Editor, PlanetArabia Magazine
The Iranian nuclear deal ushers a new era in US Iranian relations and puts a strain on many in the Middle East region. Many allies of the United States have hailed the deal as a necessity, while others continue to staunchly oppose it and fear its ramifications on regional security and stability.
Did the group of six world powers (P5+1) have any other option but to sign the Iranian nuclear deal, amid numerous geopolitical and macroeconomic implications, or were they unable to afford to continue with their sanctions against the Islamic Republic?
The geopolitical implications include regional insecurities, with Iran continuing to secretly work on its nuclear program, which would threaten the region and spark a nuclear arms race. Iran may also continue to promote its political objectives in the region and stir unrest across the Arab and Moslem Worlds, including the six Gulf Cooperation Council countries, Iraq, Syria, Lebanon and Yemen.
The macroeconomic implications include restoration of Iran’s access to the global financial system, increase of its oil production, growth of oil exports and stronger external and fiscal accounts, which in turn means an increased capacity to finance unrest in the region and more interference in the affairs of the Arab World and other Islamic countries.
Why then did the P5+1 sign the deal, while their allies in the region, including Saudi Arabia and Israel are expressing, not only concern, but also panic? Why did the P5+1 see the deal as a necessity, not a luxury?
The P5+1 decision was dictated by a number of factors ranging from economic to strategic and compelled by mutual needs. Both Iran and West have reached a point where they have no option but to cooperate in order to promote their best interests. Hence the nuclear deal.
The global financial crisis, which started in 2008, had left the economies on both sides of the Atlantic overburdened. European governments and companies are struggling today to find opportunities around the world. On the other hand, years of sanctions against Iran have degraded its infrastructure, industrial capabilities, healthcare and social services. Iran’s need for modernization gives rise to opportunities worth billions of dollars to both European and US companies. Failure to reach a deal could have caused a rift between the US and some European countries who eyed opportunities in Iran with great interest.
China, which started as a proxy producer for US and European companies in search for lower costs of production, has now become the second largest economy after the United States. Its companies are now producing goods and services for export under their own brands. As such, they are looking for avenues to export their goods and services, including the revival of the historic Chinese Silk Road through Iran. This is referred to as the China-Pakistan Economic Corridor (CPEC). The Silk Road initiative is meant to integrate European and Asian economies, with strategically-located Iran playing a key part in it.
Iran could also play a part in the Trans Adriatic Pipeline to transport gas from Azerbaijan to Europe and decrease European Union reliance on Russian gas. In addition, Iran will need to increase its oil and gas output and expand its production infrastructure, thus inviting many European as well as US oil and gas companies to take part.
While many speculate, and even hope, that the US presidential elections in 2016 will result in a Republican president who would cancel the Iranian deal, all indicators point to the fact that the deal is a necessity, not a luxury, and as such cannot be easily scrapped.