The US President Donald Trump’s decision on pullout from the 2015 Iran nuclear pact significantly impacts the tectonic plates of world politics. At the most profound level, the weakening of the US’ trans-Atlantic leadership that has been under way may have become irreversible.
Without doubt, the European capitals are in turn angry and disappointed. The support for the 2015 pact runs deep in Europe and the disillusionment with the Trump presidency is widespread in the European opinion. In principle, a “regime change” in Washington in the 2020 poll may somewhat improve matters but then, two years is a long time in politics during which the divide between the US and Europe may further deepen and a new alchemy may radically transform Euro-Atlanticism as such with the growing perception of the US as an unreliable and increasingly malevolent partner.
The European corporations are being forced in the coming six months to decide whether they wished to continue doing business with the US, or whether they would choose to continue to pursue the commercial opportunities in Iran. Europe will resist any US attempt to punish European companies. Importantly, Europe’s search for payment mechanisms that bypass American banks will gather momentum.
But these are early days and any apocalyptic predictions of a crack in the western alliance as such will be far too premature. To be sure, the Trump administration has initiated damage control. Trump telephoned British Prime Minister Theresa May to coordinate efforts to build up Western opinion on “Iran’s destabilizing behavior,” pegging the campaign on “the Iranian regime’s provocative rocket attacks from Syria against Israeli citizens.”
Britain is playing its traditional role as Washington’s gatekeeper in Europe by helping to moderate the French and German condemnation of Trump’s abandonment of Iran deal. The newly-appointed Under Secretary of State for Arms Control and International Security Andrea L. Thompson is heading for Paris and London on May 14-18 where she is expected to hold bilateral discussions “on a range of arms control and nonproliferation issues.” Thompson used to be the national security advisor to Vice-President Mike Pence and had previously served as special advisor at the State Department’s Office of Policy Planning. In her new portfolio, Thompson, a retired colonel, is in charge of arms control and international security.
Trump doesn’t seem to think that withdrawal from the 2015 agreement spells the end of all diplomatic options – for the US or for other players (including, perhaps, for Tehran too.) A buffer period of six months lies ahead before Trump would have to make some major downstream decisions. Conceivably, this buffer period may even be his negotiating period. Trump’s Art of the Deal may still provide for a “negotiating process” with Tehran. The coming six-month buffer period would be a critical maneuvering time for all protagonists.
Therefore, there is no reason to anticipate an inevitable expansion of conflict in the Persian Gulf as of now. Trump’s move gives the GCC states and Israel some time to re-group. Israel and Saudi Arabia have welcomed the Trump decision. But in meaningful terms, what benefit would accrue to them remains doubtful. Put differently, Israel and Saudi Arabia will be pushing the US to resort to the use of force against Iran sooner rather than later – especially, if the nuclear deal completely collapses and Tehran steps up the enrichment program.
Saudi Arabia and Israel probably hoped to rebuild strategic credibility in the hope that Iran will be constrained by sanctions to reduce its regional military and proxy warfare missions. But on the contrary, the high probability is that Iran, which now feels “liberated” from the seductive lure of the opening to the US and West, may even expand its power projection, given that it now has less reason for constraint.
The plain truth is that new US sanctions would not seriously jeopardize the Iranian economy. Much depends on Iran’s ability to sell oil on the world market. But then, one-third of Iran’s oil exports go to China and it is inconceivable that Beijing will cooperate with the US sanctions against Iran. On the whole, sales to Iran from China and Russia would be unaffected by the U.S. sanctions. The sanctions would almost certainly hasten the denomination of Iranian transactions with foreign suppliers in non-dollar currencies – especially, in yuan/renminbi and Russian rubles.
Considering that Saudi Arabia too is moving toward some denomination of oil sales in renminbi, the era of total domination of the energy market in dollars — petrodollars — is drawing to a close after almost a half-century of total domination of the global economy by the US dollar as the universal reserve currency. Washington may put a brave face on this tectonic shift in the international financial system, but there is a serious erosion of the US influence on global markets getting under way.
Ironically, in the near-term in the Middle East, it is possible that Trump’s decision allows Iran greater latitude in developing its strategic capabilities. Iran would probably stay in the 2015 pact with the other parties to the agreement but, paradoxically, the deal no longer holds the same charm for Tehran as before, without Washington being party to it. In a manner of speaking, Tehran would feel “unshackled.” Lest it be forgotten, Iran’s elite had agreed in the first instance to curtail what had been a rapidly growing capability to create large quantities of fissile materials, in lieu of a constructive engagement with the US.
Indeed, the 2015 pact gave a window of opportunity for the US also to reclaim influence in Iran by beginning a process of normalization. But Washington was disinterested, and arguably, Tehran too failed to take full advantage. Now, it is the historic turn for Russia, China and Turkey to move quickly to fill the vacuum created by the new US sanctions regime. While it is too early to speak of a political alignment, the events are on the one hand pushing together Iran, Russia, and Turkey, while on the other hand putting the European Union and Russia on the same side. Indeed, if US-Iranians tensions escalate, Russia may find itself in an unenviable position to mediate de-escalation. Currently, though, the events are pushing together Iran, Russia, and Turkey, which have had problematic mutual relations.