Flawed Nuclear Deal and Washington Options.. Iran In the Corner! (3-2)
Although the US pulled out of the nuclear deal and imposed sanctions on Tehran unilaterally, the deal affected other parties. There are reasons and repercussions that lashed the remaining five signatories to the agreement, and extended to include regional actors other than the signatories, given the complexity of their interests and their interdependence between the US and Iran.
Therefore, in this episode, we are reviewing the positions of the most important actors who welcomed and objected to this deal, because Iran's behavior is directly linked and dependent on the positions of these powers.
Positions of the nuclear deal partners
A. Europe… between Washington and Tehran
The US' announcement of unilaterally pulling out of the nuclear deal on May 8th 2018 dismayed the European signatories to the deal; the United Kingdom, France and Germany. The officials of the three countries made a formal statement expressing their concern about the US decision to pull out of the deal and stressing their commitment to it and its importance for their collective security. European Union’s High Representative for Foreign Affairs and Security Policy, Federica Mogherini, stated on October 13th 2017: "We cannot afford as the international community - as EU for sure - to dismantle a nuclear agreement that is working... This deal is not a bilateral agreement ... It does not belong to any single country and it is not up to any single country to terminate it. The European Union continues to fully support the Iran nuclear deal, and the full and strict implementation of all its provisions by all parties… Iran is implementing all its nuclear-related commitments." On May 16th 2018, Then President of the European Council, Donald Tusk, warned of the worrying declarations of US President Donald Trump, and summarized the European position, saying: "With friends like that, who needs enemies?", in reference to Trump and the negative effects on Europe following the US withdrawal decision, which ignored Europe's security concerns.
Tusk added: "But frankly speaking, Europe should be grateful to President Trump. Because thanks to him, we have got rid of all illusions. He has made us realize that if you need a helping hand, you will find one at the end of your arm.", indicating that Europe must do its best to protect itself.
The EU considers West Asia its direct neighbor. The nuclear arms race and the possible war against Iran will directly affect Europe, especially the influx of refugees that it has been suffering from for years.
The EU considers the nuclear deal as a gain for European diplomacy, as Mogherini confirmed on May 8th 2018, "The JCPOA is the culmination of 12 years of diplomacy which has been working and delivering on its main goal. The EU is determined to work with the international community to preserve it." In addition, withdrawal from the deal threatens the European economic interests with Iran, which expanded after signing the deal in 2015, as the value of trade between Iran and the EU increased from 7.94 billion euros in 2015 to 21.6 billion euros in 2017.
In January 2019, European countries announced the proposal of a new financial mechanism called "INSTEX", Instrument in Support of Trade Exchanges, aimed at protecting European companies from US sanctions, seeking trade exchange with Iran to include food, medicine and food products, and facilitating euro-based transactions instead of USD-based ones between Iran and European countries outside the global financial system that is dominated by the US, but this mechanism has remained unused to this very moment.
Although the EU was seeking outputs, European firms did not wait for their effectiveness, so they withdrew from Iran, fearing US sanctions to be imposed on them, and thus prevent them from accessing the US markets, as well as losing their current accounts in the US banks. Banks also feared exorbitant financial sanctions imposed by the US, and the USD 10 billion fine imposed on the BNP Paribas of France in the first half of 2014 for its transactions with Iranian companies included in the US sanctions lists, is an example of what Washington can do.
An International Crisis Group report published in January 2018 quotes a European banker as saying: "For most international banks, the JCPOA agreement is already dead."
Despite the EU’s efforts to try to maintain the nuclear deal by proposing mechanisms to ease US economic sanctions on Iran, such as INSTEX, which is mainly limited to facilitating commercial transactions in the pharmaceutical, medical and agricultural sectors, or activating the embargo law of 1996, which requires European companies not to comply with US sanctions, or allowing the European Investment Bank to have investments in Iran, but all of them have failed.
The US sanctions on Iran are harsh, as seen by the EU, because they undermine Iran's access to international financing, and penalize multinational companies that carry out their transactions in US dollars.
The volume of US commercial and economic interests with Iran is very small, compared to their European counterparts. Exports of Germany, Iran's largest European trading partner, reached 2.95 billion euros in 2017.
Therefore, the EU seeks to save the nuclear deal to achieve economic, political and security goals, and the desire to achieve more financial and banking independence does not follow the fluctuations of the US policy. But meanwhile, it fears Iran's regional behavior, its insistence on developing its ballistic missile program, its support for terrorism, and its blatant interference in the domestic affairs of the countries of the region.
The EU is fully aware of the small commercial and economic interests it has with Iran if compared to their counterparts with the US, and it is also aware that its support for the nuclear deal is limited and temporary and Iran cannot bet on it for long.
B. Russia and cautious balance
The Russian position has continued its official support to Iran without actually having influence, which can be relied upon in the long term, as Putin stated on May 15th 2019, in a joint press conference with his Austrian counterpart, addressing Iran, that "Russia is not a fire brigade to rescue everything that does not fully depend on us."
He went on with his statement calling on Iran to maintain the nuclear deal, as Russia is one of its six parties. But in fact, Russia benefited from the US withdrawal on several levels.
Russia benefited from the rise in oil prices in the wake of the crisis, as it is one of the global oil exporters, and the sudden decline in Iranian oil exports provided an excuse for Russia to increase its share in the global market within the Vienna agreement with OPEC to compensate for the Iranian oil shortage.
The US' preoccupation with Iran also reduced its focus in other conflict areas, such as the Russian military intervention in eastern Ukraine, its occupation of the Crimea, and the interference in the internal affairs of Ukraine, Belarus and other regions of the world. Indeed, it was stated in the Stratfor report for the third quarter of 2019 that the Iranian crisis topped the priority on the US foreign policy agenda.
Russia also made use of the lack of Iranian financial resources, which decreased Iran's ability to support its militias abroad, as Russia could expand its influence and increase its gains in Syria after their alliance shifted from supporting the Assad regime to the stage of divergence of interests, the division of spoils and competition for hegemony, especially after the convergence of the US, Russian and Israeli interests to kick Iran out of Syria.
The division over the nuclear deal between the EU and the US also served Russia's strategic interests. One of Russia's most important political and security goals is to undermine unity among Westerners, as any disaccord within the Western alliance negatively affects their power and enhances the capabilities of their enemies.
Yet, those interests gained by Russia do not mean that it supports the severe economic sanctions that followed the US withdrawal from the nuclear deal for well-known reasons, as it is in its interest - as it views - to keep Iran an important player in the region, and to preserve the multipolar region.
Russia believes that the nuclear deal enhances the Russian security, as keeping Iran free of nuclear weapons is in its favor, because they both share the energy-rich Caspian Sea region, and Iran is also an important partner for Russia in the field of arms purchase.
Russia may provide some diplomatic and economic support to Iran to withstand the US pressure, such as trade exchange, advice to smuggle oil, circumvent sanctions... etc., but this support will not be at the detriment of the interests of Russia and its companies, and the withdrawal of the Russian company (Rosneft) from Iran on the heels of the US sanctions is the best sign.
Also, Iran cannot count a lot on the Russian economic support, as the Russian economy has experienced myriad internal crises after the application of US and European sanctions on it.
C. China and the priority of interests
The People's Republic of China is Iran's most important trade partner, one of the parties to the nuclear deal, and the largest importer of Iranian oil. In 2017, Iranian trade with China counted for one-third of Iran's total foreign trade, at USD 37 billion. Iran is one of China's main partners in the strategic Belt and Road Initiative, which made it a target of Chinese rapprochement in light of its strategic rivalry with the US.
China criticized the unilateral US withdrawal from the nuclear deal, stressing its support for the continuation of that deal, and dialogue instead of confrontation. The destination of the first visit of the Iranian foreign minister after the US withdrawal from the deal agreement was China, a matter which indicates the importance of Beijing to Iran in mitigating the impact of sanctions.
The stability of Iran, through which one of the most important corridors of the Belt and Road Initiative passes, is important to the Chinese strategic interests. Iran provides China with a consumer market of more than eighty million people, and the Iranian oil is also important to China's energy security, which is keen on diversifying sources.
On the other hand, we find that the US is China's largest and most prominent trading partner, as the volume of trade exchange between them reaches USD 600 billion, which makes the Chinese trade exchange with Iran marginal. Indeed, Chinese companies announced no more importation of Iranian oil for fear of the US sanctions, as evidenced by Sinopec's announcement to stop developing the Yadavaran oil field.
We can see now the continuation of trade exchange between China and Iran on a very small scale through the cooperation of small and medium-sized Chinese companies that have no interests in the US. This is why China knows that its support for Iran and trade relations with the US should be balanced with its growing relations with Iran's opponents in the Arab world in general, and the Gulf states in particular.
Winners and losers in the region
A. Saudi-Emirati welcome
The Kingdom of Saudi Arabia and the United Arab Emirates welcomed the US withdrawal from the nuclear deal, and offered to compensate Iran's oil share in the global market so that importers would not be negatively affected by the sanctions.
The Kingdom and the UAE also supported the undermining of the deal and pressured the Trump's administration to pull out of it. Their interest was not only to prevent Iran from acquiring nuclear weapons, but also sought change in Iran's expansionist strategy in the region, as Iran exploited the deal politically and economically to enhance its interference in the region, and so it intensified its presence in Syria and doubled its support for the Hezbollah militias, the Houthi militias and the Popular Mobilization Forces' militias, and transferred missile technology to them, to encircle the GCC states and threaten the security of its waters.
That is why the US withdrawal from the deal canceled Iran's gains through its negative interventions in the security of states, and limited its direct financial support for its terrorist militias. It also provided great gains for the Kingdom and the UAE by undermining the financial and military support that Iran provides to the Houthis, and they also made economic gains by compensating for the oil shortfall in the global market after the imposition of sanctions on Iran.
Saudi and Emirati logic believes that the nuclear deal did not deter Iran from its aggressive and subversive policies in the region. In light of the nuclear deal and the lifting of sanctions, Iran developed its missile and military capabilities.
Also, one of the most important repercussions of the US sanctions on Iran was changing the nature of Iran's relations with Iraq. While Iraq was the most prominent area of Iranian influence, which is the commander in its political arena, Iraq saw that Iran became a burden on it at a critical time when Iran viewed Iraq as a dependent region that it might exploit for smuggling oil to the world outside, a matter that led to a Saudi-Iraqi rapprochement through mutual visits between the two sides, and the Kingdom's offers for mega investment and development projects to Iraq, as any rapprochement between the two sides would decrease the Iranian influence and limit its penetration into Iraq.
B. Turkey and siding with Iran
Determinants and motives of the Turkish-Iranian cooperation are represented in the common borders and cooperation in the fields of energy and economy. Turkey imports Iranian natural gas, which is second only to Russian gas imports, as well as the agreement on the Kurdish file, and other files.
As for the determinants of competition, the two parties differ and agree on the tools that they use to enhance their influence in the region. The common interests base is determined by prioritizing cooperation or competition. The Turkish position sided by Iran in the nuclear deal, rejected the sanctions and criticized the US position, a matter that could be realized in the context of the big Turkish gains from the nuclear deal, or gains for the innocent regional agendas. Iran considers the nuclear deal as a recognition of its right to enrich uranium, while Turkey considers it as a gain that it may find itself in this position in the future, as the Turkish ambition to develop nuclear energy is obvious to all.
Moreover, Turkey views the nuclear deal as an extension of its basic negotiating effort, the so-called "Tehran Declaration", that it made in 2010 with the participation of Brazil.
Additionally, Turkey desires to secure its presence in its areas of influence, especially in Syria and Iraq, as the nuclear deal supports this trend at the expense of Arab interests, and undermining it threatens the presence of the two allies and their interference in the region.
The US withdrawal from the nuclear deal threatens these gains, affects Turkey by cutting energy supplies and stopping its trade with Iran, and also complicates the Turkish-Iranian coordination files.
Therefore, any Turkish support for Iran may expose it to sanctions. Sanctions could be imposed on its companies which would be prevented from getting into the US market, as the Turkish economy is already facing crises that it does not wish to expand.
Indeed, we find that Turkey has closed its ports in the face of the Iranian oil, in full compliance with the US sanctions after the expiration of the exemptions deadline. The largest Turkish oil refiner "Tupras" announced no more purchase of ranian oil for fear of sanctions.
But on the other hand, there are important gains for Turkey from the US withdrawal from the nuclear deal, the most important of which is that the economic blockade against Iran reduces its influence in the region, so that with the passage of time it stops its financial and military support for the militias and their loyal regimes, providing an opportunity for Turkey to strengthen its influence, especially in Syria.
This is why the Turkish options for supporting Iran remain very limited, and the very limited trade exchange may be achieved through Turkish Lira-based trading after the Central Bank of Turkey and its Iranian counterpart officially agreed to trade in their local currencies in 2017, or through relying on the common land borders without the need to resort to the international banking system.
Securing trade exchange between the two sides, away from US sanctions, can be reached through a mechanism similar to the European "INSTEX", which was mentioned by the Turkish foreign minister during his meeting with his Iranian counterpart.
C. Israel: A brave step
Israel welcomed the US withdrawal from the nuclear deal, describing it as the right and courageous step, and that the deal was a recipe for a "disaster."
Israel believed that the nuclear deal did not provide a final and real solution to the Iranian nuclear threat, rather it reinforced its military strength and gave it the opportunity to expand its regional influence.
The evil regime… smarting
Iran made significant economic gains after concluding the nuclear deal and economic sanctions were lifted. It was able to restore more than USD 100 billion in oil revenues frozen for years in foreign banks by sanctions. It opened the door to investment companies, concluded contracts of billions in the fields of energy, industry and services, and was able to export oil and sell it in foreign currency.
On May 8th 2018, Iranian President Rouhani said: "The US today is waging a psychological and economic war against the Iranian nation, but we will not let Trump succeed in that... and history has proven that the United States does not abide by any agreements, but rather always betrays countries."
However, President Trump's announcement to pull out of the nuclear deal and re-impose harsh economic sanctions on Iran was a setback for those gains.
The US sanctions on Iran included the gold and precious metals trade sector, dollar purchases, the metallurgical industries related to cars and commercial aircrafts, and the parts and services associated with them, and because of the huge volume of manpower employed by this sector, this led to a labor movement against the mullahs.
Sanctions graduated in November 2018 until they covered oil and petrochemical sales, with exemptions granted to eight countries to continue purchasing oil until May 2019, then followed by other packages of economic sanctions. That caused Iran's crude oil exports to fall sharply from 2.5 million barrels per day in 2017 to one million barrels per day in November 2018, and then temporarily increased to 1.5 million barrels per day in February 2019, due to the US exemptions for the eight countries.
After stopping the renewal of exemptions in May 2019, as part of the US policy of "Maximum Pressure", oil exports disappeared but for the smuggled ones. That was accompanied by the withdrawal of foreign companies from Iran, such as US' GE, France's Total, Peugeot Auto, Singapore's Maersk and others.
That affected the Iranian economy. The local currency collapsed and the quality of living deteriorated, a matter which prompted the Iranian people to stage large protests and demonstrations that included all Iranian cities by the end of 2017 and the beginning of 2018, condemning the Iranian supreme leader, his blatant interference in Arab affairs, and spending money on terrorist militias at the expense of the Iranian citizen's livelihood.
To conclude, the nuclear deal was the most important bets on which the mullahs of Tehran relied on for supporting terrorist militias and interfering in the internal affairs of Arab countries to the detriment of improving the livelihood of the Iranian citizen. If the US does not rush to put a radical end to the Iranian nuclear project, the mullahs will continue to take more measures to develop this project as a means that compelled the West to negotiate and make concessions, in addition to pushing its armed militias abroad to confront the US troops and their allies in the region.