Insights into Editorial: US unilaterally pulled out of the Iran Nuclear deal
Background:
The Joint Comprehensive Plan of Action, commonly known as the Iran deal, was signed on July 14, 2015 between Iran, the U.S., China, France, Russia, the U.K., Germany and the European Union.
Under this deal, Iran agreed not to build any more heavy water facilities, eliminate its stockpile or medium-enriched uranium, cut its stockpile of low-enriched uranium, and reduce the number of its gas centrifuges. Other nuclear facilities in Iran would have to be converted into non-nuclear facilities.
In return, Iran will recover assets worth $100 billion frozen in overseas banks, and sanctions on the country by the U.S., the U.N. and the E.U. will be lifted.
Context:
President Donald Trump recently decided to unilaterally pull the U.S. out of the Iran nuclear deal and to re-imposing nuclear sanctions against that country.
It is a huge setback to multilateral diplomacy and the rules-based international order. The re-imposed sanctions will target critical sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors
Former United States President Barack Obama criticised the decision made on Tuesday by President Donald Trump to pull the United States out of the 2015 Iran nuclear deal, calling the move a “serious mistake”.
Iran’s Reaction:
Iranian President Hassan Rouhani said that if the U.S. quits the nuclear deal between Tehran and world powers then Washington would regret it “like never before”.
Iranian President declared that his government remains committed to a nuclear deal with world powers, despite the US decision to withdraw, but is also ready to resume uranium enrichment should the new sanctions against Iran become effective.
Undoubtedly, the US exit from the nuclear deal comes as a great defeat for Rouhani against the Iranian hardliners who warned him against diplomacy with the Americans.
5 ways India could be affected by U.S. decision to pull out of Iran nuclear deal:
Even so, India could face the impact of the U.S. decision on the deal as well as instituting the “highest level of economic sanctions” in several ways:
- Oil prices: The impact on world oil prices will be the immediately visible impact of the U.S. decision. Iran is presently India’s third biggest supplier (after Iraq and Saudi Arabia), and any increase in prices will hit both inflation levels as well as the Indian rupee. Non-oil trade with Iran, which stood at about $2.69 billion of the total trade figures of $12.89 billion in 2016-17 may not be impacted as much, as New Delhi and Tehran have instituted several measures in the past few months, including allowing Indian investment in rupees, and initiating new banking channels, between them.
- Chabahar: India’s moves over the last few years to develop berths at the Shahid Beheshti port in Chabahar was a key part of its plans to circumvent Pakistan’s blocks on trade with Afghanistan. India has already committed about $85 million to Chabahar development with plans for a total of $500 million on the port, while a railway line to Afghanistan could cost as much as $1.6 billion. New U.S. sanctions could slow or even bring those plans to a halt depending on how strictly they are implemented.
- INSTC: Beyond Chabahar, India has been a founder of the International North South Transport Corridor (INSTC) since it was ratified in 2002. It starts from Iran and aims to cut right across Central Asia to Russia over a 7,200-km multi-mode network, cutting down transportation and time taken by trade by about 30%. New U.S. sanctions will affect these plans immediately, especially if any of the countries along the route or banking and insurance companies dealing with the INSTC plan also decide to adhere to U.S. restrictions on trade with Iran.
- Shanghai Cooperation Organisation: India joined the SCO along with Pakistan last year, and both will be formally admitted in June 2018, when Prime Minister Narendra Modi travels to the Chinese city of Qingdao for the SCO summit. This year, Chinese officials say they will consider inducting Iran into the 8-member Eurasian security organisation.
If the proposal is accepted by the SCO, which is led by China and Russia, India will become a member of a bloc that will be seen as anti-American, and will run counter to some of the government’s other initiatives like the Indo-Pacific quadrilateral with the U.S., Australia and Japan.
The move may also rile other adversaries of Iran, like Saudi Arabia, UAE and Israel, with whom the government has strengthened ties in an effort to balance its West Asia policy.
- Rules-based order: India has long been a proponent of a “rules-based order” that depends on multilateral consensus and an adherence to commitments made by countries on the international stage. By walking out of the JCPOA, the U.S. government has overturned the precept that such international agreements are made by “States” not just with prevailing governments or regimes.
This could also impact all agreements India is negotiating both bilaterally and multilaterally with the U.S., and the government will have to choose its future course factoring in the new U.S. behaviour, especially after Mr. Trump withdrew from the U.N. Climate Change treaty (Paris Accord), and the Trans-Pacific Partnership with East Asian trading partners.
New Delhi will have to consider a new understanding of its ties with Washington in this context, and some of this understanding may be built during the first “2+2” dialogue between Foreign and Defence Ministers of both countries to be scheduled in the next few weeks in Washington.
Which companies could be affected?
A number of French firms have signed billion dollar agreements with Iran since the nuclear accord was signed in 2015.
Aside from Airbus, they include French oil giant Total and the car makers Renault and Peugeot. Companies would have to wind up investments by November or face US sanctions.
Way Forward:
With this decision President Trump is risking U.S. national security, recklessly upending foundational partnerships with key U.S. allies in Europe and gambling with Israel’s security.
Today’s withdrawal from the JCPOA makes it more likely Iran will restart its nuclear weapons program in the future
The U.S. stands isolated in its decision. Europe and other powers (UN permanent members) should stick together to respect the mandate of an international agreement. Any sanctions imposed by U.S. will hurt the global economy and may force Iran to stock nuclear weapons, further complicating the situation.
Thus, the need of the hour is to standby with the agreement even after the U.S. has withdrawn.
