UPSC Mains 2019: US Sanctions are coming

Sanctions are coming

 

Topic: Sanctions are coming

 Topic in Syllabus : International Affairs

us sanctions on iran

Context:

The Trump administration has announced it has restored sanctions on Iran’s vital oil industry as the Middle-Eastern country grapples with an economic crisis that has sparked sporadic protests over rising prices, corruption and unemployment.

 

More about on news:

  • The oil sanctions will come into effect and will target Iran’s largest source of revenue in the most punishing action taken since the Trump administration withdrew from the 2015 nuclear agreement in May.
  • The decision will also affect Iranian shipping and financial transactions.
  • It is the second lot of sanctions imposed since May, after the US targeted Iran’s automotive sector, financial transactions involving US dollars and the purchase of commercial airplanes and metals, including gold.
  • The White House insists the sanctions are not aimed at toppling the Islamic Republic, but at forcing Iran to dramatically alter its policies in the region, including its support for militant groups across the Middle East and its development of ballistic missiles.
  • The UN nuclear agency says Iran is complying with the nuclear deal.

 

Iran nuclear deal framework

  • The Iran nuclear deal framework was a preliminary framework agreement reached in 2015 between the Islamic Republic of Iran and a group of world powers: the P5+1 (the permanent members of the United Nations Security Council—the United States, the United Kingdom, Russia, France, and China—plus Germany) and the European Union.
  • Negotiations for a framework deal over the nuclear program of Iran took place between the foreign ministers of the countries at a series of meetings held from March 26 to April 2, 2015 in Lausanne, Switzerland.
  • The framework deal was embodied in a document published by the EU’s European External Action Service titled Joint Statement by EU High Representative Federica Mogherini and Iranian Foreign Minister Javad Zarif Switzerland, and in a document published by the U.S. Department of State titled Parameters for a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program.
  • On July 14, 2015, the Joint Comprehensive Plan of Action between Iran and the P5+1 and EU, a comprehensive agreement based on the April 2015 framework, was announced.

 

Agreement details

According to the joint statement in Switzerland, the P5+1 countries and Iran agreed on a framework for a deal. According to this framework, Iran would redesign, convert, and reduce its nuclear facilities and accept the Additional Protocol (with provisional application) in order to lift all nuclear-related economic sanctions, freeing up tens of billions of dollars in oil revenue and frozen assets. In addition to the joint statement, the United States and Iran issued fact sheets of their own.

 

The joint statement

The joint statement outlines the following:

 

Enrichment

  • Iran’s enrichment capacity, enrichment level and stockpile will be limited for specified durations.
  • There will be no enrichment facilities other than Natanz.
  • Iran is allowed to conduct research and development on centrifuges with an agreed scope and schedule.
  • Fordo, the underground enrichment center,] will be converted to a “nuclear, physics and technology centre”.

 

Reprocessing

  • The heavy water facility in Arak with help of international venture will be redesigned and modernized to “Heavy Water Research Reactor” with no weapon grade plutonium byproducts.
  • The spent fuel will be exported, there will be no reprocessing.

 

Monitoring

  • Implementation of the modified Code 3.1 and provisional application of the Additional Protocol.
  • Iran agreed IAEA procedure which enhanced access by modern technologies to clarify past and present issues.

 

Sanctions:

When the IAEA verifies Iran’s implementation of its key nuclear commitments:

  • The EU will terminate all nuclear-related economic sanctions.
  • The United States will cease the application of all nuclear-related secondary economic and financial sanctions.
  • The UN Security Council will endorse this agreement with a resolution which terminates all previous nuclear-related resolutions and incorporate certain restrictive measures for a mutually agreed period of time.

 

A brief history of U.S.-Iran relations:

  • Almost fifteen years later, in 1967, the U.S. gave Iran a nuclear reactor and weapons-grade nuclear fuel.
  • Fast forward to 1979: there’s a revolution in Iran, the government that the CIA helped install is overthrown and — amid the transition — the U.S. embassy in Tehran is overtaken and staff there is held hostage for more than a year.
  • In 1980, President Jimmy Carter cuts off diplomatic ties with Iran and authorizes a rescue mission to get the American hostages out. The mission failed badly and eight U.S. service members were killed.
  • The following year (1981): Iran releases our hostages minutes after Ronald Reagan’s inauguration.
  • In 1986 President Reagan, in his second term, would admit to a secret arms deal with Iran. It became a huge scandal known as “The Iran Contra affair.”
  • Then, in 1988, one of our Navy ships shot down an Iranian passenger plane, killing 290 people who were onboard.
  • From there, things got pretty frosty between the two countries over the next 15 years or so.
  • Then, in 2002, President George W. Bush names Iran as part of an “Axis of Evil” along with North Korea and Iraq.
  • In 2008, President Bush sends an official to start nuclear negotiations with Iran, which was a start. But, talks between the two countries basically fell silent and stayed that way through President Barack Obama’s first term in office.
  • In 2012, the Obama administration enacted a law that put the squeeze on Iran financially. Lots of countries cut back on buying Iranian oil. And, as a result, the Iranian economy took a big hit.
  • The following year, Hassan Rouhani was elected president in Iran. Later that year, an agreement, the beginnings of what most of us would come to know as the “Iran Nuclear Deal,” was reached.

 

What are the global implications of the decision?

  • The US has created a crisis in an already unstable region.
  • It doesn’t necessarily trigger an immediate collapse of the agreement.
  • The UK, Germany, China, France and Russia still remain committed to the agreement.
  • But it is to be seen if Europe and other powers will stick together or change under US pressure.
  • If they deviate from their positions, West Asia will be a lot more dangerous.
  • Iran is cautious, saying it would engage diplomatically with the remaining signatories.
  • Notably, the challenges will emerge not only for Europe, once US sanctions are in place.
  • Other nations with strong trade ties with Iran, including India, would also face the impact.

 

How does it impact on Iran economy?

  • The renewed sanctions have already taken a heavy toll, with Iran’s currency, the rial, losing half its value since April and the prices of fruit, poultry, eggs and milk skyrocketing.
  • Protests erupted across the country in December, with some demonstrators chanting against the Government and clashing with police.
  • The new US sanctions will mostly have psychological effects.
  • The nuclear accord struck under the Obama administration, which was also signed by Britain, France, Germany, China and Russia, lifted crippling international sanctions in exchange for Iran curbing its nuclear program.
  • Western countries had long suspected Iran’s nuclear program masked the covert pursuit of atomic weapons, but Iran has denied these allegations and always insisted its nuclear activities were for energy and other peaceful purposes.
  • After the agreement took effect in 2016, Iran began exporting its oil more freely and signed billion-dollar agreements with Airbus, Boeing and other Western firms.
  • But the legacy of decades of sanctions and economic mismanagement remained, and the nuclear deal’s future was thrown into uncertainty with the election of President Donald Trump, who had repeatedly vowed to exit the deal and finally withdrew in May.

 

Way forward:

  • It is uncertain if European companies would make investments in Iran, or even continue to do business, with U.S. sanctions.
  • Earlier, they had discussed providing companies that do business with Iran, special financing from the European Investment Bank.
  • Passing legislation to protect them from U.S. sanctions was also discussed.
  • Concrete decision on these fronts are not yet taken and the EU is wary of giving any guarantee to Iran.
  • The way forward is to continue a dialogue to find an economic and legislative package.
  • This has to shield European companies and Iranian economic interests from U.S. sanctions.

 

Sample Question:

Q) Withdrawing from Iran nuclear deal by US is a serious mistake and has many possible ramifications for India. Analyse.(250 words)