We can
conclude that the US hampering the Iran Nuclear deal will deal the global
economy a major hit which will lead to many drawbacks. This decision made by
the US is causing a ripple effect which is leading to a more issues to crop up
rather than bringing forth any fo

Conclusion

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

UAE can be seen to have a very booming
economy due to the increase in the price of Oil as they are one of the few OPEC
countries. This will lead the currency appreciating. The economy will then move
on to providing more jobs and lower cost of living. As there will be more money
being brought in from their Oil Industry. The funds can then be allocated to
other facilities and industries to provide more jobs and other opportunities.
It can be said the OPEC countries will be facing a higher profit which in turn
will boost their economies and make import of goods from other countries
cheaper and exports becoming more expensive.  

Impact on UAE

 

 

 

China can take drastic measures to
pressure US to go forward with the deal by initiating the sales of the US debt bills.  This will lead to the Dollar depreciating even
more and China can maintain the current ratio of their Foreign exchange rate.

China’s exports will become costly as
they cannot maintain supply at the current rate and such a scenario will lead
to cripple their economy to a certain extent. They along with India will
probably face greater depreciation of their respective currencies. The
suffering on long term is inevitable for both the major populace economy in the
entire world.

Due to the above fact, any rise in oil
prices on the other hand will create major challenges in controlling the higher
inflation & increase in cost of living besides meeting their planned costs
on infrastructure development and related Social costs.

But property and construction activity,
two of the economy’s main growth drivers, are starting to slow down due to
higher borrowing costs and government measures to cool a heated housing market
and curb industrial pollution.

China’s economy has surprised financial
markets with robust growth of nearly 6.9 percent in the first nine months of the
previous year, underpinned by a recovery in its manufacturing and industrial
sectors thanks to a government-led infrastructure spending spree, a resilient
property market and unexpected strength in exports.

The market will take a nose dive as the
citizens will only purchase the essentials and the IT, Automobile, Luxury Goods
and other similar industries will be hit due lack of customers which will
essentially lead to slowdown of the economy and people being laid off. The GDP
will come down and still they will be able to maintain the status of their
Growth in key segments by cutting down the non-plan expenditures besides
removing Subsidies offered to their Citizens at present. Indian Rupee also will
end up weakening and to survive and progress further, they need to opt major reforms
in their economic and Investment policies to attract Foreign Direct Investment
(FDI) to avoid challenges in BOP (Balance of Payments). This may help stable
their currency from further fall.

India will be facing major slowdown of their
Economy due to the increased price of Oil as they are one of the major
importers/consumers of Oil. As the government will have to cover the costs of
the Import bills due to increase in prices of Oil, they will have to levy
heavier tax on goods which will lead to higher pricing of goods and higher cost
of living. The Government may resort to reduce the higher Tax on Petroleum
products which may lead to lessor revenue for the country. This may lead to
delay or slowdown in Basic Infrastructure development being planned or
currently being undertaken by them. Higher deficit in budgetary proposals may
weaken their economy and the Investors’ confidence may take a beating.

Impact on India and China

USA being a debt economy will lead to banks failing as their
customers drastically reduce as compared to the overall withdrawals to cover
the higher cost of living. This will lead to Credit facility being reduced in
the banks and SLR will reduce as the amount of liquid funds will drastically
reduce to meet demand.  LIBOR can be
estimated to increase by another 80-90 points to meet with the demand as the
Central bank cannot supply all the demand with its limited supply of liquid
funds. The value of treasury bills will also mark a rise because of the current
scenario.

The decision made by the US to decertify the Iran nuclear Deal
will lead to hostile relations between US and Russia. Russia will then put a
leash on the exports made to the US and introduce higher tariff rates towards
US imports and export of Oil to the US. This will lead to Increasing price of
goods and higher cost of living in the US. Russian Ruble can be expected to appreciate
due to this situation as they are a major producer of Oil in the global market.

The production of Shale oil will be increased in the US but seeing
as the cost of production of Shale Oil being very high, it will not impact the
cost of Oil on the global market. The automobile industry especially takes a
major hit as sales will go down with rising price of Oil. The US being a major
producer of automobiles will face severe decline which will in turn depreciate
dollar.

Iran holds about 5.1% global share of Crude Oil & with the
current situation where the oil price is increasing due to higher tensions
between Iran and USA due to the Iran Nuclear deal fallout. The overall economy
will undergo a drastic dip with the inflation in the price of goods which leads
to depreciation of the value of all currencies.

We can expect the past two – three years’ severe price weakness of
crude oil to result in a return to balance in the global oil market in the 1st
quarter of 2018. At that stage, we can expect a fall of 1% in demand for the
global effective spare capacity. In addition, given the almost unprecedented
fall in investments made in industry since 2014, we can expect the focus to
return to the availability of the overall supply.

 

Oil’s
oversupply problem, which has caused most of the trouble in the markets in
recent years, will end by 1st quarter of 2018, and the market
will return to balance.

Nearly 67% of the global crude oil production is consumed by the
already developed or leading industrialized nations – i.e., the nations   that make up the Organization of Economic
Cooperation and Development. But the rising share of the demand for oil is
originating from the newly emerging markets namely India, China & Brazil.

 As the economy expands, the
demand for Oil increases proportionally. Oil accounts for more than one-third
of the global energy supply and more than 95% of transportation energy usage.
It is an important sector where there are no other viable substitutes. Annual
consumption of Oil averages approximately 2.5 barrels per person in
Non-Organization for Economic Co-operation and Development (OECD) countries
which constitutes 82% of the global population and around 14 barrels per person
in the OECD, with the US having an outlier of 25 barrels per person. According
to the current market scenario we can estimate approximately 90 million barrels
of oil are being consumed per day globally. This is at approximately around $
70 a barrel. 

Impact on a Macro-economic scale

This leads to Oil prices sky rocketing to more that $ 80 a barrel.

     He wants to
pressure Iran into getting a better deal.

     It doesn’t
cover Iran’s activities in the region supporting terrorism.

     It doesn’t
cover the launches of Ballistic missiles.

     The deal
itself is not a long-term deal.

The reasons that can be inferred as to why Mr. Trump denied
certification are listed below: –

On 13th of October 2017, the president of USA, Donald
trump announced that the US would not make the certification on the condition
of U.S. Domestic Law but did not terminate the deal.

Under the agreement, Iran agreed to reduce its stockpile of
low-enriched uranium by 98% and do away with their stockpile of medium-enriched
uranium. It was also agreed that Iran will only enrich unto 3.67% for the next
15 years. Iran agreed to reduce the number of gas centrifuges by two-thirds for
the upcoming 13 years and uranium-enrichment activities will be restricted to a
single facility. The country also agreed to not build any new heavy-water
facilities.

The Joint Comprehensive Plant of Action (JCPOA) or more commonly
known as the Iran Nuclear Deal, is an international agreement on the Nuclear
plan of Iran which was jointly reached on 14th of July 2015 between
Iran, P5+1 and the European Union.

Introduction