

That is an important but a different matter, one that I will come back to in a moment. The JCPOA was and is a nuclear deal, pure and simple.

And that brings me to perhaps the most fundamental point of all.

Congressional oversight

Everyone - and that includes the UN's nuclear watchdog and all of the signatories (including senior figures in the Trump administration) - believes that Iran is abiding by the agreement to the letter.

Enter the US Congress.

It wanted to have some oversight over the application of the JCPOA and brought in legislation, the Iran Nuclear Agreement Review Act (INARA), which requires the US president to certify every 90 days not just that Iran is complying with the deal, but that the continued suspension of nuclear-related US economic sanctions remains vital to the national security interests of the United States.

So far - despite criticising the Iran nuclear deal at every opportunity - President Trump has grudgingly recertified the JCPOA under this legislation. But now he looks set to change his mind.

Assuming he does now refuse to recertify the deal, insisting that it is no longer in US interests to do so, what then? What does it mean? And what happens next?

Map of Iran's nuclear sites

The crucial point to grasp is that the Iran deal (JCPOA) and the US legislation (INARA) are two totally different things.

By decertifying the Iran deal, Mr Trump would not be withdrawing from it. He would certainly be making a fundamental point about his view of its utility. He would be opening up a path under which Congress could effectively cease US compliance with the deal.

The return of sanctions?

But in practical terms, this is a multinational agreement that is being adhered to and thus it would remain active with or without a certification from Mr Trump.

Of course, having decertified the deal, the president could simply reimpose some or all of the economic sanctions that have been waived under the JCPOA, and this would certainly mean that the US was no longer complying with its terms of the deal.

But the more likely scenario would be that - under the US INARA legislation - the whole issue would go to Capitol Hill for the US Congress to decide.

Opinion there is divided. There is clearly no warmth felt towards Tehran, but at this stage it is not clear what Congress might do.

From left to right: EU's foreign policy chief Federica Mogherini, Iranian Foreign Minister Mohammad Javad Zarif, British Foreign Secretary Philip Hammond and US Secretary of State John Kerry in Vienna, Austria. Photo: 14 July 2015Image copyrightREUTERS

Image caption

The Iran nuclear deal was announced in Vienna, Austria, in July 2015

Would it reimpose some or all sanctions - thus pulling the US out of the deal - or decide to bide its time? There are indications that some of those on Capitol Hill most critical of the deal at the time are now reluctant to tear it up.

Now we come to another crucial aspect of this whole business: the ostensible reason why Mr Trump may decertify the agreement in the first place.

Regional risk

Iran is seen by the West and its allies as a major problem in the region. Paradoxically, the US itself helped to facilitate Iran's rise as a regional player through its destruction of the Saddam Hussein government in Iraq.

Iran has an important say with the Shia-dominated government in Baghdad. It - along with its proxy militias - is a major player in Syria. And it has a hand in the conflict in Yemen, though there is debate about the scale of its activities there.

Add in worries about its missile programmes and its alleged support for terrorism, and there are good reasons for concern about its growing regional influence.

The JCPOA agreement has not changed Iran's wider behaviour.

Men work inside a uranium conversion facility outside Isfahan (30 March 2005)Image copyrightGETTY IMAGES

Image caption

Under the deal, Iran's uranium stockpile will be reduced by 98% to 300kg (0.3 tonnes) for 15 years

The activities of Iran's Revolutionary Guard Corps and its missile-research effort have continued.

The JCPOA was never intended to tackle these wider issues. But in some basic sense, Mr Trump looks set to contend that Iran is not living up to the "spirit" of the deal - it's not playing nice - and that is why he will choose to decertify it.

The Trump administration wants to get tough with Tehran.

The president is likely to set his decertification of the JCPOA as part of a wider set of policies intended to punish Iran, as he would see it, for its bad behaviour.

All sorts of new sanctions could be on the table. Remember, there is still a whole battery of sanctions in place both from the US and the EU for a variety of other things - separate from the nuclear programme - such as terrorism or human rights violations.

One suggestion is that the Trump administration might decide to brand the whole of Iran's Revolutionary Guard Corps as a terrorist entity.

This body - part security force, part military, part ideological vanguard - also controls a significant part of the Iranian economy. More sanctions here could cause problems not just for Iran, but between the US and those of its allies who want to open up trade with Tehran.

Tehran's response

So if, as expected, Mr Trump does decertify the Iran nuclear deal, it is not necessarily the end of the agreement.

Iranian President Hassan Rouhani said the US would damage its own reputation if it violates the nuclear deal

America's allies are lining up to encourage both the White House and Congress to stick with the deal.

Theresa May urges Donald Trump to keep Iran nuclear deal

Even if Congress chooses not to reapply sanctions for now, the next problem becomes the scope and impact of the Trump administration's wider policy towards Tehran.

Iran for now is likely to do nothing. It will see decertification as an internal legal US matter, and is likely to continue to adhere to the agreement. Indeed, it may well relish the widening split between Washington and its key European allies.

But the way Tehran responds to any other US steps may well decide the fate of the nuclear deal.

Remember, this is a US administration dominated by military figures, many of whom have been up against Iranian-backed forces in the field.

US defence chief Mattis suggests backing Iran nuclear deal

They may back the nuclear deal, but also want to see Tehran held to account for its actions.

Insulating the JCPOA from team Trump's wider Iran policy is not going to be easy, and over time, it may well influence thinking towards the utility of the agreement in Iran itself.

To Inspire Young Communists, China Turns to ‘Red Army’ Schools - New York Times

YUQING COUNTY, China — With the fiery zeal of a preacher, Xie Hong addressed her class of 50 fourth-grade students, all in matching red tracksuits.

“Today’s life is rich, blessed, happy and joyous,” she said. “Where does our happy life come from? Who gave it to us?”

In Ms. Xie’s classroom at the Workers and Peasants Red Army Elementary School, there was only one correct answer, and she had worked tirelessly to ensure her students knew it.

“It comes from the blood of revolutionary martyrs! From the Red Army!” said a 9-year-old boy, Li Jiacheng. The class burst into applause, and Ms. Xie beamed.

For decades, the Chinese Communist Party has pushed a stiff regimen of ideological education on students, requiring tedious lessons on Marx and Mao and canned lectures on the virtues of patriotism and loyalty. Now, amid fears that the party is losing its grip on young minds, President Xi Jinping is reshaping political education across China’s more than 283,000 primary and secondary schools for a new era.

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Textbooks are getting a larger dose of Communist Party lore, including glorified tales about the party’s fights against foreign invaders like Japan. Schools are adding courses on traditional medicine and Confucian thought to highlight China’s achievements as a civilization. The government is scaling back discussion of iconoclastic writers like Lu Xun, amid concerns that exposing students to social criticism may inspire disobedience.

At the Workers and Peasants Red Army Elementary School, located in Yuqing County, students line up to sing a song praising President Xi’s China dream.

Javier C. Hernández/The New York Times

In a stern directive issued last month, the party ordered schools to intensify efforts to promote “Chinese traditional and socialist culture” — a mix of party loyalty and patriotic pride in China’s past. Under this new formulation, the party is presented less as a vanguard of proletarian revolution and more as a force for reviving China and restoring it to its rightful place as a world power.

But the demands have run into opposition, and even mockery, from some parents and educators, and not just the so-called tiger moms. Many see political indoctrination as an anachronism in an era when China’s more than 181 million schoolchildren need a modern education in math, science and liberal arts to get ahead.

They complain that Mr. Xi, who is expected to strengthen his hold on power at a party meeting this month, is turning public education into a self-serving propaganda exercise. Some say the president seems more concerned about defending the party’s legitimacy than educating the skilled work force that China needs to compete in the global economy.

Such frustrations recently came to a head in Zhejiang, a wealthy coastal province, where parents protested a decision by education officials to make traditional Chinese medicine a required course for fifth-grade students.

Deng Zhiguo, 40, a software programmer who has two children in primary schools there, said he worried that the changes would come at the expense of instruction in subjects like biology and chemistry.

“It’s like learning Darwinism in the morning and creationism in the afternoon,” he said. “How do you expect children to process that?”

Mr. Xi’s campaign has also extended to universities, where officials have banned textbooks that promote “Western values” and punished professors for straying from the Communist line. Some scholars describe restrictions on free speech in the classroom as the most severe since the aftermath of the massacre around Tiananmen Square in 1989.

A student at the Yang Dezhi Red Army school in Wenshui, in the southern province of Guizhou. President Xi Jinping, himself the son of a Communist revolutionary, has hailed Red Army schools as a model for the nation. Credit Fred Dufour/Agence

Critics say Mr. Xi may be raising the volume in patriotic education for fear that the party’s message is getting drowned out in younger generations immersed in social media and the internet. But he faces significant challenges. A study this year by Chinese and American researchers found that students appear to be tuning out shrill propaganda.

The study, based on the results of a 2010 national opinion survey, found that the “incessant ideological indoctrination by the Chinese government turns out to be counterproductive,” with trust in the government actually falling among those who received higher levels of education.

Carl Minzner, an expert in Chinese law and governance at Fordham University in New York, said the party’s socialist rhetoric had become “water-cooler banter and fodder for jokes” among educated Chinese.

“The party of revolution is now the party of the wealthy and powerful,” he said. “They’ve got to stand for something. They’re worried about the moral void at the core of Chinese society.”

Mr. Xi has passionately defended his push for positively portraying China’s past, chastising schools for removing ancient poems from the curriculum and calling traditional culture “part of the Chinese nation’s blood and genes.”

This fall, the Chinese Ministry of Education began rolling out new textbooks in history, language, law and ethics across primary and secondary schools. The new books include studies of 40 revolutionary heroes, writings by revolutionary leader Mao Zedong like his 1944 speech “Serve the People” and lessons on China’s territorial claims in the disputed South China Sea, a pillar of Mr. Xi’s foreign policy.

Anti-Japanese sentiment also features prominently, part of Mr. Xi’s efforts to glorify the early days of the party and its role in defending China from foreign invaders. A second-grade lesson tells the story of the “little hero” Wang Erxiao, a 13-year-old cattle herder who is said to have died in 1942 while trying to protect the offices of a Communist newspaper from Japanese soldiers.

Students at the Yang Dezhi Red Army school. The Communist Party sees the schools as charity projects that help disadvantaged children. Credit Fred Dufour/Agence France-Presse — Getty Images

Experts say the party is seeking ways to justify its hold on power in an era when its founding goal of proletarian revolution no longer seems relevant. While Mr. Xi is hardly the first Chinese leader to turn to patriotism as a substitute, he has pushed a version that plays up the party’s role as a force for restoring China’s greatness.

“The party’s theories lack vitality and innovation,” said Zhang Lifan, a historian in Beijing and a frequent critic of the party, “so the only thing they can do is to try to use the past to seize the next generation.”

The government has set up 231 so-called Red Army schools as models for its approach. One is Ms. Xie’s Workers and Peasants Red Army Elementary School, located in Yuqing County near the site of a former Communist revolutionary base in Guizhou, a mountainous southern province.

The school’s curriculum recounts the experience of Mao’s soldiers during the early years of the revolution, who are portrayed as heroically fighting to free China from rapacious warlords and Japanese invaders. As at some Red Army schools, students wear military uniforms around campus; in Ms. Xie’s classroom, that is a privilege reserved for the best students.

Even math classes are infused with party history. Students are asked such questions as calculating the distance of the Long March, Mao’s epic 1934-36 retreat across China. (The answer is about 6,000 miles.)

Teachers tell students that loyalty to the party can help them overcome personal difficulties and live a meaningful life.

“While other countries are suffering from war and people are still starving in Africa,” Ms. Xie said during a recent lesson on perseverance, “please don’t forget the sacrifices made by the Red Army soldiers.”

Mr. Xi, himself the son of a Communist revolutionary, has hailed Red Army schools as a model for the nation. He and his mother, Qi Xin, have given the equivalent of tens of thousands of dollars to the schools, records show. A Red Army school in northwestern China is also named for Mr. Xi’s father, Xi Zhongxun.

The party sees the schools, which serve tens of thousands of students in its former revolutionary bases in 28 provinces, as charity projects that help the most disadvantaged children.

While the patriotic appeals have found fertile ground among working-class Chinese hungry for a sense of pride, some experts warn that placing too much emphasis on nationalistic education has its own risks.

Jiang Xueqin, an education consultant in Beijing, said fanning national pride could quickly “mutate into a fierce and militant nationalism” that is difficult to control.

Mr. Xi’s vision of patriotic education is already in full bloom at the Workers and Peasants Red Army Elementary School, which was founded in 1788 but only became a Red Army school in 2012.

Classes begin with Red Army songs, and students take turns reciting revolutionary stories featuring Japanese spies as villains.

“The blood in the past gave us the life we have today,” said Kuang Yanli, 11, a sixth-grade student. “A lot of other countries want to invade our country again, so we have to study hard and make sure that doesn’t happen.”

Local officials are sensitive to the idea that the school is indoctrinating students, and the police blocked journalists from The New York Times from reporting after being alerted to their presence.

Mr. Xi himself has also become a part of the curriculum. Several times a week, the school’s more than 1,400 students line up in the cement-paved courtyard to sing an ode to Mr. Xi’s signature phrase, the “Chinese dream”:

Chinese dream for 1,000 years,

Chinese dream for 100 years,

The dream carries on, the dream embraces all,

For the revival of China, for the revival of China!

China's Central Bank Chief Warns Corporate Debt Is Too High - Bloomberg

China's Central Bank Chief Warns Corporate Debt Is Too High

By Ye Xie and Enda Curran

October 16, 2017

People’s Bank of China Governor Zhou Xiaochuan warned that Chinese companies have taken on too much debt, and argued for less financial leverage as well as fiscal reforms to constrain local government borrowing.

“The main problem is that the corporate debt is too high,” Zhou said Sunday during a panel discussion at a Group of 30 seminar in Washington held in conjunction with the International Monetary Fund and World Bank annual meetings.

While debt servicing costs remain low, “we need to pay further effort to deleveraging and strengthen policy for financial stability,” Zhou said. He appeared alongside policy makers including Federal Reserve Chair Janet Yellen and Bank of Japan Governor Haruhiko Kuroda.

China’s surging corporate debt is a concern for global policy makers and investors alike. While the IMF upgraded China’s growth forecasts this week, it warned that the economic expansion comes at the cost of a further increase in debt which may mask risks. Fed Governor Jerome Powell singled out China as the poster child for heavily-indebted corporate sectors in emerging markets, saying “risks are significant and bear close watching.’’

In his presentation, Zhou said China’s overall debt level, including corporate, government and household, started to decline this year after policy makers’ efforts to rein in leverage. “Although it’s a very moderate decline, anyway, the trend has been changed,” he said.

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Zhou said some of China’s corporate debt includes borrowing from financing vehicles owned by local governments. When that debt is re-defined, corporate borrowing is estimated at 120 percent to 130 percent of gross domestic product, instead of the official figure of 160 percent of GDP. Government debt would be about 70 percent instead of 36 percent, he said.

While it’s a more balanced debt structure than commonly perceived, “it’s still important to look at the local government behavior,” Zhou added.

Complicated relationships among provincial, municipal, and more than 3,000 county governments creates an opaque system and intensify price distortions for loans and debt borrowed by local governments, he said.

“There is a problem that the fiscal policy transparency may not be good enough,” said Zhou, 69, who’s lead the PBOC since 2002. “The inter-government relationship has lots of problems. There’s no very clear fiscal discipline to constrain those local governments. In the financial markets, there’s distortion.”

Zhou said the government will “gradually” tackle these problems, and “sooner or later, the central government must pay more attention on fiscal reform.”

Opening Up

Zhou’s remarks were the latest in a string of public comments by China’s normally low-profile central bank chief. Before heading for Washington, he used an interview with the Beijing-based financial magazine Caijing to make a fresh call to further open up the financial sector.

During Sunday’s the panel discussion, Zhou said the government’s efforts to cut overcapacity in the steel and cement industries have proven better than expected and may reach a target of reducing capacity by 10 percent. Economic growth may reach 7 percent this year, which would be the fastest expansion since 2014, he said.

Turning to financial stability, Zhou said shadow banking activities have slowed in response to policy makers’ campaign to reduce financial risk taking.

Still, other vulnerabilities exist. He called the asset management business “a relatively chaotic situation” because the three regulators overseeing the industry set different rules. Internet firms without financial licenses may “cause certain competition and financial stability problems,” he said. In addition, there’s inadequate policies to regulate cross-sector transactions from financial holding companies, and there may be some illegal operations in terms of capital financing.

Zhou had earlier released a statement during the IMF meetings that said a campaign to rein in leverage is showing results, and that China will monitor and prevent shadow banking and real estate risk.

Economic indicators show "stabilized and stronger growth" and the momentum of a 6.9 percent expansion in the first six months of 2017 "may continue in the second half," Zhou said last week at an event in Washington, according to the statement released Saturday.

Data due for release Thursday will show a 6.8 percent expansion in the third quarter, according to economists surveyed by Bloomberg. The Chinese Academy of Social Sciences projected that 6.8 percent growth in the period will be followed by 6.7 percent in the fourth quarter, the Economic Information Daily reported Monday.

Central banking leadership flux looms - Reuters

As the quartet breaks up, central banking leadership flux looms

Howard Schneider, Leika Kihara

WASHINGTON (Reuters) - The leaders of the world’s top central banks who risked trillions of dollars and their reputations to rescue the global economy are now set to walk off stage at a time when the lingering effects of the crisis, evolving technology and a combustible political landscape will challenge their successors.

The Federal Reserve, the Bank of Japan and the People’s Bank of China may all have new bosses in early 2018 and there will be a new head of the European Central Bank the following year.

The new leaders will have to deal with the hangover from the 2007-2009 crisis and its immediate aftermath as well as newly emerging risks.

Some $10 trillion in assets bought by the Fed, the ECB and the BOJ to prop up their economies remains on the books and will have to be pared back. Stubbornly low global inflation and weak growth complicate the return to more conventional policies. There are unfinished reforms in China and Europe, while the rise of nationalism could erode central bank independence.

Further ahead, the spread of cryptocurrencies and other technologies threatens to weaken central bank control over the financial system.

“The bad news is that in a crisis people learn by doing,” said Vincent Reinhart, chief economist at investment firm Standish Mellon and a longtime official at the Federal Reserve. “Will the next set of people have the set of experiences that allows them to do that? Will they have a test?”

The changing of the guard could veer in unpredictable directions. China’s president is considering a provincial official to succeed Zhou Xiaochuan, a veteran policymaker who has led the central bank since 2002 and whom analysts regard as a champion of reforms that could falter without his leadership.

In the United States, President Donald Trump will have the opportunity to infuse his “America First” sensibility at the Fed, an institution with an undeniable global role, when Chair Janet Yellen’s term ends in early February.

BOJ Governor Haruhiko Kuroda’s shock-and-awe record monetary stimulus gets credited for helping Japan snap out of years of stagnation. He will see his term end next April with the economy expected to keep growing, but inflation still far from his target, fueling doubts about the overall effectiveness of his policy.

ECB President Mario Draghi will be around until late 2019, but the succession battle could renew tensions over Britain’s departure from the European Union, ways of aligning the interests of economic superpower Germany with the rest of Europe, and concerns that the rise of nationalism could impair the ECB’s ability to set monetary policy for 19 countries.

“Given the divisions in Europe both politically and economically, you could have a very large swing in ECB behavior,” said Adam Posen, president of the Peterson Institute for International Economics.

Yellen, Kuroda and Zhou appeared together on Sunday to talk about the global economy on the sidelines of the International Monetary Fund and World Bank annual meetings.

It was a “farewell concert” of sorts for a group whose tenure has transformed central banking.

With rare exceptions, monetary policymakers from different countries avoid any hint of direct coordination with each other, and primarily tailor policies to domestic needs. Still, the four in charge now have shared years at the helm of the global financial system, met and talked at countless international meetings, and managed a major crisis together.

Along the way they deployed open-ended central bank asset purchases, introduced negative interest rates, salvaged the euro zone from a possible fracture, and steered China, now the world’s second largest economy, toward more openness and currency reforms. Yellen, a top Fed official since 2004, both helped craft the crisis response and steered the Fed’s to a more conventional policy.

FILE PHOTO: Chinese Vice Finance Minister Zhu Guangyao (C) hugs ternational Monetary Fund (IMF) Managing Director Christine Lagarde as People's Bank of China Governor Zhou Xiaochuan (L) smiles after G-20 finance ministers and central bank governors family photo before a plenary session during the IMF/World Bank annual meetings in Washington, U.S.,

Some continuity is possible. Yellen and particularly Kuroda could be reappointed when their terms expire next spring, and one of the top candidates to run the PBOC is cut from the same reformist mold as Zhou, who is expected to retire in the first half of 2018.

“I am not sure that all three will actually leave,” Jeroen Dijsselbloem, the chairman of euro zone finance ministers, who will himself leave his post in January, told Reuters.

“In general, losing experience is always a risk. But it is also a fact of life.”

But the odds now seem that by early next year the world’s two largest economies will have new and potentially more inward looking, central bank leadership.

Zhou’s successor will face an immediate choice of how aggressively to continue the policy transition toward market-based norms, and how to resolve a suspected mountain of bad debt on provincial and corporate books.

In the United States, some of the candidates being considered to replace Yellen are at odds with her on interest rates, inflation, and how to fight severe downturns.

Bank of Japan board member Sayuri Shirai said the Fed’s smooth transition from the era of near zero rates and bond buying to one of steadily tighter monetary policy was a testament to Yellen’s steady hand and good communication.

The calm “is attributable to the Fed’s improved communications skills with markets under Yellen’s leadership,” she said.

Reinhart said that in a sense major central banks are already in a transition as the current leaders tackle issues in a way that could help make the handoff smooth.

Whoever Trump names to run the Fed, for example, will have a clear “gradual” interest rate path and a balance sheet reduction plan to rely on, at least at first. Draghi is also expected to reduce the ECB’s bond buying and take the initial steps toward more conventional monetary policy over the remainder of his term.

Zhou set the stage for the renminbi’s broader use as a global currency whose value is determined by market forces, sparing his successor the internal and international tensions over China’s managed exchange rate.

It will be up to the newcomers, though, to be vigilant about new problems. Financial regulation is still evolving, and few governments appear willing to tackle high debts and rising entitlement spending, or have successfully confronted the changing nature of work and wages.

Posen warned that with inflation and interest rates still very low, governments hamstrung, and financial connections between nations “very dense and complicated,” incoming policymakers won’t have a tried and tested playbook.

“We don’t yet have the right set of tools and ideas to tackle that.”

Reporting by Howard Schneider and Leika Kihara; Additional reporting by Gernot Heller, Balazs Koranyi and Jan Strupczewski; Editing by David Chance and Tomasz Janowski