[Richard Nephew, The Art of Sanctions. A View from the Field. Columbia University Press. Chichester. New York, 2018. 216 p.]
RESEÑA / Emili J. Blasco
Las sanciones internacionales suelen despertar un vivo debate entre quienes las defienden como un legítimo instrumento de la interacción entre Estados y quienes consideran que su aplicación apenas ha tenido más eficacia que la de aumentar el sufrimiento de enteras poblaciones sin culpa.
A la pregunta de si sirven para algo esas sanciones, que pueden ser de diversa índole pero que sobre todo tienen carácter económico, Richard Nephew responde que depende. Y no es una evasiva, sino en el fondo la defensa que de sus propias herramientas hace un mecánico de la diplomacia estadounidense (Nephew fue director para Irán en el Consejo Nacional de Seguridad y vicecoordinador para sanciones del Departamento de Estado): “Las sanciones no fracasan o tienen éxito. Más bien las sanciones ayudan o no a conseguir el deseado resultado final de un Estado sancionador (...) Las herramientas solo pueden tener un buen desempeño cuando son empleadas con la correcta estrategia; no se puede acusar a la sierra si falla en realizar el trabajo de un destornillador”.
Nephew no es un teórico de las sanciones, sino un “practicante”; el contenido de su libro procede de la experiencia (“Una visión desde el campo” es el subtítulo de la obra). Esa experiencia le hace ser un convencido de la utilidad de esas medidas siempre que se apliquen de modo conveniente. Básicamente pone el ejemplo de dos casos: el de Irak, donde las sanciones no lograron el objetivo buscado debido un mal planteamiento de la presión internacional, que finalmente derivó en guerra en 2003, y el de Irán, donde el régimen de medidas punitivas sobre la República Islámica tuvo su efecto y en 2015 pudo firmarse un acuerdo para frenar el programa nuclear iraní.
Activo participante en la arquitectura sancionadora a Irán, Nephew se extiende especialmente en el caso de las negociaciones con Teherán, tras abordar primero someramente el capítulo de Irak. De todo ello saca conclusiones y presenta sus propios decálogos sobre cómo las sanciones deben abordarse para que puedan resultar eficaces. En las últimas páginas trata de aconsejar cómo conducir un nuevo paquete sancionador sobre Irán, para controlar su programa de misiles y contener su actividad en el exterior a través de proxis, pero sin romper el acuerdo alcanzado (JCPOA) como ha hecho la Administración Trump; cómo gestionar la presión sobre Rusia en relación a Ucrania, y cómo confrontar la actitud de Corea del Norte. No aborda otras situaciones que el debate sobre las sanciones tiene bien presentes, como la dureza de Trump para con Cuba, en el marco de un embargo de décadas que no ha producido cambios en la isla, o el cerco sobre Nicolás Maduro en Venezuela.
Reglas para sancionar con éxito
La principal conclusión de Nephew es que “el conocimiento del oponente de uno, sus tolerancias y sus vulnerabilidades, es el predictor más importante sobre las posibilidades de éxito de una estrategia que se focaliza en sanciones (...) De hecho, para que las sanciones funcionen, uno realmente debe conocer al enemigo mejor que el enemigo se conoce a sí mismo”.
Eso es lo que, en su opinión, falló en Irak. Ciertamente las sanciones fueron efectivas, en tanto que impidieron que Sadam Husein retornara a un programa de armas de destrucción masiva, pero no evitaron una guerra. Y esto porque no se tuvo en cuenta la psicología del mandatario, dispuesto a todo tipo de sufrimiento –que traspasaba a la población, sin miedo a que esta pudiera quitarle el poder–, antes que admitir que no tenía el potente arsenal que supuestamente le encumbraba entre los líderes regionales. La comunidad internacional no entendió qué importante era para él mantener esa simulación, en su pretensión de credibilidad y prestigio, por encima de la presión de cualquier paquete de sanciones.
En el proceso iraquí, además, hubo otras deficiencias, según Nephew: desde el principio se aplicaron sanciones máximas, sin espacio para una política incremental, y a lo largo del tiempo hubo una variación del objetivo, pasando de querer evitar el rearme del régimen a plantear un cambio del régimen mismo (aunque Sadam Husein hubiera aceptado las condiciones que se le planteaban, Washington no hubiera admitido su continuidad en el poder).
Esos errores llevaron a una mayor comprensión de los mecanismos en juego, que se perfeccionaron en el trato con Irán. Nephew indica que a la hora de conocer bien el país objeto de posibles sanciones deben tenerse en cuenta sus instituciones políticas, su sistema macroeconómico y financiero, sus relaciones comerciales, sus valores culturales, su reciente historia, su demografía y el acceso de la población a fuentes externas de información. Eso permitirá identificar las vulnerabilidades y el umbral de dolor que el Gobierno de turno está dispuesto a absorber. Luego tanto las sanciones como las mismas asunciones deben ser continuamente recalibradas, siguiendo una estrategia bien definida. Es importante además que al Estado objeto de las sanciones se le presenten con claridad las condiciones necesarias para que la presión sea levantada, en el marco de una negociación de términos nítidos. Finalmente, hay que tener la disposición a auxiliar al Estado que se presiona a salir de un laberinto cuya salida tal vez no perciba, o incluso a aceptar objetivos más bajos si estos son un resultado también razonable.
El autor afirma que las tres causas más comunes del fracaso de un régimen de sanciones son: quedarse corto, pasarse de largo y objetivos confusos. Estas etiquetas pueden fácilmente aplicarse a procesos pasados, pero no es tan sencillo fijar los pasos de una diplomacia coercitiva de este tipo en conflictos en curso o que puedan ocurrir en el futuro.
Así, el mismo Nephew no tendría plenas garantías de éxito con las sanciones que sugiere para una nueva negociación con Irán con el fin de limitar su programa de misiles y su actuación a través de grupos como Hezbolá. En desacuerdo con la Administración Trump, hubiera preferido mantener el acuerdo sobre el programa nuclear de 2015 (conocido por sus siglas de JCPOA) y el consiguiente levantamiento del régimen de sanciones aplicado previamente, para pasar a otras sanciones distintas que busquen ese otro objetivo. Cierto que está por ver la utilidad del movimiento de Trump, pero es difícil creer que Teherán vaya a renunciar a esas otras actuaciones por una presión que en ningún caso sería tan internacional (China y Rusia solo se prestaron a un frente contra Irán porque en juego estaba que este país se convirtiera en potencia nuclear).
Iran Country Risk Report (June 2019)
After some months of implementation, the re-imposed US sanctions against Iran are seriously affecting Iranian economy and forcing disputed political and even military reactions. The present report attempts to provide an analysis of Iran by addressing: the consequences of sanctions, the current and future state of its energy sector, the internal situation of the country, and the future prospect of the Iran-US relations.
C. Asiáin, M. Morrás, I. Urbasos
Report [pdf. 14,1MB]
The US unilateral withdrawal from the JCPOA on May 8, 2018, reshaped the Iranian domestic and international reality. On the one hand, the JCPOA enabled Iran to increase its GDP above 7% in the period of 2016-2018, more than double its oil exports and maintained President Rouhani in office after the 2017 elections. On the other hand, the US reimposition of the previously lifted sanctions demonstrated the deep vulnerabilities of the Iranian economy and its huge diplomatic isolation.
US sanctions will affect the whole of Iran’s foreign relations due to its extraterritorial nature. The EU will try to avoid its effect through legal protection of its companies and citizens with mechanisms such as the SPV, whose scope and effectivity is yet to be proved. China, as it is less exposed to the US financial and political influence, will be able to better circumvent sanctions but still far from being totally unaffected. Other countries such as India, Turkey or Russia will find difficulties to handle secondary sanctions, but will be able to maintain a certain degree of trade with the Islamic Republic. Japan or South Korea will have to follow US demands because of its strategic alliance in the Asia-Pacific region and resume energy imports and investments.
The Iranian economy is expected to enter into recession during 2019, GDP growth is expected to be -4.5% and unemployment rate will increase to the 15.4%. This economic hardship will concentrate the political debate in the 2020 legislative and 2021 presidential elections, whose result will determine if a moderate or hardliner political faction seizes power. Social unrest from ethnic minorities and opposition is expected to rise if the economic conditions do not improve, challenging the current political equilibrium of the country.
The energy sector will be deeply affected by US sanctions as it banned all countries from investing and purchasing Iran’s energy products. Sanctions are expected to reduce Iran oil exports to 1million barrels a day from the 2017 levels of 2.4 mbdp, decreasing governmental revenues drastically and freezing most foreign investments. The lack of FDI and technology will aggravate the problems of the Iranian energy sector with possible irreversible effects depending on the sanctions duration.
US-Iran relations are expected to worsen at least until the US 2020 Presidential elections, when a more dialoguing candidate could substitute the hawkish Trump administration. The United States is expected to maintain its current strategic alliances with Saudi Arabia and Israel, whose common goal of pressuring Iran can have unexpected consequences for the Middle East. Domestic politics in Iran, US, Israel and Saudi Arabia will play a major role in the evolution of the events.
How Russia, China, India and the Gulf Cooperation Council countries react to the new US sanctions against Iran
▲ Presidents Putin and Rouhani during a meeting in Tehran, in September 2018 [Wikipedia]
ANALYSIS / Alfonso Carvajal
As US-Iranian relations continue to deteriorate, the balance of power and regional alliances will be prone to shifting and changing. Iranians will likely feel increasingly more marginalised as time passes and will seek to remedy their state of international isolation. Here, the main factors to look out for will be the nations seeking to achieve great power status, and how they will try to attract Iran towards them while pushing the Islamic Republic further away from the United States.
China and Russia’s response
Russia’s relations with Iran have historically been complicated. While at some points, the two countries have faced each other as rivals in war, other times have seen them enjoy peace and cooperation. Russia has been an important actor in Iranian international relations since at least the Sixteenth Century and will most likely retain its importance in the long run. Since the fall of the USSR, Russian-Iranian relations have improved, as many issues that had caused tensions suddenly disappeared. These issues where mainly caused by their ideological incompatibility, as the USSR’s atheism was looked upon with suspicion by Khomeini, and its support given to Iraq in the Iran-Iraq war.
Recently, both countries have found themselves facing international, mainly US, economic sanctions. This is a factor that is important to acknowledge, and that will shape their future relations. As Russia and Iran struggle to defuse the effects of sanctions, they will seek trade elsewhere. This means that they have found in each other a way to make for their isolation, and their ties are likely to only grow. Militarily, cooperation has already been cemented by years of sanctions in Iran.
Whereas once the Iranian Armed Forces boasted of having the most advanced Western-built fighter jets and other military material in the region, Iran now often uses Russian and Chinese aircraft and military gear, coupled with its own native military industry that was independently developed as a result of its isolation. Iran is also said to cooperate with Russia in certain industrial sectors close to the military such as drones. However, due to the latest international sanctions, Russia is less keen to continue to cooperate on military sales and technology transfers. For this reason, Russia has shown reluctance towards helping the Iranian nuclear program, although it is in favour of reaching a deal with Iran along with the international community.
A cornerstone in Russian-Iranian relations has always been their mutual distrust towards Turkey. In the age of the Ottoman Empire, relations between Persians and Russians would often consist in an alignment against the Ottoman Turks. Nowadays, their relationship also has this component, as Turkey and Iran are increasingly competing in the Middle East to decide who will lead the reconstruction of the region, whilst Russia and Turkey find themselves at odds in the Black Sea, where Russia’s ambition of naval dominance is being challenged.
While it may seem that Russia and Iran should be close allies, there are a series of reasons to explain why cooperation is not likely to see a fully fledged alliance. First of all, there are far too many differences between both regimes, as they have different geopolitical imperatives and ambitions in the Caucasus and the Middle east. The second issue is Israel. As Russia moves further into the Levant, it tries to maintain good relations with Israel, Iran’s archenemy, also called little Satan by Iran’s first supreme leader, Ayatollah Khomeini. As the conflict in Syria dies down in the following years, Russia will be forced to choose between who to support. This is likely to mean a withdrawal of support towards Iran’s position in Syria, as it sees its meddling in the region increasingly unproductive, and would favour its retreat. Iran, however, has said it is there to stay.
Russian-Iranian cooperation has recently been developed in one important country of the region: Afghanistan. As the US seems to lose interest in the Middle East and pivots towards East Asia, Russia and Iran have moved into the war-torn country, as they back different factions aiming to end the decades-long conflict. Russia has previously backed the Taliban, because it wants to ensure that they are a part of the peace negotiations. Iran has backed both the government and the Taliban, as it wants to fight the rising influence of ISIS in Afghanistan, as well as keep good relations with the Taliban to maintain a degree of stability and control over Afghanistan’s west, so that the conflict does not spill over. Although Russia and Iran might have different objectives, they are united in wanting to push the US of the region.
The other geopolitical giant that is slowly encroaching on the region is the People’s Republic of China, albeit with a different stance altogether. Like Russia, China has welcomed business with Iran and currently supports the nuclear deal, the JCPOA, which the US recently left. Chinese-Iranian ties are more solid than the Russian’s, as they don’t have as many overlapping hegemonic ambitions. In a certain way, the relations between these two countries arose as a way to contain the USSR’s expansive influence during the 1970’s after the Sino-Soviet split, and predate the current Iranian regime. Both countries see their relation as part of the past, as great empires of antiquity, the present, and see each other as important partners for future and ongoing projects, such as the One Road One Belt initiative. However, as does Russia, China sometimes tries to play down its support towards Iran so as not to antagonize its relations with the West and the US in particular.
The Chinese have cooperated with the Islamic Republic since its conception in the 80’s, as the Iranian isolation led them towards the few markets they could access. The main theme of this cooperation has been undoubtedly based on hydrocarbons. Iran is one of the most important producers of both crude petroleum and natural gas. China is Iran’s largest trade partner, as 31% of Iran’s exports go to China, whose imports represent 37% of Iran’s in 2017. Military cooperation between these two countries has also been very important, a large part of Iran’s non-indigenous military material is of Chinese origin. The Chinese have historically been the main providers of arms to the Iranian regime, as can be seen by much of the equipment currently used by the IRGC.
Both regimes feel a certain closeness as some parts of their ideologies are similar. Both share an anti-imperialist worldview and are sceptical of Western attitudes, an attitude best perceived among their unelected leaders. They are countries that are emerging from the misery left behind by Western imperialism, according to their own narrative. Both see each other as the heirs of some of the world’s oldest cultures—the Chinese often talk of 20 centuries of cooperation between both states—, and thus feel a historical, civilizational and anti-imperialist connection in this sense. Iranians admire the great leaps that the PRC has taken towards development, and the great successes they have brought to the Chinese people and State. They also value the Chinese mindset of not meddling or criticizing the internal affairs of other States, and treating them all in the same way independent of their government.
On the other hand, the Chinese are happy to work with a Muslim country that doesn’t stir the restive North-Western Xinjiang region, where the majority of China’s Uighur Muslims live. In fact, Iran is seen by the Chinese as an important factor on the stability of Central Asia. More recently, they also see in Iran a key part of the pharaonic One Belt One Road infrastructure project, as Iran sits in the crossroads between East and West. It is understood that Beijing has high expectations of cooperation with Teheran.
However, not all of it is positive. Iranians and Chinese have different ideological foundations. China has shown that it will not be able to form an full-fledged alliance with Iran, as it fears Western backlash. In 2010 China voted a UNSC resolution in favour of sanctions towards Iran. Even though these were largely ignored by China later, Tehran understood the message. As a result of these sanctions, the only nations willing to trade with Iran where Russia and China. The latter became an increasingly important trade partner as a consequence of the lack of Western competition and began to flood the Iranian market with low-quality goods, which was unpopular among the Iranians. Resentment toward China only grew as the Chinese firms that became established in Iran brought their own workers from China and unemployment remained at high levels despite the increased economic activity. As discontent rose, Iranians of all backgrounds saw the negotiations with the West with great expectations. If successful, negotiations could provide a diversification of providers and a counterbalance against Chinese influence.
As negotiations have broken down under the Trump administration, China’s role in Iran is likely to only intensify. While the Europeans fight to save the nuclear deal, Iran is set to count on China as its main trade partner. Chinese firms, although now more vulnerable to pressure from the US than in 2010, still have strong interests in Iran, and are unlikely to leave what will be a competition-free market once most foreign firms are deterred by US sanctions. The Chinese will seek to keep the nuclear provisions of the JCPOA agreement and will cooperate in the development of the Arak Heavy Water Reactor, probably displacing the Russians, which have historically led the Iranian nuclear program. Chinese involvement in the Iranian nuclear industry will likely prevent the development of a bomb, as China does not want to encourage nuclear arms proliferation.
While China moves into South Asia, alarms go off in New Delhi. India sees itself as the dominant power in the region and its traditional enmity towards China is causing a change in its foreign policy. India’s PM, Narendra Modi, is following a policy of “Neighbourhood first” in the face of a growing Chinese presence. China already has expanded its reach to countries like Sri Lanka, where it has secured the port of Hambantota for a 99-year lease. In the latest years, Pakistan, India’s other arch-enemy, has become one of China’s closest partners. The relation between both countries stems from their rivalry towards India, although cooperation has reached new levels. The Chinese- Pakistan Economic Corridor runs from the Chinese city of Kashgar through the entire length of the country of Pakistan and ends in the developing port of Gwadar. The project has caused a rush of much needed capital in the financially unstable Pakistan, with Chinese and Saudi bonds keeping it afloat. In the face of China’s new projects and its New Silk Road, New Delhi sees itself more and more surrounded, and has accused China of scheming to isolate it.
To face China’s new stance, India has taken a more active role. Its prime minister made many State visits to the neighbouring countries in a bid to weaken Chinese influence. In this effort to impose itself on what it sees as its region, India is developing a deep-sea port in the coast of Iran, past the strait of Hormuz in the Indian ocean. Iran will be an important piece in the designs of the Indian political elite.
The development of the deep-sea port of Chabahar is a joint Indian, Iranian and Afghan project to improve the connectivity of the region and has more than one reason of being. It is effectively a port to connect Central Asia, a growing 65-million people market, through a series of rail and road networks which are also part of the project, to the Indian Ocean. Another reason for this port is the development of war-torn Afghanistan, which also serves the purpose of reducing Pakistan’s influence there. Pakistan holds a firm grip in Afghanistan and sees it as its back yard. Pakistan is said to harbour Taliban guerrillas, who use the country to launch attacks against Afghanistan, as it did against the USSR in the 80’s. The most important feature of all for India is that the port would allow it to bypass what is an effective land blockade from Pakistan, and will permit it to reach and trade with Afghanistan. The Chabahar port will essentially compete with the Chinese-built Gwadar port in nearby Pakistan, in the two superpowers’ race for influence and domination of the ocean’s oil-carrying sea lanes.
India’s usual approach is to keep a neutral stance around world conflicts in order to be able to talk and deal with all parties. This is part of its non-commitment policy. For example, India has relations with both Israel and Palestine, or Iran and Saudi Arabia. This means that India is very unlikely to make any serious statement in favour of Iran against the United States if Iranian-US relations were to badly break down, as it might be seen as picking sides by some countries. It does not mean, however, that it will abandon Iran. India has already invested greatly in infrastructure projects and is unlikely to simply withdraw them. Far more importantly, India is one of Iran’s biggest petroleum purchasers, and losing such an important market and provider is not a choice the Indian government is eager to make.
India calls its relationship with Iran a “strategic partnership”, in terms of cooperation in energy and trade activities. The Indian government is likely to take a cautious stance while acting with principles of Realpolitik. They will try to sort out sanctions if they can and will discourage this sort of activity while trying to maintain their interests in the region. As said before, New Delhi will shy away from committing strongly from any project likely to keep its hands tied.
The Syrian War
In 2011, the Middle East and North Africa region was shaken by what would soon be called the Arab Spring. While the citizens of many Arab countries where chanting pro- democratic slogans and protesting outside dictators’ palaces and in the squares of Middle Eastern capitals, outside observers began to say that the once dictatorship- riddled region was about to adopt Western liberal democracy in what would become an era of freedom never paralleled in such countries. What came later could hardly be further from that reality. The region was struck by great waves civil unrest, as one by one, from West to East, the waves of revolution spread. The most authoritarian regimes attacked their own citizens with brutal repression, and what seemed like democratic transitions rapidly turned out to fall back into authoritarianism. Such was the case in Egypt, among others. However, some countries where struck harder than others. The more serious cases became civil wars. Some of the countries that had enjoyed relative long-term stability, like Libya and Syria burst into civil war. Yemen too, was struck by sectarian conflict.
The longest of these conflicts, the Syrian Civil War, is on its 8th year already. For a long time, it has drawn many international and regional actors, turning its countryside into a patchwork of pro-government militias, rebel guerrillas, Islamist extremism, transnational nationalist movements and others. The ruling class, the Al- Assad alawite family, under an authoritarian and secularist regime, has held on to power through every means possible, using foreign support as a crucial part of its survival strategy. To his side, Bashar Al-Assad has drawn the support of Vladimir Putin’s Russian Federation, as well as the Islamic Republic of Iran and its Lebanese ally, Hezbollah. Each of these players has brought their own forces to the battlefield, as Russia has helped give Syria the necessary aerial capabilities it lacked, while Iran provides it with Shia militias, material, volunteers, and the presence of Hezbollah.
The regime faces many groups, who often fight against each other, and have different international backing, if any. For example, the Free Syrian Army is said to be backed by Turkey and is made from Sunni Arab and Turkmen militias. Other groups such as the Islamic State or Al Qaeda affiliated organizations also fight for survival, or to implement their ideal society. Another important group, perhaps the most important one is the YPG, or People’s Protection Unit, largely a Kurdish force, which holds much of Northern Syria, the Kurdish region called Rojava. The YPG and the Syrian government of Al-Assad seem to have come to an understanding and try not to enter into hostilities amongst each other, focusing on the Islamic State, or ISIL. YPG international backing comes mainly from the US, but with President Donald Trump having said that the US will soon leave Syria, their future is uncertain.
With Bashar Al-Assad’s position having become dominant in the Syrian battlefield, it is expected that the conflict will enter a new stage. Israel has shown its growing discomfort in what it sees as Iranian expansionism, and has launched aerial offensives against Iranian positions, permitted by Russia, who currently controls much of Syria’s aerial defences. This might spell the loosening of Al-Assad’s coalition.
As Iranian-backed forces draw closer to the southwest of Syria, Israel becomes more and more nervous. The implication of Israel in the Syrian conflict would most likely be a disaster for all parties involved. If Israel comes to point of fearing for its territorial integrity, or its existence, it has previously shown, in many occasions, that it will not doubt to take action and use all of its military might in the process if needed.
This is why Hezbollah is unlikely to make a serious move towards the Golan Heights. Hezbollah now boasts of the greatest amount of power it has ever had in its domestic scene. It is an influential actor in the Syrian War and at home it has achieved serious political power, forming a coalition with various other Shia and Christian groups. A war with Israel, in which it was identified as the aggressor, would be disastrous to its image as a protector of the Lebanese, as it has always taken a stance of resistance. It would put all of Hezbollah’s political achievements in jeopardy. Whatever the case, Israel boasts of significantly more modern and powerful armed forces, which would force Hezbollah to be on the defensive, thus making an offensive into Israel extremely unlikely. Hezbollah must then try to restrain Iran, although, amongst the myriad of Iranian-backed militias, it has lost leverage in its relations with Iran and the IRGC.
For Bashar Al-Assad, war with Israel might prove an existential threat, as it bears the potential to cause a great deal of damage in Syria, undermining any effort to consolidate power and end the war in his favour. If war with Israel broke out, even if it was just against Iranian-backed objectives, Al-Assad would never be able to obtain the reconstruction funds it so badly needs to rebuild the country. Israel’s powerful and advanced army would without a doubt pose the patchwork of battle-hardened militias a very big challenge. Thus, it is very unlikely for Al-Assad to permit a war might cause his downfall.
Russia, wishing to end the war and keep its military bases and prestige in the process, would no doubt discourage any sort of posturing against Israel from its allies in Syria. Moscow seeks to maintain good relations with Israel and wouldn’t be very upset about an Iranian exit. It is already trying to prevent Iran and Hezbollah from coming too close to the Israeli and Jordanian borders and has opened the Syrian airspace to Israeli aerial attacks towards Iranian targets located in its vicinity. Russia would welcome a quick and impressive end to the war to consolidate its status as a global power and become a power broker in the region.
Reaching a deal with the US to end hostilities in exchange for the recognition of Al-Assad is not outside the realms of possibility, as chances of regime change get slimmer, the US will be forced to recognize that Al-Assad is there to stay. It is necessary to acknowledge that a Russian-US deal will be incomplete, and quite unfruitful. The US is very likely to demand that Iran leave Syria and stops occupying Iraq with is Quds Force. Russia does not possess the leverage to send Iran back home. It would also be unfavourable for Russia as it has chosen to help Assad to regain its status as a great power in the world and has become a major power broker in the Middle East. This means their position relies on their status, which would be compromised, were Iran to openly confront Russia. The Iranians have already said that they would not leave unless Bashar Al-Assad specifically asked them to. Russia could pressure on Al-Assad, but the Iranians are likely to have more leverage, as they have a larger ground force in the region, and where the first to help the Syrian regime.
If the US wants to achieve any sort of meaningful peace negotiations, it must come into dialogue with the Iranians. Any sort of negotiation that does not include Iran would be pointless, as the amount of influence it has acquired in the region these last years makes it a key player. Iran is determined to stay in Syria and the IRGC is committed to force the government to keep its presence abroad.
In any case, the retreat of US troops in Syria would mark a turning point in the war. Currently the US provides air support, has 2,000 ground troops and provides an vital amount of equipment to the YPG Kurdish forces. Its retreat would be a blow to American credibility as an international ally, as it abandons the Kurds in a decisive moment where all tables could turn against them. Turkey has committed forces towards fighting the Kurds, which it sees as a threat to its national integrity, as large numbers of Kurds live inside Turkey and are hostile to it. The main reason for Turkish entry into the Syrian war was to stop the YPG from uniting a long stretch of land along the Turkish
border towards the Mediterranean Sea and to prevent the establishment of a Kurdish state. It is therefore a possibility that, whether through its Syrian proxies, or with its own army, the Turks will ally with Al-Assad against the Kurds, if these two don’t reach an agreement and begin hostilities. This alliance is more than likely, as Turkish animosity towards Kurdish forces will cause them to jump at the occasion, if Al-Assad asks for help. Al-Assad might seek in this way to balance Iranian influence by integrating another player, which would cause tensions between Iran and Turkey to rise, as both countries aspire to obtain regional hegemony, and would give Syria more margin to manoeuvre.
Saudi Arabian soldier from the First Airborne Brigade with a UAE soldier, 2016 [Saudi88hawk-Wikipedia]
The struggle for dominance in the region is expected to continue indeterminately. As long as the ideological argument between the Islamic Republic and the Kingdom of Saudi Arabia (KSA) exists, it will take geopolitical dimensions, as both states seek to ensure their legitimacy in the face of the other. The Iran-Iraq War shaped the Islamic Republic’s sense of geopolitical isolation, giving the more entrenched sectors of its political elite a fierce will to prevent any further isolation as was done in the past. Chemical weapons, often provided by the US were used against it, without any action taken from the international community. Therefore, the Iranian elites believe that Iran will have to stand by itself, and knows it will have few allies.
For the moment, Iran seems to be winning the confrontation. With a the possibility of a consolidated Syria, Iran’s influence would be unparalleled. Iraq, Syria, Lebanon will provide Iran the reach and the potential to expand its influence even in the Mediterranean Sea. The war in Yemen is proving as costly as it is ineffective to Saudi Arabia and its allies, with a minimum cost from Iran. It can be expected that Iran keeps its strong grip over these countries, as its presence has become necessary for the survival of some of these states. It will not be without difficulty, as local forces are likely to reject the imposition of Iranian authority. This has been shown before in the burning of the Iranian consulate in Basra , by local Sunni Arabs who resent the degree of influence its neighbour has in their country. The recently struck commercial deals with Iraq during Rouhani’s visit to the country might cause more Iraqis to take a more confrontational stance, as they are seen to benefit Iran more than Iraq. Both counties have pledged to increase their trade up to 20 billion dollars, but it will be hard to determine how they will affect Iraq. With this degree of Iranian involvement, the KSA’s influence diminishes.
The Yemeni war is likely to drag on for years, and if the Saudis are to win, the shall have to keep paying a high toll, which will require strong political will to overcome the adversities. The expense of this war is not only material, it has primarily taken a great diplomatic cost, as it loses credibility to its allies, like the US, which see the ineffectiveness of the Saudi military. At home, their western allies struggle to explain their partnership with a country that has proven too much to handle for certain political groups and the civil society in general, with its lack of human rights considerations and sharia-based laws that seem outdated to Westerners. The cruel Yemeni war further alienates the Saudi Kingdom from them.
The conflict for Middle Eastern hegemony might be about to attract a new player. As Pakistan tries to deal with its ongoing crisis, its new president, Imran Khan, has looked to the Gulf States for funding. The Saudis and the UAE have already pledged many billion dollars. For now, the economic woes make Pakistan an unlikely actor, but there is evidence of a change of direction in Islamabad, as Khan seems to part ways from his predecessor’s foreign policy regarding its western neighbour. Cooperation with Iran has significantly been reduced, especially in terms of security and anti-terrorism, as in March 2019 Baluchi ethno-nationalists once again attacked Iranian positions from the Pakistani border. Tehran seems alarmed by these developments and has explicitly warned Pakistan that an approach towards Saudi Arabia and participation in the so called Middle Eastern Cold War will have severe consequences for Pakistan. It is right in fearing Pakistan, which has shown that it can play the same game as Iran, making use of foreign militias and having an impressive intelligence service, on top of the nuclear bomb. If Iran where to cause conflict in Pakistan, it might find itself in severe disadvantage, as it would be harder to use subversive activities in the predominantly Sunni country. It might also come to odds with China, who will view any menace to its infrastructure projects with great suspicion. Iran would have difficult time finding a serious counterbalance to Pakistan in India, as India would decline to strike a serious alliance due to its many interests in the Gulf States.
Iran, however, still holds many cards it can use if the conflict were to escalate. Bahrain, whose predominantly Shia population contrast to its powerful Sunni ruling family, which will find itself fighting to maintain control in the case of an Iranian- backed coup similar to the one in 1981, or a pro-democracy uprising with significant Shia elements such as the one of 2011. For the latter, had the Gulf states not intervened in Bahrain in support of its ruling family, Bahrain would now likely be part of the Iranian regional system, which would be extremely troublesome for the KSA, given its proximity. It can also be expected for Iran to influence the oppressed Shia Arabs along Saudi Arabia’s Persian Gulf coast. These Shia Arabs lie just above most of KSA’s petrol wells and reserves, and if stirred to open rebellion, and properly armed, would cause immense trouble in the Monarchy.
The other option open to Iran will be to exploit the current Gulf crisis between the KSA and UAE against Qatar, whose blockade has lasted almost two years. Iran will seek to build up stronger ties with Qatar, who has found itself isolated by most Arab nations. Currently, Turkey is the key ally to Qatar in the crisis, and their partnership is seen to have strategic importance by both parties.
Qatar has traditionally had better ties to Iran than most other Gulf states, also due to the fact that they share the South-Pars/North Dome natural gas field, the largest in the world, and rely on cooperation to exploit its resources and wealth. This is largely a product of its independent foreign policy. This means that Iran is likely to use the crisis to drive a wedge between the members of the GCC and take advantage of their disunity in favour of Qatar and in detriment to the KSA. It will be difficult for the Iranians and the Qataris form a significant partnership, since there are still too many obstacles to this. First of all, Qatar is a Sunni Arab state, and it is the main exporter of the Muslim Brotherhood’s ideas, which would not fit Iran’s tendency toward Shia countries. Secondly, a partnership with Iran would make the Gulf Cooperation Council’s crisis permanently irreparable, which is not desired by Qatar. Finally, this would turn Qatar into the main objective of the Saudi-led coalition and would unnecessarily put it in harm’s way.
One key factor could change everything in a highly unlikely scenario, also known as a ‘black swan’. This is the disappearance of ISIS from the Levant, and its relocation to Khorasan, a term used for Central Asia, Northern Iran and Afghanistan. This would change the balance of power in the middle East as it would bring conflict to the very borders of Iran. It would allow for Iran’s enemies to arm this extremely anti-Shia group, following a parallel of the Yemen’s Houthi rebels for Saudi Arabia. These rebels are banking on the opportunity that, following peace in Afghanistan with the Taliban, the Taliban’s followers will become disenchanted by its leadership dealings with the US and would thus join the newly founded group. They would acquire the battle-hardened Taliban troops, which would provide a formidable foe for Iran.
Why Tehran has decided to openly confront US sanctions and how the crisis could develop from now
▲ Persian chess-game [Pixabay]
ANALYSIS / Baltasar Martos
It is now time to suggest a possible future-oriented course of action for Iran in response to the US unilateral exit from the nuclear deal1. The strategy employed to this end will be that of the red-hat analysis, capitalizing on cultural comprehension and adopting the Iranian regime’s perspective to better understand the way in which it perceives the various threats and opportunities ahead, hence always considering situational factors.
A SWOT analysis will be provided beforehand by way of introduction, focusing just in one of the most important (1) strengths: high proportion of young people; (2) weaknesses: the intrincate political system; (3) opportunities: a closer relationship with leading European countries, and (4) threats: joint pressure by the US, Israel and Saudi Arabia. This will surely enable a more in-depth approach to Iranian views and positions.
A simplified SWOT
1. First and foremost, Iran is home for more than 80 million people, 43% of which are less than 40 years old. This large young population is very much tuned to Western trends and habits of consumption. They embrace technology virtually as much as in any other Western nation. The most striking fact about Iranian youngsters is the amount of university students among them. The country is well known for hosting a highly qualified population and labor force that acquired superior education at any of the numerous universities in the major cities.
2. In second place, Iran owns a very complex, intricate political system that renders the hierarchy of the decision-making process very difficult to understand. Its current institutions are a product of the 1979 Islamic Revolution, which ousted the Shah and reformed the whole previous power network. The political system of the country then turned from an authoritarian Monarchy into a constitutional theocracy with a multipolar power structure. The religious figure of the Supreme Leader or Ayatollah is the ultimate responsible for setting both domestic and foreign policy. The main issue here is that this institution holds views that are deeply rooted in the old days and endeavors to influence the private lives of the citizens. Decisions are self-explanatorily not made according to economic efficiency or political experience, or even less to satisfy population’s demands. Instead they aim to preserve and safeguard the regime and ensure its survival. The primary concern of the ruling political elites is thus to last in power, not to introduce reforms or think prospectively.
3. In the third place, Iran has now the chance to strengthen ties with its traditional powerful trade partners in the European Union, such as France, England or Italy. Provided their opposition vis-à-vis the US reimposition of sanctions, Iran can utilize this opportunity to begin a rapprochement towards them and express its best desire to cooperate under certain established conditions that prove beneficial to both parts.
4. Finally, Iran should not disregard the warnings coming from the White House. The main threat Iran is likely to face is an aggressive diplomatic strategy at the initiative of the US with the aggregated—but separated—efforts of Israel and Saudi Arabia. This would definitely jeopardize Iran’s current position as one of the dominant powers in the region and would force the nation to find an alternative solution.
Red Hat exercise
Tehran’s interpretation of Washington’s 2018 diplomatic shift quite evidently differs from that of the Trump administration2. In the words of Ayatollah Khamenei, the ultimate reason for this new move lies in the US’s perverse ambition to progressively weaken and undermine the socio-political structure built after decades of arduous work by the Islamic Revolution. Khamenei claims that Washington’s intention is to overturn a popular, legitimate government in favor of a puppet regime completely subjected to its will.
In their public speeches, the Iranian political elites constantly refer to the US’s boundless ambition to regain total control of the region, oppress civil society and submit individuals to their corrupted dogmas and doctrines, like they did decades ago. They very often evoke the glorious past of their millenary civilization and emphasise that it is precisely its longevity what makes it worthy of the most careful preservation and promotion. Once a major empire, they say, Iran has developed a unique identity different from that of its closest neighbors.
In the Iranian collective mindset, especially that of the most orthodox Shia and the very influential clerics, the nation enjoys the highest dignity for having conquered other territories and peoples but also endured invasions and dominations from enemies and rivals, yet always remaining true and loyal to its ancient traditions and foundations. More recently, Iran owes its independence to the innumerable efforts made by the leaders of the Revolution to free the nation from the clutches of the American imperialism embodied in the Pahlavi dynasty. The country’s civilisational pride is therefore deeply ingrained in the people’s minds and very often put forward in the political discourse. Furthermore, its foreign policy is soaked by a traditional ‘regional fear’, for Iran sees itself as the guardian of true Shi’a values amidst a region dominated by Shi’a-adverse powers with superior military capabilities.
The strong resentment and hatred against the Western world in general, and the demonization of the United States in particular, appear very often in Iranian politics. Such an anti-Western narrative is very often used to cover up the regime’s economic mismanagement over the last decades, instead blaming the West for all the struggles, ills and evils of society. We must remember that, for Iranians—at least for the most religious sector of the society—the Islamic Revolution is a path that leads believers into Paradise and salvation as understood by the Shi’a. The revolution purports to redeem the peoples from the national humiliation suffered during Western dominance in the times of the Shah. Therefore, martyrdom, resistance and endurance are considered three most valuable virtues that will guarantee all kinds of enjoyments to those cultivating them throughout their lifetime.
Iran presumably decided to start a nuclear program based off several historical reasons. On one hand, in face of a strong isolation experienced during the bloody war waged against Irak—an opponent which used chemical weapons against both combatants and civilians alike—Iran began its works with the aim of further intensifying its nuclear technology developments as a means to guard against a future surprise of similar characteristics.
On the other hand we shall recall the Revolution’s need to constantly legitimate itself and maintain its status in front of the international community, thus preserving Iran’s independence from outside influence or external intervention while restoring its former greatness as a center of scientific progress. Moreover, Tehran has long claimed its need to promote a solid nuclear energy plan to ensure energy security at home and satisfy the needs of its huge domestic demand in peaceful civilian, energy and medical terms. The government emphasizes the right to develop, research, produce and use nuclear energy as endowed by Iran’s membership in the Non-Proliferation treaty.
However, the most pressing issue for Iran’s security is undoubtedly the fact that five of the world’s nine nuclear powers are located nearby or directly on its borders. The theocracy claims to have substantial grounds for feeling victim of the foreign arrogance of the outside world, which has allegedly endeavored to restrict Iran’s rights to freely develop its nuclear activities by having it sign the Non-proliferation Treaty, unlike other neigboring nuclear-armed states such as Pakistan, Israel or India. This brings us to the conclusion that, even if the regime vehemently denies any interest in developing nucler weapons and rather uses the need to supply its domestic market with much needed energy resources as an excuse to keep its works running, some evidence found in recent discoveries of covert facilities and nuclear plants can confirm the vital importance for some of the regime leaders to obtain weapons in the short or medium term.
The Persian nation is now standing on a crossroads with three different paths ahead, each one leading to a very different place. We will place them in an order, ranging from the most likely scenario to the least plausible one: (A) prolongation of diplomatic stalemate with minor tensions; (B) quick escalation of tensions and direct military confrontation, and (C) bring back the so-called ‘12 conditions’ to the bargaining table and stick to them.
A. The most likely: Diplomatic stalemate
On May 8, exactly a year after Donald Trump's announcement of US exit from the JCPOA, President Rouhani announced that Iran would cease to perform parts of its commitments under the nuclear deal, namely the observance of the limit for its stockpile of low-enriched uranium and the compliance with the limit of heavy water reserves. Its statement included a 60-day ultimatum, addressing specifically the European State parties to the treaty and urging them to find a diplomatic solution via economic packages to ease the current oil and banking restrictions. Should they prove unable to fulfill this conditions, Rouhani warned, Iran will continue with its intended pullout from the accord through a ‘multi-phased approach’.
Europeans have recently been employing a rhetoric that has resulted in ambiguous and confusing promises to Iran, mainly due to the innumerable efforts they need to make in order to balance out a strong willingness to save the deal and the fear of a further detachment from an everyday more hostile American partner. On his side, President Rouhani has remained true to his bet on ‘strategic patience’ in the style of the Moderation and Development Party, to which he belongs, during all this time.
Nevertheless, it seems that the patience of the Iranian leadership is coming to an end with each passing day. The political elites have harshly critized its European counterparts for making lots of empty promises throughout this last year without achieving any substantial or practical outcome, specially after the U.S. decision on April 22 to put an end to the waivers on oil imports from third countries in an attempt to ‘bring oil trade to zero’. This will no longer exempt any customer engaging in oil transactions with Iran from the US-led second wave of sanctions. Moreover, Rouhani has called on the Europeans to allow Iran to repatriate its money sitting in European bank accounts, which still remain blocked as part of previous sanctions.
Without disregarding the vital importance of the E3 for Iran’s national economy and the pivotal role they play in the political scenario surrounding the country in the Middle East, it is also true that there are other strategic partners involved in this game whose existence as credible alternatives to the E3 is precisely the cause that pushes the Iranian leadership to discard a complete withdrawal and rather remain adhered to the nuclear accord. At the front of this group of Iranian oil importers are China and India, which will self-evidently ignore the effects of the recent termination of the US waivers and prosecute their purchases to satisfy their huge domestic demand. Although with weaker currencies and perhaps using more rudimentary instruments, both China and India will manage to secure those transactions in an orderly manner and will most likely help other purchasers to do the same. In fact, some voices speak of a possibility of performing oil-swap arrangements via Russia to lock oil prices and protect their finances from the high volatility of global energy prices.
Following this logic, Iran will then go ahead with its ongoing business while persuading and encouraging importers to keep buying Iranian oil despite the inability of European counterparts to meet the aforementioned ultimatum as set by President Rouhani. In paralell to this, Iran will probably threaten the remaining parts and especially the Americans with a further development of its nuclear capacities, but this will only add to a strategy that seeks to prolong the current state of affairs until the next U.S. presidential elections in 2020 take place.
B. The apocalyptic, yet no the least plausible scenario
The most apocalyptic—yet not the least plausible—scenario can be inferred from the most recent moves of US military assets after the government’s official designation of the Iran Revolutionary Guard Corps as a ‘Foreign Terrorist Organization’ on April 8. Fist, on May 6, the Pentagon announced the deployment of the aircraft carrier USS Abraham Lincoln and a bomber task force on the Persian Gulf. Four days later, the Pentagon confirmed that it had sent some warships, the USS Arlington amphibious transport dock and a Patriot missile defense battery to the same region as a deterrent to Iran. Lastly, on May 12, two Saudi oil tankers and four additional Emirati ships off the coast of the Persian Gulf were sabotaged. President Trump blamed Iran for malicious behaviour targeting maritim traffic along the Gulf. More recently, Washington officials have announced a new deployment of some fighter jets and additional troops to the same territory in what they have called a ‘mostly protective measure’. This suddenly heightened tensions might result in the outbreak of renewed hostilities in the coming months.
The American public opinion does not discard a military confrontation in a close future. In fact, a poll conducted in the US between May 17 and May 20 disclosed surprising results3: more than half of the American citizens consider Iran as a ‘worrying’ or even ‘imminent’ threat. Roughly the same percentage assumes their country will go to war against Iran in the coming years. Very few civilians believe that a preemptive attack should be conducted on Iranian military interests, but roughly 80% of them are convinced that the US should respond to an attack from the side of Iranian via airstrikes or even ground troop invasions.
An undeniable fact is that there are differing views inside the White House. The National Security Advisor John Bolton and in some way also the Secretary of State Mike Pompeo have always shown a maximalist approach that seeks to overthrow the mullahs’ regime in Tehran. Apparently none of them would hesitate to enter into a dire military confrontation if the situation so required. Bolton himself had already declared his intentions even before substituting his predecessor in office, Herbert McMaster. On the other hand, President Trump has used his recent meeting with the Japanese Prime Minister Shinzo Abe to affirm the following: ‘Iran has a tremendous economic potential. […] It has a chance to be a great country with the same leadership. We are not looking for a regime change. I just want to make that clear. We are just looking for no nuclear weapons'4. This somehow spaces out his view from that of his hawkish aides. In the words of Karim Sadjadpour, a well renowned Iranian-American policy analyst, ‘What Trump articulated in Japan was another reminder that his main problem with the Iranian nuclear deal was that it was signed by Obama. Given Trump’s eagerness for a public summit and deal with Tehran, it is conceivable that Iran’s leaders could sign a more favorable deal with Trump than they did with Obama. But the pride and mistrust of Iran’s supreme leader makes him more inclined to subject his population to another year of sanctions and economic malaise rather than do a deal with Trump’.
C. The unlikely back to the negotiating table
On May 12, 2018, four days after President Trump made public his intention of withdrawal from the JCPOA, Pompeo set out a list of twelve conditions under which Washington would agree to a new agreement with Tehran. Besides addressing the termination of Iran’s participation in different conflicts throughout the Middle East, it explicitly called on Tehran to ‘stop enriching its uranium and plutonium reserves, grant IAEA unrestricted access to all sites throughout the entire country and end proliferation and testing of ballistic missiles’.
It should be noted that Trump never presented explicit and clear evidence that Iran was failing to comply with its obligation. Instead, he merely denounced the treaty as far from being minimally advantageous for American interests, once again reinforcing the idea that the Obama Administration resoundingly failed to negotiate a deal that could benefit both parts. The three European State parties also emphasized that Iranians had remained faithful to their commitment and that had been officially attested by international inspectors supervising the nuclear facilities. That was the main piece of evidence supporting Iran’s thesis of not being in a state of violation of any provision of the deal but instead strictly observing every single aspect as they were agreed upon.
Having all this in mind, there are other aspects we should look at. The war in Syria is slowly coming to an end and Al-Assad owes his victory to the strong and uninterrupted financial and logistic aid from Tehran. There is no doubt that the regime will hold him accountable for all the support provided throughout the conflict and will seek to consolidate positions around the war-torn territory, thus expanding the influences of Shia islamist ideology as promoted by the Supreme Leader and the most prominent clerics. Moreover, not only is Iran-backed Hezbollah movement present in Syria, but also it enjoys a very prominent position inside the Lebanese parliament and holds an enormous influence in the country in general terms.
All this together, in addition to the round success Tehran is enjoying in his efforts to back Houthi rebels as compared to the exorbitant cost Saudi Arabia is paying to counter the rebellion, suffices to conclude that Iran is by no means willing to get back to the conditions advanced by Pompeo in order to renegotiate a new treaty that would thwart all the efforts already made along the way. This would signify an absolute humiliation for the regime. Iran has already come too far and it would now only accept to resume negotiations if it was granted the chance to depart from a dominant diplomatic position.
Representatives from the P5+1 countries in 2015, weeks before reaching the JCPOA, the nuclear agreement [US State Department]
What the EU is doing
Among all the State parties involved in the JCPOA, the E3 are likely to be the most severely affected by the US reinforcement of sanctions given the big stake they have in the region in form of finances and investments in the oil sector, and their unwillingness to go undercover. As a result of this new decision by Washington, companies and banks doing business in Iran could see their access to the American market cut off. Among other collateral effects, the re-imposition of sanctions will cause a negative impact on the region’s trade flows, energy supplies, connectivity, security and stability. Indeed, sanctions present a special conundrum for the European counterparts: either they decide to carry on with their economic activities in Iran or they remain inside the US-led international financial circuit. They need to solve this jigsaw puzzle if they still want to secure their economic interests.
In order to do so, following the US exit, the High Representative of the European Union Federica Mogherini issued a statement bitterly regretting the US retaliation and expressing the EU’s strong commitment to enact an updated blocking statute that would enter into force on August 7. This blocking statute refers to the ‘Council Regulation (EC) No 2271/96 of November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom’5. It basically ‘allows EU operators to recover damages arising from US extraterritorial sanctions and nullifies the effect, in the EU, of any foreign court rulings. It also forbids EU persons form complying with those sanctions’6. In a nutshell, this statute acts as a shield against trade wars and mitigates the impact of those sanctions on the interests of European companies doing legitimate business with Iran, thus keeping Iran’s oil and investments flowing.
The European Union considers that its Member States’ business decisions should not be determined by any kind of foreign legislation. It would never recognize such legislation applicable to European operators. However, the EU still holds to the commitment of pursuing a continued, full and effective implementation of the treaty as long as Iran also plays its part by refraining from acquiring further equipment to develop a nuclear weapon and enables monitored verification of its uranium-235 enrichment activities. The E3 considers that the agreement is delivering on its goal so far and ensuring the peaceful nature of the nuclear program.
It is hence no surprise that the three European Member States involved in the deal are determined to preserve and implement it, insisting upon the numerous benefits it entails for Iran, the Middle East and the rest of the international community. Acting on behalf of the E3, the EU has recently endeavored to take several measures in order to offset the US withdrawal of the JCPOA7.
i) In the first place, they seek to extend the European Investment Bank lending mandates, allowing the bank to decide strictly under the EU budget to what extent and under which conditions it will finance commercial activities in Iran.
ii) Secondly, they also attempt to encourage and promote activities by Small and Medium Enterprises (SMEs) willing to undertake operations in Iran.
iii) Thirdly, they purport to accelerate the activation of the Instrument In Support of Trade Exchanges (INSTEX). This is a ‘Special Purpose Vehicle’ acting as a clearing house or barter arrangement for Iran to conduct trade with European companies outside of the SWIFT mechanism. This mechanism was officially registered by France, Germany and the United Kingdom on January 31, 2019. It works as an alternative payment channel that facilitates legitimate trade and investment between the EU and Iran despite sanctions. It is led by the EU3 and self-evidently euro-denominated. The entity originally focused only on trade in non-sanctionable essential goods, namely medical and humanitarian, and not so much on oil-related transactions so far. It mainly addresses SMEs whose total trade volume is usually small. In principle, it has not been designed to circumvent or bypass US sanctions but rather to fight money laundering and counter the financing of illicit terrorist activities. These last aspects reinforce the European efforts to voice its disagreements on Iran’s declared support for Al-Assad in Syria and the promotion of terrorism region-wide, its multiple human rights abuses and its development of ballistic missiles.
However, in view of the technical complexities resulting in a long delay to set in motion this mechanism as well as the more immediate challenges the Union has to face in the first instance, it is very unlikely that the E.U. finds enough resources and time to effectively give a definite impulse to this apparatus before the deadline of 60 days from May 8 set by Iranians eventually expires.
(1) Sanger, D. et al. “U.S. Issues New Sanctions as Iran Warms It Will Step Back from Nuclear Deal”, The New York Times, May 8, 2019
(2) Chubin, Sharam. “The Politics of Iran's Nuclear Program”, The Iran Primer, US Institute for Peace, 2010 (updated 2015)
(3) Ipsos/Reuters Poll Data, Iran Poll 05.20.19 https://fingfx.thomsonreuters.com/gfx/mkt/12/658/652/2019%20Reuters%20Tracking%20-%20Iran%20Poll%2005%2020%202019.pdf
(4) Kranish, Michael. “Trumps Says He Is Not Seeking 'Regime Change' in Iran”. The Washington Post, May 27, 2019
(7) Geranmayeh, Ellie. “60 days to save the JCPOA”. European Council on Foreign Relations. May 9, 2019
Iran Country Risk Report (May 2019)
The sanctions that the United States is implementing against the Islamic Republic of Iran since November 2018 are the toughest sanctions ever imposed on Iran. They threaten to cut off foreign countries and companies dealing with Iran from the US financial system in order to deter business with Iran so to curtail the impact of proxy groups on the Middle East’s security and stability. The aim of this country report is to provide the most recent analysis of the Iran's economic and political situation, and estimate its evolution in the short and medium term. It presents an overlook of specific clues about matters related to political risk, as well as the effect that sanctions may have on the Iranian economy, and the prospects for political stability all over the region.
Report [pdf. 13,5MB]
Effects of sanctions
The re-imposition of US sanctions will maintain the Iranian economy in recession during the remaining months of 2019. Notwithstanding the foregoing, the economic meltdown will be very unlikely to happen, as the volume of oil exports is still significant, crude prices are going to continue to rise and other major powers´ opinion will still differ from the US´s. The multinational companies dependent on US financial system will continue leaving the Iranian market, partially leading to declining of the foreign investment, but SMEs will be almost unaffected and new forms of trading are likely to emerge soon.
Iran is likely to build stronger economic and political ties with India, China and Russia, thus giving them more power and openness to new trading opportunities, basically due to lack of any other possible partner on the horizon in the mid-term.
The prices are likely to keep growing up in the following months reaching the average inflation of 31.2% in 2019-20; still the risk of hyperinflation is discarded due to the fact that Iran is able to meet a significant share of local demand through local production.
Backed by support from the EU, Iran is promised to obtain in the mid-term a special mechanism of payments (Special Purpose Vehicle) for its oil and other exports (possibly through a barter system) in order to conduct trading outside of the competence of the US sanctions. This is likely to create some tensions between Europe and the US but they will not be powerful enough to split the long-lasting alliance between the two.
Oil and gas
The Iran´s production of oil will probably continue to decrease affecting the world´s oil price.
Five from the eight initial major buyers (Italy, Greece and Taiwan have already stopped their purchases from Iran) are and will be buying Iranian oil now that the waivers have been extended for the following 90 days. Thereby, the Iranian oil will still remain in demand during the following years, and Iran´s government is likely to find solutions for its selling and exportation, even though illegally, in the mid and long-term. Thus, the United States is unlikely to meet its earlier target of driving Iranian oil exports to zero.
Iraq will continue to buy natural gas from Iran in order to use it in the production of electricity, becoming the second largest customer. Taking into account the fact that there is a sort of competence between US and Iran for the influence over Iraq, it can fuel a further deterioration of their relations. It is also plausible that more buyers will emerge if some new forms of trading, which do not rely on dollar, appear soon.
Even though the modest production growth is likely to continue, Iran won´t be able to unilaterally monetize its natural gas resources due to lack of financial partners and the investment, especially from the West. However, it will be able to fulfil its domestic demand and sustain trade with Turkey.
Iran’s ability to increase production and exports of natural gas will be almost improbable, unless the relations with the United States are improved or support from international partners in defiance of sanctions is reinforced. Nevertheless, if Iran manages to accomplish current development projects, its export pipeline capacity will increase from 46.4 bcm/year in 2018, to 119.7 bcm/year to the regional and global markets in a long run. China, India and Pakistan will play a significant role in Iran´s natural gas sector.
The domestic scene
Iran will continue demonstrating considerable resilience in coping with US sanctions, and is likely to continue to fully implement the commitments of JCPOA as long as China, Russia, or countries which are non-members of the deal, such as India, continue to trade with it, and if EU continues maintaining its constructive attitude. In this case, even a greater international support and United Nations diplomatic intervention is expected in the mid-term. However, on a longer run, the JCPOA future will depend upon the economic situation and complex political battles between moderates and hardliners in Tehran.
The current deterioration of the economic conditions in Iran, the rial devaluation and growing inflation, together with already-high unemployment will provoke a further popular discontent which is likely to maintain the protests but without any considerable probability to threaten the Iranian political stability or lead to leadership´s rupture during the upcoming years.
The sanctions are likely to produce some adverse effects on the political local scene over the longer term, as Iranian hardliners may take advantage of them and the popular frustration and obtain the victory in the coming 2020 parliamentary elections and the 2021 presidential poll. As a result, any possibility for future cooperation with US will equal zero.