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Iran Faces Threat Of Full Global Sanctions

There is a lot more to last week’s decision by the U.K., France, and Germany to trigger the dispute resolution mechanism in the 2015 Joint Comprehensive Plan of Action (JCPOA) ‘nuclear deal’ with Iran than meets the eye. The countries – three out of the total six states that formed the P5+1 group that signed the JCPOA (the others being the U.S., Russia, and China) – are working in line with pressure from the U.S. “either to force Iran back to the negotiating table on the JCPOA or to exponentially increase its economic pain,” as a senior source who works closely with Iran’s Petroleum Ministry told OilPrice.com. “This time around, the U.S. is looking for Iran to make the decision: go back to the pro-West moderate policies of [President Hassan] Rouhani and all will be good or allow the IRGC [Islamic Revolutionary Guards Corps] to tighten its grip and all will be bad,” he underlined.

More specifically, whilst many of the European Union (E.U.) initiatives related to the impasse between Iran and the U.S. have proven to be largely ineffective in practical terms – most notably, perhaps, the payment mechanism to facilitate trade between the E.U. and Iran – the invoking of the dispute resolution mechanism has teeth. “That’s because it’s part of the JCPOA itself, rather than some E.U.-only thing, with the reason for its being used basically being statements out of Iran that it’s increasing its level of uranium enrichment, and the P5+1 estimates of what the real figures are,” said the Iran source. According to a comment last week from Rouhani, Iran is now enriching more uranium than it did before it agreed to the JCPOA in 2015, whilst Israel maintains its view that Iran has continued a secret nuclear enrichment programme throughout the entire time of the deal.

The reality is somewhere in between, according to senior sources in Iran spoken to by OilPrice.com last week. The JCPOA limits Iran’s stockpile of enriched uranium to 300 kilograms (kg), less than half of Iran’s stockpile before the 2015 JCPOA was signed. At the same time, the JCPOA caps the uranium enrichment level at 3.67 per cent – before 2015 it was at around 21 per cent. The general rule for uranium-based nuclear weapons is that the more enriched the uranium, the less is needed for a weapon. So, at 20 per cent Uranium-235 enrichment, the critical mass is about 400 kg, but at 90 per cent enrichment the critical mass drops to about 28 kg. In any event the overarching aim of the 2015 JCPOA was to extend the ‘breakout time’ that Iran would need to produce enough of this material for one atomic bomb – from when it actually decided to do it - to at least a year from the worst (French and Israeli) estimates of just three months. Related: Oil Prices Head Lower Despite Small Crude Draw

Last July 2019, though, the International Atomic Energy Agency (IAEA) stated that Iran had breached both the stockpile limit and the enrichment limit. In November it added that the stockpile was at 372.3 kg and that its enrichment level was around 4.5 per cent. Shortly thereafter, the Head of the Iranian Atomic Energy Organization, Ali Akbar Salehi, said that Iran would enrich uranium to 5 per cent at the Fordow Fuel Enrichment Plant (a site specifically prohibited for use in the JCPOA) and added that the country had the capability to enrich uranium to 20 per cent. Behrouz Kamalvandi, a spokesman for the Agency, later that month stated that the capability figure was actually 60 per cent. However, according to various senior Iran sources exclusively spoken to by OilPrice.com just last week, the actual uranium enrichment capability figure is now 75 per cent, sustainably and with relative ease.

Consequently, the key aim of the U.S., U.K., France, and Germany - the first three also being Permanent Members of the United Nations Security Council (UNSC), and Germany being the ‘+1’ of the P5+1 group who signed the JCPOA with Iran – is to get a new version of the JCPOA agreed by Iran. The specific version that they want agreed is very close to the one that U.S. President Donald Trump wanted in the first place, OilPrice.com understands from political sources in Tehran and Washington. These includes four key things that were in the original draft put by former President Barack Obama to the Iranians before 2015 but which were objected to by the Iranians and withdrawn from the final agreement, plus one addition.

The first of these is that long-range (over 1250 kilometre range) missile and nuclear weapons programs are acknowledged by Iran as being inseparable for the purposes of adherence to the agreement and thus banned, and that Iran’s development and testing of other missiles should be subject to severe limitations. Second, Iran is to allow random inspections at all sites requested by international inspectors, including those sites that Iran says are no longer in operation (such as Fordow). Third, Iran must never come close to possessing a nuclear weapon. Fourth is that these provisions must have no expiration date. The additional clause is that Iran is to cease all support – financial, technological, expertise, personnel and all others – of any and all proxy groups, specifically including the Houthis, Hezbollah, and Hamas.

The way the U.S. – with the co-operation of the U.K., France, and Germany – intends to push this is via the dispute resolution mechanism’s progress through international legal channels. “The next step is that they [U.K., France, and Germany] refer the issue to a commission that is made up of representatives of the JCPOA signatories [including the other two UNSC Permanent Members, Russia and China] at which point, ultimately, Iran either answers and/or resolves any of the commission’s queries and findings or the commission officially writes to the UNSC,” the Iran source told OilPrice.com. “The UNSC – which includes Russia and China, of course – then decides whether to keep the current status quo or to re-impose all of the previous UN sanctions, which are even more widespread and hard-hitting than the U.S. ones,” he added. OilPrice.com understands from various sources in Moscow that Russia intends to threaten to veto any U.N. vote to implement further sanctions on Iran but will vote in favour if the U.S. drops all of its current sanctions against Russia (including those subsequent to the Crimea takeover, the poisoning of the Skripals, and relating to Nordstream 2) and ceases all of its objections to the finalisation of the Nordstream 2 build-out. Related: The Electricity Grid Of The Future Is Being Built Here

The other option for Iran, of course, as highlighted in my new book on the global oil markets, is that such a course of events will simply allow the IRGC to tighten its grip over the country, offering as it does a hard-line ‘resistance’ political and economic doctrine to which Iran became entirely accustomed during the last long-running sanctions environment. “From the moment [end of 2017] that senior members of Rouhani’s [moderate, pro-West] government started saying that the IRGC should give up its business interests in full and should be integrated into the regular Iranian army rather than be a separate unit, the IRGC has done everything to undermine the country’s drift towards political moderation and the West,” the Iran source told OilPrice.com last week.

“It was the IRGC that deliberately defied the requests of Rouhani at the beginning of 2018 not to engage in further ballistic missile testing and did just that, which pushed Trump into pulling out of the JCPOA in the first place,” he added. Moreover, after the 14 September attacks on Saudi Arabia’s Abqaiq and Khurais oil facilities, the IRGC has been busily working away at modifying what was essentially 1969 missile technology from Russia to produce missiles with a much longer range than many medium-range missiles. These are extremely mobile as they can be launched from adapted lorries, and have a real-time remote control handling system that makes them both incredibly difficult to shoot down and incredibly accurate. The IRGC has also unveiled a new guidance system upgrade, called ‘Labeik’, which would be compatible with the Fateh-110 series of rockets, and with Zelzal heavy artillery rockets.

The IRGC in effective power in Iran is perfectly compatible with the geopolitical plans of Iran’s long-running sponsors, China and Russia. China has been trying since the U.S. withdrawal from the JCPOA to quietly roll out plans that effectively make Iran a client state, via both extensive oil and gas deals and infrastructure build-out plans. Russia’s hold over the Islamic Republic, meanwhile, has allowed it access to the best Iranian oil and gas fields, enormous political and economic leverage in Iran’s own neo-client state Iraq, and to dictate new and unfavourable terms over its massive Caspian resources, among other objectively terrible deals for Iran. “Right now, Iran is at a watershed moment as important as in 1979 just before the Revolution that will dictate its course in the world for the next forty years at least,” the Iran source concluded.

By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on January 24 2020 said:
    When talking about Iran’s nuclear deal, analysts should also face the realities on the ground.

    The first reality is that Iran will never ever relinquish its nuclear programme. Despite Iran’s adamant denials that it does not seek to acquire nuclear weapons, the country is actually heading that way. There is also an element of security and also logic involved with Iran’s quest for nuclear weapons. Iran’s logic is that if Israel, India, Pakistan and North Korea can defy the world and get away with it, why not Iran. (For more information, please read Dr Mamdouh Salameh’s research paper titled:” Oil & Iran’s Nuclear Programme published by USAEE Working Papers Series NO: 09-036, 29 December 2009).

    The second reality is that threats of sanctions by the European Union (EU) will not intimidate Iran. While the EU is an economic giant, it is a political weakling following the dictates of the United States. Whilst pretending that it is against US sanctions on Iran, the EU has effectively been abiding by the sanctions through reducing their crude oil imports from Iran to the minimum.

    The third reality is that US sanctions have failed to stop Iranian crude oil exports and the United States is deluding itself if it thinks it can effect a regime change in Iran.

    The fourth reality is that Iran will never negotiate with the Trump administration now or ever. Moreover, any prospective negotiations with another US administration will not take place before sanctions are lifted.

    The fifth reality relates to Iran’s national mentality. There is an aspect of the Iranian national mentality that would undermine the impact of any economic sanctions and even threat of war. It is the martyr’s streak that the story of Ali, revered by Shi’ites as the true heir of the Prophet Mohammed, inspires. This sense of martyrdom could mean Iranians might prove not only unexpectedly resilient but could even draw strength from any economic hardship provided the leadership portrayed its nuclear cause as both just and patriotic.

    Against these realities, one would conclude that the United States and the EU are wasting their time and deluding themselves if they believe for one moment that sanctions or threat of war could derail Iran’s nuclear programme.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Hugh Williams on January 25 2020 said:
    The US use of economic warfare to control the world will have massive blowback because of the personal ruin it has caused.
    In the USA the cash flow has been to the Pentagon with little attention paid to maintenance, education, and the mean standard of living of US citizens.

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