Iran partially exits the nuclear deal: is war on the horizon? | Security Risks Asia Made with Humane Club

Iran partially exits the nuclear deal: is war on the horizon?

Published Jun 01, 2019
Updated Apr 15, 2020

Courtesy Global Risk Insights

President Trump’s most recent sanctions and deployment of an aircraft carrier to the Persian Gulf has raised fears about another US war in the Middle-East. Iran’s decision to cease compliance with key parts of the Joint Comprehensive Plan of Action (JCPOA) intensifies anxieties.

On the 22nd April, Trump announced that the US would end sanctions waivers which allowed select countries including Russia, China, and India to continue importing Iranian oil. The White House also imposed sanctions on Iran’s metal industry and designated the Islamic Revolutionary Guard Corps (IRGC) as a terrorist entity. This comes after Trump withdrew from the JCPOA (known as the ‘Iran Nuclear Deal’) last year, whilst re-imposing economic sanctions.

Facing an economy in freefall, Iranian President Hassan Rouhani has officially withdrawn his country from the parts of the JCPOA that limited heavy water and low-enriched uranium stockpiles. Rouhani has given JCPOA signatories and key Iranian economic partners in the EU, China, and Russia 60 days to explain how they will continue to do business with Iran. After which, more serious measures may be taken.

Europe to the rescue?

In January, France, Germany and the UK launched the Instrument in Support of Trade Exchanges (INSTEX). This special purpose vehicle, designed to facilitate trade with Iran, theoretically bypasses US transaction blocks and secondary sanctions. This came after previously slated schemes to bypass US sanctions floundered out of hesitation to pick a fight with Washington. Having pledged to save what was a signature achievement of EU foreign policy, Europe has failed to deliver.

This reluctance to choose Iran over Washington also appears to be affecting INSTEX. So far, most of the proposed items to be traded through INSTEX are humanitarian in nature and exempt from US sanctions. US Secretary of State, Mike Pompeo, has warned of unspecified ‘consequences’ if the Europeans attempt to use INSTEX for non-permitted transactions.

It is improbable that other importers of Iranian oil, namely Russia, China, and India, are capable of making up the difference. Locked in a tense trade-war with the US, China is highly unlikely to rock the boat by continuing to purchase Iranian oil in sufficiently sizeable qualities. India is keen to safeguard its relationship with the US amidst rising geopolitical competition with China. New Delhi has already been moving to shore up supply from alternative markets. Russia – being less dependent on the US financial system – and viewing Iran as a strategic partner, will probably continue to purchase Iranian oil. However, it is unlikely that this will be enough to fill the void. Accordingly, when Iran’s ultimatum elapses, it is unlikely that Tehran will have anything substantial to show for it in terms of extra European trade.

The ascendancy of the hardliners

Trump’s exit from the JCPOA has helped to shift the political balance within Iran in favour of conservative hardliners – composed of those like 2017 Presidential candidate Ebrahim Raisi – who favour a more confrontational stance against the West. This is mostly because Rouhani, in a bid to normalise ties with the West, has staked his political legitimacy on the JCPOA. Trump’s withdrawal from the deal and Europe’s inability to confront Washington has given succour to the narrative Rouhani was wrong to trust the West.

Although Iran’s Supreme Leader, Ali Khamenei, normally maintains a semblance of balance amongst the different political factions within the country, this could be changing. Khamenei recently appointed the staunch hardliner Mohammed Ali Jafari, as chief commander of the highly influential IRGC. Given this political backdrop and the worrying state of the economy, complying with a deal producing little economic or diplomatic benefit was not politically viable for Rouhani.

Future prospects

There are three main scenarios that could occur after the 60-day ultimatum elapses.

One possibility sees Iran continuing to honour the deal, aside from the limits on heavy water and low-enriched uranium. Rouhani may be comforted by the fact that US Senators Bernie Sanders and Elizabeth Warren – both have decent chances to clinch the Democratic Presidential nomination – have said that they will re-join the deal.

Yet, there is no guarantee that the Democrats will win in 2020 and Rouhani’s moderate allies have their own elections to worry about in 2021 – where they can ill-afford to look weak in a historically proud country. Rouhani has little control over the IRGC (who answer directly to the Supreme Leader) who could be tempted to take matters into their own hands in undermining the JCPOA. Therefore, the most likely scenario is that Iran will take additional steps in violation of the JCPOA, with producing highly-enriched uranium slightly beyond the JCPOA thresholds.

In addition to this, it is likely that Iran will pushback against the US and its allies through indirect means. In recent days, Iran has been accused of sabotaging Saudi and UAE oil ships in the Gulf of Oman, while the Iranian-backed Yemeni Houthis struck Saudi oil production facilities. Iran has no shortage of other proxy forces in the region which could be used to attack US allies while avoiding direct-attacks on US forces.

Any moves towards acquiring nuclear weapons and attacking US forces raises the direct possibility of war. This would most likely occur through miscalculation rather than design, given the high stakes involved. John Bolton, the US National Security Advisor, is hawkish on Iran and has drawn up plans to send 120,000 US troops to the Middle-East. The IRGC and other belligerent elements within Iran could also use war to consolidate their position within Iranian society.

A shaky peace?

Yet, war still remains unlikely. For his part, Trump has shown no penchant for protracted military adventures – which any war with Iran would be – and is actively trying to withdraw troops from Afghanistan and Syria. Instead, Trump’s approach appears to be a combination of sanctions, bluster, and the offer of negotiations. Trump would likely only consider war if Iran rapidly moved towards nuclear weapons or directly attacked US forces. Both of which are unlikely scenarios.

Nor does Iran want war. Tehran is already arguably already overextended in the Middle East and any conflict would severely compound the country’s economic crisis. A conflict could even lead to regime change. Moreover, there is no sign that either the IRGC or Iranian proxies want to attack US forces. Thus, while tensions will remain high, for at least the short term, war remains unlikely.

First Published by Global Risks Insight

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