The U.S. is currently in talks with Saudi Arabia concerning a nuclear energy programme, which Riyadh says is a means of diversifying its economy and freeing itself from a reliance on crude. An agreement for such nuclear cooperation with the U.S. is known as a 123 agreement, and as part of any such agreement that nation must abide by certain conditions as per the U.S.’ nuclear non-proliferation policy. Simply stated, this agreement stipulates that nuclear partners must agree to use nuclear technology and material for peaceful purposes only. Any agreement for nations to enrich or reprocess nuclear material must be made separately, and herein lies the heart of the issues that threaten to undermine the process.
Saudi Arabia currently does not have such an agreement to enrich uranium, which is something that Saudi Energy Minister Khalid al-Falih sees as necessary. He stated that as the kingdom had large uranium resources, it would not be "natural" to import enriched uranium for use in reactors. It may then seem illogical for the U.S. to mandate that all nuclear material be imported, but the reasons behind this clause are clear when you consider the philosophy of non-proliferation, especially in the Middle East. The problem is that Iran currently has a deal with the U.S. and 5 other nations. Known as the Joint Cooperative Plan of Action (JCPOA), which limits Iran’s ability to enrich, but does not prohibit it completely. It also has an expiration date on those limitations.
The fear from Riyadh is that that the restrictions of that deal will not hinder Tehran’s ability to enrich weapons grade uranium. In an interview with CBS Saudi Crown Prince Mohammed bin Salman warned of a nuclear arms race in the Middle East, saying that “if Iran developed a nuclear bomb, we will follow suit as soon as possible.” This was in answer to the question of whether Saudi Arabia needed nuclear weapons to counter Iran, although he added that Riyadh had no desire to acquire them.
This puts the Trump administration in a tricky position. If it wants to stand firm against Saudi Arabia enriching uranium, then the only real option is to walk away from the deal entirely, or rewrite Obama’s deal with Iran, and force Tehran’s complete and permanent cessation of its own enrichment. The latter seems very unlikely. Whilst Europe wouldn’t want to upset U.S.-Euro relations, it is also reluctant to walk away from a deal that it sees as an immense achievement, especially one it believes Iran is abiding by. Related: U.S., Europe And Africa Boost Oil Exports To Asia
More critical is China’s investment in Iran. China has grand plans for Iran as part of its One Belt One Road (OBOR) project, plans which are already underway. China is interested in Iran for its location as a gateway to Europe, but it is also in need of its oil. In 2016 it promised Tehran $600 billion in investment, and late last year it extended $10 billion in credit. Opponents of the nuclear deal in Washington are convinced they can cripple Iran’s economy to force its hand, but according to Dr Kamiar Mohaddes, a senior lecturer in economics at the University of Cambridge, unilateral sanctions from the U.S. alone will not provide sufficient leverage. If Washington is indeed unable to force Tehran’s hand, then what will it lose by walking away from the Saudi deal?
Saudi Arabia is in talks with private firms from Russia, China, and South Korea to build two reactors, and it has plans to build 16 in total over 22 years, an investment of around $90 billion. Walking away from the deal would be walking away from any chance of having a piece of that pie, and as Saudi energy minister Khalid al-Falih said, "If the US is not with us, they will lose the opportunity to influence the program in a positive way." The Trump administration may be keen to bend these agreements to its will, but if it overplays its hand it stands to lose the most. Indeed its filibustering may already have led to its undoing, not only in terms of investment, but in terms of geopolitical influence on the whole.
By Gary Norman for Oilprice.com
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