AGF Management : U.S.-Iranian Confrontation Looms Off the Coast of Venezuela

Insights and Market Perspectives

Author: 8

June 10, 2021

U.S.-Iran Confrontation Looms off the Coast of Venezuela
June 10, 2021
JOE BIDEN'S PROBLEMS BACK HOME: The U.S. president has to focus on more than just Europe for the next week. He faces problems back home: inflation concerns, his stalled legislative agenda, and a potential naval confrontation with Iran off the coast of Venezuela.

WITH ALL THAT'S HAPPENING NOW, the threat of a conflict with Tehran has received little attention. But it's a major concern within the Biden administration, which has issued public and private warnings to Tehran in recent days.

THE DISPUTE CENTERS on two Iranian ships that are believed to be carrying weapons - probably including missiles and fast attack ships - for the leftist government of Venezuela, a move the U.S. considers a threat to allies in the region. Satellite imagery reportedly has confirmed that several of these weapons are on the two Iranian ships.

THIS HAS PROMPTED SENIOR BIDEN OFFICIALS TO ISSUE A WARNING: 'We would reserve the right to take appropriate measures in coordination with our partners to deter the transit or delivery of such weapons,' a U.S. official told Politico, which first reported details of the shipment.

WE SEE FOUR IMPLICATIONS -

1. IRAN WOULD LOVE to poke the U.S. in the Western Hemisphere. Only hard-liners are allowed to run in next week's Iranian elections, and they have little appetite for a nuclear deal with Washington that could ease economic sanctions. They want to stir the pot.

2. VENEZUELA HAS BEEN CRIPPLED by U.S. sanctions and might be willing to accept a face-saving deal, refusing to allow the Iranian ships to dock in exchange for the easing of sanctions. A similar strategy may apply in Cuba, where relations with the U.S. could improve after four difficult years if Havana refuses to allow the ships to dock.

3. WINNING NAVAL SUPERIORITY is a key issue throughout the world. The U.S. faces threats from the Persian Gulf to the South China Sea, and we think next year's defense bill may include more funding for ship-building than Biden originally proposed.

4. FOREIGN POLICY HAWKS, mostly Republicans like Marco Rubio, may have a major issue for the 2022 and 2024 elections. Even though the Trump Administration did little other than talk tough, Biden would face a political push-back if the ships dock in Venezuela and his implied threat to Iran isn't backed up.

THIS IS JUST ONE OF SEVERAL ISSUES Biden will have to deal with before his meeting with Putin, which has generated very low expectations. In addition to an inflation report this morning that may be worrisome, Biden faces an uphill fight to jump-start his stalled agenda. And the reviews have been scathing from both parties for the trip to Central America by VP Harris.

THE LAST THING BIDEN NEEDS is a foreign policy crisis, but one seems to be looming in the Caribbean Sea by early next week - a distraction that Putin would surely enjoy.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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.

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