The US’ withdrawal from Joint Comprehensive Plan of Action (JCPOA) with the commitment to reintroduce economic sanctions indicates President Trump’s plan to tighten the noose around Iran like North Korea. He believes that North Korea has crumbled to the US sanctions and ultimately joined the negotiations. Evidence suggests that the US is miscalculating the situation as it is the Chinese diplomacy,which worked behind the scene. However, in any scenario, Iran’s case cannot be compared with North Korea. Besides the US, the JCPOA has been signed by five other major powers of the world that are not only the guarantors of the agreement but also committed to safeguarding the plan.
Russia has regarded the decision as “confirmation of incompetency of Washington” to deal with the changing global dynamics. China believes that a deal is better than ‘no deal’. The UK, France, and Germany have decided to meet Iranian representatives to discuss the situation. France’s foreign minister said:“The deal is here and only the US has withdrawn from the deal.”
Hence, the US’ actions are considered unilateral,and sanctions have been introduced unilaterally without consultation with other signatories. The US is in the process to put sanctions on Iran by taking the route of secondary sanctions. It is pushing its allies and countries to comply. The US ambassador to Germany recently advised German companies to shutdown their business with Iran. Currently, 120 German companies are present in Iran,and 10,000 companies have a business interest there. Most of the staff of German companies is from Germany. It will hurt Germany in two ways: first, loss of business and second, loss of remittances. Right now, the EU does not seem to comply with the demand of the US. Rather the US has received the strongest reaction from France’s finance minister. He said, “The USA is not the economic policeman of the planet”.
The decision will also impact economies of the world, especially of the Middle East and North Africa. Proxy wars will re-emerge, and security of region would be at stake
Many European companies are doing business with Iran. Airbus signed a deal of US$19 billion to provide 100 planes. Total invested in the oil sector of Iran,and they seem committed to their deal. There are many other companies, which have invested in hotel, tourism and vehicle industry. It is clear that European countries will suffer more along with Asian countries.
The worst victim of these sanctions would be Iran. It was estimated that during 2012 to 2016 Iran lost revenue of$160 billion due to lack of access to the international energy market. These losses were transferred to unemployment and poverty in the country.Sanctions also badly impacted Iran’s trade.
The withdrawal also has geo-strategic interests for the US. Trump’s rise is mainly attributed to the slogan of ‘Make America Great Again’. This sentence actually spells the reality of the Trump’s actions. The US wants to contain emerging economic powers,especially China and counter the notion of declining power of America.
China at the moment has signed a deal of$60 billion for import of oil. China is also expanding its relation with Iran to integrate it into its BRI programme. Iran is also trading partner with other BRI countries like Pakistan,the Central Asian States and European countries. By introducing sanctions, the US wants to make it difficult for other countries to do business with Iran and also disturb alliance of BRI countries.
Sanctions will lead to increase in oil prices. Increasing oil prices will also hurt developing countries across the world. Prices are already on the rise and sanctions will aggravate the situation. China and other developing countries will have to face consequences of increasing prices. For example, India was importing crude oil at the rate of US$47/barrel during 2016-17. Owing to rise of prices, now India will have to import at the rate of US$70/barrel. In addition to oil prices, India is also being persuaded by the US to rethink about its investment in Chabahar port.In a nutshell, India is on the list of “do more”.
These actions of Trump resemble the actions of British Empire during the last years of its Empire. The British were involved in chalking out a strategy to hold their interest by introducing the concept of “British first”. Criticism of JCPOA reminds the famous sentence by Harry White to John Keynes, “Your Highness, we will try to produce something which you can understand”. Maybe now the UK, Germany and France have to tell this sentence to Mr Trump on the JCPOA.
It will also impact economies of the world, especially of the Middle East and North African countries. Proxy wars will re-emerge,and security of region would be at stake. The first incidence has already been observed. Israel launched a missile strike in Syria by blaming that there is Iranian base, which had fired a rocket. Disturbance in the region will have direct implications for EU due to its vicinity. The EU is already suffering from the burden of Syrian refugees. A new surge of migrants and refugees will further burden the EU countries.
Therefore, the EU countries are observing the situation very closely and trying to devise a sensible and appropriate policy.China and Russia will also be involved later on for similar discussion with Iran. It seems that the US will not get the desired results from the sanctions.
Independent observers feel that it is a severe blow to the international system. It will weaken the moral authority and reliability of global order. Even the US politicians and leaders are criticising this action. Mr Obama clearly stated it is a misguided decision. Mr Joe Boden considers it an act of isolation from our friends and allies. Majority of leaders take it as a question on the reliability and global leadership of the US. Now North Korea will be more cautious and reluctant to deal with a sustainable solution. It is also a deviation from the thoughts of Mr Woodrow Wilson, who always advised Americans to devise policies on the basis of moral and ethics,not economic interests.
Pakistan has to devise its policy very carefully as it is also on the hit list of Trump administration. Pakistan is already a victim of different actions and policies of the US. A minor miscalculation can have very severe implications and price for Pakistan. However, Pakistan should not compromise on its sovereignty and independence for decision-making. Firstly, Pakistan should forge new partnerships in regions of South Asia, South East Asia, Middle East, North Africa and Central Asia with like-minded countries. Secondly, Pakistan should clearly demark the boundaries between Pakistan’s interests and scope for cooperation with the US. Thirdly, Pakistan should also negotiate with Iran and Saudi Arabia to come out of their paranoia. Lastly, Pakistan should not side with any country in proxy wars.
The writer is Director Research Uptake and Business Development, Sustainable Development Policy Institute
Published in Daily Times, June 3rd 2018.