Implication of Iran Accord with P5+1

Iran Accord SAThe accord reached between the P5+1 group and Iran seems to be unfolding like a jigsaw puzzle. Many people have not understood the underlining motives or their long-term implications. The brutal reality is that the regional power centre will shift from Saudi Arabia to Iran though it is difficult to foresee how the future will unfold and who will be the winners and losers. The bottom line is that those who are able to understand the dynamics in play will be better off and those who try to fly against the wind will soon exhaust their energies. It will be a marathon with no slot for a sprinter.

Those who believe that the accord was desired by the western powers as well as Iran may be right but one has to keep in mind that it is the outcome of imposition of stringent sanctions that has led to reconciliation. The span of these negotiations is spread over ten years, during which the world has changed a lot, friends have turned into foes and rivals have been made partners, involved in proxy wars in many countries. During this period a lot of dust was thrown up which made it difficult for the actual happenings to become visible even for those who were in close proximity.

Over the years, crude oil prices were kept high and touched a peak of more than US$147 a barrel. The largest oil producing countries were apparently benefiting but were hardly able to understand the ultimate motive. The shale oil boom in the U.S. catapulted the number of active rigs to beyond 1,600 but now only around 600 rigs are in operation. Most of the storage facilities in the U.S. are full but the country is still producing around 9 million barrels per day and has surpassed daily production of Saudi Arabia, which is the world’s largest oil producing country.

Is it just a coincidence or a paradigm shift? Two points were evident, during these years: 1) there were hectic diplomatic efforts to tame Iran and convince it to roll back its disputed nuclear program and 2) the number of working rigs in the U.S. broke all previous records.

The timing of final negotiations between the P5+1 group and Iran and the fall of crude oil prices also coincide. The plunging oil prices appear to exert pressure on Russia and Saudi Arabia and also to force Iran to kneel down. In fact, Iran had faced multifarious problems because it was allowed to export only a limited quantity of oil.

Hurdles were also created by blacklisting those banks that channeled payments to Iran and stopping insurance companies from underwriting oil and ships. During this period, China emerged as an important savior for Iran by becoming the biggest buyer of its oil; others joining the bandwagon were India, Japan and South Korea. China can be said to have played a pivotal role in concluding the accord. It is no secret that as a result of all this, China aspires to become a global economic and military force.

This evident in China’s “One Belt, One Road” initiative that aims to link the country with Eurasia and the Middle East. Sanctions-scarred Iran was in desperate need for a new infrastructure and was also keen to expand the flow of people and commerce across its borders. Nearly three decades of economic sanctions had made Iran the most attractive investment destination. Proximity to key energy shipping routes made China the biggest beneficiary of this accord. Since many of the foreign energy companies left Iran due to sanctions, Chinese energy giants seemed best placed to invest in Iranian oil and gas development.

Security cooperation between China and Iran is an important feature of Sino-Iran relationship. Both the countries are keen to stop ISIS from gaining a foothold in the neighborhood. If Iran is not ready to tolerate insurgents on its borders, China also wants to stop radicalism in its Xinjiang province. It has already pledged unprecedented security assistance to Afghanistan and has reportedly brokered peace talks between the Afghan government and the Taliban.

Sino-Iranian cooperation may also be based on anti western, especially anti-U.S. sentiments. Beijing seems to be boosting Iran’s role in China-led multilateral institutions that do not include the US, especially the Shanghai Cooperation Organization and the Asian Infrastructure Investment Bank.

One fear is that this cooperation can dent U.S. policy in the Middle East and beyond. An Iran that is overly dependent on China will bolster Beijing’s efforts to create alternative political forums that exclude Washington. If the U.S. does not take a prominent role in Afghanistan’s peaceful reconstruction and the development of Eurasia, it will cede influence in a pivotal region.

China’s ties with Iran are also likely to impact future US-China relations. The best way to balance China-Iran relations would be to keep Sino-American interests in the Middle East constructive and not competitive. The US has to consider sending its own companies to Iran to engage in commercial diplomacy. Taking such steps would help the U.S. bring stability in the region and ensure that China and Iran both see their respective strategic relationships with the U.S. as being more important than the one they have with each other.

While the U.S. may be eager to establish a cordial relationship, the gesture will not be approved by its strongest allay of yesteryears, Saudi Arabia. Often voices are raised in the Kingdom and its peripheral states, to the effect that, “Iran is a bigger enemy as compared to Israel.” This has resulted in a change in the mindset in Saudi Arabia and Israel vis-a-vis. repairing the relationship of peaceful coexistence.
The Saudis seem more concerned about the threats from Iran and the ISIS than Israel. It is beginning to appear as if the Saudis support a decade-old peace offer to the Jewish state. Some analysts say the Arab-Israeli conflict is a minor historical hiccup compared to the ancient feuds between the Arabs and the Persians, spread over more than a thousand years.

There is also a change in the mindset of US citizens who believe that Iran can play a key role in bringing stability in the Persian Gulf, but apprehensions remain. The common perception is that the worst levels of extremism and terrorism in the past two decades were the outcome of funding and influence of Saudi Arabia. Those who considered Iran an enemy have started taking it more like a potential friend.

Iran and Saudi Arabia are engaged in a proxy war in Yemen. Iran does not approve of Saudi Arabia’s approach of using pressure to resolve regional problems but many believe that Tehran-Riyadh relations should be turned into ordinary and acceptable levels. Both the countries should engage in constructive dialogue for fighting terrorism and extremism and bringing peace and security to the Middle East.

It is not an easy task because hardliners on both sides are most likely to resist any rapprochement; to the contrary, they fear that the US and the Saudis will become more distant. Those who are witness to the pre-revolution US-Iran relationship, consider Iran a natural ally, even if the coordination happens mainly behind the scenes. The Saudis are not ready to face the new reality as they want to tighten, not loosen, relations with the US.

As a result of this deal, the six major world powers (U.S., UK, France, Russia, China and Germany) want to secure the sanctity of the Strait of Hormuz to preserve a steady and cheap supply of oil from the Gulf. While Iran may have to wait for a longer period to reap benefits, the six major world powers are already benefiting from the lower oil prices.

There are two major opportunities for Pakistan in the deal. Firstly, it will be able to meet its energy demands by either getting gas directly from Iran or by increasing its oil purchases. Secondly, Pakistan will seek the help of Iran to improve its relationship with Afghanistan. This largely depends on whether Iran is now closer to Pakistan or India. That it may be closer to India is construction of the Chabahar Port at the mouth of the Gulf and the road and rail links to Central Asia that pass through Afghanistan are being financed by India.

After the sanctions on Iran are lifted, India will find itself in a better position than Pakistan to enhance and diversify its volume of trade with the Gulf power. This also means that the corresponding interests of both Iran and India in the future of Afghanistan may offer a challenge to Pakistan.

However, the major threat to the Pak-Iran future relationship is sectarianism, which is legacy of the socio-political developments of the 1980s when Pakistan was encouraged to keep aloof of Iran. To reap the benefits of Iran’s energy resources and trade potential, Pakistan must contain sectarian and militancy within its own borders.

This article was originally published in SOUTHASIA magazine



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