Explained: How the US And Iran Are Fighting A Cold War In The Middle East

The tensions between the United States (US) and Iran were already high when Iran breached its internationally-agreed stockpile limit of low-enriched uranium.

Iran’s Foreign Minister Mohammad Javad Zarif stated that the country now had more than 300kg of uranium hexafluoride which is equal to 202.8kg of low-enriched uranium, the latter being the limit agreed to under the Joint Comprehensive Plan of Action (JCPOA) or the Iran Nuclear Deal.

The breach was confirmed by the International Atomic Energy Agency (IAEA). However, a spokesman for Iran’s foreign ministry said that the breaches of the deal were ‘reversible’.

However, the tensions between the two nations are set to attain a new high as Iran has announced that is going to breach the enrichment limit (currently set at 3.67 per cent) under the 2015 Iran Nuclear Deal. The decision to breach the limit was announced by Ali Rabiee, a government spokesperson, in Tehran on Sunday (July 7).

Background: The Iran Nuclear Deal

The JCPOA was signed in July 2015 between Iran and the US, the United Kingdom, China, France, Germany, and Russia. The 159-page agreement is fairly technical but focusses on five major fronts-stockpile, enrichment, centrifuges, inspections, and sanctions.

The deal had Iran giving up 97 per cent of its enriched uranium, thus bringing down its stockpile from 10,000kg to merely 300kg. The uranium enrichment (the percentage composition of the uranium-235 isotope) was capped at 3.67 per cent.

To put things in perspective, uranium used for medical research is enriched at 20 per cent while those used for weapons is 90 per cent enriched. Thus, these two aspects of the deal ensured Iran did not have a thriving nuclear weapon development programme.

Also, Iran had to give up 3/4th of its centrifuges, critical to the process of enrichment, further weakening its nuclear programme. Inspections and monitoring were agreed upon. In return, the Iranian economy was given a lease of life with the removal of sanctions, thus boosting the socio-economic prospects of its 80 million people.

The nuclear experts have offered a mixed reaction to the breach of the uranium stockpile. Given the minimum threshold for a crude nuclear weapon is 400kg of uranium enriched to 20 per cent U-235, Iran may be able to weaponise uranium but shall find itself limited by its own lack of capacity for deployment of the warhead.

What worries some other nuclear experts, however, is the enrichment breach which Iran is plalning to go ahead with. Iran plans to breach the uranium enrichment cap, currently at 3.67 per cent, thus falling back on its commitments on two major fronts within the JCPOA.

Even though Iran would still be a long way from having a working nuclear weapon, ready for deployment across a continent, it may inspire Iran to accelerate its otherwise weakened nuclear programme.

The US President Donald Trump, however, appears to be without a coherent strategy. The lack of any plan to deal with Iran after the walkout is starting to take a toll on Trump as he finds himself unable to commit to war or get the Iranian leadership back to the drawing board for a JCPOA 2.0.

Trump, as of now, is losing the narrative battle against Iran on multiple fronts.

Friends No More

Firstly, on the issue of walking out of the JCPOA, he finds himself without much support back home or across the world. The Democrats have voiced their disagreement against the walkout on multiple occasions.

The other signatories to the JCPOA have also stated their concerns and are going to look to preserve the deal. While China said that dialogue was better than confrontation, both France and Germany, along with Russia and the United Kingdom have repeatedly expressed their disappointment and hailed grave consequences for the stability of the Middle East if the JCPOA ceased to exist.

Secondly, European governments are already working overtime to preserve their economic relationship with Iran via a special purpose vehicle (SPV), Instex, or The Instrument in Support of Trade Exchanges. Established in January 2019 by France, Germany, and the United Kingdom, the SPV will enable non-dollar trade with Iran for goods like food, medicine, and other humanitarian requirements.

While the SPV was functional since January, no transactions had been made until very recently. Last week, the French, German, and British, collectively known as the E-3, promised a capital injection of a few million euros and an Instex credit line to get the transactions going. The SPV shall be used to make payments from the European companies that import Iranian goods to those European companies that export goods to Iran.

As per a report of an Iranian news agency, Russia has also expressed interest in joining the Instex. Meanwhile, Austria, Belgium, Finland, Netherlands, Slovenia, Spain, and Sweden have backed the Instex programme.

The very establishment of Instex shows how diverged the interests and intentions of the US and Europe are in the Middle East. The circumvention of the US sanctions on Iran by Europe, and possibly soon, by the remaining two signatories via Instex not only isolates the US but also opens up room for a JCPOA 2.0 without the US as a member.

Vanishing Ships

Three, countries are now evading the US sanctions in other ways too. As per an elaborate report in the New York Times, ships transferring cargo to-and-from the Persian Gulf are ‘vanishing’. Shipping fleets are now defying restrictions and going dark and off the grid, thus making it hard for analysts and other shipping companies to track them.

According to a maritime treaty of the United Nations, ships using the international routes and transferring over 300 tons of goods are required to have an automatic identification system (AIS). This AIS enables search-and-rescue, helps in tracking the shipping traffic and is helpful in avoiding collisions.

By going off the grid, these fleets make it difficult for the authorities to punish them under the sanctions authorised by the US against Iran. For instance, ships travelling from Chinese ports in the East to the Persian Gulf via Indian ports turn off their AIS transponders as they enter the Iranian region, thus making it impossible for tracking companies to locate them.

As per the report, this has been going on for the last 18-months with ships not registering their location in the Persian Gulf but having regular deliveries and shipments to other nearby ports in Oman, Bahrain, and Saudi Arabia.

The intelligence agencies of the US and Israel have stated that the Islamic Revolutionary Guard Corps, a branch of the Iranian Armed Forces which was recently designated as a terrorist group by the US, has deep interests in the oil and petroleum business in Iran. Thus, the petrodollars from the export of cheap oil add to the military strength of Iran, further aggravating the US.

Crude Oil Tankers, with a gross tonnage capacity of over 85,000 tons are hard to track when they manually disable their AIS transponders. Given these tankers can carry enough oil to meet 5 per cent of US’ daily oil consumption, their circumventing the US sanctions adds to the strength of Iran.

The Long War in Yemen and the Skirmishes in the Gulf

Four, the ongoing proxy war between Saudi Arabia and Iran in Yemen is starting to take its toll on the interests of the US in the region. The United Arab Emirates has pledged to pull out most of its forces from Yemen. Fighting against the Houthi rebels backed by Iran, the UAE was Saudi Arabia’s biggest ally in the war in Yemen.

UAE is also seen by the US as an important partner of the coalition challenging Iran’s supremacy in the region. Thus, the exit of UAE from Yemen reinstates the myth of Iranian supremacy in the region, further adding to the growing stress between Saudi Arabia and Iran.

Five, even though Iran has been actively involved in low-scale sabotage operations against the US and its allies, the latter is limited by its own appetite for another war in the Middle East after Iraq. In May 2019, Iran was reportedly involved in the attack on four commercial ships in the Gulf of Oman. Last month, two oil tankers were attacked near the Strait of Hormuz.

Tensions attained a peak when the IRGC announced that it had taken down a US RQ-4A Global Hawk surveillance drone. While the US official position was that the drone was in international airspace, the Iranian state claims otherwise, saying that it was shot down as it violated their airspace.

In retaliation, the US was planning to go ahead with air strikes on Iranian military targets that would have killed 150 people before Trump called it off at the last minute, signalling how the US was not looking for a wider conflict against Iran.

Iran: An Economy in Shambles

It is not only the US without a strategy as even Iran, today, finds itself dented by the sanctions imposed by the US. Though Instex and the petrodollars do offer the leadership some hope, the Iranian economy is dwindling.

As per the International Monetary Fund (IMF), Iran registered a negative growth percentage in 2018 as the sanctions were imposed. The IMF forecasts for 2019 predict a negative growth rate of 6 per cent for Iran’s GDP. However, the forecast may have to be revised if waivers on sanctions are offered to Iran’s crude oil importers later this year by the US.

Iran’s oil output has also suffered. Beginning of 2018, Iran’s crude oil production stood at 3.8 million barrels per day (MBD). By March 2019, the production stood at 1.1 MBD.

China and India have reduced their crude oil imports from Iran by 39 and 47 per cent respectively. Between May and October of 2018, India imported 563,000 barrels per day while China imported 590,000. Between November 2018 and March 2019, the import figures for India and China stood at 300,000 barrels and 360,000 barrels respectively. An estimate puts the loss of the decline in Iranian crude oil imports at $10 billion.

The Iranian currency has suffered too. Since the sanctions were reinstated, the rial (Iran’s official currency) has lost 60 per cent of its value against the dollar. This has also been attributed to the macroeconomic crisis within the country and a large demand for foreign currency, given the citizens are fast losing trust in the rial.

Inflation has also skyrocketed in the country. While it was less than 10 per cent in 2017, it has gone beyond 30 per cent in late 2018 since the sanctions came into play. This has increased the cost of living rapidly and is taking a toll on businesses within the country. The per capita income has also been on the decline in Iran since the last 12-months.

Final Word: The Lack of Direct Communication is Aiding this Nuclear Cold War

What complicates the tensions between Iran and the US further is a lack of direct contact.

While Trump has been taking on North Korea on the issue of denuclearisation and China on the issue of tariffs, direct contact with the leadership in both countries has ensured a sustained dialogue.

With respect to Iran, the US finds itself undone given the JCPOA walkout without any plan of action. The walkout has also eroded the good old American credibility, and therefore, the US will have a tough time negotiating another nuclear deal, if it ever wants to. For Iran, there is no incentive in pursuing a JCPOA 2.0 and hence, they have chosen the path of low-key attacks and provocations.

The Iranian leadership is looking to build a narrative against the US as evident by Iran’s decision to breach two critical aspects of the JCPOA days before the G-20 summit last month in Osaka, Japan.

While Europe, China, and Russia would look to preserve the JCPOA, Iran will exert pressure on them to get the US to eliminate the sanctions by threatening to go back on its nuclear commitments.

The timing is critical with respect to the US as well as Trump would be looking to get re-elected for another term. Given 2020 is going to be an election year, the last thing Trump would want is the prospect of a full-fledged war with Iran, without an exit strategy.

For now, the two sides are engaged in a Cold War without any of them making much headway. While Trump would be hoping to win a second term, choke Iran with more sanctions and arm-twist them into a JCPOA 2.0, the Iranians would be hoping for, in their own words, a saner leader to deal with.

Yes, Iran and the US are not going to war anytime soon, but the question that remains is for how long will they keep this cold war going and ensure no miscaluclation on either side results in a real one.