Earlier this month Obama-led America shocked the world with the removal of economic sanctions against Iran, ending a 36-year old feud between the two nations. What started as a diplomatic failure on the part of Iran in 1979 quickly spiralled out of control after Iran announced its plans to become a nuclear power with the construction of uranium-enrichment centrifuges in secret facilities throughout the 1980s (USIP, n.d.).
During Clinton’s administration in 1995, Iran saw many countries and even the United Nations supporting America’s stand on the sanctions. The economic sanctions imposed by America on Iran was based solely on the latter’s refusal to step down on its nuclear quest. Iran has since the formation of Israel actively pursued top nuclear scientists from Germany and invested millions of dollars in building uranium-enrichment centrifuges secretly (Bar-Zohar and Mishal, 2012). America’s biggest fear was that Iran would emerge as a nuclear state without its involvement in the process. America justifies its sanctions against Iran by stating that its nuclear technology threatens order in the Middle East (particularly its allies like Israel and Saudi Arabia) (Chiles, 2011). But the fact remains that the Middle East was already embroiled in turmoil during the said period. For example, there was unrest in Iraq during Saddam Hussein’s regime, conflicts between Palestine and Israel in Gaza, the civil war in Lebanon in 1971, etc. Naturally, many countries followed suit and radically decreased their trade with Iran. The sanctions coupled with the Iran-Iraq war of 1980 crippled Iran’s economy for a while. Unemployment rose sharply, as did inflation, poverty and social unrest in Iran (Habibi, 2008). But being bestowed with some of the biggest oil reserves in the world, Iran soon learnt to capitalize on it even without America’s assistance. It sold oil, sometimes in black, to any country that was willing to talk business with it (Egan, 2015). It also invested generously in establishing scientific research institutions, automobiles, and medical technology. Economic growth was back in the positives, albeit far from impressive.
A period of desperation
But Iran had a problem. With trade being restricted to the point of suffocation, the cost of basic commodities rose sharply. Medicines became rare, food became a luxury. The rich became richer due to monopolistic market conditions while the poor became poorer as they were forced to pay up to 20x more for the same services. Violence against humans intensified, making living conditions stifling. With time the sanctions grew graver as the EU imposed a complete ban on oil imports from Iran in 2012. Iran was soon trapped and was looking desperately for an opening.
The removal of sanctions on Iran
In 2015, Iran got lucky twice. First in the form of Russia’s offensive on Ukraine and second with the rapid rise of Islamic terrorist group which calls itself the ISIS (Islamic State of Iraq and Syria). As a result of Russia’s invasion of Ukraine, many sanctions were imposed on Russia and the West (America and Western European nations) are looking for alternatives to Russian fuel (Katakey, 2014). Iran already has the infrastructure in place to produce oil and its abundant oil reserves work in favour of the West. On the other hand, the ISIS with the destruction of America on its agenda poses a threat to it on many fronts. First, America is eager to avoid another disaster like Al Qaeda and Taliban which can be best expressed as CIA experiments went horribly wrong. Secondly, the occupation of major oil wells in Iraq- the world’s third-largest country in terms of oil reserves- by ISIS threatens to push oil prices further higher (Mosendz, 2015). America sees ISIS’ rival, the Lebanon-based Hezbollah, as a pawn to mitigate the risk to its business interests in the Middle East (Anderson, 2015; Blanford, 2015). Shiite Hezbollah and Sunni-led ISIS have clashed on many occasions in the matters of faith and territory in the Lebanese-Syrian border. It is common knowledge that Hezbollah is funded by staunch Shia country Iran which also provides them with military and weapons training to create insurgency in the vastly Sunni Middle East. Thus with more money incoming from foreign trade after the removal of economic sanctions, Iran can afford to invest a significantly higher sum in protecting Hezbollah’s interests in the region. The situation can quite plainly be seen as a win-win for both America and Iran.
Is America going the wrong way?
From the removal of economic sanctions against Iran, the biggest global fear rightly is that it will use the income from economic growth to fund terrorism in the form of Hezbollah and Shia-sponsored terrorist groups. The fact is that America is perfectly aware of it, accepts it, and even sponsors the possibility. These terror groups will be used to leverage the growth of ISIS which has pledged to destroy America beyond repair. Globally a fear has spread of ISIS’ growing presence and violent activities in the Middle East and more recently in Europe. This time too it looks like America has not deviated from its tradition of answering terror with terror- Al Qaeda and Taliban are even today relevant examples of the catastrophes birthed by America. It has, in the process, managed to upset many important strategic partners like Israel and Saudi Arabia to be specific. It remains to be seen if America is prepared to bear the ramifications of such a daring, unexpected move.
- Anderson, S. (2015). “ISIS is trying to take over Lebanon. This Christian village is on the front lines.” NY Mag News & Politics, June 21, 2015. [online]. Available at http://nymag.com/daily/intelligencer/2015/06/this-lebanese-village-is-under-attack-by-isis.html Last accessed on 20 August 2015.
- Bar-Zohar, M., and Mishal, N. (2012). Mossad. USA: Ecco Publishing.
- Blanford, N. (2015). “Hezbollah prepares major offensive against ISIL.” Aljazeera America, March 24, 2015. [online]. Available at http://america.aljazeera.com/articles/2015/3/24/hezbollah-prepares-major-offensive-against-isil.html Last accessed on 20 August 2015.
- Chiles, R. (2011). What’s really going on?. USA: Xlibris.
- Egan, M. (2015). “Iran nuclear deal could make oil even cheaper”. CNN Money, March 17, 2015. [online]. Available at http://money.cnn.com/2015/03/17/investing/iran-sanctions-oil-prices-opec/ Last accessed on 20 August 2015.
- Habibi, N. (2008). “The Iranian Economy in the shadow of economic sanctions”. Brandies University Report. [online]. Available at http://www.brandeis.edu/crown/publications/meb/MEB31.pdf Last accessed on 20 August 2015.
- Katakey, R. (2014). “Crimean crisis pushes Russian energy to China from Europe”. Bloomberg Business, March 25, 2014. [online]. Available at http://www.bloomberg.com/news/articles/2014-03-25/russian-oil-seen-heading-east-not-west-in-crimea-spat Last accessed on 20 August 2015.
- Mosendz, P. (2015). “Oil prices rise amid concerns over ISIS influence in Libya”. Newsweek, 16 February 2015. [online]. Available at http://www.newsweek.com/oil-price-rises-amid-concerns-over-isis-influence-libya-307209 Last accessed on 20 August 2015.
- United States Institute of Peace (USIP) (n.d.). “Iran’s nuclear program”. [online]. Available at http://iranprimer.usip.org/resource/irans-nuclear-program. Last accessed on 20 August 2015.
- Investment diversification with momentum hybrid performance - April 14, 2021
- How to submit your work? - April 1, 2021
- Medium-term momentum analysis of growth, income and value stocks - March 25, 2021