US withdrawal from Iran-Nuclear Deal

Context:

President Donald Trump has announced that the US will withdraw from the nuclear deal and reimpose the sanctions against Iran.

The Timeline of Iran Nuclear Deal:

• 1967- Iran received technical assistance for nuclear technology under the US Atoms for Peace Programme
• 1979– Assistance ended with Iranian Revolution ( Islamic revolution which over threw Pahlavi Dynasty) JWatch the movie Argo directed by Ben Affleck
• 1984– Iran- Iraq War prompted Iran to restart nuclear programme
• 1992- US Central Intelligence Agency warned that Iran could develop a nuclear weapon.
• 2002-2015– UN and USA and EU put Economic sanctions on Iran
• 2003 – Initial negotiation by E3 countries
• 2015– Iran Nuclear deal signed by P5 + 1 and Iran
• 2016- All nuclear related sanctions on Iran lifted
• 2017–

1. US imposed sanctions on individuals and companies linked to Iran’s Ballistic Missile Programme.
2. US decertifies Iran’s compliance to the deal (According to Iran Nuclear Agreement Review Act (INARA), 2015, the US President must certify Iran’s compliance with the deal in every 90days)

What is Iran Nuclear Deal?

1. Formally known as the Joint Comprehensive Plan of Action (JCPOA), the nuclear deal was announced in 2015.

The deal was signed between Iran and the P5+1 group (US, UK, France, Russia, China and Germany)

2. It restricts Iran’s nuclear programme, in return for lifting most of the economic sanctions of against it.

Key Provisions of the Nuclear deal:

1. Limits on uranium enrichment
2. Limits on number of nuclear centrifuges (centrifuge is a device used to enrich uranium)
3. Restrictions on plutonium enrichment- Stopping Iran from operating at Arak nuclear site which was used to make plutonium
4. The deal increased the breakout time to 1 year

Breakout time is the time it would take Iran to produce enough bomb-grade material for a single nuclear weapon

5. Allowing International Atomic Energy Agency (IAEA) for inspections.
6. In return Sanctions relief: i.e. lift all US and EU economic and energy sanctions.

Imp Note: The deal does not cover Iran’s Ballistic Missile programme.

US Withdrawal from Iran Deal and Reactions:

• International Atomic Energy Agency (IAEA) confirmed that Iran is complying with its obligations under the Nuclear Deal, however USA has decided to withdraw from the deal citing the following reasons:

1. The JCPOA fails to deal with the threat of Iran’s missile programme
2. The deal does not include strong mechanisms for inspections and verification.
3. Israel is also vehemently opposed the deal

• France, Germany, UK, China, Russia and European Union announced that they remain committed to the deal
• Israel and Saudi Arabia have welcomed US decision
• Iran announced that it remains committed to the deal but may resume uranium enrichment if the accord no longer offers benefits

Pictorial Representation: Changes in Iran Nuclear Deal after US exits

Implications of United States’ withdrawal from the Iran Nuclear Deal

1. International trade/business

• Trump’s announcement to impose ‘secondary sanctions’ would hinder international companies to continue working in Iran due to potential consequences for their US business

What are secondary sanctions?   Those which put pressure on third parties to stop their activities with the sanctioned country by threatening to block third party’s access to the sanctioning country. These sanctions against Iran block foreign companies to access US market unless they comply with the sanctions against Iran

2. Energy sector/oil prices

US sanctions would decrease Iran’s oil exports and put pressure on global markets consequently increasing oil prices

2. Nuclear Risks:

• Threat of Iran restarting its nuclear program
• It will hamper denuclearization efforts.

3. Impact on West Asia:

• Sanction will adversely affect Iran’s economy
• The collapse of the deal would aggravate the instability in West Asia
• If Iran resumes it nuclear programme, both Saudi Arabia and Israel are expected to increase their efforts to combat Iranian interference in the region.
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4. Impact on US

• Increase tensions with Russia and China
• Strain relation with close allies like France, UK and Germany

5. Impact on India: (Most important from UPSC mains perspective):

Oil Prices:

• Presently, Iran is India’s third largest oil supplier. Oil prices are expected to increase after US sanctions on Iran. Any increase in oil prices would increase inflation levels in India and result in fall in the value of rupee.

Chabahar Port:

• India may have to reduce its investments in Chabahar port in order to restrict repercussions from USA. This would hinder India’s strategic access to Afghanistan and Central Asia

International North South Transport Corridor (INSTC)

• Ratified in 2002, INSTC is a multi-mode network connecting India, Russia, Iran, Europe and Central Asia.
• Plans for INSTC gained momentum after the JCPOA was signed in 2015 and sanctions on Iran were lifted
• Countries along the route or banking and insurance companies dealing with the INSTC plan would be adversely affected by the reimposed US sanctions

India- West Asia:

• India shares diplomatic relations with Iran, Israel and Saudi Arabia. The tension in West- Asia will hamper India’s strategic and economic relations with the countries.
• The potential of conflict in West Asia will have spillover effects in India

Way Forward:

• The international community should ensure the effective implementation of the nuclear deal.
• International diplomacy should play a proactive role to ease tension between US and Iran