The new kids on the block are unaware that not a year had passed since the Islamic Revolution in Iran 40 years ago when US sanctions against that country wasn’t a fact of life. Iran has weathered multiple rounds of sanctions before. As a BBC commentary put it, “Iranians will be forced into finding creative ways to sell oil, relying on their years of experience of life under previous sanctions.
And to fill the gap left by lost European investment, Iran will be looking east to forge new links with Russia and China.” This is also the signal one gets from the Iranian reaction to the Trump administration’s re-imposition of sanctions. At the most authoritative level, Supreme Leader Ali Khamenei has been plainly dismissive. Some excerpts from his remarks on Saturday:
“The enemy made all attempts against us, with a variety of actions; the US engaged in military, economic, and media warfare against us. Via all these actions, the US aspired, in vain, to regain its previous domineering status over Iran — that it enjoyed during the Pahlavi Regime.”
“Today, an overview of the situation of the US shows that the US’s power is declining. The US is today much weaker than it was forty years ago… US’s soft power has degraded… US’s hard power — that is, its economic and military power — is also declining… It suffers from more than $15 trillion dollars public debt and $800 billion budget deficit… The US is declining. Everyone should know this.”
Clearly, for Tehran, talks with the US will be simply out of the question.
On the other hand, there are no knee-jerk reactions, either – such as that Iran is going to dump the 2015 nuclear deal. As the Iranian ambassador to the UK Hamid Baeidinejad (who was a leading member of Iran’s negotiating team with the US during 2013-2015) put it, “The aspiration that we have with the European Union, Britain, France and Germany, China and Russia, is that we keep the Iran Nuclear Deal alive and give time to the U.S. to rethink and revise its position.”
Baeidinejad added, Tehran will not accept any idea of changing or renegotiating the nuclear deal, because if one word is changed, other aspects of the deal will either be changed or compromised. “We have a total loss of confidence” in negotiating with the US, but “we are trying very hard with European countries, with China and Russia, to find mechanisms that this deal could (still) be effectively implemented.”
The ambassador said, “There will be pressure against some countries, particularly European countries, and economic and trade institutions from attempting to enter into working with Iran, there will probably be some risks.” However, there is “total determination” by European countries and other world partners to find “practical solutions” so that the deal will be kept alive.
These remarks sum up the Iranian position. Tehran estimates that it has much elbowroom left to force a rethink on the Trump administration. Curiously, this is also the assessment of some Israeli experts. A commentary in the Jerusalem Post gives the expert opinion that while the US’ oil sanctions will no doubt hurt Iran, “Tehran maintains key support from Asia,” which means that the sanctions are “insufficient to compel Iran to accept a new tougher nuclear deal.”
Equally, support for Iran from China, Russia, India and South Korea would be too strong to sufficiently isolate the Islamic Republic’s economy… the fundamental dynamics protecting Iran from a total collapse, if anything, are even more solid (today).”
Interestingly, Tehran is not perturbed about the US threat to cut Iran off from the SWIFT. The fact of the matter is that Iran has an alternative to SWIFT – Russia’s SPFS. By the way, SPFS’ clients already include three of the top importers of Iranian oil – China, India and Turkey. (India probably used it recently to make payments for its purchase of the Russian S-400 ABM system!)
Suffice to say, Washington not only needs to accept that SPFS is a viable workaround for countries to import Iranian oil, but also factor in the long-term implications of the emergence of such a new and parallel monetary system. Therefore, the Trump administration’s decision to give the ‘waiver’ on import of Iranian oil is understandable. It is only prudent not to jeopardize the US’ relations with countries such as India or Turkey on account of the Iran oil sanctions when these countries are in any case going to find ingenious ways to import Iranian oil.
Then, there are other factors at work. One, as mentioned above, the US realizes that it lacks the ability to bring about Iran’s oil exports to anywhere near zero level, as it once boasted. Two, oil sanctions against Iran will impact the world oil prices. Can Trump afford the political cost of oil prices cascading to, say, $100 bpd or more when he gears up for his re-election bid in 2020?
Third, there is great uncertainty about US-Saudi relations in the aftermath of the murder of Jamal Khashoggi. It is turning out to be a high stakes game of rogue operation by intelligence agencies for regime change in Saudi Arabia, which went horribly wrong. The searing experience seriously damages US-Saudi relations. And Saudi Arabia happens to be the only OPEC country that has the means to boost oil production to make up for shortfalls due to US’ oil sanctions against Iran. (Even Saudi surplus capacity is severely restricted.)
The bottom line is that New Delhi must stay the course, no matter what the American lobby in Delhi may say. The point is, the Trump administration is heading toward a cul-de-sac. When this realization dawns on Trump, he’ll, typically, make the course correction. As Ambassador Baeidinejad explained, Iran’s plan is to isolate the US and give it time to rethink. In this wise approach, Iran is getting strong support from the EU and Russia and China.
K. Bhadrakumar has served as a career diplomat in the Indian Foreign Service for over 29 years, with postings as India’s ambassador to Uzbekistan (1995-1998) and to Turkey (1998-2001).