In to withdraw from the deal this April

Topic: EconomicsConsumer Science
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Last updated: February 20, 2019

In July 2015, Iran entered into a landmark nucleardeal “Parameters for a Joint Comprehensive Plan of Action (JCPOA)” with sixworld powers the US, UK, Russia, France, China, and Germany to limit itssensitive nuclear activities for more than a decade in return for the liftingof crippling sanctions. This agreement has been a signature foreign policyachievement of Barack Obama’s presidency. Now in Presidency, Donald Trump findsthe deal lenient and is unmilling to recertify it. This deal resulted a globalimpact creating opportunities for countries and re-establishing frozen relationships.

If such strategic important internationaldeals had to be signed and rescinded on the whims and perceptions of individualleaders of the leading nation and their electorates, the entire system wouldcollapse; and collapsing it is, with North Korea under no one’s control andmeasures underway to ensure that Iran too would head the same way.The deal involved limited installationsto 5060 Centrifuges involving Uranium enrichment, restrictions on Nuclear research& development, barred to operate and build heavy water containing Plutoniumsuitable for nuclear bomb, extraordinary and robust monitoring, verification andinspection from global nuclear watchdog IAEA, increase in ‘Break out Time’ from3 months to one year and most importantly lifting sanctions on selling oil ininternational markets and using Global financial system. Had Iran violates anyaspect of the deal, The UN sanctions will automatically ‘snap back’ into placefor 10 years and extensions.

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However, the senior official electorates and theleaders of allied governments have influenced rump to withdraw fromthe deal this April 2018 as the costs of blowing up the deal outweigh thebenefits. The major impact of the broken deal will be onIran. Iran is the second largest economy in the Middle East and North Africa regionafter Saudi Arabia. The Iranian economy strongly recovered in 2016, on the backof a significant rise in oil production and exports, following the removal ofnuclear related international sanctions. In 2016, the economy registered astrong oil-based bounce back, with an annual headline growth rate of 13.

4percent, compared to a contraction of 1.3 percent in 2015. The country resumedselling oil on international markets with $48 Bn in 2017 and using the globalfinancial system for trade. Iran is also able to access more than $100bn inassets frozen overseas. The sanctions have cost Iran more than more than $160bn(£102bn) in oil revenue since 2012 alone.

Re implementation of sanctions willhave a boomerang effect on the economy re building back itself to 2015 as aslow economy.United States have overestimated their efforts ofmanaging the economy on their own. Pulling the U.

S. out of the deal would notonly erode the credibility of the U.S, it would also deal a heavy blow to theinternational nuclear non-proliferation drive, and set a bad precedent thatwould surely hamper the ongoing multinational efforts at finding a peacefulsolution to the Korean Peninsula nuclear deadlock through negotiations.Worse, the move could undermine thesystems in place that monitor Iran’s nuclear activity, and would certainly makeproliferation more likely and burn all conceivable options short of war withIran and Korea. A stable and integrated Iran is inthe national interest of India.

With oil price splurging highs with 99.4% fromtheir 2016 low, imposing sanctions on Iran would affect the oil prices andtrade relations with major countries. India has been one of the few countriesdoing billions of dollars of trade with Iran, despite the sanctions having beenbefore. Current bilateral trade between India and Iran is about $14bn with thebalance of trade heavily. Indian exports to Iran were around $4.2bn last year.

 Sanctionswill fuel in the current rising prices high and as India spends nearly $1billion in import costs for every dollar increase in global crude pricesleading to negative balance of trade. Resuming restrictions on selling of oilin international market will cut back production of oil leading to inflationturmoil in India. Secondly, the concerns among Indian businessmen that Iran is playinghard to get, or even turning to more competitive international players due toopening up of the economy can rest for some while as the negotiation power hasbeen dragged down. Thirdly, development of Iran’s Chabahar port, which isstrategically significant as an entre-pot being the gateway to Central Asia inproviding access to Afghanistan shall ignite for early development.

As Israeland several West Asian states are at loggerheads with Iran, India musttactfully use its diplomacy to balance its equations. With a deal of thisnature that has multi-dimensional implications for India ranging from theeconomic to the geostrategic, India must capitalise on the opportunities thatthe deal offers. So it is this unpredictability which will rear its uglyhead, which is never good for any international business and trade; the lastthing India needs at a time when its economy is in re-stabilisation mode is anincrease in its oil bill. Stringent sanctions reimplementationdestabilise the economic and security situation in Iran, which has close linkswith China. The two countries have economic, trade and energy ties, with Chinarelying on oil imports from Iran while latter looks to China for investment,particularly stemming from its sprawling belt and road trade and infrastructureplan.  The Iran nuclear deal has thepotential to affect the UAE due to UAE’s economic ties to Iran and the GCC’s (Gulf Cooperation Council) geopolitical rivalry with their neighbouringcountries. Firstly, expatriates from Dubai have made huge profits as thecommercial centre for new business ventures in Iran, adding to its role as thecentre of Middle Eastern commerce and host of scores of company headquarters.

Secondly, UAE has stood strongly with oil producing countries for aggressivelyhigh rate and due to nuclear deal had put stress on UAE and budget deficits ofthe nation. Implementation of sanctions would relief UAE’s rising pressure ontheir price control through cartel. The nuclear agreement had played apositive role in ensuring nuclear non-proliferation and protecting peace andstability in the Middle East for the world. President Trump’s obsession with isolating Iran could witnessthe return of a far more robust mechanism of monitoring and preventing breachesthrough alternatives ignored by previous administrations.    

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