By Dr. Emran El-Badawai, Program Director and Associate Professor of Middle Eastern Studies, University of Houston
Is sabotaging international agreements the “art of the deal?”
Last week, U.S. President Donald Trump announced he would not “recertify” the Iran Nuclear Deal — fancy lingo for the U.S. government undercutting an international contract. Trump further designated Iran’s Revolutionary Guard a “terrorist” group and authorized new sanctions against them. Somewhere in the middle of this, the U.S. Congress is to decide the fate of the now-damaged deal with Iran.
The Joint Comprehensive Plan of Action (JCPOA) is an Obama era policy limiting Iran’s nuclear program from ever including nuclear weapons, in exchange for much needed sanctions relief. Since the deal first took effect in July 2015, Iran has kept its end of the bargain and complied with the terms. One year into the deal, in 2016, analysts at the Brookings Institution concluded the JCPOA to be a “net positive” among supporters or a “new normal” compromise among detractors.
Even today Iran is “compliant.” Who says so? As late as last month, the U.S. Department of State (DOS) and the International Atomic Energy Agency (IAEA), among numerous other government or regulatory bodies, agree.
So why is Trump appearing to dump this deal? Since his presidential campaign began in 2015, Trump has reviled former president Barack Obama’s diplomacy with Iran and that nation’s growing power in the Middle East, including mutual animosity with Israel and funding of militant groups in neighboring countries. His latest policy against Iran comes in the context of “Protecting the Nation from Foreign Terrorist Entry into the United States,” the enhanced vetting proposal issued March 6. The law makes it virtually impossible for foreigners from Iran and a handful of other nations to enter the U.S.
Those of us who study the Middle East have seen this movie before. This is not simply a campaign promise. Trump’s undermining of the JCPOA deliberately sabotages new energy projects and foments old wars in the Middle East.
Restricting European and Asian Energy Business
Outside the dysfunction and xenophobia of Washington D.C. much of the world has started doing business with Iran. In July, French Total SA and China National Petroleum Corporation (CNPC) signed a $5 billion agreement to develop some of the world’s largest natural gas fields, located in Iran. China recently opened up a $10 billion line of credit for Iran. What is more, throughout 2015-2016 China, which relies heavily on importing Middle Eastern oil, has moved swiftly to import more oil from Iran and less from its rival Saudi Arabia. Iranian oil production has boomed from about 1.3 million barrels a day in early 2016 — before sanctions were effectively lifted — to 2.3 million barrels in the fourth quarter of the 2017 fiscal year. That is more than three times U.S. oil exports.
Moreover, a consortium of over 30 oil and gas giants and service providers have been “qualified” to do business in Iran since sanctions were lifted between 2015-2016. Oil companies include Royal Dutch Shell Plc, Italy’s Eni SpA and Russia’s Rosneft Oil. Service providers include Schlumberger, among others.
Is it any surprise that European leaders condemn Trump’s undermining of the Iran Nuclear Deal? Of course not. Nor is it any surprise that China is against Trump’s actions involving a deal 13 years in the making. Might the Americans and Saudis be troubled by Iran’s newfound economic success in the oil and gas markets?
Iranian oil has not flowed into American ports for 40 years. Furthermore, no American oil and gas companies or service providers have been doing business in Iran since sanctions spiked in 2011. How could they do business there when Washington flip-flops between war and diplomacy with the third largest OPEC member?
Perhaps mixed signals from Washington turned off Iranian interest in business with the Americans. Wrong, and quite the contrary. In 2016 Iranian Oil Minister Bijan Zanganeh announced, “we welcome the presence of American oil companies in Iran…we will definitely prepare the grounds for the presence of American oil companies in Iran.” The Trump administration appears to be single handedly calling the shots on American business with Iran.
In other words, the policy appears to be don’t do business with Iran; if anything reclaim global market share through undercutting Iranian oil exports.
This is precisely what U.S. Secretary of Energy Rick Perry has been doing in India throughout 2017. India has typically been supplied by Iranian oil exports. Trump is working to change this and assert American oil dominance in India. Asserting U.S. dominance and clawing back market share are not appropriate demands while cutting out a nation — Iran — with whom the U.S. had a binding international agreement, JCPOA. U.S. Interior Secretary Ryan Zinke justified this behavior earlier this month by blaming Iran for —what else? — “terrorism.”
Undermining the Iran Nuclear Deal is more than bad for business. It sends a message to potential partners in the Middle East that the Americans don’t play fair. They cannot be trusted to keep their word. It sends a message to commercial and political allies in Europe and Asia that their economic interests are against ours. To complete the logic of the Trump doctrine, “America first”…everyone else last.
The Invisible Hand Is Gone; the Oil Curse Returns
Ten months into his presidency, Trump’s greatest contribution to “Middle East peace” has been undermining the Iran Nuclear Deal. This contribution is, unfortunately, a step backwards. It means moving once again towards war and renewed instability in the Middle East. Tehran feels betrayed by Trump, and justifiably so. However, the director of the National American Iranian Council (NIAC), Trita Parsi, is correct in calling the Trump presidency a “gift to the [Iranian] hard-liners.” This is as true for Iran as it is for North Korea, where Trump is sparring with Supreme Leader Kim Jong Un over a possible nuclear conflict in East Asia.
In the case of Iran, Trump’s disregard for diplomacy and his explicit desire to step up to foreign military strikes has a long history in the Middle East. The U.S. has been making war intermittently with Iran’s neighbors — Iraq and Afghanistan — for about four decades. American wars helped birth Al-Qaeda, the so-called Islamic State (ISIS) and increase global terrorism. During this time Iran has stayed remarkably stable — and defiant. With each American blunder in the region, Iran has filled one power vacuum after another. This is especially the case after the Second Gulf War in 2003 and following the Arab Uprisings (or “Arab Spring”) in 2011. Iran’s influence in Shia-controlled Iran, Syria, Lebanon and north Yemen is now a fact. Along with Iranian influence comes Russian dominance, especially in Syria where the Trump Administration’s merciless bombing campaign against both militants and civilians there and in Iraq throughout 2017 have only renewed accusations of yet another U.S. president committing war crimes.
The ground continues to shift in the Middle East. Within the past year the Saudis and Israelis have both received U.S. President Donald Trump, as well as made visits to Russian President Vladimir Putin in Moscow. The fate of the region is being shaped behind the scenes. To say this differently: Syria, Iraq and Iran are accessible through military might or economic sanctions, whichever serves foreign interests.
In this context, “refusing to recertify” the JCPOA has an entirely different meaning. It demonstrates a loss of trust after more than a decade of hard fought diplomacy. It represents a plunge back into the dark ages. I describe the time when Iran secretly developed highly enriched uranium (perhaps for a bomb) and the U.S. and Israel were accused of acting together to assassinate Iranian nuclear scientists. The dark storm clouds have already gathered over the region as Iran’s two arch-enemies — Israel and Saudi Arabia — now celebrate the damaged JCPOA.
Like a shrewd (even reckless) businessman, Trump is determined to dismantle international diplomacy and grip U.S. energy and strategic interests forcibly through the language of war. In economic terms, the “invisible hand” does not truly control the global oil and gas market. That control belongs to the series of wars, failed states and broken promises characterized by the “oil curse.”
The Economic Importance of Iran
Iran sits on the fourth largest proven oil reserves and second largest proved natural gas reserves in the world. However, it also has an active, storied nuclear energy program stretching back to the 1970s, i.e. before the days of the Islamic Republic. Iran is also home to a thriving and diversified alternative energy portfolio, including solar, wind and geothermal energy. Iran’s “renewable energy boom” runs parallel to innovative water solutions being implemented. And again its partners on this front include foreign investors and companies from Norway, China, South Korea and others.
Over the past two years Iran has re-forged its economic and political relationship with European, Russian and Asian partners. Therefore its progressive energy and water agenda are attractive to foreign investors and trusted by a growing number of foreign governments. Iran is simply too important economically to ignore. The choice, therefore, is either to partner with Iran on economic terms as most of the world has done — as former U.S. President Barack Obama did — or to fester through decades of failed U.S. foreign policy, further destabilizing the region and the world.
Sanctions against Iran have not worked in the past, and they won’t work now. There is a good chance Europe and Asia will continue to do business with Iran, leaving the U.S. with no option but the ‘war card.’ This is all to say nothing about future vacillations in the price of oil, changes in energy security or decline of American supremacy in the Middle East and the incremental rise of Russian-Chinese power instead. Those are subjects for another day.
The coming days will truly decide the fate of the Iran Nuclear Deal, and just how much damage Trump has precipitated.
Dr. Emran El-Badawi is Program Director and Associate Professor of Middle Eastern Studies in the Department of Modern and Classical Languages, at the College of Liberal Arts and Social Sciences, University of Houston. His research examines liberalism, Islamism and the impact of oil and gas on MENA societies. His work includes advising government, legal and business communities on Middle East related projects. He can be followed on Twitter @EmranE.