By Kumar David –

Prof. Kumar David

Iran after the lifting of sanctions

Sanctions may soon be lifted; whether staggered country by country or in unison, and the timing of the process are difficult to foresee. The finalisation of negotiations is set for 30 June; Israel and US neo-right attempts to prolong sanctions forever will not succeed. Clearly their objective is NOT a tighter nuclear weapons agreement, but by whatever means possible to prevent the lifting of sanctions. To put it another way the objective is to prevent Iran from recovering economically, emerging as a strong regional entity, and rearming even as a conventional (non-nuclear) military power. From the point of view of Israel and the American neo-right this makes sense; they behold the prospect of a strong Iran with horror and there is reason for their panic. The shock for Israel and the American neo-right is that Iran has already resurged, despite prolonged sanctions, as a major regional player. Though it is likely, but not certain that a final deal will be reached by 30 June, Israel and the American neo-right on one side, and the powerful hardliner camp in Iran on the other, will use every trick in the book to spoil the party.

This essay will argue that it is not possible to maintain the sanctions regime for long, it will explore reasons for the panic about the resurgence of Iran, and comment on the prospects of economic and military resurgence and political reform. What still remains to be finalised on the deal is a time-schedule; one column setting out when each item will be implemented and a parallel column listing the sanctions to be lifted at each step. It is realistic to fit it all this into a 100-day programme if a deal between the 5+1 team (five UN Security Council members plus Germany), led by US Secretary of State John Kerry, and Iranian Foreign Minister Mohammad Javad Zarif is signed. Then China and Russia will lift sanctions immediately and other countries will follow suit. There is no reason for not lifting all sanctions once Iran implements all parts of the deal; in fact I go further and argue that all sanctions should be lifted pronto when the agreement is signed. A formula that says: “Thanks for signing but we need to watch for longer to ensure that you don’t backtrack”, is nonsensical. No international treaty is possible on this basis; especially since the option of re-imposing sanctions exists. I will not, in this essay, press my further view that Iran – or some other Middle Eastern Islamic country – should be a nuclear power unless Israel is ‘nuclear disarmed’.

The prospect Israel and the US hard-right dread is that if an agreement is reached and sanctions lifted, it will clear the way for Iran to rise as a political, economic and non-nuclear regional power, and this will tilt the balance in the Middle East. As Al Jazeera says “What Israel is truly concerned about is Iran’s re-entry in the world community”. This is the core of my argument and it is logical, irrespective of which side, Iran or Israel-US, you deem to be “good guys” and “bad guys”. I also am inclined to the view the Obama and Kerry are reconciled to the lifting sanctions and the rise of Iran as a regional power. They see this as inevitable and the ongoing imbroglio in the region (ISIL, Iraq-Syria and Yemen) would have driven home the point that Iran (not Saudi Arabia or Turkey) is the principal regional power.

Russian and Chinese sanctions busting

Russian President Vladimir Putin has approved delivery of the sophisticated S-300 air defence missile system to Iran and is sending out a message that it is “necessary” that all countries live up to their “commitments”. Foreign Minister Sergei Lavrov followed up that the ban was obsolete as talks between Tehran and the international mediators are moving forward. “It was done in the spirit of good will in order to encourage progress in the talks,” he said. “We believe that the need for this embargo, a voluntary Russian embargo, has disappeared.”

Putin called the cancelation of the S-300 ban “valuable” to improve relations between Tehran and Moscow. At a meeting with Ali Shamkhani of the Iranian National Security Council he sent warm greetings to the Supreme Leader and the President and praised Tehran’s constructive interaction with the world. “Iran’s close cooperation with 5+1 countries has become a source of great moves”. Shamkhani visited Moscow for a security summit of the Shanghai Cooperation Organization (SCO) whose members are Kazakhstan, China, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. Afghanistan, India, Iran, Mongolia, and Pakistan have observer status. Putin opined that the SCO can play an important role in establishing durable security in the region and criticized “certain countries” seeking to perpetuate a bipolar world. “The process to change the bipolar system is unstoppable” he said.

The Chinese have made no big noises (unlike Russia they are not agitated by sanctions against themselves). Two Chinese state-owned oil companies, China National Petroleum Company and Sinopec were committed to $4 billion oil projects before sanctions but backed out afterwards. At the first sign of sanctions lifting China moved quickly; in the first six months of 2014, imports of Iranian oil increased 48 percent from the same period the previous year and a 28% on a whole year basis. Acting on an expectation of sanctions termination China accepted Iran as a member of the Asian Infrastructure Investment Bank. This was approved by AIIB’s existing members – including Britain and France. The Chinese port of Chabahar is a key anchor in China’s Maritime Silk Route plan and India backs the plan which bypasses Pakistan’s Gwadar into Central Asia. President Xi Jinping will visit Teheran in May; Iranian delegations are in discussing investments; clearly the momentum is mounting.

Obama’s dilemma

Obama and Netanyahu intensely dislike each other, but the latter has the former by the short and curlies because of the quagmire of American domestic politics. The rightward shift in the US, and the anti-Obama bent of the Republican majority in Senate and House, make manoeuvring difficult. It is clear from his several news conferences that Obama is committed to the Kerry- Zarif package; it will be his foreign policy legacy. The Republicans are determined to thwart this; they are committed to seeing Obama going out of office with no legacy; he is an intellectual (hated by American politicians) and he is black. It seems, thanks to modern military technology, Iran believes it can develop conventional military power with second strike capability; hence nuclear capability can be postponed. Iran is deferring nuclear capability by a decade since it believes that when sanctions are lifted the economy will grow and permit it to become a conventional power capable of deterring attacks.

The U.S. Congress approved bipartisan legislation subjecting the accord to congressional review. This is a stumbling block for lifting US sanctions, but what the US Congress thinks is irrelevant for the rest of the world once an agreement is signed. The likely scenario is that the whole world except the US (and possibly some client states) will lift sanctions placing US business interests at a disadvantage. “The sanctions that have been put in place by Congress cannot be lifted without the administration bringing to us every detail of the deal” is the stand of the US hard-right bent on thwarting the lifting of sanctions irrespective of the terms of the deal. Their tactic will be to impose unacceptable conditions. US finance and business, itching to get piece of the pie will be adversely affected and a tussle can be expected. The conflicting interests of Washington neo-cons and Wall Street investors are driving them apart; eventually business will win but there will be holdups.

A deal and a return to growth

The agreement is a series of steps spread over six months to allow Iran a nuclear infrastructure for power generation but suspend bomb-making capability for a decade. The main elements are to halt production of 20% uranium, disable certain centrifuge cascades, dilute half the 20% enriched uranium stockpile, and not commission the Arak heavy-water reactor capable of producing plutonium which can be quickly assembled for a bomb. Supreme Leader Ayatollah Ali Khamenei and President Rouhani have both declared: “If there is no end to sanctions, there will be no agreement. The end of these negotiations and a signed deal must include the end of sanctions”.

There is a general view in the IMF and among economists that Iran is making economic reforms and growth is picking up. After two years of contraction it copes with constrained oil revenues and sanctions, but has been able to sustain military support for Shia forces in Iraq-Syria and Yemen. GDP growth is stabilising and inflation has decreased; still the near-term outlook remains uncertain. Sanctions relief will allow oil output to quickly rise to 3 million barrels per day and 2 million barrels in exports. During the last fiscal year which ended in March 2014 the economy shrank by 1.9 percent. In late September Iran’s economic growth was estimated at 1 percent but could rise to 2 percent by March 2015 — despite severe sanctions. With the lifting of sanctions a rapid return to growth is likely, especially if essential economic reforms, most important being curtailing the economic influence of the Revolutionary Guard, are implemented. There is massive overseas investment interest which will be important in accelerating growth. The country has many intrinsic advantages including intelligent and educated manpower and an integrated national outlook.

The downside is that excessive religious fervour cannot be curtailed for a long time; regional Sunni-Shia sectarian “warfare” will continue to harm the region. The region is in turmoil, miscalculation by either side will have catastrophic consequences. Sunni-Shia sectarian “warfare” is a reality but history shows Iranians know how to handle it in their interests. A nuclear deal is pivotal in improving relations with the West but let us not fool ourselves, a huge gulf, which will be a recurring topic in the next US presidential elections, remains. A lot depends on who will be next in the White House.