The Back-Channel Diplomacy Behind Trump’s U-Turn on Iran
Foreign ministers from Egypt, Turkey, Saudi Arabia and Pakistan gathered before dawn Thursday in Riyadh for talks aimed at finding a diplomatic off-ramp to the war in Iran.
But there was one big problem, according to Arab officials involved in the discussions: finding a counterpart in Iran to negotiate with. Earlier that week, Israel killed Iran’s national security chief, Ali Larijani, who had been considered a viable partner who could engage with the West.
Egyptian intelligence officials managed to open a channel with Iran’s Islamic Revolutionary Guard Corps—the paramilitary group that protects the Iranian regime and is the country’s most powerful security and political entity—and put forward a proposal to halt hostilities for five days to build confidence for a cease-fire, some of the officials said.
Those discussions laid the groundwork for an abrupt reversal more than 7,000 miles away in Florida.
On Saturday night, President Trump, who spent the weekend at his Mar-a-Lago club, gave Iran an ultimatum to reopen the Strait of Hormuz within 48 hours or the U.S. military would “obliterate” the country’s power plants. Two days later, as word of the discussions in Riyadh made its way to the White House, Trump reversed course, embracing diplomacy with Tehran and putting his threatened strikes on hold.
Trump’s shift Monday morning followed a series of closed-door discussions—through Middle Eastern intermediaries—that U.S. officials said gave them hope an agreement to settle the conflict was possible. It also reflected a growing desire by Trump and some of his advisers to bring the war to a close, according to people familiar with the matter, as the president faces political and economic fallout from the conflict.
“These are sensitive diplomatic discussions, and the U.S. will not negotiate through the press,” said White House press secretary Karoline Leavitt. “This is a fluid situation, and speculation about meetings should not be deemed as final until they are formally announced by the White House.” (…)
The US will not negotiate through the press and we should all wait for formal White House announcements.
But what was Trump’s “Truth Social” post yesterday morning, followed by his other statements:
- “very good and productive conversations” with a “top” Iranian leader with “the two sides having major points of agreement”.
- Steve Witkoff and Jared Kushner began the talks Sunday.
- “They called. I didn’t call,” Trump said.
- “this time, they mean business”.
- Trump added that discussions with Iran “started last night [Sunday], a little bit, the night before that.” (He probably meant discussions with regional countries…).
- “There’s automatically a regime change, but we’re dealing with some people that I find to be very reasonable, very solid. Maybe one of them will be exactly what we’re looking for. Look at Venezuela, how well that’s working out.”
What the WSJ omitted:
- Iran’s speaker of parliament Mohammad Bagher Ghalibaf, presumed to be the “top Iranian leader” wrote on X that in fact “no negotiations have been held with the US”.
- “Yes, there are initiatives from regional countries to reduce tensions, and our response to all of them is clear: We are not the party that started this war, and all these requests should be referred to Washington,” Iran’s Foreign Ministry said, according to state broadcaster IRIB.
- “Over the past few days, messages were received via certain friendly states conveying the US request for negotiations to end the war,” Esmaeil Baqaei, the foreign ministry’s spokesperson, told official news agency IRNA.
- People briefed on the matter said the diplomatic efforts involved very early-stage messaging, rather than a formal process.
- Hours after President Trump said the U.S. and Iran are talking, the Iranian Foreign Ministry spokesman said there have been no negotiations during the conflict but added that “messages have been received” from the U.S. in recent days requesting “negotiations to end the war.” “Iranian people demand complete and remorseful punishment of the aggressors,” he wrote in English in a post on X. “No negotiations have been held with the US, and fake news is used to manipulate the financial and oil markets and escape the quagmire in which the US and Israel are trapped.”
- Middle Eastern intermediators said the gaps between the parties remain enormous and that progress remains fleeting. Arab officials said they have been talking separately with both sides, but that Iran has set a high bar for ending hostilities that is preventing discussions from gaining traction.
That said, or not said as said it was said, we now know some of Trump’s off-ramps:
- Arab mediators have proposed putting the strategic waterway under the control of a neutral, regional committee to allow all ships to pass through, they said. Iran’s Islamic Revolutionary Guard Corps demanded a new order for the Strait of Hormuz that would allow Iran to collect fees from ships that transit the waterway, as Egypt does now with the Suez Canal, those people said.
- Trump told us that the regime change has already been achieved: “A deal would also include regime change, Trump said, noting how many top Iranian officials have been killed. “We’re dealing with some people that I find to be very reasonable, very solid,” he said. “Maybe one of them will be exactly what we’re looking for. Look at Venezuela, how well that’s working out.”
Trump will no doubt support GCC-Iran collecting fees for a Hormuz passage. Remember his “We don’t even need the Strait of Hormuz”. The fees would be paid by EU and Asian countries.
But the rest will be more difficult: “The Revolutionary Guard also demanded guarantees the war wouldn’t restart, an end to Israel’s strikes on the Iran-aligned Lebanese militia Hezbollah, closing of U.S. bases in the Gulf and compensation for damage done to Iran during the war, those people said.”
(…) But Mr Trump’s climbdown could also signal a divergence in American and Israeli war aims. Israel sees this war as a crucial step towards neutralising Iran’s military threat, its nuclear-and ballistic-missile programmes and support for proxies in the region, an objective it believes can only be achieved through regime change.
Mr Trump has at times appeared to share these aims. But recently he has appeared more concerned with ensuring that oil flows out of the Gulf. He has twice criticised Israel during the war, both times after Israeli jets bombed targets related to Iran’s energy industry.
Mr Trump’s focus seems increasingly to be on averting a global energy crisis for which he would be blamed, including by trying to make a deal with whatever remains of Iran’s regime. Israel thus faces the prospect that the war will end without the attainment of the main objective stated by Binyamin Netanyahu, its prime minister: to prepare the ground for a popular uprising that would topple the Iranian regime. (…)
The war’s unexpectedly long duration, as well as Mr Trump’s latest climbdown, undermine the idea that Iran’s regime is fragile and that regime change is possible. Instead, it is looking more likely that the ill-judged campaign will either drag on or end messily, with an Iran that is battered but defiant, and still able to inflict considerable damage on the region and the world.
Unintended consequences…
Marcos Says War May Spur Energy Talks With China in Disputed Sea
Philippine President Ferdinand Marcos Jr. is open to restarting talks with Beijing on a joint oil and gas project in a disputed area of the South China Sea, saying the war in Iran may provide the impetus for a breakthrough.
Marcos and Chinese President Xi Jinping in 2023 agreed to resume discussions on a joint oil and gas development in the waterway, which had been stalled for years.
“That’s something we’ve been talking about for a great deal, but territorial disputes are getting in the way of that,” Marcos said in an interview with Bloomberg Television’s Haslinda Amin on Tuesday at the presidential palace in Manila, when asked about the possibility of discussions with Beijing.
“Maybe this provides impetus for both sides to come to an agreement,” Marcos, 68, said, referring to the conflict in the Middle East. “That’s something we are exploring. Everything that might be of help, we are certainly pursuing.”
The remarks signal a possible further easing of tensions between the Philippines and China, which had ramped up after Marcos took office in 2022. Marcos had bolstered military ties with the US to help safeguard the nation’s claims in the South China Sea, leading to repeated clashes with Chinese ships deploying water cannons against Philippine ships and crew. (…)
The Philippines is also in talks with China on fuel and fertilizer, according to Marcos. (…)
The Philippines is exploring the possibility of sourcing crude oil from Russia too, Marcos added. (…)
Other consequences…
“Contracts representing millions of barrels of oil changed hands about 15 minutes before Trump’s post yesterday that sent crude prices tumbling by as much as 14%.
Futures corresponding to at least 6 million barrels traded in the two minutes from 6:49 a.m. in Washington, exchange data shows. The average for the same time period over the previous five trading days was about 700,000 barrels. Trump’s Truth Social post was published at around 7:05 a.m.
The FT did the calculation:
The notional value of those trades was $580mn, according to FT calculations based on Bloomberg data. (…)
The well-timed trades echoed the flurry of large highly profitable bets made on prediction market Polymarket on the timing of the US’s attacks in recent months on Iran and Venezuela.
“It’s hard to prove causality . . . but you have to wonder who would have been relatively aggressive at selling futures at that point, 15 minutes before Trump’s post,” said a market strategist at a US broker, referring to Monday’s trades. (…)
Several hedge funds noted that this was one of a number of examples in recent months of large trades being made ahead of official US government announcements.
One trader at a major hedge fund said energy consultants had recently noticed several large block trades that they found to be unusually timed. Another portfolio manager said a series of large and well-timed trades had created a “level of frustration” among investors.
“My gut from watching markets for the last 25 years is this is really abnormal,” he added. “It’s Monday morning, there’s no important data today, there aren’t any Fed speakers you’d want to front run. It’s an unusually large trade for a day with no event risk . . . Somebody just got a lot richer.” (…)
Tim Skirrow, head of derivatives at the consultancy Energy Aspects, said: “That is a larger than usual volume [in Brent and WTI] than I would expect at that time of day, but in the same breath it’s not excessively large. I find it a bit hard to join the dots here.”
He added that the Brent futures and options markets had seen “significant inflows” from funds over recent weeks. “Given the price reaction, it seems that nearly everyone was long. This is almost a necessary precursor for such a violent move.”
Mere coincidence? Some people made a lot of money, but some others lost a lot of money. The latter group might want to understand … Let’s see if the SEC will want (dare?) to look into that.