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The Real Losers of the Iran Nuclear Deal Crisis


The recent withdrawal of US from the Iran nuclear deal of 2015 comes amidst a series of executive actions that will hasten the uprooting of the present international order which since the last few decades has been based on US hegemony. While wrangling over the US pullout from the Iran deal continues on one front, on several other fronts, the US is waging increasingly hostile trade wars that have ended up alienating even its all-weather allies EU and Japan, besides the irrational trade conditions put before its arch-rival China. As a result of US’s higher tariffs on aluminum and steel imports from June 1st onwards, ostensibly in the name of ‘national security’, EU, India and Japan have already submitted, to the WTO, a list of items from the US on which they would impose higher import tariffs. In the sphere of education, recent data reveals that students no longer want to go to USA to pursue higher education, due to a criminal culture of mass shootings and other disabling policies of Trump administration.

The upshot of US isolation and the weakness of Europe is that Asia is increasingly integrating itself and turning inwards, while Europe is gravitating towards Asia for partnership and support, particularly China. As is becoming obvious, the US in particular, and the model of western dominance in general, is on a wane. It is increasingly becoming costly to have economic relations or interdependence with US – widely viewed as untrustworthy – and countries are now looking for alternatives to US. This has become crystal clear in the aftermath of the dismantling of the Iran deal.

The deal was signed in 2015 between the US, UK, France, Germany, China, Russia and Iran with the simple limited objective of restricting Iran’s nuclear programme in return for granting it limited access to global markets. It was a deal of convenience and aimed at ensuring some safety buffer. It had no conditions related to other aspects, such as Iranian political activities in West Asia or its ballistic missile programme, even though the US’s differences with Iran have always run deep. Even though Iran was complying, Trump now wants a ‘giant’ negotiation that would enable the US to curb all aspects of Iran that bother it. The list of 12 absurd demands released by the US – including Iran’s withdrawal from Syria, curbing of ballistic missile programme etc. – are both unrealistic and clearly aimed at bringing Iran to its knees and ensuring regime change in the country. The US has a prolific record with regime changes – Libya, Iraq and meddling in Afghanistan. It would preferably hobnob with Israel and Saudi Arabia and prop up a Sunni regime in the Shia country. Europe and Iran have obviously slammed these unworkable demands.

There is no reason for Iran or Europe to heed the US. The only thing that is raising trepidation in Europe is not the US walkout from the deal, but its imposition of secondary sanctions on any parties that do business with Iran. Otherwise, the US walkout affects little. And for Russia – itself hit with severe US sanctions in the wake of the Crimea crisis – and China, these considerations would matter less than for Europe and UK, whose dependence and friendship with the US has been historical, but is now increasingly becoming a costly liability for them.

Iran, itself, would not be crippled by the US sanctions, even though it will take a temporary hit. There are many reasons for Iran being favourably placed, such as its relations with countries that have little to do with the US, its parallel political economy and Shiite military power centers that have always supported the country and its economy, and, its rising clout in West Asia.

Iran is presently going from strength to strength in West Asia. Shiite Hezbollah – termed by US as a terrorist group – has gained immense popularity in the recently concluded elections in Lebanon, while elections in Iraq are seeing an unprecedented contest between five factions, all of which belong to Shia sect and owe allegiance to Iran. Besides this rising clout, Iran is already funding the Houthi rebels in Yemen to keep off Saudi Arabia. In Syria, it has spent a major part of its money in propping up the Assad regime with the help of Russia and Turkey and in contravention of US, Saudi Arabia and France. In the recent past, the legendary Iranian Revolutionary Guards and its overseas Quds force fought to curb the rise of the ISIS, rebel factions of which were being funded by the Western powers to ensure regime change in Syria. All in all, it is not difficult to understand why Iran’s invincibility is threating everyone, especially the US allies in the region.

In the present conflict in West Asia, it is ironic for Saudi Arabia and its western allies to term Iran a terrorist state. Historically, Saudi Arabia has funded – and continues to do so – Sunni Islamic extremism all over the world. Its pathetic results are now showing, closer home, in countries like Pakistan, Bangladesh, Maldives and Indonesia. It has also funded setting up of extremist madrassas in Kashmir. Sunni Islamic terrorism – particularly Saudi Arabia’s brand of hardline Wahhabism – has been responsible for jihad around the world. Yet, the West labels Iran as being extremist. What frustrates Iran’s enemies is its resilience and persistence. One has to remember that Saudi Arabia and US – both young countries comparatively immature – are no match for Iran’s ancient civilization. In international politics, Iran has always played for long-term stakes and mostly succeeded.

Under the present conditions, the sanctions are not likely to hit Iran too badly. They will mostly be useless as Iran’s largest trading partners are the sworn enemies of the US – like Russia and China. Ever since limited sanctions relief was provided after the 2015 deal, Europe has been fumbling for ways to explore Iran. But two years is too short a time to say that Iran was getting effective investments from the West. In fact, even after the lifting of the sanctions, many western banks did not initiate business with Iran because of the wariness of the US, while other major European and US companies had only initiated contracts to be operationalized. Now few of them have announced withdrawal, while aircrafts like Boeing will also have to withdraw. This does not mean that Iran will be deprived of the money it needs. It simply means that the process of modernisation of infrastructure that Iran could have started will now be put on hold, if at all, since Iran has always had non-Western backups. If anything, the collapse of the deal will make US and EU the real losers.

On the other hand, Iran’s bilateral trade with Russia – its major defence partner – is already touching 10 billion USD, while China has become the third-largest importer of Iranian oil, providing Iran large credit lines through its banks and has placed Iran at the heart of its Belt and Road Initiative. In another major project, India, Russia and Iran have partnered for the International North South Corridor (INSC). Besides these three, 11 more countries have joined in, enabling shipments from India to reach right up to Russia, by shortening the transit time from 40 days to less than 25 days.

India has strongly supported Iran. Not only did it announce a doubling of oil imports from Iran in February, but, after the recent the US pullout, immediately moved to ‘insulate’ its relationship with Iran. It has announced that it will not allow its relationship with Iran to be dictated by third parties, even as the US has called on 12 key allies, including India, to support it. But by now, India sees the US for its unprincipled politics and for the last few months has been proactively strengthening its separate relationships with China, Russia and Iran, through a series of ‘informal summits’. India is just superficially entertaining US by talking about alignments like QUAD (between India, Japan, US and Australia), even as it privately recognizes that nothing good will come out of engagement with the US. India’s most crucial partnership with Iran is on the Chabahar project, which will bypass Pakistan and give India direct access to Afghanistan.

Moreover, from a long-term perspective, a strong Shia power dominating in the Gulf is good news for India. It will keep the Sunni extremism in check and doesn’t export Islamic terrorism all over the world. In recent times, Wahhabism has hit India in Kashmir and Kerala and, to some extent, in UP. Back home, Shias have a cozy relationship with the Modi government, with official Shia boards endorsing Modi’s policies on banning cow slaughter and constructing Ram temple at Ayodhya. It would be in India’s interests to have such a power globally too. It would also keep Pakistan in check.

Iran’s partners, like India, had already anticipated arbitrary actions from the US and had, therefore, put the necessary safeguards in place. For instance, for the first time India and Iran agreed on a method in which India can invest in Iran in rupees through the UCO bank of India – the first time such arrangement is working outside of South Asia. And if, as Europe has indicated, it plans to remain in the deal, India can continue making payments in Euro. These arrangements, which could be the last straw to finish off US hegemony, raise a larger possibility for the future namely, the prospect of completely bypassing the dollar payment system and, eventually, the dollar losing its status as the reserve currency of the world. Europe, now, would certainly prefer such an option. For Europe, staying with the US has become costly and unproductive, with threats at every step. If dollar were to lose its hegemony in the future, due to increasing mistrust of the Americans, it would bring a complete end to US power. Alternatives like Chinese renminbi are already being worked upon, while Europe continues to be confident of the Euro.

Besides these non-Western backups and Iran’s growing relationship with countries that have little to do with the US, one has to also factor in the fact that Iran is not a country which will suddenly be hit by new sanctions. Iran has learned to survive under sanctions for years. As a result, the real clout in Iran is not the superficial economy that Europe wants to invest in, but rather, a parallel economy run by the Iranian deep state under the control of the Iranian Revolutionary Guards and other Shiite hardliner forces, who decide what gets done in the economy and where the money has to go – which is mostly visible in Iran’s strong forays across the Gulf and its external funding of Shiite groups like Hezbollah and Hamas.  That is why even after the sanctions were lifted, post-2015, foreign investors have had a difficult time trying to navigate the corrupt and entrenched bureaucratic systems of the country – everything, the whole political economy, remained the same, because the prospect of the opening up of Iran after sanctions has never suited the geopolitical aims of the real centers who have always controlled the country.

In a way, the blow dealt to the Iran deal by the US has been good. It has ended up exposing and isolating the US, which has opened up several war fronts with many non-Western countries. Nobody will ever trust the US enough to get into a deal with it, even after a change of government. Alternative global arrangements that can insulate economies from the US will be developed and are already being worked out at regional levels. The imposition US sanctions is also good news from India’s point of view for the reasons discussed above, in addition to the fact that India will now be able to get cheaper oil deals out of Iran, since Iran’s non-modernized system of oil extraction is suited to India’s old refineries. The growing closeness of India, Russia, China and Iran and Japanese alienation from the US also means that Asia can continue to grow powerfully. In the process, historical western supports and props for Sunni extremism are taking a hit. China has already cracked down powerfully on Islam within its Uighur and now, Hui, populations and has completely banned traditional Muslim architecture, so much so, that now even mosques will be designed in the ‘Chinese’ style.

These developments are heralding a positive era in international politics well-suited to the rise of Asia and further embroiling the Western world in its own political contradictions and divisions. The monsters of global terrorism spawned by the West for long, are finally coming back to bite it. It is quite possible that even centers of terror activities will now be shifted to Western soil, and be driven out by counter-forces like Iran from Central Asia, thereby crippling the West. These developments are a precursor to the different kind of terms on which global politics is beginning to be conducted.

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