Collapse of the Iranian Nuclear Deal: It’s Effect on India

The Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action, offered Tehran billions of dollars in sanctions relief in exchange for agreeing to curb its nuclear program.

In 2015, this deal came into existence under US Former President Barack Obama when  Iran agreed a long-term deal on its nuclear programme with the P5+1 group of world powers – the US, UK, France, China, Russia and Germany.

It came after years of tension over Iran’s alleged efforts to develop a nuclear weapon. Iran insisted that its nuclear programme was entirely peaceful, but the international community did not believe that.

Under the accord, Iran agreed to limit its sensitive nuclear activities and allow in international inspectors in return for the lifting of crippling economic sanctions.

The agreement was aimed at ensuring that “Iran’s nuclear program will be exclusively peaceful.” In return, it lifted U.N. Security Council and other sanctions, including in areas covering trade, technology, finance and energy.

Tehran acceded to a 10-year restriction on nuclear production, agreed to shut down thousands of centrifuges and exported almost all of its bomb-making material. Under the agreement, Iran agreed that “under no circumstances will Iran ever seek, develop or acquire any nuclear weapons.”

Iran also allowed a strict monitoring regime, permitting international inspectors to gain access to sites suspected of nuclear weapons-related activities.

Why is the deal controversial?

As of May 2018, there was broad consensus that Iran has abided by the agreement.

Israeli Prime Minister Benjamin Netanyahu, however, has alleged that “Iran lied” about its nuclear weapon ambitions in the 2000s, although the information he shared seemed to match up with what nuclear inspectors had already reported about Tehran’s program. 

Critics also allege that the deal itself is flawed and does not prevent Iran from engaging in aggressive actions that fall outside the pact’s purview, such as pursuing a ballistic missile program and expiration dates on some restrictions, as well as extending its influence throughout the region.

President Donald Trump has made no secret of his dislike for the agreement, calling it “the worst deal ever” while on the campaign trail.

On May 8, 2018, Trump announced the U.S. would reimpose sanctions on Iran, leaving other nations involved scrambling to salvage the pact.

Restoring sanctions amounts to a U.S. breach of the original deal whereas Iran was deemed to be compliant, according to international nuclear inspectors.

Why does Mr Trump oppose it?

In a televised address in May, the president denounced the JCPOA as a “horrible, one-sided deal that should have never, ever been made”.

Rather than protecting the US and its allies, it had placed “very weak limits on the regime’s nuclear activity and no limits at all on its other malign behaviour, including its sinister activities in Syria, Yemen and other places all around the world”, he said.

Mr Trump also said intelligence documents published by Israel in April had proven that “at the heart of the Iran deal is a fiction that Iran only desired a peaceful nuclear energy programme”. Iranian officials have consistently insisted their intentions are peaceful.

The president added that the accord’s so-called “sunset clauses” – under which key limits on Iran’s nuclear programme will start to expire – were “totally unacceptable”; that it did not deal with Iran’s development of ballistic missiles; and that its mechanism for inspections and verification was not strong enough.

How India could be affected by U.S. decision to pull out of Iran nuclear deal?

Despite United States President Donald Trump’s decision to pull out of the Joint Comprehensive Plan of Action (JCPOA), the nuclear deal itself won’t be scrapped as long as Iran and the other signatories: the U.K., France, Russia, China, Germany and the European Union remain committed to it.

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 THESE TWO MAIN ways:

  1. 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, which breached ₹67 to the U.S. dollar this week. In the past week alone, crude prices have crossed $70/bbl (barrel) level, touching a four-year high.
  1. 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, and the new U.S. sanctions could slow or even bring those plans to a halt depending on how strictly they are implemented. 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.

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