Trump and the Iran Nuclear Deal: Geopolitics and Financial Unipolarity
On 8 May 2018, US President Donald Trump, true to his style and ‘America First’ philosophy, walked out of the Iran nuclear deal, technically known as the Joint Comprehensive Plan of Action (JCPOA). A fortnight has elapsed and it would be pertinent to examine the geopolitical implications of Trump’s decision.
The US’ Position
By now it is reasonably clear why Trump withdrew from the deal. He has failed to provide any rational argument against the deal for the obvious reason that there is none. The JCPOA is a 159-page document that prevents Iran from developing nuclear weapons. Trump and Israel’s Prime Minister Benjamin Netanyahu—the foreign leader closest to him spiritually—have argued that unless sanctions are re-imposed, Iran will continue with its ‘destabilising’ policy in the region, and develop missiles endangering Israel’s security—and that therefore it is imperative to keep Iran permanently in a pariah status.
The project to keep Iran as a pariah state fits in with the Israeli right wing’s decades old project for Greater Israel that involves the weakening of Israel’s neighbors, sowing discord among them, and eventually establishing Pax Israelica in the region. In pursuing his goal, Trump gave short shrift to the EU which had urged him to stay with the deal, and decisively demonstrated his disregard for international law. Obviously, the rest of the world must think hard on ways to deal with Trump. This question needs to be addressed in a context wider than the Iran deal.
Spotlight on the EU
Iran has made it clear that it would abide by the deal if the EU provides “practical guarantees” for the economic benefits of the deal. Iran wants trade and investment from Europe. The secondary sanctions that Trump has unleashed are meant to punish any non-US entity doing business with Iran by preventing it from doing business with US entities. In short, non-US companies have to now choose between the US and Iran.
The key question is how the EU will respond to US sanctions? In public, the EU has not minced words. The High Representative of the European Union for Foreign Affairs and Security Policy, Federica Mogherini, said, “It seems that screaming, shouting, insulting, and bullying, systematically destroying and dismantling everything there is already in place, is the mood of our times.” This begs the question: is the EU willing and able to stand up to Trump?
The EU-Iran trade stood at 20.9 billion Euros in 2017—a substantial jump from 13.7 billion Euros in 2016. The EU has initiated action for the 1996 “blocking statute” [Council Regulation (EC) No 2271/96 of 22 November 1996] to protect EU companies from US sanctions. In 1996, such action was taken in the context of trade with Cuba, but it was not tested as the US backed down. There is no good reason to believe that Trump would back down. He has already announced his intention to impose tariffs on steel and aluminum from the EU. It is rather unlikely that the EU will want to begin a trade war with an unpredictable Trump who can be easily provoked into disproportionate retaliation.
Major EU companies such as Norway’s shipping giant AP Moller-Maersk, Italy’s steel giant Danieli, and France’s oil major Total have announced their decision to quit Iran. In short, these big companies do not believe that the EU can protect them from Trump’s wrath.
What are Iran’s options?
Obviously, the options will depend on power equations in Iran. Iranian President Hassan Rouhani’s opponents, the hardliners, never wanted the deal as they distrusted the US. Trump seems to be seeking a ‘regime change’ in Iran. If he expects a new regime suitably intimidated and therefore ‘friendly’ to Washington, Trump is sadly mistaken. If Rouhani falls, the hardliners will step in.
However, what can a hardline government do? Can it start enriching uranium in violation of the deal? In that case, the EU will be compelled to join the US in imposing sanctions. Therefore, Iran finds itself in a weak position. A government that finds itself in a weak position will stamp out dissent. Repression will follow if people start protesting over price rises or abridgment of liberties.
There is the risk of Israel starting fireworks to provoke Iran into open hostilities; but Iran, even under a hardline government, is likely to act with utmost restraint. If Israel succeeds in provoking Iran, there can be a regional conflagration with disastrous implications for the regional states and states whose citizens reside there, apart from oil prices shooting up. India, in particular, is vulnerable.
Financial Unipolarity and the World Order
There exists a unipolarity in the world of international finance. Will the EU, China, and Russia work together to dismantle the US’ unipolar hold? No sign of any such project has been seen yet. Russia and China by themselves can provide limited relief to Iran. Russia can buy and sell Iran’s crude. Russia and China might be glad to draw Iran closer into an alliance with them.
Implications for India and Ways Ahead
If India goes slow on the Chabahar port project or reduces the import of crude from Iran at the US’ behest, it will hurt India, and New Delhi’s plans to project itself as an emerging regional power will be ruined. The US’ sanctions regime needs to be viewed in a wider context. The Countering America’s Adversaries Through Sanctions Act (CAATSA), passed in 2017, can be applied to prevent India from entering ‘significant’ defense deals with Russia. It is inevitable that Putin and Modi would have discussed CAATSA at the recently concluded summit in Sochi. Obviously, it would have been undiplomatic to make any specific mention about it in public. One may reasonably conclude that India will not stop buying arms from Russia because of CAATSA.
India’s diplomacy needs to navigate in the perilous geopolitical waters with Chanakyan strategies. Above all, diplomacy is the art of dancing with more than one partner at a time. The unipolarity in the financial world needs to be dismantled. India should not appear to be taking the lead in dismantling it, but it should be dismantled sooner or later, the sooner the better.