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The tension between Iran and the United States

Giancarlo Elia Valori

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At the beginning of last summer, precisely on May 8, 2018, US President Donald J. Trump carried out one of his old projects, i.e. to explicitly walk out of the Joint Comprehensive Plan of Action (JCPOA) reached between Iran, the United States, China, France, Russia, the United Kingdom + Germany and the European Union on July 14, 2015.

 The IAEA inspectors spend 3,000 days a year, on average, checking Iran’s nuclear facilities, and so far they have not ascertained any particular Iranian infringement of the 2015 agreement.

 Immediately after the US action, the EU adopted a blocking statute, based on the fact that the USA had unilaterally stated that Iran had not publicly declared a previous nuclear programme, prior to the JCPOA.

  According to the 2015 Treaty, Iran had agreed to destroy its arsenal of medium-enriched uranium, as well as to eliminate 98% of its low-enriched uranium production, and to finally reduce the number of its gas centrifuges for the selection of isotopes by two thirds, for a period of 13 years starting from the signing of the agreement with the P5 + 1, namely the JCPOA.

 For the subsequent 15 years, in fact, Iran had committed to enrich its uranium by only 3.67% compared to the levels before the signing of the agreement, without building other centrifuges for the following 10 years as from the signing of the JCPOA, while the enriched uranium production had to be reduced to the activity of a single first-generation centrifuge.

 As previously mentioned, the EU put in place a blocking statute mainly to protect EU-based companies from the effects of US sanctions against Iran. In May 2019, however, IAEA established that Iran had basically complied with the JCPOA, except for some doubts about the number of centrifuges actually in operation.

 Immediately after the US withdrawal from the treaty, Iran reaffirmed its acceptance of the treaty of July 14, 2015, along with France, Germany and Great Britain, while the Russian Federation and China explicitly supported Iran, which stated that only the USA had unilaterally and illegally withdrawn from the agreement.

 According to President Trump, one of the political reasons for the US withdrawal from the JCPOA was the resulting strengthening of his positions during the negotiations with the North Korean leader, Kim Jong Un, while the former US President, Barack Obama, said that the US withdrawal from the treaty of July 14, 2015 left the USA torn between two equally suicidal choices: a completely nuclearized Iran or the quick breaking out of another war in the Middle East.

 The only countries supporting President Trump, against the nuclear agreement with Iran, were Saudi Arabia, the traditional enemy of the Iranian Shiites, and obviously Israel.

 The US President also added that the USA would cooperate with the EU to “put pressure” on Iran, but the European Union implemented a project, called Instrument in Support of Trade Exchanges (INSTEX), to avoid the negative effects of US sanctions on European companies. INSTEX, officially announced on 31 January 2019, is led by Per Fischer -former Head of Financial Institutions at Commerz bank -as President, and includes Simon McDonald, permanent undersecretary for foreign affairs of Great Britain, Miguel Berger, Head of the economic office at the German Foreign Ministry, and Maurice Gourdault de Montaigne, Secretary General of the French Foreign Ministry (“and of Europe”, as the official formula states). The whole body does not include senior managers of the banking system and of commercial institutions.

A political organization that has political purposes vis-à-vis Iran and the USA, not a real starting point for continuing to do business in Iran.

 Hence for many countries, including Iran, INSTEX is more a political move to differentiate themselves – with difficulty – from the USA than an effective and operational system against the US sanctions on Iran.

 On April 29, Iran announced it had set up the Special Trade and Finance Institute (STFI) to monitor the INSTEX activities and thus favour Iran-EU trade even during the US sanction regime.

 The Iranian President of STFI is Ali Askar Nouri, former consultant of Iran Zamin Bank and the Institute also includes Hamid Ghanbari, former director of the Central Bank of Iran, Farshid Farrokh, manager of the Refah Bank, and finally some other managers coming from the Iranian banking system.

 Given the low political level of the Iranian STFI, it is likely that the Iranian government does not trust the INSTEX system at all as a way to really solve the trade relations between the EU and Iran.

 The European system also implies that the profit generated from the purchase of Iranian oil by companies having their headquarters in the EU must be transferred to the INSTEX “special-purpose vehicle”.

 Nevertheless, considering the general US restrictions on the sale of Iranian oil, in all likelihood the EU “special-purpose vehicle” will be increasingly linked to ever smaller Iranian funds and hence will not be in a position to collect enough liquidity to justify reasonable trade with Europe.

 Moreover, considering that the major buyers of Iranian oil belong to non-European States, it is equally unlikely that these countries, namely China, India, Korea and Japan, will accept to transfer their payments to INSTEX.

 Moreover, considering the US regulations, even if the EU vehicle really worked, Iran could spend all the funds included in the EU mechanism only for medicines and- to a little extent – for food.

 Hence no mechanism to protect Iran-EU trade can be created unless agreements are also made with the USA.

 However, who is really hit by the US sanctions? Rather than the political and military actions of the Iranian government, what is really destroyed is Iran’s private economic sector.

 Currently the Iranian population is equal to 82 million inhabitants, with an economic ranking that places the Shiite Republic of Iran in the eighteenth position in the world.

 In the case of Iran, another reason for the economic crisis led by foreign countries is the devaluation of its national currency, namely the rial.

 The local government’s inflationary actions, the restriction of foreign currency assets and the related slowdown in growth, with an inflation rate at 13% and an unemployment rate at 12.3%, are drastic measures. This is official data from the Iranian government, which is apparently much more acceptable than real data.

 Furthermore, the Shiite regime has imposed restrictions for as many as 1,300 types of product, in addition to the escape from the dollar in transactions and the preferential use of the Euro in international trade.

 In the real exchange market, currently the rialis worth 90,000 as against the US dollar, while at the end of last year one dollar only was worth 42,840 rial. An induced Weimar-styleinflation, which is destabilizing for every social system.

 The Euro, however, is not a currency that has the characteristic of being a Lender of Last Resort, as Paolo Savona often says- hence its global use is inevitably very limited.

 Therefore the rial should still decrease by at least 10% in the exchange with the US dollar.

At official rates, bank interest is already at 24%. Hence, in these crisis contexts, the Euro is therefore not allocable, while the role of the Chinese renmimbi is growing, considering China’s vast purchases of Iranian oil – which will not last forever.

 If not to maintain a game of tensions with the USA, on the part of China, pending the trade war that inflames the two major players in global economy, namely the USA and China.

 Transfers abroad- to the EU in this specific case – cost the Iranian companies at least 20% of the total capital transferred.

 It should also be recalled that oil sales are worth only  40% of Iran’s total GDP, considering that the largest sector of the Iranian economy is services, which account for 51% of GDP, followed by tourism (12%), the real estate sector, and finally the mining sector (13%) and agriculture (still at 10%).

 What could be a possible solution? The greater economic correlation between Iran and China, considering that the commercial crisis between the United States and China is almost simultaneous to the crisis between Iran and the USA – and it has quite similar strategic potentials.

 Hence for the United States the effects will be the maximum pressure available against Iran, in addition to greater US military presence in the Middle East and the damage caused by the USA to the European allies still tied to the signing of the 2015 JCPOA.

  It is also impossible not to think about the inevitable negative reactions on the Nuclear Non-Proliferation Treaty, already under pressure from various parts.

 Moreover, the bilateral relations between China and Iran are still growing significantly, at economic, political and strategical levels.

 Furthermore, China currently imports 11% of its oil from Iran, in addition to an investment of over 5 billion US dollars for the technological upgrading of the refining and transport of oil and gas.

 China has also invested in the urban transport system, particularly in the Tehran subway, as well as in regional motorways and in the Mehran Petrochemical Complex, in addition to a credit line of the Chinese State financial holding (CITIC) to the Iranian government, amounting to over 10 billion US dollars.

 The China Development Bank has also guaranteed additional 15 billion US dollars – up to a transfer of capital – between Iran and China, which, as stated by Hassan Rouhani, the current leader of the Iranian government, are expected to reach 600 billion US dollars.

  Currently Iran is China’ second trading partner, after the United Arab Emirates, and is also capable of permanently supplying the Shiite republic with advanced weapons.

  Therefore, it is a real “substitution of Iran’s imports” both from the EU and, obviously, from the USA, which enables China to create an economic and military outpost in the Persian Gulf, capable of opposing – in a short lapse of time-the US strategic presence in the region. Not to mention the EU countries’ military set-up and arrangement in the Middle East.

 Moreover, also the USA knows that, considering the asymmetric structure of Iran’s military forces, a clash with Iran could be very costly and even burdensome for the United States, which probably could barely penetrate the Gulf, while it is still believed that a direct North American action on Iranian soil is currently ever more difficult.

 Meanwhile, Iran is struggling to create new markets for its oil, in areas that cannot be integrated into the JCPOA and the US system.

 The target countries of Iran’s expansion are Brazil, China – as usual – but also India, which can be decisive today, considering that the Iranian production reached only 400,000 barrels per day last May, less than half of the sales in the previous month and even below the 2.5 million barrels per day of April 2018.

Everything started with an annual income from Iranian oil of approximately 50 billion US dollars.

  Currently, however, according to US experts, oil proceeds have fallen by at least 10 billion US dollars, after the US re-imposing full sanctions last November.

 The situation is still better for Iranian exports – also to Turkey – of petroleum by-products, such as urea, but above all for the sales of natural gas, liquefied petroleum gas, biofuel, methanol, and even other non-oil energy products.

 Iran accepts payments either in currencies other than the dollar or with the old trade-in system, which is a traditional and widespread system in the oil world.

 However, let us revert to the bilateral political crisis between the USA and Iran.

 After the sanctions renewed by President Trump, Iran has started again to enrich uranium to 20% and has also announced it would update the Arak reactor, which was part of the Iranian military system and produced plutonium.

 Moreover, Iran claims that the Arak reactor is still subject to the JCPOA rules and that its productive activity will end soon.

 In Natanz, another important centre for the Iranian production of enriched uranium, the extraction of isotopes has increased significantly. As Iranian leaders themselves say, this extraction should be increased by 400% compared to the JCPOA rules.

 It should be recalled that the treaty of July 14, 2015 limits the production of uranium to 300 kilos of uranium hexafluoride (UF6), which has a real content of active and useful uranium to the tune of 202.8 kilos.

 On a strictly military level, the USA has already sent to the Persian Gulf region a group of warships, including the aircraft carrier Abraham Lincoln and four destroyers armed with missiles. Furthermore, some B-52 bombers have been deployed in the Al-Obeid US base, Qatar, in addition to over 120,000 soldiers, distributed in the various US facilities in the Middle East, although President Trump has said that the shipment of these troops is a fake news.

 Nevertheless, this shipment has recently been confirmed by the US Administration.

 However, on May 12 last, Iran’s Revolutionary Guards, the so-called Pasdaran, attacked four-seven large commercial ships in the port of Fujrairah, one of the great world hubs in oil maritime trade. Other data has not been provided to the press.

 Allegedly, they were vessels belonging to companies based in the United Arab Emirates.

 It is also likely that at least two of those ships were of Saudi nationality.

  Another attack of obscure Iranian origin occurred on May 19, when a Katjuscia rocket was fired against the US Embassy in Baghdad, but without causing victims.

 On May 14, however, Supreme Leader Ali Akhbar Khamenei said that “there would be no war against America”. At the same time, however, the Iranian Rahbar does not want to re-open the nuclear talks with the United States.

  Both because Khamenei does not want to give the impression of rapidly succumbing to the United States – and here the Shiite regime could even self-destruct – and because, in all likelihood, reopening negotiations would imply the end of Iran’s nuclear ambitions.

 It should be noted that there is also the oil issue for the USA itself.

 Tension in the Gulf leads to a fast and significant increase in all OPEC crude oil prices while, even considering its higher extraction costs, the US oil is also capable of producing profit, in a context of quick and uncontrollable growth in the OPEC oil barrel prices.

The United States has now reached a production of at least 2.5 million barrels per day, which makes the USA attentive to any possible useful hedging on OPEC oil, with a view to exploiting any geopolitical crisis that – in the oil market – always has immediate consequences on the oil barrel price.

  It should also be noted that the Strait of Hormuz is twenty miles wide. It is technically impossible for Iran to control or block it all.

 Iran, however, can use strong cyberattacks against the oil networks of the neighbouring States that, in various ways, are also all linked to Saudi Arabia.

 Nevertheless, Saudi Arabia and the United Arab Emirates have alternative pipelines that can easily bypass the Strait of Hormuz.

 Even in the case of an Iranian unconventional attack, Saudi Arabia can sell at least 6.5 million barrels per day and currently the USA is much less exposed to an oil shock like those of the 1970s, given that the American economy is less oil-dependent and particularly considering that the national production of American (and Canadian) oil and gas is such as to ensure an acceptable level of oil use, even without the North American purchases from OPEC countries.

 In 2019, however, China has agreed to keep on buying oil and gas at low prices in Iran, at a level ranging between 700,000 and 800,000 barrels per day.

 Iran has no interest in dealing with the United States, right now that a new presidential election cycle is starting.

  On June 8 last, Iran officially declared that it would break some other restrictions included in the JCPOA if the 2015 treaty continues not to provide the expected economic benefits to Iran.

 The remaining parties that adhered to the JCPOA have recommended Iran to comply – even unilaterally – with the agreement of July 14, 2015 – and these countries are China and the United Kingdom.

 The EU, however, will continue to carry out checks on Iran’s compliance with the JCPOA, both in the collection of heavy water and in the production of enriched uranium, which is essential for building nuclear weapons.

 On a strictly economic level, Iran has abolished the oil subsidy regime for the population – a cost of 38 billion US dollars a year, equal to approximately 20% of GDP.

 As both the International Monetary Fund and the World Bank have noted, this is the first aspect to be kept in mind.

 Nevertheless, in a context like the sanction regime, it is impossible to maintain a policy of internal liberalizations.

 However, on a purely strategic level, what could all this mean, insofar as a permanent geoeconomic clash is emerging between Iran and the United States?

 For example a much harder and more continuous war in the Lebanon than we have already experienced.

 Or a clash with Israel involving Assad’ Syrian Army, the Hezbollah, some units of Iran’s Revolutionary Guards and even Hamasin the South.

 A long-term war capable of slowly consuming both the material and soldiers of the Jewish State and its  international support.

 Or a new war in Syria, between the Golan Heights and the areas close to Damascus, forcing Russia to play a military role in Assad’ Syria and creating a clash between Israel and Russia, again on Syria alone.

Or another possibility could be a direct confrontation between Israel and Iran, with airstrikes on the territory of the Shiite republic and the whole panoply of means available for non-conventional actions.

 Or finally a clash throughout the Middle East, with the possible presence of Saudi Arabia and Iran’s coordination of all Shiite forces inside and outside the opposing countries.

 It is from this viewpoint that we must evaluate the above mentioned strengthening of the US military structure throughout the Middle East.

 It should also be noted that the 120,000 US military to be deployed in the various US bases in the region are more or less the same – in number – as those that were used in the attack on Saddam Hussein’s Iraq in 2003.

 Meanwhile, the economic crisis is tightening on Iran: last March oil exports fell drastically up to reaching only 1.1 million barrels on average, while Taiwan, Greece and Italy stopped their imports and the major importers, namely  China and India, reduced their purchases from Iran by 39% and 47% respectively.

 The more the crisis deepens in Iran, the more likely the option of a regional war – probably triggered by Iran – becomes.

 The probable clash between Iran and the United States, Israel and Saudi Arabia must be assessed in the framework of this very weak balance between a possible anti-Shiite war and a careful evaluation of the effects and results of a probable war against Iran and on how it will leave the Middle East.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Iran-US Tensions Are Unlikely to Spill into War

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To the south of Georgia trouble is brewing as Iran and the US (and its allies) are almost openly engaged in a military competition around the Persian Gulf and the Strait of Hormuz.

True, Georgia does not share a border with Iran, but its close economic and cultural relations with Tehran might be further endangered. It is unlikely that the US will tolerate Georgia’s neutral position in a potential conflict between the two states. Therefore, the Georgian government will find itself in a difficult position but will most likely act according to wider US interests in the South Caucasus. Even if a military conflict does not ensue (as explained below), Georgian-Iranian relations will take a hit.

The US recently announced plans to set up a multinational military coalition to protect the waters around Iran and Yemen, particularly commercial routes where about $554 billion worth of trade, mainly oil and gas, passes through the Straits of Hormuz each year. The military confrontation between Iran and the US could cause disruption, costing the biggest trader, Saudi Arabia, $3.5 billion a week, but also negatively impacting many Asian shippers.

This comes on top of what happened last month when Iran came close to war with the US after Tehran’s unprecedented decision to shoot-down a US drone with a surface-to-air missile. Back then, the US officials, including President Donald Trump, said that this could trigger retaliatory strikes. According to various sources, Trump green-lighted a limited air-strike against Iran’s surface military capabilities but cancelled the decision some minutes later when fighters were in the air.

The root of Iranian-American tensions lies in the differences regarding Tehran’s nuclear program. Washington abandoned the nuclear agreement the world powers reached in 2015 and Iran recently announced it has reached a high level of uranium production.

The tensions, as said above, induced the US and its allies, primarily in the Persian Gulf, to create a coalition. This is a very good example of what kind of future naval coalitions the US will be able to muster to prevent a certain group of countries from controlling vital economic choke points such as the Strait of Hormuz or the Strait of Malacca in Asia. But this also raised an alarm among politicians and the world’s analytical community that we might see a military confrontation between the US (and its allies) and Iran. First, it should be emphasized that Iranians understand well that a military confrontation would be deadly for the country’s economy, leading to potential unrest in various regions. Second, a military confrontation with the US is simply beyond the Iranian resource base. However, it is also true that the US does not want to engage Iran as the latter is a completely different story from what the American forces did during the invasion of Iraq in 2003. And it is not about Iran’s far superior military capabilities than those of Iraq: the major difference lies in geographic factors.

A look at the map shows that Iran’s major population centers are surrounded by almost impregnable mountains and deserts as well as water barriers. In the west and northwest are the Zagros Mountains, which bar Iran from Iraq. In the north, the Elburz Mountains as well as Armenia’s mountainous lands serve as a defensive shield. The Caspian Sea to the north and the Arabian Sea to the south are yet more impregnable barriers. To the east and northeast lie the harsh climate of Afghanistan and Pakistan. Turkmenistan’s semi-barren steppe-lands keep Iran’s provinces more or less safe (barring occasional attacks by nomadic peoples).

The fact of being both geographically contained and geographically defended has defined the Iranian grand strategy from the ancient Persian empires to modern Iran. The country’s mountains and deserts have made it almost impossible to conquer and then keep under control. Consider, for example, several of history’s greatest conquerors. The Mongols and, later Tamerlane successfully invaded the Iranian plateau, but to keep it, they either had to deploy tens of thousands of troops (which they were unable to do) or co-opt the local population (which they did) by allowing them to participate in the country’s governance. The same goes for Alexander the Great, Iran’s most successful conqueror. Following his conquest of the land, he co-opted the local elites to hold onto the state – and after he died, Iran quickly regained its independence.

Iran and the US want to avoid a direct military clash, but also do not want to lose their face among their respective allies. Still, the attempts to diminish tensions between the two powers become less and less effective as Iran grows its nuclear-related capabilities and the US sees less and less room to entice Tehran into a mutually beneficial understanding.

Author’s note: first published in Georgia Today

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Algerian soccer success is a double-edged sword

Dr. James M. Dorsey

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It took Algeria barely two weeks to charge Algerian soccer fan Samir Sardouk and sentence him to a year in jail for harming the national interests of his country.

Mr. Sardouk was convicted for shouting “There is no God but Allah, and they will come down” during the African Cup of Nation’s opening match in the Egyptian capital of Cairo on June 21.

Four other Algerians were given six-month suspended sentences for lighting firecrackers in the stadium.

Mr. Sardouk’s slogan referred to demands put forward in months of mass anti-government protests that all those associated of Abdelaziz Bouteflika, the country’s long-standing president who was toppled in April, be removed from office.

Mr. Sardouk’s sentencing casts a shadow over the Algerian squad’s achievement in reaching the African Cup final for the first time in 29 years after defeating Nigeria.

Together with celebrations of Algeria’s earlier qualification for the African Cup’s semi-finals after defeating Ivory Coast, it demonstrates the risk for autocrats and illiberals who use sports in general and soccer in particular to project their country in a different light internationally and polish their tarnished images by associating themselves with something that evokes the kind of deep-seated passions akin to the power of religion.

If celebrations of Algeria’s semi-final qualification and subsequent victory over Nigeria are anything to go by, an Algerian triumph in the finals, like past soccer victories in countries like Egypt and Iran, are likely to inspire rather than distract anti-government protesters.

Algerians fans in France took to the streets in Paris, Marseille and Lyon within hours of Algeria reaching the final. Their celebrations were mired by violence.

Similarly, the semi-finals celebrations spilled over into mass anti-government protests despite a huge police presence on the streets of Algiers and Paris added to the significance of Mr. Sardouk’s conviction. The protesters demanded a “civilian, not a military state”

Algerian police reportedly detained a dozen demonstrators. “There is a clear desire to prevent peaceful marches in Algiers, the deployed security device says it all.” tweeted Said Salhi, vice president of the Algerian League for the Defense of Human Rights (LADDH).

African Cup-related Algerian fan violence precedes the 2019 tournament. A massive brawl between players and fans mired a 2014 Libya-Algeria African Cup qualifier.

Violence associated with this year’s tournament was nonetheless minimal when put into the context of violence in Algeria having become a norm prior to this year’s revolt and the fact that the uprising has been largely peaceful.

The apparent shift away from violence is all the more remarkable given Algerian psychologist Mahmoud Boudarene’s assessment in 2014, a time of multiple soccer-related incidents.

“Violence in Algeria has become ordinary and banal. Hogra, the word Algerians use for the government’s perceived contempt for ordinary citizens, has planted a sickness in Algerian society. People feel that the only way to get anything done is to have connections or threaten the peace. It is a system where hogra and social injustice rule. Social violence has become the preferred mode of communication between the citizen and the republic — today in our country everything is obtained through a riot,” Mr. Boudarene told the Associated Press at the time.

This year’s popular revolt, inspired by lessons learnt from the 2011 popular Arab revolts, has emboldened protesters and given them a sense of confidence that is likely to ensure that potential African Cup final celebrations-turned-protest remain largely peaceful.

With Algeria having qualified for the final, the Algerian defence ministry, despite the police posturing, was preparing six military planes to fly 600 fans to Egypt for the African Cup final.

The gesture underlined soccer’s political importance and constituted an attempt by the military to align itself with the Algerian squad’s success.

The significance of soccer makes Mr. Sardouk’s sentencing all the more remarkable despite the assertion that his slogan mired Algeria’s march towards soccer victory.

For starters, it sought to draw a dividing line between national honour and protest in a country where a majority are likely to be soccer fans.

He was convicted at a time that Algeria has been wracked by protests since February in support of political reforms that would dismantle the country’s long-standing, military-dominated regime with a more transparent and accountable government.

The conviction is also noteworthy because Mr. Sardouk’s protest, coupled with acts of defiance by militant Egyptian soccer fans, threatened to turn the African tournament into a venue for the expression of dissent from across the Middle East and North Africa, a region populated by autocratic, repressive regimes and wracked by repeated explosions of poplar anger.

Finally, the sentencing was striking because it violated the spirit of both the military’s effort to retain a measure of control by co-opting the protests and a long-standing understanding with militant soccer fans that preceded the recent demonstrations that allowed supporters to protest as long as they restricted themselves to the confines of the stadium.

The Algerian military’s attempt to curtail fans and co-opt the revolt bumps up against the fact that the protesters, like their counterparts in Sudan, Morocco, Pakistan and Russia, have sought to avoid the risks of the military seeking to implement a Saudi-United Arab Emirates template to blunt or squash the protests.

The core lesson protesters learnt is that the protests’ success depends to a large extent on demonstrators’ willingness and ability to sustain their protests even if security forces turn violent. An Algeria that emerges from the African Cup final as the continent’s champion would give the protesters a significant boost.

It also constitutes an opportunity to ensure that Algeria does not revert to an environment in which violence is seen as the only way to achieve results.

Said a former senior Algerian intelligence official: “We will return to violence if there is no real democratic transition. The African Cup doesn’t fundamentally change that but does offer a window of opportunity.”

Author’s note: This story first appeared on Africa is a Country

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Iran: Second stage of suspension of commitments under JCPOA nuclear deal

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On May 8, 2019 – exactly a year after President Donald Trump’s catastrophically ill-advised decision to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA) and impose financial and economic sanctions on the Islamic Republic of Iran (IRI), Iranian President Hassan Rouhani said that Tehran was suspending the implementation of two of its commitments under the landmark nuclear accord, signed in 2015.  “Tehran has spent a whole year waiting for the remaining signatories to the agreement to fulfill their part of the obligations,” Rouhani said in televised remarks.  

Tehran insists that since the parties to the 2015 nuclear deal, above all the Europeans, have failed to fully meet their commitments concerning the economic part of the agreement, maintaining the JCPOA in its present form makes no sense. Iran did not follow the US example and leave the JCPOA though. It only warned the other signatories that it might do so, giving them two months to compensate for Washington’s withdrawal and guarantee Iran’s interests. This deadline expired on July 7.

During those past two months, Tehran refused to sell uranium enriched up to 3.67 percent to either Russia or the United States above the 300 kg limit.  By the time the JCPOA deal was signed, Iran had accumulated 10,357 kg of such uranium, and 410.4 kg of uranium enriched up to 20 percent. By 2019, Tehran had eliminated its stocks of 20%-enriched uranium and was selling surplus low-enriched uranium (LEU) to Russia and the US.  According to the terms of the JCPOA deal, Iran was allowed to enrich limited quantities of uranium for scientific purposes, and export surplus quantities exceeding the 300 kg limit. Now Iran is stocking up on LEU again. Tehran has been doing the same with its surplus heavy water necessary for the production of plutonium, which is at the heart of the production of plutonium-based nuclear weapons. Iran has a heavy water producing plant, which is not on the list of facilities banned by the JCPOA, but it is still not allowed to store more than 130 tons of heavy water. Tehran previously exported 32 tons of heavy water to the United States and 38 tons to the Russian Federation. After May 8, however, it started accumulating heavy water.

President Rouhani insisted that Iran’s interests, above all the freedom to sell oil and the lifting of sanctions imposed on its banking sector, be ensured.  No miracle happened though, as the European Union, above all Germany, France and Britain the United Kingdom have failed to create an effective mechanism to compensate for the negative impact of US sanctions on the Iranian economy.

On June 28, Germany, France and the United Kingdom set up INSTEX (Instrument in Support of Trade Exchanges) – a new transaction channel that will allow companies to continue trading with Iran despite US sanctions. However, this system has so far focused on the supply of humanitarian goods to Iran (medicines, medical equipment, food). Iran wants more though: it needs free oil exports and free banking.

Sadly, the European powers are not yet ready to guarantee this, apparently hating the prospect of coming under Trump’s sanctions.

Iran is now announcing a new stage of its struggle. As it earlier promised, within the next 60 days Tehran will lift restrictions on the level of uranium enrichment (currently at 3.67 percent) bringing it to a level it needs. Weapons-grade uranium is enriched to 90 percent. It’s really a long way moving from 3.67 percent all the way up to 90 percent. What is really dangerous, however, is that Iran is now moving exactly in this direction. Back in January, Ali Akbar Salehi, the head of the Atomic Energy Organization of Iran (AEOI), said that his country was now all set to resume uranium enrichment in a wider scale and with a higher level of enrichment.

On June 7, AEOI spokesman Behrouz Kamalvandi said that Iran was fully prepared to increase uranium enrichment to any level, adding that the enrichment level would soon be brought to 5 percent. The following day, he said that “Iran has surpassed the uranium enrichment level of 4.5 percent. The level of purity is sufficient to meet the country’s needs in providing fuel to our power plants,” he added.

In the second stage of suspensions of its commitments under the JCPOA deal, Iran will move forward also on the plutonium track. It has just announced the termination of work done by a special group of experts concerning the reconstruction of a heavy water reactor in Arak. The IR-40 reactor was designed to produce up to 10 kilograms of weapons-grade plutonium a year, which is enough fissile material for making approximately two plutonium bombs. The JCPOA envisages reformatting the reactor so that it is not capable of producing weapons-grade plutonium. It is exactly for this purpose that a working group was set up consisting of representatives of the Atomic Energy Organization of Iran, the Atomic Energy Authority of China and the US Department of Energy. In 2017, experts from the United States replaced their British colleagues during the Arak reactor redesign process. According to an official Iranian report released in April 2018, “conceptual reconstruction of the reactor” had already been completed. However, the reconstruction process is slow and easily reversible. At the end of May, Iranian Deputy Foreign Minister Abbas Araghchi said that “We don’t count on JCPOA and JCPOA participants in the Arak project anymore. We will do it ourselves.”

Finally, it was announced that the process of accumulating heavy water for the IR-40 reactor was in full swing. Allaying all doubts, President Hassan Rouhani said loud and clear that after July 7, Iran would refuse to reformat the Arak reactor and would bring it back to a state, which foreign countries describe as dangerous and capable of producing plutonium, if the other signatories to the JCPOA agreement failed to honor their obligations.

Unpleasant news, but fully predictable too, following the US withdrawal from the nuclear deal. It took the whole world by surprise.

Berlin has expressed “grave concern” overTehran’s plans to enrich uranium above levels allowed by the JCPOA deal.

“We have repeatedly appealed to Iran not to take further action to destroy the nuclear deal. And now we are urging Tehran to refrain from any steps that are contrary to its commitments under the JCPOA system,” the German foreign ministry said in a statement.

Paris was seriously alarmed by Tehran’s stated desire to raise the level of uranium enrichment above 3.67 percent fissile purity set in the JCPOA.

“We urge Iran to cease all activities that do not meet its obligations under the JCPOA,” the French foreign ministry said in a statement.

According to the Élysée Palace, President Emmanuel Macron will soon resume consultations on this issue with the Iranian authorities and concerned international partners, and will, before July 15, examine conditions for resuming dialogue with all parties.

London will remain committed to the nuclear deal with Iran, although it believes that Tehran’s actions breach the terms of the agreement, the British Foreign Office said. Simultaneously, the Foreign Office is coordinating its actions with the other signatories to the JCPOA deal and discussing with them what should be done next.

The European Union is extremely concerned about Iran’s plans and is urging Tehran to roll back its nuclear activities, which are not covered by the JCPOA agreement. However, the EU is waiting for official conclusions by the IAEA concerning Tehran’s steps before it outlines its official response.

Iran will take center stage at the meeting of EU foreign ministers, scheduled for July 15.

The EU countries, as co-authors of the JCPOA accord, are mulling the possibility of holding a summit to discuss the situation.

Tokyo is equally worried about Iran’s intention to begin uranium enrichment above 3.67 percent, and urges Tehran to immediately resume the implementation of the JCPOA accord. Japan believes that the Islamic Republic should stick to its commitments under the nuclear deal.

Jerusalem believes that the steps being taken by Iran to raise the level of uranium enrichment are “moderate.” Meanwhile, Israeli Energy Minister Yuval Steinitz said that Iran is on its way to producing nuclear bombs.

Prime Minister Benjamin Netanyahu, for his part, described Iran’s new decision as “very dangerous,” and urged France, Britain and Germany to impose “paralyzing sanctions” on Tehran.

Washington, in the person of President Trump, called the Iranian officials “bad guys,” just as he usually does, and advised Tehran to be careful about what it says and does.

“Iran does a lot of bad things. The Obama agreement [on this deal in 2015] was the most foolish agreement that you will ever find,” Trump said. He added that there will be a very serious discussion of this issue, either now or within the next few days. “Iran will never have a nuclear weapon,” Trump said bluntly.

Echoing the president, US Secretary of State Mike Pompeo is equally tough on Iran intimidating Tehran with new sanctions and threatening to completely isolate the country if it makes no concessions.

The truth is, however, that all this mayhem around Iran was provoked by Washington, while Tehran is just trying to push back the best way it can.  Moreover, it is doing this strictly in the framework of the JCPOA, a document approved by Resolution 2231 of the UN Security Council. Article 26 of the JCPOA prescribes the European Union and the United States to refrain from re-introducing or re-imposing sanctions against Iran. Moreover, the Article states that Iran will treat a re-imposition of sanctions or the introduction of new nuclear-related sanctions “as grounds to cease performing its commitments under this JCPOA in whole or in part.” This is exactly what Tehran is doing.

Beijing describes President Trump’s policy of “putting maximum pressure” on Iran as the main reason for Tehran’s retaliatory decision to suspend the implementation of some of its commitments under the JCPOA deal. Simultaneously, China regrets the measures being taken by Iran, and calls on all parties to show maximum restraint and stick to the terms of the 2015 nuclear accord in order to avoid any further escalation.

Russia fully understands the reasons behind Iran’s actions, but still urges Tehran to refrain from taking any further steps that could complicate the situation. Mikhail Ulyanov, Russia’s Permanent Representative at International Organizations in Vienna, hopes that the level of uranium enrichment in Iran will not exceed 5 percent. He also believes that there is no danger of nuclear proliferation.

Russia’s Deputy Foreign Minister Sergei Ryabkov warned against attempts to overdramatize the whole situation and urged the parties to show restraint and keep the nuclear deal alive.

“We urge everyone to show restraint, we urge the European signatories to the JCPOA not to ramp up tensions over the issue. We urge our Iranian colleagues to be extremely responsible, as before, in what they do in this respect, especially where it comes to the implementation of a comprehensive safeguards agreement with the IAEA and an additional protocol to this agreement, not to mention maintaining Iran’s participation in the NPT accord. There have been alarming signals to this effect coming from Tehran and we would certainly not welcome, to put it mildly, any movement in this direction,” Ryabkov emphasized.

The IAEA has decided to hold an emergency meeting on the Iranian issue and the Agency’s Board of Governors met on July 10 to discuss concerns about the nuclear report issued by the Iranian authorities.

Virtually the entire world understands Tehran’s position and the measures it has been taking to counteract the US sanctions, but it still urges it to show restraint in order to avoid any further spike in tensions.

Is it really possible to defuse tensions? Well, this depends on multiple factors, both internal and external.

The main thing, however, is whether the European Union is able to make a dent in Washington’s financial, economic (and, above all, oil) blockade of Iran. Will Europe face a serious confrontation with the United States? How satisfied will Tehran be with the EU’s actions and assistance it could get on the matter from China and Russia?

Presently, these questions defy easy answers, although many observers believe that, unfortunately, these answers could be pretty pessimistic. Iran’s Deputy Foreign Minister Abbas Araghchi said that Iran would suspend ever more commitments to the JCPOA once every 60 days if its signatories failed to adhere to the terms of the landmark deal. 

What are the further steps that the Iranians could take as they roll back their commitments under the JCPOA deal? According to political analysts, a discontented Iran could keep stocking up on low-enriched uranium and heavy water above the caps set by the nuclear deal. The most dangerous thing, however, is that if Tehran starts to raise the level of uranium enrichment to 20 percent or above, it will restore the nuclear reactor in Arak to the condition it was in before the nuclear deal was signed, and limit, or even end, any oversight by IAEA inspectors. 

According to experts, the next, “reverse” re-equipment of the reactor to its pre-2015 state will take a lot of time and cost a lot of money. Despite the really drawn out process of conversion to a “safe” state, the head of AEOI Ali Akbar Salehi said in 2016 that after reconfiguration, the reactor would take between three and four years to go on-stream – sometime around 2020. The reactor, modified according to JCPOA specifications, is about 75 percent ready now. This means that “reverse-converting” it to a working “plutonium” state will take at least several years.

The same is true with the uranium program. According to the London-based International Institute for Strategic Studies (IISS), in 2013, at the height of its nuclear infrastructure development, of all enriched uranium stored in Iran, about 120-130 kg of 93 percent-enriched uranium could be obtained, which is enough for building five nuclear charges.

US and Israeli physicists believed that it would take between a year or two for Iran to achieve these indicators. It was a purely mathematical calculation though, which ignored a whole variety of external and internal factors. The specialists were not sure that Iran possessed sufficiently advanced technology and chemically pure substances to ensure a gradual increase in uranium enrichment up to 90 percent and be able to turn uranium from gaseous state to that of a high-quality metal, necessary for the creation of a nuclear charge.

Therefore, it would actually take Iran at least a decade to create a ready-for-use nuclear weapon (a missile warhead). And this provided there is no outside interference.

In view of the above, it would be safe to assume that Iran will take months, and in some cases even years, to restore the highest level of its nuclear infrastructure development. This is the relative time frame within which Iran’s nuclear program could get a new start. If, of course, it is allowed to make such a start.

How to prevent a military solution to the Iranian nuclear issue? This question takes us back again to the year 2012. There are two answers: war or negotiations. Since no one wants war, either in Tehran, Washington, Jerusalem or anywhere else, then negotiations are the way to go.

Washington appears ready for negotiations with Tehran without any preliminary conditions, that is, with continued US pressure on Iran and tough sanctions.

Tehran may start negotiations with Washington if these sanctions are lifted and with a permission from the country’s supreme leader Ayatollah Khamenei.

On May 31, Russian Foreign Minister Sergei Lavrov said: “We will welcome the start of negotiations between the US and Iran … <…> But we are convinced that negotiating from the position of “first, I will strangle you economically, and then you will beg us to negotiate,” is not something we perceive as a model for behavior on the foreign policy front.”

From our partner International Affairs

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