The Sanctions Fall and the Pendulum Swings

Slide1For over 30 years Iran has been living in exile from the rest of the world, a pariah state accused of promoting terrorism and building a nuclear bomb. It all started with the Iranian Revolution in 1979 and the subsequent hostage crisis when over 60 US diplomats and citizens were held hostage in the American Embassy in Tehran for 444 days.

Before 1979 the US and Iran, under the rule of Shah Mohammad Reza Pahlavi, enjoyed good relations. It was a time when the US actually provided the Iranians with nuclear knowhow and technology. But the Shah’s regime was unpopular with the people and on 17th January 1979 he left the country, the monarchy was abolished and a Shi’a theocracy was established under Supreme Leader Ruhollah Khomeini.

Many Iranians blamed the Americans for supporting a ruler who they believed was a despot. Anti American feelings grew, rioters surrounded the American Embassy which came under siege.

The surrounding Sunni countries, especially Saudi Arabia, looked on with horror at the sight of thousands of Shi’a chanting ‘down with America’ and glorifying the revival of Shi’a Islam. They feared that Shi’a uprisings would spread to their own countries and so consequently squashed any sign of dissent from their own Shi’a minorities, a situation that remains today.

The US and her allies worried about instability in the region that might threaten their own trade relations. Somehow Iran had to be contained and the answer was the imposition of draconian sanctions starting with the freezing of $100bn Iranian assets held in foreign banks. Then the US, EU and UN all imposed sanctions forbidding trade with Iran, including the purchase of Iranian oil and restricting Iran’s nuclear programme.

Almost overnight many of these sanctions have been removed. $30bn of the $100bn Iranian assets will be released back to them almost immediately and Iran will have access to world banking. European companies will be free to trade with Iran and the embargo on Iranian oil will be lifted adding an extra 500,000 barrels of oil a day to an already swamped market.

President Obama and President Rouhani are both claiming a great victory although both are acutely aware of conservative elements within their own countries that are far from happy. Republican Americans as well as Israel still maintain that Iran supports terrorism and that the lifting of sanctions will only make it easier for them to achieve their aims. Perhaps today’s three surprise new sanctions by America are timed to appease the Republican Right.

We could ask, “why now?” It is said that at last the International Atomic Energy Agency (IAEA) are confident that Iran has complied in every way to the restrictions imposed on her nuclear activities. But could there be other reasons? Iran, alongside the US, EU and many countries around the world admits to one common enemy and that is Daesh. Iran has been fighting Daesh on the ground in Iraq for many months. Iran would make a good partner in the alliance against Daesh. If Iran is allowed to come in from the cold that alliance could bear fruit.

But where does all this leave Saudi Arabia? The Kingdom has many problems at the moment, not least of which is economic. It is predicted that Saudi oil could drop to as low as $10 to $20 a barrel and that was BEFORE the flood of Iranian oil that will only lower the price still further.

It has been suggested that Saudi Arabia’s motivation for executing Shi’a cleric Nimr al-Nimr was in order to provoke a response from Iran that would destabilise the sanctions negotiations.

It is early days in this new relationship and there are those on both sides who would wish to see it fail. In the meantime Iran has cause to celebrate, her people hope for more business opportunities and a higher standard of living. As for Saudi Arabia, after years of living on the fat, the future begins to look bleak. Unlike Iran, she is a new country with little, if any, experience of diversification.

What the world would like to see is stability, not only for the people of the region but for the sake of world peace.