Strategic Interests and the Iranian Nuclear Deal

The United States withdraws from the Iranian nuclear deal, but it is increasingly certain that the EU and Iran are still standing by it. The decision is in fact about the different possible lines regarding the future of the Middle East and the acceptable roles for Iran.

The dynamically changing atmosphere of the Middle East received a new impulse, as President Donald Trump announced in May 2018 that the United States withdraws from the Joint Comprehensive Plan of Action (JCPOA) concluded in 2015. In connection with the situation, the most striking detail is the rigid tension between the United States and the European Union. It was in 2003 when the last similar occurrence happened. At that time, France and Germany strongly boycotted the war plans of the United States in Iraq. However, Europe remained divided regarding the situation. At this point, there is no such division. The member states of the European Union will remain united in keeping the agreement in place.  Even London, which is leaving the European Union, did so.

In the recent years, the consensus of experts was that the suspension of sanctions introduced by the United Nations, the United States and the European Union would have had a positive effect on the country in several aspects. We expected an upswing in the economic sense, which is what happened. It meant foreign investment and technology transfer, which created new jobs and declining unemployment, especially among youngsters. These expectations largely favored the reelection of President Hassan Rouhani in 2017. The moderate president won against the conservatives who were interested in confronting with the West.

In the wake of economic interests

In addition to political issues, the JCPOA raises economic questions as well. European companies have launched a real invasion in Iran over the past two years. The market of 80 million people, the broad middle class and the underdeveloped hydrocarbon industry have enormous potential. The Airline of the Islamic Republic of Iran has ordered about two hundred aircrafts from Airbus and Boeing, in order to renew the obsolete fleet. The French Total energy company has signed a five-billion-dollar contract to exploit one of the world’s largest sources of natural gas. The likewise-French Peugeot is about to open a half-billion-dollar car factory in the country. In the past few years, there were numerous similar investments in the country.

According to the data from 2017, the European Union was the third largest trading partner for Iran, after China and the United Arab Emirates. The total cash flow was nearly 20 billion dollars. Of course, this is still far from the European Union’s investments in the United States, where the 28 Member States is responsible about four million jobs, and they spent 42 billion dollars  on research and development only. It is visible that although Iran is important, the true partner for the Old Continent in the economic symbiosis is the United States.

In August 2018, the United States imposed new sanctions on Iran, targeting mainly the automotive industry, gold and other precious metals. Additionally, Tehran is not allowed to purchase American dollar or conclude business in that currency. The biggest impact on the Iranian economy will not come from these decisions, but from the new sanction plans which are scheduled to launch in November. These sanctions are designed to prevent the exportation of the Iranian oil stocks which are one of the most prominent sources of oil in the world.

Currently, the largest importers of Iranian oil are China (24 percent), India (18 percent), South Korea (14 percent), Turkey (9 percent) and Italy (7 percent). Other major importers include Japan, France and Spain. It appears from the list that some of the countries will be willing to act in the interests of the United States, otherwise they would face American sanctions. South Korea and Japan will look for alternative options because of security assurances against China. China is likely to fail to meet the expectations of the United States, and this will further strengthen the relationship between Tehran and Beijing. The expected reaction of India and Turkey is still uncertain. Over the past decade, the relationship between New Delhi and Washington has come a long way. However, the demand in India is increasing unbelievably. If the country is able to find an alternative source for import, then the Indian leadership will be likely to stand by the United States.

The reaction of Turkey is not clear yet. The bilateral connections with the United States have never been worse before. In 2018, the two countries introduced sanctions against each other and Washington blocked the transfer of the most advanced F-35 fighter aircrafts to Ankara. In these circumstances, it is unclear whether Turkey is willing to obey for the new pressure from the United States or rather will quietly look for alternative sources.

The relationship of Iran and America will open a new chapter in late 2018. For the time being, Iran is denying the effects of the newly introduced sanctions on the country. However, there were several demonstrations recently. In conclusion, it is unlikely that Tehran will kneel before the sanctions introduced by the United States. Additionally, Russia and China are going to be important partners.

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The GLOBS is the only magazine in Hungary that focuses on global affairs and trade. The topics cover the different aspects of social life, business and culture (especially business culture), research and development, investment opportunities, charity initiatives, and the everyday life of the diplomatic delegations.
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