After months of threats, speculation and rumors, U.S. President Donald Trump has finally pulled the plug on the US Iran Nuclear Deal. On May 8, he declared the U.S. “withdrawal” from the agreement — known as the Joint Comprehensive Plan of Action (JCPOA) — matters regarding that the deal was not comprehensive enough and did not intent on Iran’s destabilizing provincial activities. The move is a significant reversal of U.S. policy on Iran and raises a number of questions about a situation that will require close monitoring in the months to come.
US Iran Nuclear Deal | Actual Statement
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“We cannot prevent an Iranian bomb under the decaying and rotten structure of the current agreement,” the president forenamed in condoning his accord. “Therefore, I am announcing today that the United States will withdraw from the Iran nuclear deal.”
In his announcement, Trump outlined a plan to re-impose all suspended primary and secondary sanctions on strategic sectors of Iran’s economy, including the vital oil and financial sectors. The plan also includes placing a number of people and entities back on the Specially Designated Nationals and Blocked Persons List.
Now, this announcement doesn’t mean the deal is immediately dead. Technically, the Iran Nuclear Deal is an agreement between Iran and what’s called the P5+1 (the US, Britain, France, Russia, China, and Germany) — which means the US leaving the agreement doesn’t end it. If the rest of the P5+1 keep their sanctions off, Iran may decide to continue to adhere to the deal’s restrictions even after the US Iran Nuclear Deal pullout.
The Iran nuclear deal led to the lifting of secondary sanctions that had limited foreign companies, including European and Asian firms, from doing business with Iran. Most transactions between U.S. companies and Iran, however, had remained illegal and limited by primary sanctions unrelated to the JCPOA. While the U.S. withdrawal from the JCPOA effectively ends the multilateral agreement, the European Union immediately noted that it still views the agreement as critical for ensuring regional and global security and that it remains committed to the deal — including the provision for sanctions relief for the Islamic republic.
US Iran Nuclear Deal | Questions for the Oil Markets
The U.S State and Treasury departments, along with the Director of National Intelligence (DNI), will determine whether each country has cut imports of Iranian oil by the end of the period and include the ending of contracts, lower volumes and any percent reduction in their determinations.
With Iran exporting roughly 2.5 million barrels per day, this works out to a drop of about 500,000 bpd if the sanctions are highly effective, far less than the 1 million bpd that Iran’s exports declined by in 2012 due to sanctions. However, this time the European Union won’t put in place a full embargo on Iran’s imports, which alone led to a 600,000 bpd drop.
US Iran Nuclear Deal | Options for Iran’s Response
Iranian President Hassan Rouhani said that his country considers the JCPOA a deal between Iran and five other countries — China, France, Germany, Russia and the United Kingdom — and that he has ordered Foreign Minister Javad Zarif to talk to these countries about ways to continue the agreement.
Because the United States is no longer a party to the agreement, bringing up the issue in the JCPOA joint commission is a pointless strategy. Beyond talks with the European Union, Iran largely has three strategies. They involve immediately pulling out of the JCPOA and restarting parts of its nuclear program; removing the additional protocol that gives inspectors from the International Atomic Energy Agency easier access to its nuclear sites; and withdrawing from the Nuclear Non-Proliferation Treaty.
US Iran Nuclear Deal | The Risk to Iran’s Economy
In the wake of Trump’s announcement, questions swirled around the subject of Iran’s economy. Such challenges aren’t new and even helped ignite protests at the start of the year. The Islamic republic has long struggled to create jobs for its youth. Many Iranians complained that the JCPOA had failed to provide the country with any tangible economic benefits. The Iranian rials fell from 36,000 to the U.S. dollar in September 2017 to 60,000 in April due to speculation that the United States could re-impose sanctions.
The government will also try to mitigate the sanctions by reducing economic ties to places that are likely to buckle under to U.S. pressure or take steps toward more friendly partners such as China, Russia, Qatar and India.
US Iran Nuclear Deal | Trump’s Iran Deal Withdrawal effect for India’s Security
Even though India was not part to the deal, India promoted it. New Delhi had scrutinized the thriving tensions between Iran and the United States earlier than the deal was reached with some anxiety because a war could have had diversified negative emanation for India. Thus, India was quite happy with the nuclear deal because it disposed of the contingency of instantaneous war.
A bigger concern is regarding India’s energy security. Iran is the third biggest supplier of oil to India, supplying 18.4 million tons of crude from April 2017 to January 2018 and 27.2 million tons in 2016-17. Iran’s acting ambassador in India, Massoud Rezvanian Rahaghi, ventured to console New Delhi, stating that “oil trade with India will not be affected.” But it is quite possible too that he was attempting badly to keep India engaged with Iran, squabbling that given the strategic relevance of the Chabahar port to India, no bureaucratic arguments should come in the way of developing the port.
The second affair is about Chabahar port. Advancement of the port has been deferred by several years, in spite of it appears to have acquired new power following Modi’s visit to Tehran in May 2016. According to Nitin Gadkari, the national minister of roadways, the port will be functional by 2018. Significant as Iran might be, there is insufficient similarity between Iran and the United States when it advances to assuring India’s larger national security interests, which massively involves China.
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