Indian Defence Review

On 08 May 2018, President Trump announced that the US was pulling out of the Iran nuclear deal or ‘JCPOA’ as it is called. Delivering on his election promise, he called it a “horrible one-sided deal that should have never, ever been made”. Promising strict and unprecedented economic sanctions, he urged the international community to join the US in confronting Iran. Following it up on 21 May, Mike Pompeo, the newly appointed Secretary of State announced a list of 12 demands for inclusion in any future deal with Iran, the stated purpose being to ensure that Iran is prevented from developing nuclear weapons ‘in perpetuity’.

Outlining the demands, Pompeo said that Iran must declare the military dimensions of its nuclear programme and “permanently and verifiably abandon such work in perpetuity”, stop uranium enrichment and allow international inspectors “unqualified access to all sites throughout the entire country”. The list also states that Iran should pull out completely from Syria, end military support to Houthis in Yemen, Taliban in Afghanistan and permit disarming of Shia militias in Iraq. Further, it requires Iran to cease backing its proxies in the region like Hezbollah, Hamas and the Palestinian Islamic Jihad. Threatening action against non-compliance with these demand, Pompeo added that “the sting of sanctions will be painful. These will be the strongest sanctions in history when complete. Iran will be forced to make a choice: either fight to keep its economy off life support at home or keep squandering precious wealth on fights abroad. It will not have the resources to do both.”

How Does it affect Iran

There is much talk on how the economic sanctions are likely to have a crippling effect on Iran which may ultimately lead to not only a regime change but also force Iran back on to the negotiating table. Such arguments are however, far too optimistic and simplistic. For a realistic appraisal, we need to take a step back into recent history and evaluate.

Until the JCPOA was signed in July 2015, Iran had been subjected to both primary and secondary sanctions from the US as well from the EU for over a decade since 2004-05. However, during this period, Iran not only survived but expanded its influence across the Levant including Iraq and Syria. In 2010-11, the outbreak of the people’s revolution in the form of ‘Arab Spring’ shook the rulers/monarchs and regimes in the region. Iran, however, was affected by it to any major degree. Instead, it emerged as a protector of the regime in Syria, supporter of Houthi militia in Yemen and an all-out supporter to Iraq in its fight against the Islamic State (IS). It also found common grounds with Turkey and strengthened its alliance with Russia.

On the economic front, the easing of economic sanctions announced post the JCPOA, could not take full effect as they were declared just around the time when the US presidential elections were taking place and most businesses decided to wait for the outcome of elections before moving into the Iranian markets. Trump’s election naturally caused businesses to exercise caution.

Oil exports, Iran’s top revenue generator include China, India, South Korea, and Turkey as its primary clients. While South Korea could downscale its imports aligning with the US, others are likely to either circumvent or be exempted from the effect of economic sanctions. With EU announcing support to the Iran nuclear deal (JCOPA), there could even be a way found to pay for the oil and natural gas through non-dollar payment methods.

The result of major international companies investing in Iran like  ‘Total’ and ‘Airbus’, pulling out will no doubt be an economic setback to Iran, but with hardly any money having actually been invested in Iran by these companies till now, the negative effect is rather notional and speculative. Also, smaller businesses, petrochemicals and automobiles industries which have major clients in Asia could risk continuing business with Iran as they have limited exposure in the western markets and thus limited affect of US sanctions hurting them.

Domestically, the Iranian regime has been put under pressure more than once in the recent past. The most recent was a series of protests across various cities in Iran in December 2017 and January 2018. Starting from the city of Mashad, protests focused on rising prices, high unemployment rates, and corruption in the government. The protestors even shouted slogans asking the ‘Supreme Leader’ to step down and withdrawal of Iranian military support in Syria. However, lack of coordination amongst protesting groups, immediate and heavy crackdown by the government as well as lack of political alternative saw the protests peter out. There could be a revival of such undercurrents with the kicking in of US economic sanctions. The Iranian rial has already lost its value against the US dollar by over three times in the past weeks and fear of economic sanctions could take it further down. Increased pressure of sanctions, rising inflation, depleting oil revenues and slower growth could pose challenges for the Iranian regime in the future.

Weaponisation of Iran’s Nuclear Programme

While Iran has been accused of violating the terms of JCPOA by Israel and the US, the IAEA has consistently confirmed that Iran has been in full compliance of terms and conditions with regard to its nuclear program. With regards to the threat of Iran’s nuclear programme being upgraded to weapon grade or otherwise, here are a few points that have been stated earlier too[i] which may drive the argument.

Empirical history of nuclear weapons post World War II highlights two facts; firstly, no nation has yet been prevented from becoming a nuclear weapons state if it sets its sights on it, be it India, Pakistan, North Korea or Israel. Secondly, there has yet been no case of a nuclear weapon power using its nuclear weapons in a military conflict.

Iran is yet to be directly involved in any military conflict (after war with Iraq in 1980s) in a conflict-ridden region. Yes, it has proxies in the region but so do many other countries protecting and serving their respective national security interests.

It is not in Iran’s interests to declare a nuclear weapons program unilaterally. Maintaining a state of ‘nuclear latency’ would be the best option which would leave the window open for a ‘quick breakout’ if and when it is threatened militarily.

Domestically, the nuclear program has been a huge rallying point and a major source of nationalism for the regime. Iranians have endured economic sanctions over the nuclear programme for over a decade earlier.

With the exception of Israel, which frequently calls for military strikes on Iran, there is little threat to Iran in the region. The Saudi Arabia-led countries in the region have never demonstrated intention of taking any unilateral military action against Iran.

In case Iran develops nuclear weapons, Saudi Arabia, UAE, and possibly Egypt could be forced to do the same, thus dramatically altering the regional security calculus. Also, the US and Israel would then assume a legitimate right to bomb Iran. Thus, currently, Iran, gains very little from developing nuclear weapons.

Conclusion

The economic sanctions post US pull out from JCPOA pose a huge challenge for Iran. With the EU presently supporting Iran in continuing with the nuclear deal, there is a ray of hope for the JCPOA to survive. Some major private investments from Europe have announced their pullouts from Iran. In such a scenario, effectiveness of the European governments siding with Iran could yield limited gains to business in Iran. Also, in his televised address on 24 May, Iran’s Supreme Leader has clearly laid out the ‘Seven’ terms in front of the EU for this deal to continue.

Oil revenues, though depleted, are likely to continue bailing out Iran’s economy for the time being. Increase in global oil prices could help Iran. Again, this is not the first time that Iran would have been subjected to strict economic sanctions. Unlike previous decade, sanctions being imposed this time around have not found global favor, which may work to Iran’s advantage. In the present form therefore, Iran is unlikely to succumb to the pressures of economic sanctions. Instead, it could streng then existing alliances, forge new ones (as with Qatar, Turkey) and harden its stance to secure its national and regional interests, adding to the destabilization, fragmentation and fragile security situation in the region. In wake of recent protests in the country and the devaluating rial, the US pullout might just be the lifeline that Iranian regime could hope for.

Courtesy: http://www.claws.in/1907/the-iranian-regime-and-the-us-pull-out-from-nuclear-deal-mounting-trouble-or-a-timely-lifeline-rajeev-agarwal.html