Iran Issue Pops Up at G-20 Summit Posted by David Shorr

If you read today's communique from the G-20's Los Cabos summit veerrry closely, you'll notice a pair of oblique references to Iran's controversial nuclear program. The subject is pretty off-topic for a forum devoted to the global economy, but the sanctions-related issues noted in Los Cabos signal the intense and widespread international concern about Iran. The summit took place against the backdrop of significantly tightened sanctions due to take effect at the end of June and beginning of July. (Big hat tip to John Kirton of the University of Toronto Munk School's G-8/20 Research Group.)

The more explicit of the two Iran-related passages of the communique concerns international efforts to clamp down on illicit financial flows. The G-20 leaders are expected to say:

We support renewal of the Financial Action Task Force (FATF) mandate, thereby sustaining global efforts to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. 

The passage will represent the first-ever mention of WMD in a G-20 communique. It's no coincidence that the reference comes just as banking and oil export sanctions are notching up and could help spur diplomacy with Iran. 

The other connection to Iran has to do with energy prices. For some time volatility of food commodity prices -- and the derivatives markets based on those prices -- have been prominent on the G-20 agenda. The cost of staple grains have a big impact on household budgets, especially for low-income families around the world. In earlier G-20 communiques, though, the references to energy have focused on reducing subsidies and clean energy technologies. According to a draft of the Los Cabos statement, it will say:

We recognize that excessive price volatility in energy commodities is also an important source of economic instability.

Translation: a big spike in the price of oil could seriously undermine the world's fragile economoic recovery. And you don't have to be an oil futures trader to know the biggest driver of energy price volatility: fears about a war with Iran and reduced purchases of Iranian oil associated with sanctions (European nations are about to implement a total embargo). 

Photo: Gobierno Federal de Mexico