Iran after the lifting of sanctions

It is a strangely complicated world

Nuclear sites in Iran
(Some "under construction" sites have now been completed)
by Kumar David-April 25, 2015, 5:03 pm

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 re-arming even as a conventional (nonnuclear) 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 neoright 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 dont 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 Irans reentry 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 Tehrans constructive
interaction with the world. "Irans 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 AIIBs existing
members including Britain and France. The Chinese port of Chabahar is a
key anchor in Chinas Maritime Silk Route plan and India backs the plan
which bypasses Pakistans Gwadar into Central Asia. President Xi Jinping
will visit Teheran in May; Iranian delegations are discussing investments;
clearly the momentum is mounting.

Obamas 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 Irans 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.
Posted by Thavam