President Donald Trump has attempted to reach a new agreement with the Islamic Republic of Iran since withdrawing the United States of America from the Joint Comprehensive Plan of Action in May 2018. Tehran’s leaders have a singular opportunity to craft a new deal favorable to them due to his eagerness. They could arrange for the lifting of economic sanctions and pumping in of American and European finance, technology and industry. In Trump’s own words, a new pact would “make Iran great” without seeking “leadership change.”
France, Germany, Britain, Russia, China, Iran and even the US discussed a new framework at the UN General Assembly in late September, according to French President Emmanuel Macron. The proposed new deal would have Iran permanently abjuring nuclear weapons, conforming to a long-term framework of peaceful nuclear technology, and contributing to regional stability and noninterference in return for the US lifting sanctions. Restricting the Islamic Republic’s ballistic missiles was set aside for future discussion. Iran’s Foreign Minister Mohammad Zarif disputed these terms, however, upon returning to Tehran.
Conditions within Iran prevent the Rouhani administration from working with the Trump administration to settle the nuclear issue.
On the military front Tehran’s Syrian ally, Bashar al-Assad, is well re-ensconced, and in Yemen, the Houthis are causing Saudi Arabia major scares – with tactical and material support from Islamic Revolutionary Guard Corps. Iran remains self-assured that its ballistic missiles are well bunkered to withstand an American aerial onslaught. Iran’s confidence is boosted after missiles and drones evaded US-made air-defense systems during the alleged-Houthi attack on Saudi Aramco. The US Air Force’s testing, on September 28, of the mobility readiness of command and control away from its Persian Gulf base in Qatar mistakenly added to Tehran’s belief in eventually gaining strategic superiority within the region. So has Moscow’s proposal for a new Gulf security plan.
Iran’s society ranks 60/189, ahead of Turkey, Egypt and Iraq though below much-less populated and far wealthier neighbors on the Persian Gulf’s southern shores like the UAE, Qatar and Saudi Arabia, on the UNDP’s Human Development Index. The UN Sustainable Development Solutions Network’s World Happiness Report places Iran’s people 117/156, again above Iraq and Egypt though below the Persian Gulf states. The World Economic Forum’s Inclusive Development Index ranks Iran 27/76 among emerging nations, just after China. Related: Why One Analyst Thinks Tesla's Stock Could Soar To $400
For now, Iran is weathering US economic sanctions. The nation has maintained export of oil to China, and even to Syria and India, through trade and transport mechanisms that skirt US regulations. China, in particular, continues doing business with Iran in the energy, mining and transportation sectors. Even Britain circumvented US sanctions in October to make a ?1.25 ($1.54) billion settlement with a partially state-owned Iranian bank. Iran has achieved self-sufficiency in gasoline refining. Planning ahead, Iran began cooperating with the Eurasian Economic Union. The oil ministry is laying a pipeline, with completion expected by March 2021, for carrying oil to an export terminal east of the Strait of Hormuz. Tehran and Beijing are finalizing a 25-year Chinese commitment to invest $280 million into Iran’s energy sector.
Military and social accomplishments coupled with economic endurance have emboldened officials of the Islamic Republic, including IRGC commanders, who abjure any compromise with the US. They harbor ill will for past American involvement – from the 1953 reinstallation of the shah, through chemical weapons supplies to Iraq during the 1980s war, to the ongoing sanctions.
Ayatollah Ahmad Khatami, speaking after Friday prayers at Tehran in late August stressed that “negotiation under pressure is surrender,” adding “given the approach adopted by the US and Trump, they’re going to have to take this dream to their grave.” In early September, the Majlis (Parliament) National Security and Foreign Policy Committee issued a “firm warning” over President Hassan Rouhani’s remarks on readiness to negotiate with “anyone” to resolve Iran’s problems.
Supreme Leader Ayatollah Ali Khamenei, who maintains authority largely by playing political factions against one another, has asserted: “I had cautioned about [agreeing to] the JCPOA… repeatedly reminded the president and foreign minister.” Indeed, Khamenei has begun characterizing US sanctions as a “short-term problem” facing the country that could generate “long-term benefits” by reducing dependence on oil and gas revenues.
So, upon returning from the UN General Assembly, Rouhani had little choice but to assert at a cabinet meeting that “all the contacts revolved [only] around the issue of reviving the 5+1 group.” Zarif too held a press conference once back in Tehran to reassure opponents of reconciliation that there had been “no bilateral talks between Rouhani and Trump.” Despite those attempts to placate the anti-US faction, the president’s brother was convicted of corruption and sentenced to five years imprisonment, viewed inside Iran as a warning to the executive branch it must toe the uncompromising line.
Barriers to trust: Iran’s real economic growth has declined since the US reimposed sanctions (Source: World Bank)
As a result, the more Trump has clamored for a deal, the more Iranian leaders have stuck steadfastly to their preconditions of lifting sanctions, restoring the JCPOA, and even paying compensation for losses. Tehran has even countered with the possibility of “leaving the NPT [Non-Proliferation Treaty]” and enriching uranium up to 60 percent. Iran’s shopkeeper-to-customer approach to a nuclear deal may be dangerous, however. The American president’s caution should not be misunderstood as weakness. To date, Trump’s policy toward Iran has been restrained and consistent – offer rewards and impose penalties. He has punished the Islamic Republic through economic and cyber rather than military attacks – most recently by sanctioning the construction sector on October 31. But Trump is not a rejected customer who quietly leaves. Related: Oil Majors Team Up To Launch World’s Newest Crude Exchange
In early October, under American pressure, the state-owned China National Petroleum Corporation pulled out of a $5 billion deal to develop the South Pars gas field as had France’s Total S.A. As US sanctions ramp up, the International Monetary Fund estimates Iran’s GDP will continue to fall by 9.5 percent in 2019 while inflation will rise to 35.7 percent. Unemployment will keep increasing, from 12.1 percent in 2018, according to the World Bank, due to foreign sanctions coupled with domestic mismanagement. So, the majles may authorize the Central Bank to devalue the rial. The United States has vastly more firepower ready to be deployed as well. Hence, compromising with Washington rather than repeatedly demanding the JCPOA be fulfilled is in the Islamic Republic’s self-interest.
Tehran’s aggression and deception including downing an unarmed US drone, seizing a British oil tanker, promising not to sell oil to the brutal regime of Syria but then doing so through a third party, perhaps mining commercial transport in the Persian Gulf, and facilitating strikes on Saudi energy facilities have compounded skepticism of its good faith. Despite implementation of the JCPOA in January 2016, Iran’s Atomic Energy Organization apparently retained capability to reconstitute its facilities. Tehran’s subsequent violation of commitments by increasing uranium enrichment utilizing advanced centrifuges and reactivating the Arak heavy water reactor has added to negative views. Such deeds make it difficult for the current or a future US president to reinstate the JCPOA, per Iran’s demand, although doing so is a path endorsed by the other signatories. However, a fresh agreement constraining Iran’s bad behaviors would be acceptable.
Speaking at the White House on January 2, Trump claimed, “Iran is in trouble. And you know what? I’d love to negotiate with Iran. They’re not ready… But they will be.” Yet, for now, Iran’s regime is enduring – with Rouhani insisting on October 8, “the Iranian nation’s power and status have improved after one-and-a-half-years of constant economic pressure.”
Consequently, conditions do not bode well for reinstating the JCPOA or negotiating a new nuclear deal soon.
By Yale Global
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China has also experienced the mercurial behaviour of President Trump. That is why it has been dragging its feet on reaching an agreement to end the trade war with the United States. Having won the trade war, China could well afford to drag its feet until the United States accepts its terms.
Iran could equally afford to wait until it sees the back of President Trump. It will, however, never negotiate with President Trump’s successor until he accepts Iran’s preconditions, namely lifting the sanctions and restoring the JCPOA.
Iran is talking from a position of strength. For now, it is weathering US economic sanctions. US sanctions have failed miserably to dent its oil exports. Moreover, it has not only become self-sufficient in gasoline but also a major exporter of refined and petrochemical products earning a very sizeable income to bolster its crude oil revenue.
On the military front, it emerged victorious in its efforts to support the regime of Syrian President Bashar al-Assad, its allies in Yemen, the Houthis, have taken Saudi oil industry hostage and above all it reduced its confrontation with the United States in the Gulf to a stalemate.
Military and social achievements accomplishments coupled with economic endurance have emboldened Iran in its attitude to negotiations with the United States.
Iran controls the Strait of Hormuz the most vital chokepoint in the world and is capable of blocking it at well. As a result, Iran is capable of taking the global economy as hostage by pushing oil prices to $140 a barrel and precipitating a global oil crisis.
That is why Iran has reached the conclusion that the US is capitulating and will be soon withdrawing from the greater Middle East, starting with the Persian Gulf, Iraq and Syria and leaving the whole region under Iran’s influence.
The global balance of power is shifting away from the United States towards the strategic Russian-Chinese alliance which will shape the world in the next two decades. Part of the shift is the emergence of Iran as the major power in the Gulf region and the strategic decline of Israel.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Iran has a thing against Israel. It is currently heating up between Iran and Israel. The hate is palpable. What is the rest of the world going to do? Oil supply is potentially affected. Best if we all transition away from oil dependency. World peace suffers around oil dependency. What Iran/Russia does is now a major trigger point.
Once again, nice contents.