US Sanctions against Iran

New sanctions were imposed on Iran by the United States over Iran’s Ballistic Missile Test. This has affected ties between the two countries which saw gradual improvement over a couple of years. The sanctions target thirteen people and twelve companies including groups in China, Lebanon and the United Arab Emirates. These sanctions were enforced in the wake of Iran’s support to Houti rebels in Yemen.

What is the significance of Iran?

• Unlike Iraq of 2003, Iran is a strong regional power whose influence runs from Syria and Iraq to Lebanon and Yemen.
• In order to bring out stability in West Asia, there is a need for Iran’s cooperation, rather than, hostility.
• Iranian-controlled shia militias played an important role in liberating cities captured by Islamic State. Hence, the world needs Iran’s cooperation in the fight against Islamic State.
• It is apparent that the Iran is a key regional power in the dialogue process as seen in the recently conluded Astana Peace talks.

What are the implications?

• US may not repeal the nuclear deal since it is a multilateral agreement.
• US may put immigration restrictions on Iranian citizens, impose new sanctions on Iran and labelling the country as the “greatest state sponsor of terrorism”.
• Trump appears to pursue the goal of restoring the bipolar balance between Saudi Arabia and Israel, the United States’ strongest allies in West Asia.
• Targeting Iran by siding with the Saudia would only make Iran to step up its activities in other countries through the “Shia corridor”. It runs the risk of making West Asia even more chaotic than before.
• Iran is an oil rich country and the isolated or unstable Iran would result in raising oil prices, thus affecting Iran’s trade.
• Further decrease in business investments in Iran and increase in trade deficit would result in declining socio-economic indicators such as unemployment and high inflation.
• Isolating Iran by US may negatively affect improving US-Russia relations since Russia considers Iran as its critical ally.
• It will foster US-Israel relations particularly at a time when relations between them took a hit due to the US abstention on resolution declaring Israeli settlements illegal.
• Due to the sanctions, there is more possibility that Iran becomes a full time member of SCO as it is one of the possible candidates for the enlargement due its ties with China and Russia. Because of this, SCO would turn from a neutral international group, to a regional organisation that is anti-US tag.

What are the implications for India?

• It could spell trouble for India’s plans to develop the chabahar port due to the deterioration in US-Iran ties.
• It will affect India’s Current Account Deficit (CAD) negatively since oil exports to India would once again be carried out in rupees as Iran would be forced to make concessions to revive its economy amid sanctions.
• In order to reduce effect of sanctions, Iran would look for new geopolitical avenues such as China. Iran moving closer to China would impact India’s strategic interest in Iran.
• China thinks that the new sanctions will create valuable opportunities for China’s interests in the Middle East.

India has considerable stake in Iran. Hence, India will have to take its move in caution in order to maintain a balance in relationship between US & Iran. It is high time that the Trump administration is to continue with the Dialogue process carried forward by his predecessor Obama for a peaceful world.