While the US-Iran nuke deal had initially seen some positive progress in terms of re-establishing Iran’s economic relations with the West, particularly the EU, the progress now seems to be degenerating into a stalemate.
What was, and continues to be, a story of various disagreements between the US and Iran during Obama administration has now started to glimpse a potential reversal. Donald Trump’s rise has accelerated this process and clearly signaled the policy the Republican Party is likely to follow in the years to come. This potential reversal will make it a lot easier for Russia and China to integrate Iran into the grand Eurasia alliance they are gradually building and use the vast energy-connection of the Eurasian region to their advantage vis-à-vis the West.
Two recent developments clearly indicate the reversal taking place in the US under Republican Party. The last week saw the House of Representatives voting against the sale of commercial aircraft to Iran, a bid to stop sales by Boeing and Airbus that have already been approved by President Barack Obama’s administration. In the same week, the same House also re-authorized the Iran Sanctions Act for 10 years.
The bill to block sale was passed by the Republican-led House by 243-174 largely along party lines. The measure would bar the US Treasury Department from issuing licenses that US banks would need to finance sales of commercial aircraft.
Although this bill apparently means to counter the nuke deal, it is also a strong indication of what to expect once Republican President-elect Donald Trump, who was harshly critical of the nuclear agreement during his campaign, takes office in January 2017.
The sense of reversal has been duly compounded by the passage of Iran Sanctions Act for 10 years.
Whereas these two developments indicate the much propagated tough-line the US is starting to follow vis-à-vis Iran, it will not necessarily prevent Iran from changing its own course of action.
“The current US government has breached the nuclear deal in many occasions,” Iranian Supreme Leader Ali Khamenei said, addressing a gathering of members of the Revolutionary Guards, according to his website. “The latest is extension of sanctions for 10 years , that if it happens, would surely be against JCPOA, and the Islamic Republic would definitely react to it.”
This ‘reaction,’ however, may not take the shape of an outright start of the nuclear program. What is likely to happen, and can already be seen happening, is an increasing tilt towards Russia and China, both of whom are aware of the potential role Iran can play in the Eurasian economic block.
While Russia may find it difficult to fulfill Iran’s economic needs, it can certainly buttress Iran’s defense needs. On the other hand, China’s ambitious One belt-One Road policy and the China-Pakistan Economic Corridor has already found much attraction in Iran (read: Iran has expressed its wish to join CPEC and become a transit route for China to the Middle East and the Caspian sea region).
Apart from economic co-operation, China does understand Iran’s military position in the region and has already signaled its willingness to extend co-operation with Iran in Syria.
As such, and interestingly enough, while the US House of representatives was busy passing these bills, Iran was hosting Chinese Defense Minister, General Chang Wanquan, who was on a mission to upgrade military co-operation between both countries, including co-operation in Syria.
At the same time, Viktor Ozerov, head of the Defense and Security Committee of the Russian Federation Council, the upper house of the Parliament, was also in Tehran, leading talks over an arms deal worth around US$10 billion.
While some tend to see the EU’s vitality, as a big market, for Iran’s economic recovery, Iran has already found other potential markets, including China and India (read: Iran has already taken over Saudi Arabia as the top supplier of Oil to India, which is the world’s third-biggest importer of crude oil).
Consider this: despite onerous US and EU economic sanctions on Iran, Sino-Iranian trade had grown even before the 2015 nuclear agreement loosened some sanctions. Bilateral trade grew from $400 million in 1989 to almost $52 billion in 2014. Today the Iran-China Chamber of Commerce and Industries (ICCCI) has grown from 65 members in 2001 to 6,000, an indication of the intensity of economic cooperation.
What makes China and Iran attractive for each other is not only the fact that China is a major buyer of Iranian oil and Iran’s largest export customer, but also that Iran is also vital to China’s vision to create entirely new manufacturing and logistics hubs in Central Asia and Europe.
What has provided an additional impetus to this growth of trade is that the expectation of gaining economic recovery through re-capturing the Western market is slowly dying in Iran. This hope is now being replaced by an emphasis on using the Iranian territory to cash in on the grand regional projects that China and Russia are in process of implementing, and wherein the Iranian territory has appeared of central significance.
For instance, the rail link to Gorgan in Iran already is linked to Iran’s national railway grid and will thereby enable rail transport between China, Central Asia and the Persian Gulf. The connection will shorten the route by 400 km, and reduce freight transport time more or less in half, from 45-60 days at present to 25-30 days.
Iran’s gradual integration into the Eurasian economic landscape has undoubtedly come at a result of multiple failures its leadership has faced, since the implementation of the nuke-deal, in removing the US imposed financial sanctions.
While this failure has allowed the hardline conservative elements in Iran to campaign against Rouhani’s moderate policies, Trump’s rise seems to have equally convinced the current leadership of the futility of keep looking to the US and the Western market.
As such, while the Iranian leadership continues to have naïve hope in the unhindered implementation of the deal under the Trump administration, the confusion prevailing within Iran is also signalling that Iran’s attempt to strike a balance between the West and the East is now giving way to the policy of maintaining an obvious tilt towards the East, use the Iranian territory along with oil to buttress its economy and strategic significance in the Middle East, South and Central Asia for both China and Russia.