Iran nuclear agreement: A fragile deal on verge of collapse

Thursday, 2018-06-21 17:16:55
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Iran's President Hassan Rouhani speaks during an extraordinary meeting of the Organisation of Islamic Cooperation (OIC) in Istanbul, Turkey May 18, 2018. (Photo: Reuters)
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NDO – Iran recently rejected US President Donald Trump’s proposal on the renegotiation of the Iran nuclear deal, which will be extended to the issues deemed as “sensitive”. The Islamic nation also voiced its dissatisfaction with the proposals offered by the European powers in an effort to save the nuclear agreement. The landmark deal is now on the brink of collapse, while investors are “holding their breath” in anticipation of the relevant developments triggered by fears of US sanctions on Tehran.

After his summit with the Democratic People’s Republic of Korea (DPRK) leader Kim Jong-un, US President Trump announced that he would soon like a “real deal” with Iran. Trump’s remarks referred to the issues that the US still mentions in the controversy surrounding the Iran nuclear agreement, including the provisions that may work to curb Iran’s ballistic missiles development programme, as well as Iran’s intervention in the regional crises, as alleged by Washington. However, Tehran rejected such proposals from the US, while affirming their steadfast pursuit of the nuclear deal, officially known as the “Joint Comprehensive Plan of Action (JCPOA)”, signed in 2015 between Iran and the P5+1 group (the US, the UK, France, Russia, China and German).

French President Emmanuel Macron and other European leaders are also stepping up the efforts to save the JCPOA after the US withdrew from the agreement. However, the moves taken by the European powers have not been strong enough to build trust with Iran in ensuring a deal that the Islamic nation wants without the US involvement. The European countries are trying to prevent the JCPOA from collapsing, as Europe’s interests will be considerably impacted if the breakdown occurs. Meanwhile, the European companies themselves cannot ignore the threat of sanctions from the US if they wish to continue their business partnerships with Iranian partners.

The insufficient efforts and the possibility of Europe’s concession to the US are leading Iran to become concerned about the possibility of maintaining the JCPOA. Iranian President Rouhani said that Tehran would not be able to sustain the JCPOA if the benefits brought about by the deal were not guaranteed. Iran even threatened to resume uranium enrichment at the Fordow nuclear facility if the 2015 agreement falls apart. Iran’s Supreme Leader, Ayatollah Ali Khamenei, has ordered the country’s atomic energy body to prepare for an increase in uranium enrichment capacity if the JCPOA cannot be saved. He said he would not accept the limit of Tehran’s ballistic missile programme.

While no feasible solution has been worked out to preserve the JCPOA, the new US sanctions on Tehran have remarkably affected their economic and financial activities. France’s finance minister Bruno Le Maire stated that although most French companies still wished to continue their business in Iran after the US imposed new sanctions, they would not be able to do so. It will be impossible for any French firms to remain in Iran, because there is no independent European financial institution capable of protecting and helping businesses to pay for the products they ship or manufacture in the Islamic country, while the US holds the role of controlling the world economy.

Analysts have warned that it is difficult to protect multinational companies against US sanctions due to the operational scopes of large banks in the US financial system as well as the dollar transactions. The first round of new sanctions aimed at Iran’s automobile manufacturing and civil aviation industries is scheduled to take effect on August 6.

Iran recently announced a plan to attract investment capital of up to IRR300 trillion (approximately US$7 billion) through the Iran Energy Exchange (IRENEX) to maintain the operations of its key oil fields. In May 2018, Iran’s oil production reached 3.806 million barrels a day and its crude oil exports reached 2.7 million barrels a day, the highest level since January 2016, regardless of the US threatening to impose new sanctions. However, the current unresolved disputes between Iran and the Western countries related to the JCPOA have triggered concerns about the prospect of maintaining the Iran nuclear deal, while hampering the efforts to restore and develop the economy of the Islamic country, which has undergone years of US confrontation.