US says Iran talks to continue despite Hormuz skirmishes

[WASHINGTON] Talks between the US and Iran over a permanent peace deal are continuing, according to a American official, despite two days of clashes that threatened to shatter an already fragile ceasefire.

The US is still committed to finding a diplomatic solution with Iran, the official said on Thursday (Jul 9), declining to be named discussing sensitive matters. The official described the ongoing discussions as technical talks.

The comments are likely to ease fears of a return to all-out war after the US launched strikes on Iranian military targets this week, retaliating against attacks on ships in the Strait of Hormuz. Iran hit back at US bases in the region, including in Kuwait and Bahrain.

The skirmishes underlined the precariousness of an interim agreement signed between Teheran and Washington in mid-June.

The two countries, which have been at war since the US and Israel bombarded Iran in late February, are trying to agree a permanent peace by around mid-August, though that timeline may have to be extended. Qatar and Pakistan are the main mediators.

Maritime traffic through the strait has fallen this week and oil has risen, with Brent up more than 6% to US$76.50 a barrel, taking its gain this year to 25%. Still, it remains far below a peak in late April of US$125, when traders were more concerned about all-out conflict resuming. Since then, US President Donald Trump has consistently signalled he wants to end a war the majority of Americans disapprove of and which has hit his polling numbers ahead of midterm elections in November.

Amid the new violence, Trump on Wednesday suggested the ceasefire was “over.” But he also said he would not prevent negotiations from going ahead.

Talks slowed this week as Iran held days of funeral rites for former Supreme Leader Ali Khamenei, who was killed in an airstrike on the first day of the conflict. Khamenei was buried on Thursday in the north-eastern city of Mashhad. His son and successor, Mojtaba, has not been seen in public or appeared on video since taking on his new role, sparking questions over his health and involvement in negotiations with the US.

The flareup and the US Treasury’s decision to revoke a waiver allowing the sale of Iranian oil globally marked the biggest challenge to last month’s interim peace agreement.

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The interim deal was supposed to reopen Hormuz, a narrow waterway where a fifth of the world’s oil and liquefied natural gas transited before the war effectively brought maritime traffic to a standstill.

Both sides have accused each other of violating the truce, with Washington saying Teheran is attacking vessels and Iran claiming the US is interfering with its control of the waterway.

The same US official cast Iran’s attacks on vessels in the strait as acts of terrorism and Teheran’s actions as failing to meet the interim deal’s performance-based conditions. The US says Iran can only get funds held in various countries unfrozen if it meets the terms of the memorandum of understanding.

Iran has not claimed this week’s strikes on ships, including Saudi and Qatar energy tankers.

The US military said Iran doesn’t control Hormuz, citing that it’s helped the transit of more than 800 commercial vessels and 380 million barrels of crude oil through the strait since early May.

Iran is insisting that ships going through the waterway seek its permission and has said it will set up a permanent management system that may involve vessels paying fees. The US and many other world powers say that’s unacceptable and that ships must have free passage.

Beyond Hormuz, the US-Iran talks are meant to resolve long-standing and highly-complicated issues regarding the Islamic Republic’s nuclear programme. Trump, fearing Iran will build a atomic bomb, wants a moratorium on Iran enriching uranium for more than a decade. He also wants Teheran to relinquish its existing stocks of near-bomb grade uranium. BLOOMBERG