Iran’s Nuclear Program & Western Sanctions

May, 14, 2019

Explained: Strait of Hormuz — the world’s most important oil artery

News

Why in news?

  • The Strait of Hormuz, a vital shipping route linking Middle East oil producers to markets in Asia, Europe, North America and beyond, has been at the heart of regional tensions for decades.
  • Recently two Saudi oil tankers were among vessels targeted in a “sabotage attack” off the coast of the UAE, condemning it as an attempt to undermine the security of global crude supplies.
  • Iran’s foreign ministry called the incidents “worrisome and dreadful” and asked for an investigation.

Strait of Hormuz

  • The Strait of Hormuz is a strait between the Persian Gulf and the Gulf of Oman.
  • It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world’s most strategically important choke points.
  • The waterway separates Iran and Oman, linking the Gulf to the Gulf of Oman and the Arabian Sea.
  • The Strait is 21 miles (33 km) wide at its narrowest point, but the shipping lane is just two miles (three km) wide in either direction.

Why does it matter?

  • The US Energy Information Administration estimated that 18.5 million barrels per day (bpd) of seaborne oil passed through the waterway in 2016.
  • That was about 30 per cent of crude and other oil liquids traded by sea in 2016.
  • With global oil consumption standing at about 100 million bpd, that means almost a fifth passes through the Strait.
  • Most crude exported from Saudi Arabia, Iran, the UAE, Kuwait and Iraq — all members of the Organization of the Petroleum Exporting Countries are shipped through the waterway.
  • It is also the route used for nearly all the liquefied natural gas (LNG) produced by the world’s biggest LNG exporter, Qatar.

Why always in turmoil?

  • During the 1980-1988 Iran-Iraq war, the two sides sought to disrupt each other’s oil exports in what was known as the Tanker War.
  • The US Fifth Fleet, based in Bahrain, is tasked with protecting the commercial ships in the area.
  • The fleet ensures that the critical waterway remains open, provocative Iranian military maneuvers are likely in the immediate offing as is a nuclear restart.
  • Iran agreed to rein in its nuclear programme in return for an easing of sanctions under a 2015 deal with the United States and five other global powers.
  • Washington pulled out of the pact in 2018. Western powers fear Iran wants to make nuclear weapons. Tehran denies this.
  • The UAE and Saudi Arabia have sought to find other routes to bypass the Strait, including building more oil pipelines.

Have there been incidents in the strait before?

  • In January 2012, Iran threatened to block the Strait in retaliation for US and European sanctions that targeted its oil revenues in an attempt to stop Tehran’s nuclear programme.
  • In May 2015, Iranian ships fired shots at a Singapore-flagged tanker which it said damaged an Iranian oil platform, causing the vessel to flee. It also seized a container ship in the Strait.
  • In July 2018, Iranian President hinted Iran could disrupt oil flows through the Strait in response to US calls to reduce Iran’s oil exports to zero.
  • A Revolutionary Guards commander also said Iran would block all exports through the Strait if Iranian exports were stopped.
  • The US in turn declared the guards a terrorist organization.
Nov, 03, 2018

[op-ed snap] How not to choose among allies

Note4students

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora

From the UPSC perspective, the following things are important:

Prelims level: Joint Comprehensive Plan of Action (JCPOA)

Mains level: US sanctions on Iran and why India should not toe the line as sketched by the US


Context

India’s role in JCPOA negotiations

  1. In May 2012, Hillary Clinton, then U.S. Secretary of State, visited Delhi on behalf of the Western countries negotiating the Joint Comprehensive Plan of Action (JCPOA), or the nuclear deal, with Iran, to convince India to cut its oil imports from Iran
  2.  India needed various reasons to help put pressure on Iran to return to the negotiating table for the six-party talks
  3. India agreed to cut its imports by only about 15%
  4. But cumulative global pressure had the desired impact on Iran, where inflation had risen more than 40% and oil exports declined from 2.5 million barrels of crude each day to about 1 million
  5. JCPOA negotiations that followed eventually led to a deal hailed by the United Nations, that had quarterbacked the talks all through

Current scenario

  1. The sanctions that the U.S. now proposes trying to ensure India adheres to have been placed not in order to forge any deal, but because the Trump administration has walked out of the JCPOA
  2. In this, the U.S. has no support from any other country involved in the deal, and the UN has expressed grave misgivings about the decision
  3. The U.S. has given no evidence that Iran in any way violated the terms of the JCPOA — in fact, the International Atomic Energy Agency’s June report concluded that Iran’s stockpile of uranium and heavy water, as well as its implementation of additional protocols, were “in compliance” with the agreement
  4. Unlike in 2012, the U.S.’s EU allies are now working closely with arch rivals like Russia and China to put a “special payments mechanism”, primarily with a view to supporting trade to Tehran to ensure that the Iranian regime does not walk out of the nuclear deal as well
  5. The US  is increasingly being isolated politically, as was evident at the most recent Financial Action Task Force meet in Paris where the U.S. proposed sanctions on Iran for terror funding

Impact on India

  1. There is the shock that sanctions would deal to the oil import bill, given that Iran is India’s third largest supplier
  2. There are not only rising costs of oil to contend with, but also the added cost of having to recalibrate Indian fuel refineries that are used to process Iran’s special crude
  3.  India’s investment in the Chabahar port would face both direct and indirect sanctions: as shippers, port suppliers and trading companies refuse to participate in the project
  4. This problem will only get more acute as sanctions kick in, threatening India’s $500 million investment in the port and its $2 billion plan for a railway line to circumvent Pakistan and reach Afghanistan and Central Asian trade lines
  5. There would be the impact on India’s regional security situation, which could see the Iranian-Arab divide deepen, Afghanistan’s choices dwindle and an angry Iran pitched closer into the China-Russia corner
  6. All of the above outcomes will follow regardless of whether the U.S. gives India a waiver for sanctions or not
  7. Along with the JCPOA-linked sanctions, India continues to face sanctions linked to the Countering America’s Adversaries Through Sanctions Act, which puts more strictures on dealings with Iran, Russia and North Korea

Iran’s possible reaction

  1.  With trade levels receding, the Iranian regime may well lose interest in the Chabahar option, and focus on its main port of Bandar Abbas instead, derailing India’s grander plans for regional connectivity
  2. All of India’s sacrifices may come to naught, as Mr. Trump may well use the pressure placed on Iran to his own advantage, and possibly open talks with Tehran at a later date

India’s affection with the US

  1. Indian officials have made a beeline for Washington to discuss the reasons why India deserves a waiver, from both Iran and CAATSA sanctions
  2. The U.S. has been apprised of India’s energy requirement compulsions, and of the cut of about 35-50% in its oil purchases from Iran
  3. On the CAATSA front, the U.S. has also been assured of a significant reduction in Indian defence dependence on Russia, and that no weapons procured, like the recently purchased S-400 missile system, would be used against American interests
  4. Given the heavy costs and in the complete absence of any benefits, it is surprising that the government has not been more vocal in its protest against the U.S.’s actions

Way forward

  1. If the U.S. presses on with sanctions, it would be a marked failure of Indian diplomacy
  2. And if the waiver does come through, as is indicated, it will be no victory, but signify an abject submission to the sanctions themselves
  3. With no gains in the offing from a policy of ‘pragmatism’, India may have been better off sticking to principle instead
Nov, 03, 2018

US agrees to grant India waiver from Iran oil sanctions: Report

Note4students

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora

From UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: Changing dynamics of US policies and its impact on India


News

The impending US sanctions

  1. The impending oil sanctions have been a U.S. tool to pressure Iran in the six months since Trump backed out of the 2015 nuclear deal between the Middle East nation.
  2. US argue that Iran didn’t do enough to constrain the Islamic Republic’s nuclear program or curb what the U.S. calls other “malign activity” in the region.

Waiver for controlling Global Oil Prices

  1. The US has agreed to let eight countries – including Japan, India and South Korea – keep buying Iranian oil after it re-imposes sanctions on the OPEC producer.
  2. While the Trump administration’s goal remains to choke off revenue to Iran’s economy, waivers are being granted in exchange for continued import cuts so as not to drive up oil prices.
  3. China – the leading importer of Iranian oil – is still in discussions with the U.S. on terms, but is among the eight.
  4. The other four countries that will get waivers weren’t identified.

Temporary Exemptions

  1. The waivers are only temporary, and the U.S. will expect countries that get them to keep cutting Iranian imports in the months ahead.
  2. The Trump administration has asked that those nations also cut other economic ties with the Persian Gulf state, such as by reducing trade in goods that aren’t covered by the sanctions.
Nov, 02, 2018

[op-ed snap] A tough balancing act between geopolitical realities and energy security

Note4students

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora

From the UPSC perspective, the following things are important:

Prelims level: OPEC, INSTC

Mains level: Impact of US sanctions on Iran on the global economic and geopolitical order


Context

US sanctions on Iran

  1. The US oil and banking sanctions against Iran will come into effect on 4 November
  2. As the deadline nears, the oil market is unusually calm
  3. The Organization of the Petroleum Exporting Countries (OPEC) crude price basket went down by 8.6 %, while the Brent benchmark fell by 9.4 % during the month

Effect on the economy of India as well as other countries

  1. For most of the consuming countries, it is not simply a question of finding replacement oil
  2. Crude import has to be at prices they can afford
  3. The price has already gone up
  4. The increase in oil prices is not only due to the impact of sanctions against Iran but is also driven by policies pursued by Opec and non-Opec producers to restrict crude oil production to keep the prices high
  5. The Indian crude oil basket is up by nearly 30% since last year, which would add more than ₹2 trillion to our annual oil import bill if the trend persists
  6. If rupee depreciation is factored in, the effect will be even more pronounced

Connectivity problem

  1. There are also issues of connectivity and trade with Afghanistan and Central Asia
  2. Seen against the background of worsening situation in the Af-Pak region, this factor assumes added importance
  3. India is committed to develop Chabahar Port which is in no way linked to Iran’s oil exports, which go through the Kharg terminal in the Gulf
  4. Apart from Chabahar, India also has interest in the International North-South Transit Corridor (INSTC), which runs through Iran
  5. This will improve connectivity with five Central Asian republics

Sanctions are not universal

  1. This round of sanctions is different, as it is not supported by the European Union and the United Nations
  2. Germany, France, the UK along with China and Russia continue to support the nuclear deal
  3. Iran’s compliance with the nuclear accord has been confirmed by the International Atomic Energy Agency (IAEA)
  4. The International Court of Justice (ICJ) has also ruled against the US sanctions

Options for India

  1. During the last round of sanctions against Iran, a rupee payment arrangement was evolved
  2. This involved making 45% of oil payments in rupees, which were utilized to cover Indian exports to Iran
  3. During the last round of sanctions, India reduced its crude import from Iran from 21 million to 10 million tonnes per annum
  4. For India, the only option that remains is reviving rupee payment arrangement to bring down current account deficit, and ensure continuity in Indian exports, which are largely limited to food and pharmaceuticals

Way forward

  1. India has an extremely important and growing relationship with the US
  2. It also has geopolitical compulsions, and an age-old relationship with Iran as well as its Arab neighbours
  3. India needs to maintain a fine balance between the two
Aug, 03, 2016

Signs of mistrust in Iran-American N Deal?

  1. Iran’s top leader, Ayatollah Ali Khamenei says it is futile to engage with the Americans, cautions against talks with Washington on other regional issues
  2. Despite the lifting of nuclear-related sanctions, Iran is still barred from using the US’ financial system because of many other prohibitions
  3. This caused delay in Iran’s purchases of new jetliners from Boeing and Airbus, which the nuclear agreement specifically permitted
  4. Trivia: Mr. Trump had called the nuclear agreement a disaster, suggesting that he would seek to renegotiate it
  5. Wonder what happens if he gets to ascend the throne!
Mar, 15, 2016

Missiles for self defence, tests do not violate nuclear deal: Iran

  1. Context: Recently, Iran test fired ballistic missiles, supposedly to be for self defence
  2. The tests drew international concern and prompted a meeting of the 15-nation Security Council
  3. Statement: The ballistic missiles were for self-defense and recent tests did not violate the historic nuclear deal between Iran and six world powers
  4. Also, the missiles tested would never be used in aggression
Mar, 14, 2016

Israel demands world powers punish Iran for missile tests

  1. Why? because, Iran test-fired 2 ballistic missiles emblazoned with the phrase Israel must be wiped out in Hebrew
  2. Context: U.N. Secretary-General Ban Ki-moon called on Iran to act with moderation, and U.S. ambassador to U.N. said the launches were provocative and destabilizing
  3. Iran’s stand: Missile tests do not violate Iran’s nuclear deal with world powers or U.N. Security Council resolutions
  4. UN Security Council resolution: Last year removing sanctions called on Iran not to undertake any activity related to ballistic missiles designed to deliver a nuclear weapon
  5. Israel demands: world powers had pledged to prevent Iran from such violations, so they should act on it
Jan, 19, 2016

Normalising Iran

Tehran’s readmission to the world market offers opportunities Delhi must seize.

  1. Economic sanctions related to its nuclear programme — imposed by the US, EU and the UN — were lifted, following the IAEA’s confirmation of Tehran’s compliance with the terms of nuclear deal.
  2. But, Washington imposed fresh sanctions over Iran’s missile programme, pertaining to the test-fire of a precision-guided ballistic missile.
  3. US has only suspended its nuclear-related sanctions; it hasn’t terminated them.
  4. Non-nuclear economic sanctions imposed by the US remain in place, forbidding American citizens and firms from trading with Iran.
  5. All said and done, Iran is now back in the global market, ready to raise its production and export of oil, gain access to capital and investment.
  6. As India’s gateway to Central Asia, Iran is also a promising investment destination for India’s private sector in infrastructure, IT, petrochemicals, etc.
  7. As Other Asian economies, like China and Japan, rush in, India must move swiftly.
Jan, 18, 2016

U.S. lifts sanctions; Iran comes in from the cold

Primary sanctions that bar U.S citizens and companies from business with Iran will remain.

  1. US removed a wide range of sanctions against Iran after International Atomic Energy Agency (IAEA) confirmed that Tehran has met its commitments to roll back its nuclear programme.
  2. The U.S has only removed secondary sanctions that restrict the dealings of other countries with Iran.
  3. The removal of restrictions on its oil, petrochemicals, banking, natural gas and port sectors will hugely benefit Iran and allow it to reenter the global market.
  4. This also help India’s plans in Iran, include the Chabahar port, an Indian Oil petrochemical plant and the proposed Iran–Pakistan–India (IPI) gas pipeline.
Jan, 02, 2016

U.S.-Iran tensions on the rise again

Iran’s President has warned of reprisals if Washington resorts to further sanctions.

  1. This could jeopardise a hard-won nuclear deal due to be finally implemented within weeks.
  2. U.S. Treasury Department had planned to blacklist companies and individuals with ties to Iran’s ballistic missile programme.
  3. Since the nuclear deal was struck, U.S. officials say Iran has conducted two missile tests.
  4. The tests breached previous resolutions aimed at stopping Iran from developing missiles capable of carrying a nuclear warhead.
Jul, 24, 2015

The Iran deal, a triumph for diplomacy


 

  1. US and Iran were pressed by political, economic and geopolitical factors to reach a comprehensive solutions to deep-rooted crises.
  2. Obama could not take forward Bush administration’s aggressive strategy against Iran due to the economic crisis that hit the world.
  3. US faced daunting challenges in Asia after 9/11, i.e. stabilising Iraq and Afghanistan, neutralising terror groups operating from within the region and dealing with Iran.
  4. It was the confluence of strategic interest in Iraq and Afghanistan and US’ need for an ally in the region to tackle IS, which led to Iran’s shift from spoiler power to stabilising power.
Jul, 21, 2015

U.N. endorses Iran nuclear agreement

  1. UNSC unanimously endorsed the Iran – P5+1 nuclear deal agreement, paving the way for terminating sanctions against Iran.
  2. This move will boost the economy of Iran which was crippling under harsh sanctions imposed on it since 2006.
Jul, 17, 2015

Obama defends Iran nuclear deal, Israel declares it a big mistake

  1. President Obama said the Iran nuclear deal is the only way to avert a nuclear arms race in the Middle East and reduce chances of war.
  2. The deal announced on Tuesday offers to roll back economic sanctions on Iran if it scales down its nuclear program.
  3. Israel PM Netanyahu has called this move to amicably suppress Iran a mistake of historic proportions.
Jul, 15, 2015

Iran reaches historic nuclear deal

  1. The deal puts strict limits on Iran’s nuclear activities for at least a decade and calls for stringent U.N. oversight.
  2. The international arms embargo against Iran will remain for 5 years but deliveries would be possible with special permission of the UNSC.
  3. Sanctions had slashed Tehran’s oil exports by a quarter and choked its economy
Jul, 01, 2015

Big hurdles still remain in Iran n-talks


 

  1. The main differences are on the pace and timing of sanctions relief for Iran and on the nature of monitoring mechanisms to ensure Tehran does not cheat on any agreement.
  2. U.S. and European negotiators also want to ensure there is a mechanism for restoring sanctions if Tehran fails to meet its commitments under any future accord
Apr, 08, 2015

The road from Lausanne

  1. The Nuclear agreement has left many crucial details to be worked out in the next round of talks, including sequencing of sanctions-relief and details of inspection regime.
  2. Iran is expecting rapid relief on sanctions from UN and EU.
  3. US is looking for conclusive proof of Iranian compliance with the nuclear inspections and limiting Iran’s programme, before taking off sanctions.

  4. Israel has tried all efforts against this deal, which will later draw the international attention on the Israeli arsenal.
  5. If a deal is reached, it will significantly reduce the risk of further proliferation in the Middle East.
Apr, 02, 2015

Iran-P5+1 talks: Breakthrough


 

Key Points:

  1. Iran and P5+1 agreed on the framework for a draft plan of action that would be ready by June 30th this year.
  2. The draft plan envisages to limit Iran’s nuclear programme for civilian nuclear activities only.
  3. The plan of action clearly states the no. of enrichment plants & centrifuges Iran will have access to, as well as their verification by IAEA.
  4. The UN will terminate all its resolutions sanctioning Iran, which had crippled its economy.
  5. The breakthrough deal will have wider geopolitical repercussions on all of West Asia, which is witnessing the results of the proxy war between Iran and Saudi Arabia
  6. The deal will bring big relief for India, who found it difficult to strengthen its civilizational ties with Tehran in face of international sanctions.
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