July 17, 2015

Iran’s Rapprochement with the West and its Implications

~ By Alok Bansal

Iran and six Western powers led by the United States reached a historic agreement on 14 July 2015. The agreement ends decades of Iran’s isolation, while significantly limiting Iran’s ability to produce a nuclear weapon. The deal clinched after 18 consecutive days of discussions, brought an end to the negotiations that were going on for last 20 months. The agreement has for the time being capped Iran’s capacity to acquire a nuclear weapon, without overtly denigrating Iran or hurting its national pride and dignity. It has been projected as the biggest diplomatic achievement of Obama Presidency and has enormous implications for the entire globe including India.

The agreement drastically reduces Iran’s stockpile of low enriched uranium for 15 years, by directing it to ship 98 per cent of its current holdings abroad, the most likely destination being Russia. In addition Iran has been asked to reduce its centrifuges by two third. These two actions will extend the time taken for Iran to make a nuclear bomb form two to three months at present to one year, should it decide to abandon the accord. The agreement based on verification, grants Iran sovereign rights to develop nuclear energy after satisfying the international community that it has no plans to build a nuclear bomb. Accordingly, there are no restrictions on Iran to produce nuclear fuel after 15 years and it can carry out research on advanced centrifuges after eight years. International Atomic Energy Agency (IAEA) safeguards will remain in perpetuity and so will be the verification process by IAEA inspectors on all the nuclear facilities of Iran. It has also agreed for the time being to a ban on designing warheads and carrying out tests with detonators and nuclear triggers that could lead to nuclear weapons in future.

The agreement will allow Iran to boost up its petroleum production and ameliorate the sufferings of its population. Consequently, there were jubilations on the streets of Tehran as soon as the news about the agreement was disseminated. Crippling sanctions had led to devaluation of Iranian Rial leading to massive inflation and shortages of essential goods including medicines. Ordinary citizens in Iran believe that the deal will create jobs and usher in better days. Iran has also been permitted to import and export conventional arms as well as pursue its guided missile programme, after five and eight years respectively. President Hassan Rouhani, who was elected in 2013 on an agenda of freeing Iran from sanctions, claimed that the agreement was the culmination of Iranian people’s prayers. There is no doubt that such an agreement was virtually impossible under the previous hawkish government in Tehran.

Iran was the second largest producer of crude before the sanctions set in and its return to the global petroleum market will result in lowering of crude prices. This will help to boost the global economy and be especially beneficial to the energy deficit developing countries like India. However, the biggest impact of this deal has been on the security environment and as expected there has been disquiet amongst the Arab regimes in the Persian Gulf as well as in Israel, whose Prime Minister has called it a ‘historic mistake’ that would create a terrorist superpower with nuclear weapons. An objective analysis indicates that this deal will enable the western world to collaborate with Iran and Iraq to take on the Islamic State (IS) as well as the Al Qaeda and its affiliates, which possibly pose the greatest long term danger to global peace an security. Thus the agreement has the potential to make the globe more secure and peaceful; in the process it could strengthen Bashar al Assad in Syria and Houthis in Yemen. However, it also gives an opportunity to bring in democratic reforms both in Syria and Yemen. This may upset some of the Arab states, who are known to propagate an extremist version of Islam and abhor secular and democratic regimes.

From India’s point of view, the agreement is extremely significant. India’s strained relations with Pakistan and China in the past, ensure that Iran provides the only access to Afghanistan and Central Asia. Geo-political imperatives of India mandate good relations with Iran if it wants to have any role in Afghanistan or Central Asia. In the past India and Iran have collaborated against Taliban in Afghanistan and may need to collaborate against the growing menace of IS and various affiliates of Al Qaeda. Iran also provides India the shortest access to the vast energy resources of the Caspian basin and the Caucasus region. The growing Indian economy not only requires the vast untapped markets of central Eurasian landmass, but also needs newer sources of energy supplies. In the past cooperation between India and Iran was severely hampered due to sanctions that were in force.

Iran possesses 10 per cent of world’s proven oil reserves and approximately 15 per cent of global gas reserves. Despite having the second largest reserves of natural gas in the world, Iran has not been able to exploit them optimally and thus its exports are fairly limited. There are therefore strong complementarities between India and Iran. Indian investment, technology and markets can enable Iran to develop its gas reserves, which could be used to quench the growing thirst for energy in India. Iran’s energy resources provide one of closest and cheapest energy resource available to fuel India’s growth and India has been considering North South Transport Corridor and Iran-Pakistan-India (IPI) gas pipeline to meet its energy requirements. After the agreement, India can look at this pipeline afresh to resolve its energy crisis. Iran also does not have adequate refining capacity and In spite of its enormous oil reserves, imports approximately one third of its consumption. On the other hand, India today has excess refining capacity and is a net exporter of petroleum products. Indian refineries in the private sector, which are unable to market their products locally, sustain themselves by exporting them to Iran. In the past, some of them had to curtail their exports due to sanctions; the agreement will provide a fillip to their exports to Iran.

As India has lot of stakes in the success of this agreement, it should actively work to ensure that the agreement succeeds. The agreement has a provision of re-imposing sanctions against Iran, if it violates the provisions. New Delhi must ensure that such a situation does not arise. Both Iran and the West trust it and it can therefore play the role of an honest broker. Similarly, the US congress dominated by the Republicans may vote against the deal, although President Obama has promised to veto any congressional opposition, it may be in New Delhi’s interest to use its newly acquired clout on the Capitol Hill to lobby for this significant agreement.


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