By Dr Dan Steinbock
Dr Dan Steinbock is an internationally recognised strategist of the multipolar world and the founder of Difference Group. He has served as Research Director at the India, China and America Institute (USA) and Visiting Fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore).
At the end of December 2017, a series of protests erupted in Iran, which primarily targeted the current economic policies of the country. As they spread, their scope expanded to include political opposition against the government. US President Donald Trump’s tweet in support of the protesters criticising the government invoked pro-government marchers to fill the streets.
According to Western media, the protests were the result of unfavourable economic policies that have been implemented by Iranian President Rouhani’s administration. However, these protests also showed the Iranian population’s dissatisfaction and disapproval of the “theocratic regime”.
Supreme leader Ayatollah Ali Khamenei accused unspecified “enemies” of the disruption—reportedly, US, Israel, and Saudi Arabia—for the turmoil. On 3rd January, the head of Iran’s revolutionary guards, Major-general Mohammad Ali Jafari, announced the defeat of the “sedition” in the country.
Making matters worse, the Trump administration imposed sanctions on five subsidiaries of the Shahid Bakeri Industrial Group (SBIG)—an Iranian defence corporation that is a key producer of the country’s ballistic missiles. It is reported that the SBIG group was already under US sanctions before fresh ones were imposed.
US sanctions and re-sanctions
After years of diplomacy, the comprehensive nuclear accord (JCPOA, July 2015) offered Iran relief from US, UN and multilateral sanctions on energy, financial, shipping, automotive, and other sectors. These primary sanctions were lifted after the International Atomic Energy Agency (IAEA) certified in January 2016 that Iran had complied with the agreement. However, secondary sanctions on firms remained in place, along with sanctions applying to American companies and banks.
In late 2016, Washington took a U-turn. Following the House of Representatives, the Senate unanimously extended the Iran Sanctions Act (ISA) for a decade. Despite the sanctions relief under Obama, most Democrats reversed their positions surprisingly quickly. As Trump arrived in the White House, he began developing a far more muscular policy against Iran. In turn, a big beneficiary of his efforts has been Saudi Arabia. In May 2017, Trump signed a $350 billion arms deal with Saudi Arabia; the largest in US history. Afterwards, he began the push to counter Iran’s regional and strategic weapons programs.
Two months before the protests, the Trump administration designated additional sanctions against missile and IRGC-related entities, while threatening to cease the implementation of the JCPOA unless Congress and U.S. allies successfully addressed the weaknesses of the agreement.
By mid-January, Trump must decide whether to recertify Iran’s compliance with other world powers in the 2015 nuclear deal (which he decided not to do in October), and whether to waive U.S. nuclear-related sanctions that were suspended under the landmark agreement. If Trump withdraws the US from the JCPOA, his administration would have to revoke waivers, decline to renew waivers or trigger a provision of the Iran Nuclear Agreement Review Act. Under this, the Congress might act on legislation to re-impose sanctions. However, all of these would heavily penalize Iran’s economy, while alienating other JCPOA signatories.
The Dark Prince
Along with causing economic pressures, Trump has taken control of covert operations, even though Western reports have suppressed the role of the highly controversial Michael D’Andrea in the process. After Trump made the conservative Iranian hawk Mike Pompeo the head of the CIA, the abrasive uber-hawk D’Andrea became the head of CIA’s Iran operations.
After the 9/11 attacks, D’Andrea, who is also known as the “Dark Prince” or “Ayatollah Mike” in CIA, has been influential in the capture of Osama bin Laden. He has also been deeply involved in the detention and interrogation programs that were condemned as inhumane and ineffective in the 2014 Senate report. D’Andrea’s operatives, together with the Israeli Mossad, played a key role in the assassination of Hezbollah’s operations chief Imad Mugniyah in 2008. He also ramped up the drone program in Pakistan and Yemen, with the support of President Obama.
It is not difficult to suspect that D’Andrea has made his signature covert-operation signature in Iran’s recent events. It is highly probable that D’Andrea has been influential in Iran’s current turmoil.
Iran’s quest for economic stabilisation
Between 2010 and 2013, the sanctions have hurt Iran’s economy significantly, contributing to the fall in crude oil exports from 2.5 million barrels per day to 1.1 million by mid-2013. That, in turn, was compounded by the plunge in oil prices since early 2014. Before stabilisation in 2015, Iran’s economy shrank by 9% under sanctions in just two years.
However, since 2015, Iran’s economy has been stabilising. Sanctions relief has enabled Iran’s oil exports to return to pre-sanction levels. This has allowed Iran to regain access to international funds, which has been pivotal in helping Iran gain 7% overall economic growth in 2016. Foreign energy firms have begun making new investments in Iran’s energy sector and major aircraft manufacturers have supplied new passenger aircrafts to Iran’s commercial airlines. The relief also contributed heavily to President Hassan Rouhani’s election in May 2017.
Growth has also begun to broaden to the non-oil sectors of the economy. Real GDP growth is projected to reach 4.2% in FY 2017/18 and is expected to be sustained above 4.5% in the medium-term if financial sector reforms take hold.
In the West, weak employment prospects are perceived as a key reason for Iranian protests, yet the geo-economic context is mostly ignored. According to the IMF, Iran’s unemployment is almost 13%, with female and youth unemployment at 21% and almost 30%, respectively. However, in Saudi Arabia, unemployment is about 13%, youth unemployment exceeds 33% and a third of working-age women are unemployed. Indeed, most Arab countries suffer from excessive unemployment and high female and youth unemployment—not just Iran.
Unlike the 2009 protests in Iran that were led by the urban middle class, recent demonstrations have been fuelled largely by discontent in rural areas and smaller regions—the core constituencies of former president Mahmoud Ahmadinejad, who has been arrested for inciting unrest against the government as he seeks to make a comeback.
This economic unease is being stirred further by the new USA sanctions and alleged destabilization efforts, which aim to undermine Iran’s ongoing policy recalibration in the Middle East.
Shifting toward the East
Only two weeks before the protests, Iran’s media reported that the country would join the Russia-led Eurasian Economic Union (EEU) in early 2018. Turkey and Central Asia are shifting away from the Brzezinski Doctrine of a US-led Central Asia.
In addition to Russia, the EEU includes Kazakhstan, Belarus, Kyrgyzstan and Armenia. It is meant to guarantee free transit of goods, services, capital and workers among member states. The participation of Iran in the EEU would increase the Union’s population to 260 million and its GDP to close to $1.9 billion, making it the world’s eighth largest regional entity after India.
Even more important is Iran’s proposed role in the evolving One Road One Belt initiative (OBOR). Through the worst days of the 2010-16 sanctions, major Asian countries remained engaged in Iran’s economy. In the coming years, these countries are likely to support Iran in re-emerging from the sanctions isolation, to diversify its economy away from oil and gas and to become a major regional trading hub.
Recently, China and South Korea’s oil imports have reached or surpassed pre-sanction levels, while purchases by Japan and other Asian countries have been slower to rebound. Iran has regained access to some $115 billion in hard currency held abroad (whose repatriation was restricted by foreign banks to comply with US sanctions). At the same time, China’s share of Iran’s global trade has climbed from 20% in 2010 to 31% in 2016. Moreover, foreign direct investment in Iran has soared, growing five-fold to 12.2 billion in 2016.
America’s assertive sanctions policy is not just misguided but self-defeating. Since it penalises rightful compliance, its credibility is crumbling across the Middle East. It is alienating US allies and strengthening US adversaries. It can slow Iran’s participation in OBOR initiatives and its reintegration in the world economy but it cannot stop Iran from taking its rightful place in the family of nations.
Featured Image Source: Pixabay
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