What happens if Trump abandons the Iran nuclear deal?
US President Donald Trump has until May 12 to decide whether to pull out of the nuclear deal with Iran. The 2015 nuclear accord underpins many of Iran’s economic hopes. Iran’s escalating tensions with the Trump administration will increase instability in the country.
If the US refuses to continue to waive sanctions under the six-nation agreement reached in 2015, Iran has made threats that it will also walk away.
European powers are trying to persuade Trump to preserve the agreement, with German Chancellor Angela Merkel in Washington on Friday on the heels of French President Emmanuel Macron. So what’s at stake if the US withdraws? Here is a quick guide to the impact on various sectors:
Oil markets
A ‘snapback’ in Iran sanctions by the US would almost certainly reduce Iran’s oil exports, further stretching an oil market that has seen prices rise 11 per cent this year. What’s more uncertain is exactly how far shipments would fall. A recent Bloomberg survey predicted Iranian exports would be cut by 500,000 barrels a day. Iran is currently shipping just over 2 million barrels a day. More than half of that goes to China and India, while European Union nations currently buy about a quarter.
Although America purchases no Iranian oil, that might not matter. If US sanctions put banks, shipping companies, refiners, insurers and ports at risk of losing access to the global banking system, they would have little option but to end their involvement with Iran. Much depends on whether Trump offers waivers and exemptions.
Doing business
A resumption in US sanctions could derail tens of billions of dollars in business deals. While a US exit may not render signed deals illegal, new sanctions would make it risky for international companies to continue working in Iran due to potential ramifications for their US business or banking transactions. In recent weeks, Iranian officials ordered banks to raise interest rates on local currency deposits in an attempt to stem demand for dollars, and followed up with a reform of exchange rates and a crackdown on a black market blamed for weakening the rial.
Global power balance
On the international stage, the biggest winners from a resumption of American sanctions could be two other signatories to the deal — China and Russia, whose influence has gradually spread in the Middle East as the US has scaled back its engagement.
Russia is already fighting, and winning, on the same side as Iran in the Syria conflict. And cold feet among European and US investors could herald a new boom for some Chinese companies, already major investors in Iran, where they have signed multibillion dollar agreements in the oil, industrial and transportation sectors.
Nuclear risks
The collapse of the accord could hamper denuclearisation efforts, and not just in the Middle East. Iranian Foreign Minister Mohammad Javad Zarif warned this week that if the US exits, his country might resume its nuclear programme. Iranian officials have also threatened to leave the Non-Proliferation Treaty if the deal crumbles. Iran denies its enrichment was ever intended to build weapons as the US, Israel and others had charged. North Korea, which does have a nuclear arsenal, will be watching developments closely. Some analysts say the upcoming talks with North Korean leader Kim Jong-un might be weighing on Trump — and leave him more inclined to preserve Iran’s agreement.
Iranian political dynamics
A collapse of the nuclear deal would be a blow for Iranian President Hassan Rouhani and the reformists who championed a diplomatic settlement to the nuclear standoff that had left Iran increasingly isolated. The nuclear deal is a rare concrete achievement for Rouhani, who was re-elected last year but has been weakened by demonstrations, a currency crisis and problems in the banking sector.
Hardliners, who warned through years of talks that the US was not a trustworthy partner, would emerge strengthened. There are also signs that the attitudes of ordinary Iranians, many of whom welcomed a deal they hoped would bring prosperity, are hardening. “If the US doesn’t stick by its obliga- tions then the situation will go back to what it was before and we will start enriching uranium,” Morteza, an unemployed Tehran resident, said. ‘It’s Iran’s right to do so, because they’re the ones violating it, not us.”
Risk of more conflicts
If the deal collapses and Iran restarts its nuclear programme, the risk of confrontation could increase. Washington’s leading Middle East allies — Israel and Saudi Arabia — are both determined to roll back Iranian influence in their neighbourhood. Israel in the past has threatened to bomb Iranian nuclear sites to prevent it obtaining a weapons capability. The potential for a broader conflict is compounded by the war in Syria, which has already drawn in Iran, Lebanon’s Hezbollah, Russia, the US, Turkey and Israel.
Defying the US
The amount of turbulence, especially for businesses, will depend on how Iran, and other powers, respond to any US exit. “If the Americans wind up walking away from the deal but the rest of the world is able to say ‘we are sticking to our approach,’ then this might not be so catastrophic for investments in Iran,” said Alex Vatanka, a senior fellow at the Middle East Institute in Washington.