What’s the deal with Iran anyway? Part 2
“…the worst deal in history.” President Donald Trump
“You can do business with the US banking system or do business with Iran, but not both.”
US Treasury Department
This is part two of the discussion we began last week on the serious ramifications of President Trump’s decision to pull the USA out of the JCPOA (Joint Comprehensive Plan of Action) Agreement. Previously we defined the JCPOA and contemplated whether or not the signatories of the agreement are complying with the covenant.
This week I will address what the departure of the USA from the JCPOA will mean. We will look at how that departure will impact the future of the JCPOA, along with that of the remaining signatories and the rest of the present players.
This issue of MTMTE has been particularly difficult to write. I have researched this matter thoroughly and as a result, some of my opinions as to how wise it was for President Trump to pull the USA out of the JCPOA have changed. Though, I uniformly believe that the JCPOA was not a good agreement for the US due to some of it’s serious short-comings, I am convinced that pulling the US out of the agreement was also not a good idea. It has limited the US’s options concerning how to respond to the nuclearization of Iran. It has polarized the US away from its historical allies in Europe. My conclusion is that there was probably a better way to deal with the inadequacies of the JCPOA agreement. I admit that I do not have the same access to information that our President has, but from what I have studied this may be a miscalculation. It is what it is, however; and the chips are falling, causing some potentially dangerous consequences for the US, Europe, Iran and for the rest of the world.
- What is the JCPOA and why is there such a difference of opinion as to how good it is as an agreement? Does it accomplish what it was intended to accomplish?
- Are the Iranians and the P5+1 honoring the agreement?
- How will the US’s departure from the agreement impact its intent?
- What are the possible scenarios for responses by signatories after the US departure?
- What will the likely result be in the near future?
Continuing on from last week:
Point 3. How will the US’s departure from the JCPOA agreement impact its intent and what is the timeline?
In a first step, companies must wind down holdings of Iranian sovereign debt or Iranian currency by the 6th of August. By that date, any person or company that assists the Iranian government with acquiring or purchasing US dollar banknotes will be subject to sanctions. Re-imposed by that date will also be sanctions targeting Iran’s trade in gold and other precious metals, graphite and coal, aluminum and steel, the country’s automobile sector and luxury products such as Iranian-origin carpets and caviar.
In a second phase, starting November 4th, sanctions against Iran’s oil industry will be reinstated, including penalties against foreign financial institutions that conduct significant transactions with the Central Bank of Iran. On top of that, the US is targeting petroleum-related transactions, punishing companies who do business with Iranian oil firms, such as National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company. Trump administration argues the nuclear deal doesn’t address other unrelated issues such as Iran’s ballistic missiles, regional influence, support for “terrorist” groups and human rights.
The first batch of sanctions being re-instituted by the USA will target trade-in cars, gold and other metals while the second will sanction Iran’s oil exports and transactions with the Central Bank. The Europeans, according to Federica Maria Mogherini (an Italian politician who has served as High Representative of the European Union for Foreign Affairs and Security Policy since November 2014) point to the renewed economic activity in Iran and the return of major European companies that will, in their view, ultimately strengthen Iranian civil society.
Point 4. What are the possible scenarios for responses by signatories after the US departure?
Possible scenario #1- Iran could decide to stay in the JCPOA but it would be doing so with a tacit acceptance that it will receive less benefits than it would otherwise. This would be a victory for hardliners in Iran and would undermine Hassan Rouhani’s presidency. It would be an embarrassing climb-down for Iran, but it would mean that war would be less likely.
Possible Scenario #2- Iran would withdraw from the JCPOA and resume its nuclear program. There are a couple of different ways this could happen. Iran could trigger a dispute resolution mechanism in the agreement, but without a realistic expectation. Iran could also simply ignore the JCPOA and resume enriching uranium to 20 percent or stop implementing the IAEA’s additional protocol, which gives increased inspection access. While either scenario might satisfy Iranian hardliners and evoke national pride in the face of US pressure, it is not a sustainable outcome. The US and Israel, fearing the renewed build up of enriched uranium, would doubtless begin to prepare for military contingencies. A diplomatic crisis would ensue.
Possible Scenario #3- The US could trigger a snapback of UN sanctions. A plain text reading of UNSCR 2231 seems to imply that the United States has this power, even though President Trump said that he was withdrawing from the JCPOA. The re-imposition of UN sanctions would put the EU in the impossible situation of having to decide between complying with the UN Charter or complying with a legally non-binding nuclear agreement with Iran. While there is some precedence for European institutions overruling the UN Security Council, it seems implausible that this path forward would result in anything other than a termination of the JCPOA.
As of this writing, there is no assurance that Europe can come up with measures that will fulfill these goals. Major multinational firms, weighing the benefits of an $18 trillion US market versus Iran’s $400 billion market, may quietly wind down their Iran business to meet an American deadline six months from now.
If sanctions against Iran are accompanied by pressure against Iranian proxies in the region, through support to those willing to resist them, Iran will confront the choice between retreat or escalation. Escalating will divert resources from use at home and add to Tehran’s economic and perhaps political problems, including increasing tensions among factions inside the regime, strengthening those who seek a fundamental change. Such a development in turn could risk instability and perhaps even revolt. Iran may already be in a pre-revolutionary phase; hardship from sanctions and increased costs of its involvement in regional conflicts could tip the balance.
If the JCPOA collapses completely, the International Atomic Energy Agency (IAEA) may face an untenable situation. Israel and possibly other member states will spur the agency to investigate allegations of previously undisclosed weapons-related activities in Iran. Iran will bar IAEA (International Atomic Energy Agency) access to the very sites, people, and information it previously enjoyed. And the United States will sideline the IAEA, apparently seeing no value in IAEA reports that do not advance US efforts to bring about Iranian political capitulation. As the nuclear crisis deepens, the UN Security Council will be rendered powerless by opposing interests among its five permanent members.
My Analysis: The decision to leave the JCPOA may have been a miscalculation by President Trump. The deal has significant flaws, notably a relatively brief duration and a failure to compel Iran to make a complete and correct declaration of all relevant nuclear activities—the bedrock of any effective verification system. Withdrawing from the agreement, however, only compounds those problems, shortening the duration and abandoning mechanisms to investigate and respond to compliance issues. It perhaps would have been wiser to defer any decision on leaving the agreement indefinitely, because no better deal with Iran is forthcoming. “The leverage that helped to bring about the JCPOA depended on a broadly multilateral front against the export-dependent Iranian economy, assembled painstakingly over many years.” Without that leverage, it may be difficult to get that kind of conciliation with the Iranian government again.
Point 5. What will the result likely be in the near future?
The most important consequences must be sought in the realities and balance of forces in Iran. There, the economy is reeling under double-digit inflation and unemployment, a 50-percent fall in the price of Iranian currency in the last two months, a massive flight of capital from Iran’s fledgling markets, a financial system on the verge of collapse, a water shortage of almost Biblical proportions, and most important of all, an increasingly disgruntled population, more and more militating against regime corruption, incompetence, cronyism, costly and regional adventurism. For the first time, that population is also defiantly finding Ayatollah Ali Khamenei, the Supreme Leader, responsible for failed policies.
Iran quietly announced recently that it will henceforth try to replace English with Russian as the primary foreign language taught in Iranian schools. Khamenei has long quietly favored an Iranian pivot to Russia. Talk of the US withdrawal from JCPOA was enough for him, and his allies to propose such a move more openly. An Iranian pivot toward Russia—and away from the West—will have far reaching, perhaps historic consequences.
I wrote last week on the possible ramifications concerning US allies and Russia and China. Now, what is clear is that there is so much more than meets the eyeconcerning this catastrophic situation. One thing is for certain; it may have been a reckless gamble, on President Trumps part, but history will judge the results.
There are so many variables important for us as Christians in this historic series of events. Here is the rub. I think they are right. “If the U.S. isn’t honoring its commitment already to the JCPOA, what’s the assurance that they’re going to honor a follow-up to the deal?” I think that this puts the USA in a very bad light. If the US cannot keep its word, why would any country ever place their trust in the US again? This is a difficult situation.
Between a rock and a hard place- In a call with Rouhani late last month, Macron and his Iranian counterpart agreed to work together to try to preserve the accord. But Iran’s official government website quoted Rouhani as saying Iran won’t accept any additional restrictions and the deal is “by no means negotiable.”
The impasse witnessed by all of us is what happens when pride and money take over diplomacy. President Trump determined long ago that he would pull the US out of the JCPOA. He feels he is not in a position to negotiate or back down. The Europeans cannot back down now, because if they do it will appear they are cow-towing to President Trump, even though they know that the JCPOA is a bad deal. The Iranians can’t back down because it will make them look weak in the world’s eyes. They must insist that nothing be changed, even though the evidence is compelling that they are noncompliant and have been from the signing. They will use President Trump’s actions to justify their deception. The Russians continue to live by Cold War rules, undermining anything in which the United States gets involved. The Chinese will exploit this situation to its fullest to gain a foothold in the Iranian sphere of influence. Global corporations will continue to do what is best for their shareholders, namely, making money. If you haven’t believed in the fallen-ness of man until now, this is a pretty convincing argument for it.
- Pay attention to what is happening. The ramifications of pulling out of the JCPOA will occur very quickly. Alliances will change over night, especially when great sums of money are involved. Only by paying attention will you be able to pray effectively and intelligently.
- Resist the temptation to join sides quickly. There is more than meets the eye. I have changed my opinion more than once over the course of my research considering this matter. Look for pride and greed. Recognize it for what it is and be wary of aligning yourself with it.
- Take two minutes a day to pray for this situation. It is not going away anytime soon. It has the potential to upset your world. When it does, trust me; you will pray.
Ian J Stewart, and director of the European Non-proliferation and Security Initiative at the Vienna Center for Disarmament and Non-Proliferation, director of Project Alpha at King’s College London, https://thebulletin.org/2018/05/trump-withdraws-from-the-iran-nuclear-deal-what-now/
Zia Mian, Program on Science and Global Security, Princeton University, physicist and co-director,https://thebulletin.org/2018/05/trump-withdraws-from-the-iran-nuclear-deal-what-now/
Seyed Hossein Mousavian, Woodrow Wilson School, Princeton University, associate research scholar, https://thebulletin.org/2018/05/trump-withdraws-from-the-iran-nuclear-deal-what-now/