Asna H. Rizvi
The history of U.S. – Iran relations is seemingly indifferent from the present day. The first time Iran suffered a trade embargo from the U.S. in alliance with the U.K. was in 1951, with the purpose to overthrow popular Prime Minister Mohammed Mossadegh and restore Shah Mohammed Reza Pahlavi to power. Mossadegh’s regime was successfully toppled two years later, bringing Shah back to power. More than two decades later in 1979, the Persian Monarchy was finally abolished by overthrowing Shah, and establishing the Islamic Republic of Iran under the leadership of Grand Ayatollah Ruhollah Khomeini.
Since then, as the Islamic Republic worked to establish itself, the unilateral punitive measures of the U.S. to shrink its development were put to play. The purpose of economically dismantling Iran lies in the core objective of ‘nuclear dismantling of Iran’. In the year 1957, a civil nuclear co-operation agreement was signed between the United States and Iran, which later became the basis of Iran ratifying the Non-Proliferation Treaty (NPT) in 1968. According to the agreement, America pledged its alliance in establishing a civil nuclear program in return for Iran’s commitment not to acquire nuclear weapons. During the 1970s and 1980s, U.S. – Iran relations continued to deteriorate as Iran was labeled as a ‘state sponsor of terrorism’ and Iran’s violation of arms embargo. During the presidential period of George W. Bush, it was revealed that Iran had been secretly working on a uranium-enrichment plant at Natanz and a heavy water-moderated nuclear reactor at Arak, which were deemed as direct violations of the NPT. As negotiations between the two countries were carried out, based on Iran’s verifiable abandonment of nuclear enrichment, in 2009, another secret uranium-enrichment site in Qom was discovered, stalling the relations between the U.S. and major powers up until 2013. In 2015, Joint Comprehensive Plan of Action (JCPOA) assured Iran a partial lift of U.S., U.N. and EU sanctions in return for disabling a part of Aruk Nuclear Reactor. As sources started to confirm Iran’s compliance as per the JCPOA requirements, countries such as China, members of European Union and Middle East’s promptly started to develop better multilateral and bilateral relations with Iran. Even during the stretch of trade embargo imposed on Iran in the later half on the 20th centuries, countries such as China, Turkey and India, continued to violate the sanctions by finding loopholes and passages of indirect investment in Iran. But once the JCPOA formulated, many European companies started to invest in Iran in terms of trade. JCPOA negotiations reaching an all-time low of $30.24/bbl in oil prices in 2016, provided substantial opportunities to expand the network of oil extractions in Iran, causing lower oil prices, as the costs fell.
Now, as America has pulled back from the JCPOA and has recently issued a November warning for all Iranian oil exports to be cut off, all allies of the U.S. have a decision to make. A unilateral pull out of the U.S. from the JCPOA, will cause secondary sanctions on whatever state/company continues to do trade with Iran. One must understand that America is the biggest Oil Importer in the world, followed by China and the EU. Although America does not import a single gallon of oil from Iran, the trade embargo on oil exports of Iran, will indirectly cause a loss of annual savings of $38-76 billion for the United States. With all this keeping in view, American allies (especially the EU) have been trying to vigorously negotiate with the Trump Government to withdraw the decision of the trade embargo. The nuclear operations in Iran, have been on a static hault ever since JCPOA went into actions. Several inspection sources have confirmed that Iran is currently not pursuing its former dreams of becoming the second Islamic Nuclear country. Given the facts, if the trade embargo does get implemented, then all stakeholders need to decide between higher prices of oil and consumer goods along with suffering businesses and suffering a short-term loss as per U.S. Sanctions. The world community also needs to keep in mind, that Iran is no longer the militarily hampered Iran of the 1950s. Today Iran has the military might, ammunition and naval infrastructure to protect itself. The sanctions imposed, increase the chances of a potential war, for the sake of curbing Iran’s nuclear technology. The sanctions will not only collaterally damage the economies of direct and indirect oil export partners of Iran, but will also persuade Iran to continue its nuclear enrichment projects. The analysis of the timeline of trade embargoes imposed on Iran showcase that Iran has never stopped its pursuit to become a nuclear power(up until the JCPOA), and will thus use its alliances and trading partnerships (China and N.Korea) in present times to continue its sustenance.
Iran’s retaliation to the trade embargo will not only be caused by high oil prices using alternate resources, but can also be backed by Iran’s claim as per the UNCLOS framework of international law. Under this, a large share of the Strait of Hormuz (which links the Persian Gulf to the Gulf of Oman), a strategic waterway for oil shipments falls under Iran’s territorial waters, and so as a retaliation to the trade embargo, Iran’s rightful inspection of Saudi Arabia and UAE Oil Shipments will cause severe delays in supply, leading to high oil prices. Although Iran does not have control over the entire Strait of Hormuz as the south of this water belt lies with UAE and Oman, the shrink of access to the waters in the strait will ultimately cause complications in the transportation along the passage.
At the same time, Iran can freely practice its trade, with countries that do not comply with the November Cut Off, complementing economic gains for non-compliant states. Meanwhile, OPEC producers such as Venezuela, Nigeria, Libya and Iraq along with Russia, UAE and Saudi Arabia can together not compensate for Iran’s Oil Production, and so will cause a severe energy distress.
In present day, Iran has many allies aiding its technologies, infrastructural development and oil extraction mechanisms. So for the U.S. to easily mold the interests of the Islamic Republic of Iran is highly unlikely. One must also understand that the Trump Government, with its strong strategic alliance with Israel, is hampering the progress of its European Allies. The EU has bred grievances against America due to a number of reasons, such as Trump’s suggestion to re-include Russian Federation into G7 Group of Industrialized Democracies, the on-going U.S.-China Trade War as a barrier to globalization and U.S. neo-isolationist outlooks.
The question however lies, whether the international community (including the EU, China, India etc.) is willing to let its economy suffer in this century of economic supremacy. The JCPOA had highlight excessive compliant traits in Iran’s diplomacy towards its nuclear program, and yet the U.S. pulled out of it. The U.S. military’s Central Command had made Iran’s increased naval activity in the Strait of Hormuz as the basis of imposing sanctions on Iran all over again. Keeping these developments in mind, an oil trade embargo imposed on Iran lacks substantial grounds, and seems like an illegitimate use of power to make a sovereign nation surrender. How significant is maintaining the alliance with the U.S. at the cost of imprudent inflation for the entire world, will thus be determined by November 2018.
The author is a Research Associate at the Center for Global & Strategic Studies (CGSS), a think tank based in Islamabad with the mission to help improve policy and decision-making through analysis and research.
