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Why the JCPOA Won’t Turn Iran Into the Next Saudi Arabia

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Of all the anxieties surrounding this summer’s groundbreaking accord between the United States and the Islamic Republic of Iran, concern over oil has been among the most prevalent. Once the terms of the Joint Comprehensive Plan of Action (JCPOA) are firmly in place, sanctions on Iran’s economy, including a set of rigorous restrictions on its oil industry, will begin to recede.

This could unleash a potentially-gargantuan supply of Iranian oil onto an already-saturated world oil market and augment the abilities of the Islamic Republic to influence regional politics. The Washington Institute has warned that a “post-sanctions windfall” will allow Iran to “rescue the Syrian regime, reshape Iraq’s political environment, expand its terrorist proxy activities in various theaters, and otherwise amplify the effects of its destabilizing regional posture.”

There is fuel for such speculation. Iran has the fourth-highest proven oil reserves in the world, and the second-largest gas reserves. If it gains the ability to tap these enormous resources, Iran could potentially become a major world oil and gas producer, rivaling Saudi Arabia, its major regional competitor.

Yet it is far from certain that the JCPOA will have anything like the cataclysmic effect some have predicted. Moreover, it is questionable how far Iran will push its newly-freed oil economy once sanctions are lifted, with a host of infrastructural challenges, as well as some compelling historical experience, potentially foiling the country’s rise into major petro-state status.

Before the U.S. began pressuring it to give up its nuclear ambitions, Iran was a major oil exporter, second only to Saudi Arabia among the OPEC member-states. Production reached 4 million barrels per-day (bpd) in 2007 before dropping to 3.6 million bpd in 2011; sanctions took that down to 2.85 million bpd by July of 2015, with exports dropping from 2.6 million bpd to 1.4 million bpd.

Expectations for Iran to immediately increase its production one sanctions begin to taper off are high. Iran’s oil minister Bijan Zhanganeh boasted in July that Iran would increase its national production by 1 million bpd within one month of sanctions being lifted. While more moderate analysts debate this figure, most agree that Iranian production will increase by the end of 2015, dropping the anticipated price of crude by $10-12 per barrel.

While the impact of greater Iranian production could further depress oil prices which have struggled for over a year, Iran will likely experience a sudden economic stimulus. The World Bank estimates that Iran’s economic growth forecast for 2016 could increase from 3% to a robust 5% if the JCPOA is approved, signaling a real end to the economic stagnation that set in with the sanctions regime.

Commentators and skeptics of the Iran deal have suggested that Iran’s aspirations to regional hegemony will finally become attainable once oil revenues are freed from sanctions limitations. There is the immediate impact of $150 billion in frozen assets to consider, money Iran will potentially be able to access once sanctions are lifted. This enormous windfall along with greater oil revenues will lead to a more strident Iranian policy, challenging Saudi and Gulf interests and ratcheting up support for Bashar al-Assad’s regime in Syria.

But considerable debate surrounds the precise amount of capital Iran has locked away in overseas accounts: $150 billion is the oft-quoted sum, but the Obama Administration has dropped its estimate from $100 billion to $50 billion, and one analysis in Fortune based on information from Iran’s Central Bank suggests that only $29 billion will be immediately available.

Depressed world oil prices will likely increase Iran’s oil revenues by a relatively small amount, from $50 billion to about $65 billion, roughly what it was earning in 2013 before prices fell. Rather than a sudden, tremendous surge in new assets, Iran will see a modest and gradual financial windfall over the course of 2016 and 2017.

How that new income will affect Iran’s foreign policy is difficult to say with any precision. The regime spends an estimated $10 billion per year on foreign “adventures” like the wars in Syria and Yemen, yet this amount dropped in 2014 in light of lower oil prices and seems trifling when compared to the amounts spent by Riyadh on similar endeavors. Saudi Arabia military spending surpasses that of Iran by five times and the UAE’s small force spends 50% more than Tehran on new weapon systems and arms. It is unlikely that any increase in oil revenues will upset this balance.

Support for Iran’s regional allies, proxies and clients will likely be overshadowed by investment that Iran will direct towards is domestic oil industry. Some of Iran’s most important oil fields are 70 years old and after a decade of sanctions the country’s infrastructure, from the wellhead to the refinery, has suffered considerable degradation for want of investment. Even the CIA, in a recent intelligence analysis, predicts that Iran’s economy will take precedence over support for regional allies.

An estimate from Iran’s oil ministry puts the total cost of industry upgrades at $200 billion, roughly half of Iran’s gross domestic product. Iran will have to pump a considerable amount of its new revenues into re-building its industry, and while external agents (including the massive Western oil firms like Royal Dutch-Shell, ENI and Total) have shown considerable interest in investing, the Obama Administration continues to warn off American companies, arguing that Iran’s aging infrastructure makes it a poor candidate for increased investment.

Even if its production reaches former levels, Iran must fight to win back market share from Saudi Arabia, which has increased its own production to record levels in order to force out new producers and bring the price back up. Saudi Arabia dominates the oil market and will likely continue to do so, as its production level (nearly 10 mbd) dwarfs that of Iran. Iran must effectively triple its current production level in order to compete, a feat that could take decades to accomplish.

Finally, a strong historical argument exists that might very well deter Iran from aggressively embracing increased oil production. Oil revenues largely funded the 1960s and 1970s regime of Mohammed Reza Shah Pahlavi, who pumped most of the country’s earnings into its military and expansive modernization programs. The Shah’s policies made Iran a regional power but over-heated the economy, created powerful inflationary effects and so destabilized his regime that it collapsed in the 1978-79 Islamic Revolution.

Ayatalloh Ruhollah Khomeini, Iran’s Supreme Leader, cut Iran’s oil production in half after 1980, causing it to fall from 6.6 million bpd to 3 million bpd. He believed Iran needed a “revolutionary economy” separate from the wider capitalist world.

Khomeini may have been driven by ideological concerns more than hard economics, but his reasoning was largely validated by post-1970s scholarship. Influential texts by Terry Lynn Karl, Hossein Mahdavy and Richard Auty point to a “resource curse” that affects country’s overly dependent on export earnings and rents from oil production. Today, oil-rich economies like Venezuela and Russia are struggling with such dependence.

If history is any guide, Iran will likely steer clear of such a policy, using its new oil revenues to bolster domestic economic growth and infrastructural development, shoring up the political support for its hardline regime (which has staked a considerable amount on reducing sanctions) while continuing its support for regional proxies and allies. The effect of a sanctions-free Iranian oil industry may take some years to reveal itself, but it is unlikely to be as dramatic as some have speculated. After all, the world oil market remains glutted; the Middle East remains a region riven by conflict; and neither the U.S. nor Iran have indicated that they plan to alter the nature of their postures towards one another. Iran’s oil may alter this situation, but it probably won’t upend it completely.

Middle East

After 10 years of war in Syria, siege tactics still threaten civilians

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The future for Syria’s people is “increasingly bleak”, UN-appointed rights experts said on Tuesday, highlighting escalating conflict in several areas of the war-ravaged country, a return to siege tactics and popular demonstrations linked to the plummeting economy.

According to the UN Commission of Inquiry on Syria, the country is not safe for refugees to return to, after a decade of war.

The panel’s findings come amid an uptick in violence in the northwest, northeast and south of the country, where the Commissioners highlighted the chilling return of besiegement against civilian populations by pro-Government forces.

“The parties to the conflict continue to perpetrate war crimes and crimes against humanity and infringing the basic human rights of Syrians,” said head of the Commission of Inquiry, Paulo Pinheiro. “The war on Syrian civilians continues, and it is difficult for them to find security or safe haven.”

Scandal of Al Hol’s children

Professor Pinheiro also described as “scandalous” the fact that many thousands of non-Syrian children born to former IS fighters continue to be held in detention in dreadful conditions in Syria’s north-east.

“Most foreign children remain deprived of their liberty since their home countries refuse to repatriate them,” he told journalists, on the sidelines of the 48th session of the Human Rights Council in Geneva.

“We have the most ratified convention in the world, the Convention on the Rights of the Child, is completely forgotten. And democratic States that are prepared to abide to this Convention they neglect the obligations of this Convention in what is happening in Al Hol and other camps and prison places.”

Some 40,000 children continue to be held in camps including Al Hol. Nearly half are Iraqi and 7,800 are from nearly 60 other countries who refuse to repatriate them, according to the Commission of Inquiry report, which covers the period from 1 July 2020 to 30 June 2021. 

Blockades and bombardment

The rights experts also condemned a siege by pro-Government forces on the town of Dar’a Al-Balad, the birthplace of the uprising in 2011, along with “siege-like tactics” in Quineitra and Rif Damascus governorates.

“Three years after the suffering that the Commission documented in eastern Ghouta, another tragedy has been unfolding before our eyes in Dar’a Al-Balad,” said Commissioner Hanny Megally, in reference to the siege of eastern Ghouta which lasted more than five years – and which the commissioners previously labelled “barbaric and medieval”.

In addition to the dangers posed by heavy artillery shelling, tens of thousands of civilians trapped inside Dar’a Al-Balad had insufficient access to food and health care, forcing many to flee, the Commissioners said.

Living in fear

In the Afrin and Ra’s al-Ayn regions of Aleppo, the Commissioners described how people lived in fear of car bombs “that are frequently detonated in crowded civilian areas”, targeting markets and busy streets.

At least 243 women, men and children have been killed in seven such attacks over the 12-month reporting period, they said, adding that the real toll is likely to be considerably higher.

Indiscriminate shelling has also continued, including on 12 June when munitions struck multiple locations in Afrin city in northwest Syria, killing and injuring many and destroying parts of al-Shifa hospital.

Insecurity in areas under the control of the Syrian Democratic Forces (SDF) in northeast Syria has also deteriorated, according to the Commission of Inquiry, with increased attacks by extremist “remnants” and conflict with Turkish forces.

Division remains

The Commissioners noted that although President Assad controls about 70 per cent of the territory and 40 per cent of the pre-war population, there seems to be “no moves to unite the country or seek reconciliation. On the contrary.”

Despite a welcome drop in the level of violence compared with previous years, the Commission of Inquiry highlighted the dangers that continue to be faced by non-combatants

The senior rights experts also highlighted mounting discontent and protests amongst the population, impacted by fuel shortages and food insecurity, which has increased by 50 per cent in a year, to 12.4 million, citing UNFPA data.

“The hardships that Syrians are facing, particularly in the areas where the Government is back in control, are beginning to show in terms of protests by Syrians who have been loyal to the State,” said Mr. Megally. They are now saying, ‘Ten years of conflict, our lives are getting worse rather than getting better, when do we see an end to this?’”

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IAEA Director General reaches agreement in Tehran, as Biden’s clock is ticking

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IAEA Director General Rafael Grossi at a press conference. Photo: IAEA/Dean Calmaa

A meeting to resolve interim monitoring issues was held in Tehran on 12 September between the head of Iran’s Atomic Energy Organization, Mohammad Eslami, and the Director General of the International Atomic Energy Agency (IAEA), Rafael Grossi. Grossi was on a visit to Tehran to fix roadblocks on the stalled monitoring of Iran’s nuclear program, which is ever more challenging in a context where there is no diplomatic agreement to revive or supersede the JCPOA. Grossi said in a press conference on 12 September that the IAEA had “a major communication breakdown” with Iran. But what exactly does that mean?


The IAEA monitoring equipment had gone three months without being serviced and Grossi said he needed “immediate rectification” of the issues. He was able to get the Iranian side to come to an agreement. The news from Sunday was that the IAEA’s inspectors are now permitted to service the identified equipment and replace their storage media which will be kept under the joint IAEA and AEOI seals in Iran. The way and the timing are now agreed by the two sides. The IAEA Director General had to push on the terms of the agreement reached in February 2020.

Grossi underlined on Sunday that the new agreement can’t be a permanent solution. Data from the nuclear facilities is just being stored according to what commentators call “the continuity of knowledge” principle, to avoid gaps over extended time periods but the data is not available to inspectors.

When it’s all said and done, basically, it all comes down to the diplomatic level. The American withdrawal from the JCPOA nuclear agreement in 2018 keeps undermining the Iran nuclear inspections on the technical level. All the inspection activities have been stalled as a result of the broken deal. The IAEA’s strategy in the interim is that at least the information would be stored and not permanently lost.

Everyone is waiting for the JCPOA to be restored or superseded. As Vali Nasr argued in the New York Times back in April this year, the clock is ticking for Biden on Iran. Iran diplomacy doesn’t seem to be on Biden’s agenda at all at the moment. That makes the nuclear inspectors’ job practically impossible.  Journalists pointed out on Sunday that the Director General’s visit found one broken and one damaged camera in one of the facilities. Grossi assured it has been agreed with Iran that the cameras will be replaced within a few days. The IAEA report notes that it was not Iran but Israel that broke the IAEA cameras in a June drone attack carried out by Israel. Presumably, Israel aimed to show Iran is not complying by committing the violations themselves.

Grossi’s visit was a part of the overall IAEA strategy which goes along the lines of allowing time for diplomacy, without losing the data in the meantime. He added that he thinks he managed to rectify the most urgent problem, which is the imminent loss of data.

The Reuters’s title of the meeting is that the agreement reached on Sunday gives “hope” to a renewed Iran deal with the US, after Iran elected a hardliner president, Ebrahim Raisi, in August this year, but that’s a misleading title. This is not the bit that we were unsure about. The question was never on the Iranian side. No one really expected that the new Iranian president would not engage with the IAEA at all. Earlier in November 2019, an IAEA inspector was not allowed on a nuclear cite and had her accreditation canceled. In November 2020, Iranian lawmakers passed a law that mandated the halt of the IAEA inspections and not to allow inspectors on the nuclear sites, as well as the resuming of uranium enrichment, unless the US sanctions are lifted. In January 2021, there were threats by Iranian lawmakers that IAEA inspectors would be expelled. Yet, the new Iranian President still plays ball with the IAEA.

It is naïve to think that Iran should be expected to act as if there was still a deal but then again, US foreign policy is full of naïve episodes. “The current U.S. administration is no different from the previous one because it demands in different words what Trump demanded from Iran in the nuclear area,” Khamenei was quoted to have said in his first meeting with President Raisi’s cabinet.

“We don’t need a deal – you will just act as if there was still a deal and I will act as if I’m not bound by a deal” seems to be the US government’s line put bluntly. But the ball is actually in Biden’s court. The IAEA Director General is simply buying time, a few months at a time, but ultimately the United States will have to start moving. In a diplomatic tone, Grossi referred on Sunday to many commentators and journalists who are urging that it is time.

I just don’t see any signs on Biden’s side to move in the right direction. The current nuclear talks we have that started in June in Vienna are not even direct diplomatic talks and were put on hold until the outcome of Iran’s presidential elections were clear. US hesitance is making Grossi’s job impossible. The narrative pushed by so many in the US foreign policy space, namely that the big bad wolf Trump is still the one to blame, is slowly fading and reaching its expiry date, as Biden approaches the one-year mark of his presidency.

Let’s not forget that the US is the one that left and naturally is the one that has to restart the process, making the parties come back to the table. The US broke the deal. Biden can’t possibly be expecting that the other side will be the one extending its hand to beg for forgiveness. The US government is the one that ruined the multi-year, multilateral efforts of the complex dance that was required to get to something like the JCPOA – a deal that Republicans thought was never going to be possible because “you can’t negotiate with Iran”. You can, but you need skilled diplomats for that. Blinken is no Kerry. Judging from Blinken’s diplomacy moves with China and on other issues, I just don’t think that the Biden Administration has what it takes to get diplomacy back on track. If he follows the same line with Iran we won’t see another JCPOA in Biden’s term. Several weeks ago, Biden said that there are other options with Iran if diplomacy fails, in a White House meeting with Israel’s new prime minister Bennett. I don’t think that anyone in the foreign policy space buys that Biden would launch a military attack on Iran’s nuclear facilities. But I don’t think that team Biden can get to a diplomatic agreement either. Biden and Blinken are still stuck in the 2000, the time when others would approach the US no matter what, irrespective of whose fault it was. “You will do as I say” has never worked in the history of US foreign policy. That’s just not going to happen with Iran and the JCPOA. To expect otherwise is unreasonable. The whole “Trump did it” line is slowly and surely reaching its expiry date – as with anything else on the domestic and foreign policy plane. Biden needs to get his act together. The clock is ticking.

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Elections represent an opportunity for stability and unity in Libya

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With just over 100 days until landmark elections in Libya, political leaders must join forces to ensure the vote is free, fair and inclusive, the UN envoy for the country told the Security Council on Friday. 

Ján Kubiš, Special Representative of the Secretary-General and Head of the UN Support Mission in Libya (UNSMIL) briefed ambassadors on developments ahead of presidential and parliamentary elections due to take place on 24 December. 

They were agreed under a political roadmap stemming from the historic October 2020 ceasefire between Libya’s rival authorities, and the establishment of a Government of National Unity (GNU) earlier this year. 

At the crossroads 

“Libya is at a crossroads where positive or negative outcomes are equally possible,” said Mr. Kubiš.  “With the elections there is an opportunity for Libya to move gradually and convincingly into a more stable, representative and civilian track.” 

He reported that the House of Representatives has adopted a law on the presidential election, while legislation for the parliamentary election is being finalized and could be considered and approved within the coming weeks.  

Although the High National Election Commission (HNEC) has received the presidential election law, another body, the High State Council, complained that it had been adopted without consultation. 

Foreign fighter threat 

The HNEC chairman has said it will be ready to start implementation once the laws are received, and will do everything possible to meet the 24 December deadline. 

“Thus, it is for the High National Election Commission to establish a clear electoral calendar to lead the country to the elections, with support of the international community, for the efforts of the Government of National Unity, all the respective authorities and institutions to deliver as free and fair, inclusive and credible elections as possible under the demanding and challenging conditions and constraints,” said Mr. Kubiš.  

“The international community could help create more conducive conditions for this by facilitating the start of a gradual withdrawal of foreign elements from Libya without delay.” 

Young voters eager 

The UN envoy also called for countries and regional organizations to provide electoral observers to help ensure the integrity and credibility of the process, as well as acceptance of the results. 

He also welcomed progress so far, including in updating the voter registry and the launch of a register for eligible voters outside the country. 

So far, more than 2.8 million Libyans have registered to vote, 40 per cent of whom are women.  Additionally, more than half a million new voters will also be casting their ballots. 

“Most of the newly registered are under 30, a clear testament to the young generation’s eagerness to take part in determining the fate of their country through a democratic process. The Libyan authorities and leaders must not let them down,” said Mr. Kubiš. 

He stressed that the international community also has a responsibility to support the positive developments in Libya, and to stand firm against attempts at derailment.  

“Not holding the elections could gravely deteriorate the situation in the country, could lead to division and conflict,” he warned.  “I urge the Libyan actors to join forces and ensure inclusive, free, fair parliamentary and presidential elections, which are to be seen as the essential step in further stabilizing and uniting Libya.”

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