Indian Defence Review

The US exit from the deal and intensification of economic pressure, confronts both Iran and the US with an uncertain end-game, complicated by the appearance, at least of divisions within the political establishments in both nations. By demanding a blanket severance of its oil exports and all other trade as quickly as possible, President Trump is seeking to apply maximum pressure on Iran with a sense of urgency that suggests impatience for a quick result. But what is it that President Trump wants, precisely?

President Obama has many quotes credited to him. One of the many, addressed to his country’s foes, was a simple message to Iran, “We will extend a hand if you are willing to unclench your fist.” Iran did just that and on July 14, 2015, Iran and the six major world powers announced a deal after 18 days of hectic parleys, intense, and at times even fractious, negotiations. The group came to be known as “P5+1”, with Britain, France, Germany, Russia and China as the other members, and the deal was termed as the Joint Comprehensive Plan of Action (JCPOA). The US President was required to certify every 90 days that continued sanctions relief pursuant to the JCPOA was in the national security interests of the US and that Iran was implementing the terms and conditions imposed under the JCPOA and was not in material breach of it. President Trump had previously twice certified after taking over as President – in April and July 2017, albeit with reluctance. He has always been calling the deal as ‘biased and unfair’ and Iran as ‘a liar’. On May 08, 2018, President Trump finally announced the US withdrawal from the deal and re-imposition of sanctions on Iran and anyone dealing with it.

The Charges Against Iran

In his policy statement, President Trump has charged that Iran was not complying with all the provisions of the deal and highlighted two occasions when Iran produced more heavy water than permitted under the JCPOA. Iran had briefly exceeded the limits on heavy water production twice in 2016 (February and November) and on both occasions, the issue was amicably resolved fairly quickly. These two violations in 2016, did not, however, prevent President Trump from certifying Iran’s compliance, twice in 2017!

President Trump has also alleged that Iran was placing restrictions on the work of the inspectors of the International Atomic Energy Agency (IAEA), the sole inspection agency authorised to ensure compliance with the terms of the JCPOA. Contrary to the allegations, however, Iran has allowed over 400 IAEA inspections and over 80 short-notice inspections. The IAEA moreover, has daily access to Natanz, the only location where Iran is permitted to enrich uranium for nearly 15 years, apart from several other significant transparency measures.

President Trump, on the other hand, insists that Iran has been reluctant to give IAEA inspectors access to military installations which are part of Iran’s “clandestine nuclear weapons programme”. While Iran has said it will not permit IAEA access to ‘sensitive’ military sites, the JCPOA has provisions to seek such access, with the P5+1 having to provide reasons for seeking such access. The JCPOA also contains provisions to resolve any controversies relating to such access issues, via the mechanism of the Joint Commission. Without invoking these provisions and no information regarding such access requests being available in the public domain, Iran has been charged with “multiple violations of the agreement” by President Trump. The most significant charge laid at Iran’s doorstep is that it “is not living up to the spirit of the deal”; Iran’s activities from Syria to Yemen are viewed as destabilising factors in the region and directly opposing the terms of the JCPOA, which, in his view, was supposed to contribute to “regional and international peace and security”.

For all Iran’s penchant for troublemaking, its regional influence is often overstated. Iran is not the sole author of the region’s instability; the other Arab powers of the Middle East, most of them American allies, bear significant responsibility too for fuelling the extremism, sectarianism and lack of accountability that feed the region’s conflicts.

Reactions and Results

On July 14, 2015, even before the ink had dried on the accord, reactions and results had begun. Iranians poured onto the streets in jubilation to celebrate the nuclear deal that many hoped would end the isolation, which had led to years of sanctions and hardship. Even the Supreme Leader, Ayatollah Ali Khamenei, had made clear his support for the deal, wasting no time in praising the negotiators. Iran’s reaction now to the US withdrawal from the agreement has been on predicted lines. Its Supreme Leader has warned of making President Trump “worm food” before Iran bowed to his threats! Iranian President Hassan Rouhani’s reactions however, were subdued and spoke of negotiations with the other participants of the deal, to recover the agreement. On the other hand, President Rouhani, while propagating negotiations, has also instructed the country’s atomic agency to be ready to enhance its enrichment programme, should the efforts fail to retrieve the deal.

The three EU nations that signed the deal – Britain, France and Germany – seemed to have their responses ready, with a declaration of continued support to the pact, anticipating the US walkout, which was announced despite their advice to President Trump. This was on expected lines since a range of UN and other independent observers, including Tamir Pardo, a former intelligence chief of Israel, had confirmed that Iran’s nuclear ambitions had been severely curbed and that Iran had, by and large, kept its part of the accord. Russia and China, the other two members of the P5, also declared their continued support to the accord.

Notwithstanding the assertion of support to the pact by the other signatories, Israel, which had opposed the agreement from its very conception, welcomed the announcement by USA. Many in Israel’s defence and intelligence establishment, however, continue to feel that the deal was beneficial and had controlled Iran in the region. Across Middle-East too, ripples of the US action have been felt. Hostility between the two regional powers and rivals, Saudi Arabia and Iran, respective supporters of Sunni and Shia Islam, have increased throughout the region. The two nations, through their proxies, have enhanced confrontation against each other in Yemen and Syria.

Internally, Iran has been facing turmoil with localised protests in response to the country’s growing economic crisis and ever-increasing demands from hardliners. There have been protests at malls, traders closing their shops to protest against the declining currency, with demonstrators marching to the parliament building in Tehran. On June 27, 2018, nearly two-thirds of the parliament members demanded a joint approach by the three branches of the government to deal with the protests and the struggling economy. As USA increases the pressure on nations to stop importing Iranian oil – the embargo becomes effective in November 2018 – the Iranian government is hoping to deflect some of the criticism directed towards it to curtail the protests. The demonstrations so far, appear to be by the suburban middle-class, a group that typically supports moderates of the likes of President Rouhani. Government stability could be threatened if the upper class, which has stayed aloof from the protests, joins in. Such a move could then bring the poorer, rural citizens also into the fray. While the government attempts to control the developing protests and tackle the hardliners, the parliamentarians have recently voted to impeach the Economy and Finance Minister of Iran for failing to effectively manage the country’s economic challenge.

India needs Iran, not only for its gas and oil, but also because of its geo-strategic location. It provides the link for India to tap the vast iron ore reserves in Afghanistan and the connectivity to the hydrocarbon reserves of Central Asia. A strain in relations between the two nations could be an open invitation to China to step into the void created. The Indian foreign policy mandarins have achieved success by walking a tightrope between the real-politik and ideological policy options. India has been in talks with USA to seek a waiver for oil imports for itself. While there has been no denial from President Trump, the request has not yet been accepted.

The oil market is in a quandary. The success of sanctions will depend on how much they affect Iran’s oil exports. With Iran exporting roughly 2.5 million barrels per day (bpd) subsequent to the easing of sanctions post-2016, a drop of about only 500,000 bpd would be seen if the forthcoming sanctions are highly effective. This would be far less than the one million bpd that Iran’s exports declined by in 2012 due to sanctions. However, with the EU not putting in place a full embargo on Iran’s imports that alone can lead to a 600,000 bpd drop, a decline of 1 million bpd is unlikely if Iran stays a party to the deal and does not ramp up its nuclear program. A shortfall, in any case, can be met by the GCC nations and Russia, which have plenty of spare capacity.

What Does President Trump Want of a Defiant Iran?

The US exit from the deal and intensification of economic pressure confront both Iran and the US with an uncertain end game, complicated by the appearance, at least, of divisions within the political establishments in both nations. By demanding total severance of its oil exports and all other trade as quickly as possible, President Trump is seeking to apply maximum pressure on Iran with a sense of urgency that suggests impatience for a quick result. But what is it that President Trump wants, precisely?

For President Trump himself, the temptation of a bigger, better deal with Iran or at least a photo-op summit that has the appearance of a breakthrough, as with North Korea, seems to appear attractive. Since he first announced his intentions for the presidency, he has emphasised his unique capabilities to renegotiate “a new and lasting deal”. The barrage of threats and appeals that he has directed at Iran in recent weeks, to negotiate “any time they want” and with “no preconditions”, betray his exasperation that Iranian leaders have yet to take him up on the offer. There is a growing likelihood that President Trump may make an offer to meet his Iranian counterpart, President Rouhani, at the annual UN General Assembly meetings in New York. Speculations are high, as he had done this earlier in 2017.

The American foreign policy team which can have a turnover by the day, appears to understand Iran’s particular blend of antagonism and boldness that has historically discouraged bilateral diplomacy. While the US National Security Advisor, John Bolton and the Secretary of State, Mike Pompeo, have not been pursuing their earlier statements of supporting a regime change in Iran, their current public pronouncements with about a dozen demands, do sound like preconditions, contrary to the offer of talks by their President. Iran’s aversion to a direct dialogue with USA may be bolstered with such announcements.

Oct-Dec 2018: Buy Now

In their public statements, Iranian leaders have insisted that no dialogue is possible with the US until President Trump reverses his abrogation of the nuclear deal and ceases the application of what they describe as psychological and economic warfare against Iran. However, the mood on the streets of Iran appears volatile. Iranian leaders appreciate from their previous ordeals that muddling through sanction waivers does not offer a sustainable formula for securing the nation through a period of anticipated transition, especially with a succession process for an ageing Supreme Leader, is not far beyond the horizon. Waiting out the pressure is a possibility as many EU nations have advised with an eye on the American political calendar or even the investigation into Russian election interference. Iran’s appetite for tactical escalation remains, if only to highlight to USA that its pressure comes at a cost. On multiple occasions including the diplomacy that produced the 1988 ceasefire with Iraq, an overture to the US in 2003, apparently endorsed by Iran’s Foreign Ministry for a ‘grand bargain’ and the 2013 interim nuclear agreement with US and its allies, the Iranian leadership has used negotiations to manoeuvre itself out of dire predicaments.