The US Leaves the Iran Nuclear Deal: The Potential Implications

The US Leaves the Iran Nuclear Deal: The Potential Implications

REPORT • May 2018

On 08 May 2018, the President of the United States, Donald Trump, announced that the USA would be leaving the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran Nuclear Deal, that placed significant restrictions on Iran’s efforts to gain technology to build a nuclear weapon. President Trump has also insisted that the US would impose “the highest level of economic sanctions” on Iran and also proceeded to sign an executive order reimposing sanctions on any foreign company which does business in Iran. The order gives firms 90-day or 180-day grace periods, dependant on their business sector, to remove themselves from existing Iranian contracts or face US disciplinary measures.

Key Points

  • On 08 May 2018, President Trump announced that the US would be withdrawing from the Joint Comprehensive Plan of Action (JCPOA), widely referred to as the ‘Iran Nuclear Deal’.
  • The other members of the deal, including the United States’ European allies, have criticised the move and stated their intent to uphold their obligations under the treaty.
  • This move is likely to have widespread and damaging consequences.
The US Leaves the Iran Nuclear Deal: The Potential Implications

Situational Summary

On 08 May 2018, the President of the United States, Donald Trump, announced that the USA would be leaving the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran Nuclear Deal, that placed significant restrictions on Iran’s efforts to gain technology to build a nuclear weapon. President Trump has also insisted that the US would impose “the highest level of economic sanctions” on Iran and also proceeded to sign an executive order reimposing sanctions on any foreign company which does business in Iran. The order gives firms 90-day or 180-day grace periods, dependant on their business sector, to remove themselves from existing Iranian contracts or face US disciplinary measures.

In response, European signatories of the deal – France, Germany, and the United Kingdom – expressed ‘regret and concern’, while emphasising their continued commitment to JCPOA. France’s President Macron has warned that the “nuclear non-proliferation regime is at stake.” International bodies, US and international intelligence agencies, and nuclear inspectors all agree that Iran has adhered to the terms of the deal (while some argue that they have not adhered to its spirit). President Trump has been critical of the deal since its inception. In his White House remarks on 08 May, Trump argued that the deal was “a horrible one-sided deal that should never, ever have been made” and that “it didn’t bring calm, it didn’t bring peace, and it never will.”

Balance of Power in the Middle East

President Trump’s withdrawal of the United States from the JCPOA does not mean that a regional war in the Middle East (with potentially global implications) is imminent but it does increase its likelihood; diplomatic tensions in the region have increased with this decision.

Over the past few years dividing lines have been drawn in the Middle East. Concern over spreading Iranian influence in the region has brought together a coalition led by Saudi Arabia. The Saudis are supported by the Gulf Cooperation Council (GCC) – Kuwait, the UAE, Bahrain, and Oman (excluding Qatar), as well as Egypt. In a surprising move, the past few years have seen a warming of relations between Israel and Saudi Arabia, despite Riyadh not diplomatically recognising Israel. Both countries see Iran’s growing influence in Lebanon, Iraq, and Syria as a threat to their own standing and influence in the region. Saudi Arabia is also broadly supported by the EU, despite Europeans generally acting to balance power between Riyadh and Tehran. For its part, Iran is supported by President Assad in Syria and by Russia through their joint relationship with Damascus. Iraq and Qatar are also leaning more towards Iran in their support.

The most important ‘wildcards’ in the current regional division in the Middle East are Turkey and China. Beijing is a large net importer of oil from Saudi Arabia and Iran. In order to ensure it can maintain economic growth, China may be keen to act as a stabilising or balancing force. Beijing’s relationship with Moscow may push it more towards Iran and if they do throw their support behind either side, this might prove to be decisive. In the past few years, Turkey has begun engaging with Iran while also being opposed to the Tehran-backed government led by President Assad in Syria. (Figure one above attempts to display these divisions).

Many observers suggest that the US ought to play the role of arbiter in the Middle East, only engaging passively until they are needed to prevent a conflict or resolve a diplomatic spat. President Trump’s Middle East policy has ensured that the United States has been backed into a corner, limiting its ability to be a neutral arbiter. This decision, alongside other decisions including moving the United States Israeli Embassy to Jerusalem, has shown that the United States under President Trump has sided firmly against Iran and is doubling down.

While inherently a compromise, the JCPOA limited Iranian advancement towards to its nuclear ambitions. If the agreement is allowed to disintegrate, then Iran may once again act outside of international law and norms in a quest for nuclear weapons. This move strengthens the position of religious hardliners in Iran. These hardliners are more likely to seek open conflict with Israel and Saudi Arabia. Moreover, Israel under Prime Minister Netanyahu has already stated that they will use military action against Iran to prevent it from gaining a nuclear weapon. President Trump’s withdrawal from the JCPOA has already seemingly emboldened Israel and Iran. Overnight on 09 to 10 May, the Iranian military directly targeted Israel Defence Forces (IDF) in the disputed Golan Heights with ‘around 20 missiles’. In response, the IDF launched its most intensive attack on Iranian positions in Syria since the beginning of the civil war in 2011.

Options in Iran

It is not quite clear what the long-term policy goals are for the Trump administration. If President Trump was intent on preventing Iran from gaining a nuclear weapon, it would have made more sense for the US to stay engaged in the JCPOA or try to renegotiate the terms. Full withdrawal of US support for the deal simply grants Iran a legitimate route to renege on its own obligations, potentially having the effect of increasing the pace of nuclear development; the very outcome Trump’s administration states it seeks to avoid.

Moreover, pulling out the deal will not stop Iran’s ambitions in the Middle East. As figure one above shows, Iran is a long way from having a level of influence comparable to Saudi Arabia, let alone regional dominance. Staying in the JCPOA not only prevents a nuclear-armed Iran but also allows the US and its allies to keep an eye on Iranian activity and gave them a bargaining tool to pressure Tehran when its activities are seen as threatening. The JCPOA was seen as a triumph for multilateral diplomacy. Getting the US, EU, Russia, and China to support a single policy is rarely achievable in the present international political climate. By withdrawing from the deal, the US administration has ensured that such multilateralism is highly unlikely, certainly so in the next five to ten years.

Regime change in Iran may be the Trump administration’s longer-term aim. President Trump’s new hawkish advisors – John Bolton as National Security Advisor, Mike Pompeo at the State Department, and the nomination of Gina Haspel (who has been accused of overseeing “black sights” where torture allegedly took place) to run the CIA – are all likely advocates for such action. This aim could be achieved by two primary means. Firstly, economic sanctions could seek to cripple Iran and lead to the fall of the clerical regime; early 2018 saw widespread anti-government protests meaning that this may not be a farfetched proposition (though these rallies were more closely tied to economic and environmental concerns). It is of note that the US sought the end of the Castro regime through a trade embargo with little luck, while sanctions on North Korea have not prevented the country making technological advances in its quest for nuclear weaponry. Alternatively, the US and its allies may be using the withdrawal from the JCPOA to provoke Iran into restarting its nuclear weapons programme, giving the US-led coalition the rationale to launch a preventative war as in Iraq in 2003.

Many have pointed to international precedent as to why regime change may not be in US’ interest in the long run. The 1953 US- and UK-backed coup d’etat in Iran eventually led to the current clerical regime. Support of regime change in Afghanistan, Syria, Iraq, Libya, and Somalia has often led to the countries becoming a breeding ground for terrorists, more intent on attacking the US and US interests than previous regimes. While war, or even a small military strike on Iran, is likely to harden anti-Americanism and support Iranian hardliners. A targeted attack may set back the nuclear programme some years, but it would not prevent Iran from developing a weapon in the longer term. The country may follow the same route as North Korea and close themselves off from the outside world, potentially becoming a pariah state. Should this occur, other countries in the region may feel forced to seek nuclear weapons of their own (for ostensibly defensive reasons), leading to further destabilisation of an unstable region.

Oil Output and Production

This move to reimpose crippling sanctions is expected to increase the price of oil at a time when there is instability in Venezuela and Russia is reducing global oil production; as supply decreases, prices increase. While the expected rise in oil prices may reduce some of the effects of the renewal of US sanctions on Iran, the big winner with regards to oil is likely to be Saudi Arabia, a key US ally. This is especially useful to the Kingdom ahead of the initial public offering (IPO) of state-owned oil giant Saudi Aramco – higher oil prices make the company more valuable. The United States is also set to be a winner of rising fuel prices on the back of its shale revolution. Volatility in the oil market is expected in the longer term, thanks partly to an increase in regional geopolitical instability as well as a potential fall in supply from Iran. The full effects of the sanctions on Iranian oil output are dependent on the attitudes of other countries. While the United States is the most powerful economy in the world, it does not have the same dictatorial influence on trade which it had in the early years after the fall of the Soviet Union, nations now have further options regarding trade. It remains to be seen if Europe or China will comply with US policy; an increasingly multi-polar environment means trade will continue at the same or only a slightly lower level than present.

EUROPE

Europe’s global influence looks feeble. Over the past few weeks preceding the announcement by Donald Trump, European leaders have stood in line and kowtowed to the US President. President Macron, Chancellor Merkel, and UK Foreign Secretary Boris Johnson have all made visits to Washington DC to try and convince President Trump to stay in the deal; they all failed. The way in which Trump has seemingly ignored Europe and European concerns shows the lack of diplomatic clout Europe has with Washington DC at this time and how little the US leadership is concerned with their requests. This may harden anti-US feeling in Europe, at a time when President Trump already remains unpopular for a series of domestic and international moves, not least the threat of increased industrial tariffs on imports from Europe.

While many in Europe may be chastising or criticising President Trump for his decision to leave the JCPOA due to genuine concerns of peace and regional stability, this may hide a key motivation – money. The European Union is Iran’s closest trading partner, providing the EU with a much-needed supply of oil. Moreover, the Iranian provision of oil allowed the EU to diversify their energy sources from countries like Saudi Arabia and Russia.

There is a small avenue through which Europe could save some diplomatic face. If Europe was somehow able to ensure that Iran continued to adhere to the terms of the deal and continued to trade with Tehran, it may demonstrate Europe’s increasing power as a united entity on the international stage. However, Europe and European companies will have to weigh up whether or not trade with Iran is worth the potential sanctions from the United States; many are likely to believe it is not.

United States

By withdrawing the United States from the JCPOA, Trump has remained consistent in many ways with the foreign policy views he encouraged during the 2016 Presidential election campaign. This move is the latest example of his isolationist tendencies – he also withdrew the US from the Trans-Pacific Partnership, the Paris Climate Accord, and stepped back from a deepening relationship with Cuba. However, the current incumbent of the Oval Office also promised a more restrained foreign policy and withdrawing from the JCPOA is not an example of this, making the long-term need for direct intervention more likely. Trump has proved himself to be an antithesis of his predecessor, Barak Obama, who sought further international engagement; Trump has also dented or dismantled many of Obama’s foreign policy achievements.

This move by President Trump sets a dangerous precedent for the future. It effectively tells not only Iran but also the world, that the US’s word is worthless. The ongoing negotiations with North Korea are likely to be affected. President Trump and South Korea’s President Moon deserve credit for bringing Pyongyang to the table. However, North Korea and Kim Jong-un may look at this move and wonder if they can trust the United States. Why should they agree to US demands to denuclearise and allow international inspectors if the US only reneges on the deal when the White House occupant changes? By withdrawing from the JCPOA, Trump may be limiting his ability to impose positive diplomatic outcomes for the rest of his term.

Withdrawal from the JCPOA may prove to be to Trump’s domestic advantage and may be his primary motivator. The JCPOA has never been popular with President Trump’s base, nor with the Republican Party. Indeed, Republican Senators called for the agreement not to be signed or passed by the Senate, before they even had a chance to read the final text. Withdrawing from the deal is popular with the hardline and influential Israel lobby in the US, which will likely provide support to Trump’s party in the November 2018 mid-term elections. Withdrawing from the Iran Nuclear Deal may help the Republican Party provide a cohesive and united front as they prepare for the 2018 vote, in which polling suggests that they will struggle to maintain their current political dominance in the US House of Representatives and Senate.

Security Advice

High Political Risk

For long-term stability in the Middle East, it is imperative that some form of the JCPOA remains. As Israeli-Iranian clashes on 09 to 10 May 2018 demonstrate, regional tensions are rising. By withdrawing from the deal, President Trump has added more fuel to the fire and has made regional conflict more likely.

For Iran, travellers are advised to be aware of the potential for large-scale anti-US protests and the potential for targeted attacks on foreign individuals or companies. Travellers should maintain a low-profile at all times, a heightened level of situational awareness, and employ sensible security provisions. For most travel to Iran, Solace Global would advise clients to employ a security-trained driver. However, this level of security may need to be increased depending on developments in the country. We would also advise travellers to use travel-tracking technology in order to gain rapid access to the latest incidents and to notify others should an incident occur.

US foreign policy decisions also frequently result in unrest across the wider region. Whilst many Middle Eastern states remain opposed to Iran, and therefore this decision is unlikely to have serious impact, future actions may spark widespread and violent protests, particularly near US embassies and consulates. Travellers to the region should maintain an awareness of the local and international situation, implementing enhanced security measures when violence is more likely.

Travellers to the Middle East as a whole are advised to stay abreast of the latest news in case of the further developments which could have a negative impact on travel. Moreover, travellers are also advised to have evacuation plans in place in the event of further and rapid deterioration of regional stability.


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