The Deal and After
Sanctions lifted, Iran can now look forward to a new era of progress.
Iran is back in the good books of western powers.
The U.S. and European Union sanctions on Tehran were finally lifted on Saturday, Jan 16, 2016, restoring Iran's access to world markets. The country had been gearing up for this moment for months. It was expected that Iran would soon return to the top ranks of global oil producers.
In July 2015, Iran signed a nuclear deal with six world powers which meant that Iran would curb its nuclear activities and would thus circumvent and evade the economic sanctions that had crippled its economy.
The nuclear agreement bound Iran to comply with certain actions. It agreed to turn its Fordov facility into a research center where world scientists would work side by side with Iranian scientists. Fordov had for many years been the focus of world attention as a facility where Iran was alleged to be enriching weapons-grade uranium. According to the deal, Iran has also agreed to rebuild its Arak heavy water reactor using a design approved by the international community which would make the production of weapons grade plutonium an impossibility. Most importantly, Iran agreed to give up most of its centrifuges which were used to enrich uranium. It would bring down their numbers from 20,000 to 6104.
Iran scaled back its nuclear program at a pace that far exceeded world expectations. This created Iranian access to around $100 billion in Iranian oil revenue that was being held under the UN sanctions. The IAEA submitted a positive report to the UN on the implementation of the Iran deal.
What would a post-sanctions Iran mean to the world and especially to Saudi Arabia, its arch regional rival? This is a country which finds itself on the wrong side of Iran after the execution of Sheikh al-Nimr, a prominent Shia leader who was influential in Saudi Arabia’s eastern provinces.
The tensions between the two countries gradually mounted with protesters storming the Saudi Embassy in Iran and the Saudi Kingdom announcing the cutting of ties with Iran.
The lifting of economic sanctions against Iran is being viewed as a dangerous sign by Saudi Arabia and many countries around the Persian Gulf and Jordan. Iran already enjoys and exercises immense influence in countries like Iraq, Lebanon, Palestine and Yemen. It is accused by Saudi Arabia for using subversive and terrorist activities to enlarge and extend its control over these countries. Saudi Arabia sees itself as the standard bearer of Sunni Islam whereas Iran regards itself as the defender and protector of Shia Muslims everywhere in the world. The acrimony between the two countries is historic and thus military, political or economic gains by one are considered as a loss by
the other. The sectarian battle lines are the fundamental fault lines that have marred the relationship of the two countries over the years and have been the major cause of the overall destabilization in the Middle East.
Today both Saudi Arabia and Iran stand at an important crossroad between their relations. On one side is the Iranian President Hassan Rouhani who got elected in 2013 elections on a mandate that he would open up his country to the outside world, revive the economy and bring in the much needed social reforms. On the other side is Saudi Arabia’s King Salman who ascended the Saudi throne just recently and has already shown signs of being a tough ruler, given his military adventure in Yemen and the executions of Shia Muslims in the Saudi Kingdom. Both the countries continue to fight a proxy war in Syria – their main battleground with non-state actors sponsored and supported by both sides to seek political and military ends.
Iran considers Syrian President Bashar Al Assad as its most important Arab ally. President Asaad is an Alawite which is an offshoot of Shia Islam. The Saudis on the other hand subscribe to the claim that Sunnis are in a majority in Syria and should have the right to rule their country. Both are at loggerheads and their policies take an entirely different trajectory and direction. This only contributes to the growing destabilization in Syria. Saudi Arabia is a partner in the US-led coalition that fights the war in Syria and views with suspicion the logic of lifting economic sanctions against Iran.
According to an assessment, Saudi Arabia is the world’s largest oil exporter and could cut down its oil production to try and push up oil prices that have fallen below $40 a barrel. But its oil production continues to remain high as analysts find the Saudi strategy is in anticipation of lifting of economic sanctions against Iran. The Saudis never wanted Iran to make a comeback in the short term as a major competitor and player in the world oil market. Betting on their big cash reserves, the Saudis are anticipating to hold on longer and retain their market share. In any case, oil production due to the Saudi-Iranian rivalry is likely to remain high and oil prices will continue to remain low – a welcome strategy for the Iranians who are banking on their oil industry to make an economic comeback.
Iran continues to demonstrate military bravado. One element of this is its ongoing ballistic missiles tests which it claims do not come under the purview of the nuclear deal. This infuriates Israel, a long time opponent of Iran and a country that does not accept the world view of a nuclear deal with Iran. It terms it as a bad deal as it does not ensure the complete dismantling of the Iranian nuclear program.
The rising Saudi insecurity also means increased business for the US military-industrial complex. Saudi Arabia has recently signed a $1 billion defence deal with the US for primarily acquiring missiles for the US supplied F-15 fighter jets. The US continues to sell billions of dollars of weapons and ammunition to Saudi Arabia. With Iran getting ready to flex its military muscle after the lifting of the UN imposed economic sanctions, the region may also see increased militarization and enhanced military budgets - all at the cost of social development and the much needed reforms that should liberalize societies and reduce radicalization.
Saudi Arabia has grudgingly accepted the nuclear deal that the six powers have signed with Iran. Going by the Saudi perspective, Iran will have enhanced ability in the short term to improve its economic and military standing and in the long term it will continue to retain its nuclear capability. In reality, the world, led by the US, has been able to diffuse a likely confrontationist situation where Israel was contemplating a unilateral military action to strike down the Iranian nuclear facility. With Iran not shying away and showing willingness to give a befitting response to military adventurism by Israel, what the six world powers have attained by getting the Iranians to sign the nuclear deal is to avoid a military flashpoint that had all the signs of turning very ugly and harmful for overall world peace.
Iran continues to maintain its technical capabilities to maintain and run its nuclear program and this is a win-win situation for the country. However, it is hoped that Iran will grab this opportunity with both hands to re-direct its nuclear ability towards civilian use and utilize its nuclear program for creation of energy to boost its economy and also to provide the much-needed electricity to the energy- starved northern and eastern sectors of its country.
The world may also use its diplomatic influence to reduce growing tensions between Saudi Arabia and Iran. The possibility of such an eventuality between the arch rivals is weak but if the world shows a committed desire we may in the long run see both Iran and Saudi Arabia burying the hatchet and making a new beginning for a new relationship based on mutual dependence and trust.