Trump administration had earlier imposed sanctions on Iran and walked out of the “JCPOA Nuclear Deal”.
As sanctions are now taking a political toll in Iran, allies should facilitate talks with the U.S. to ensure that the situation doesn’t escalate.
What is the context of the nuclear deal?
Alarm - Iran was thought to be in the process of acquiring nuclear capabilities as it had uranium enrichment plants, which raised a worldwide alarm.
To restrain Iran from this endeavour, UN sanctions were introduced in 2010, which effectively curtailed Iran’s economy.
Compromise - The election of Hasan Rohani (a moderate leader) as Iranian President in 2014 saw the commencement of talks with international players.
Negotiations were carried out by P5+1 countries (permanent 5 in the UN, plus Germany), and a “Joint Comprehensive Plan of Action” (JCPOA) was evolved.
This was called “Iranian Nuclear Deal” and it effectively placed restrictions on Iran’s potential to enrich Uranium and thereby develop a nuclear bomb.
The deal proposed to lift sanctions on Iran in a phased manner and opened up Iran’s nuclear facilities for international inspections (by IAEA).
Politics - This was appreciated as a historic deal that resolved a tense situation peacefully, for which Obama administration was commended for.
But the Trump administration decried the deal since the start, claiming that it gave away too much to Iran, it recently withdrew U.S. from the deal.
Further, it had introduced sanctions again and is also coercing its trading partners to do the same through stringent norms.
What are the implications of a U.S. walkout?
Economic - The Nuclear Deal and its subsequent lifting of sanctions had boosted Iranian economy massively and created an overall euphoria.
Tehran had managed to double its oil exports, climbed out of recession and had managed to contain the runaway inflation that prevailed before 2015.
With the return of economic sanctions, Iran has been prohibited from using the U.S. currency, and faces a bar on trade in cars, metals and minerals.
Further, “Rial” lost over 50% of its value this year, pushing up prices and compelling consumers to convert their savings into gold and other assets.
Political - Iranian Finance Minister and Central bank governor were removed recently for failing to handle the currency situation effectively.
These actions have helped a little to subdue public anger against high inflation and alleged corruption, but the situation is far from addressed.
The crisis has also upended the hand of extremist views within Iran’s polity, thereby directly affecting President Rouhani’s popularity.
How does the future look?
Internal - Iranian Central Bank has announced a relaxation of foreign exchange rules to enhance access hard money for essential purchases.
But with the next round of sanctions (to curb Iran’s oil exports and financial dealings) slated to kick in by November, the future looks bleak.
International - With tensions rising, there is speculation that Iran might blockade the vital Strait of Hormuz (33% of world’s oil supplies flow here).
This might create a worldwide panic and generate a situation akin to the oil shocks of the 1970s, which is undesirable.
Direct confrontation isn’t on anybody’s cards, and a renewed nuclear deal also looks unlikely, thereby indicating the likelihood of a prolonged stalemate.
Hope - Considering the likely fallouts, European Union (EU) and other international players should engage to ease the tensions between both sides.
Even a small relaxation in U.S. sanctions might help in easing tensions within Iran, an option that is possible despite Trump’s inconsistent policy stands.
