One Year Scorecard of the JCPOA
On December 27th, one year will have passed since the implementation of the “Joint Comprehensive Plan of Action” (JCPOA). The Iranian public, a significant portion of which celebrated the signing of the JCPOA and considered its implementation as the beginning of an opening in their economic life, appears exhausted and disappointed, having lost its former enthusiasm on the anniversary of this event.
Given the largely unexpected obstacles that arose in the path of implementing the JCPOA and the dangers that weigh upon its future, this despair and exhaustion is entirely understandable.
However, despite the doubts surrounding the JCPOA’s record and its future, we must avoid hasty and emotional judgments about it. The achievements and failures of this agreement must be examined in light of the multitude of complexities existing in Iran, the Middle East, and the world. Iran is passing through one of the most complex and perilous passages of its contemporary history. The Middle East is burning in the grip of the greatest regional tensions of the past hundred years. The global system of international relations has been shaken by political developments, including those in Europe and America, and without rebuilding its foundations, maintaining international security to avoid uncontrollable explosions will be impossible.
The JCPOA, contrary to what its opponents across various Iranian political factions say, is not “much ado about nothing.” And unlike what unconditional supporters of it expected, it cannot be a cure for Iran’s countless ailments. This agreement is the result of conditions created under the pressure of crippling economic sanctions against Iran and emerged from the actions and reactions within both the Islamic Republic and among the sanctioning powers, born from countless rounds of negotiation between the two sides of this transaction. Its achievements are undeniable. Its limitations are as clear as daylight. Its future is shrouded in ambiguity.
If the JCPOA had not been…
Had the nuclear talks between Iran and the “P5+1” group not borne fruit, they could have had very ominous geopolitical consequences for the country and exposed its security to very serious threats. Some powerful countries in the region were banking on this scenario to finish off Iran. But even if we set aside the scenario of a possible war in case the nuclear talks failed, and focus only on the economic consequences of failed negotiations, there is no doubt that intensified sanctions could almost certainly have produced the following results:
One) A collapse of Iran’s oil exports to a level of 200 to 300 thousand barrels per day.
Two) A further collapse of the country’s foreign currency receipts and, consequently, an unstoppable surge of the dollar to over 10,000 tomans.
Three) A surge in inflation rates above 100 percent.
Four) A severance of Iran’s remaining bridges of communication with the outside world in financial sectors, a staggering increase in the cost of all types of transactions with foreigners, a further collapse of the economic cycle, a decline in Iran’s growth rate to negative levels below 10 percent, and an explosion in unemployment.
Five) The “Venezuelization” of Iran’s economy, with the difference that Venezuela is located in a geographically relatively tension-free zone, whereas Iran is surrounded by the most severe regional instability.
Among opponents of the Islamic Republic system, some imagine that the failure of nuclear talks and Iran’s further sinking into economic and social difficulties could pave the way for Iran’s liberation from theocratic rule and its progress toward democracy and development.
This notion not only ignores the painful and lasting wound of economic sanctions for Iran and Iranians, but forgets that the failure of nuclear talks, by further radicalizing both the internal and external environment of the Islamic Republic, could lead to increasing isolation of the country and consolidation of the most hardline factions of the ruling system, creating the ground for even more severe suppression of civil society in Iran. It is no coincidence that these same factions were impatiently awaiting the failure of nuclear talks and still speak of the fruitlessness of the JCPOA.
Achievements of the JCPOA
It is entirely natural that some within the country, due to affiliations with particular factions in the Islamic Republic system, evaluate the JCPOA as completely fruitless. Beyond them, those who say the JCPOA was a weak agreement and brought no positive results for Iran’s economy are interpreting international realities and relations according to their own wishes. During the year of implementation of this agreement, the JCPOA has been able to create better breathing space for Iran’s economy in several areas. We will point to a few examples:
One) Iran’s oil production and exports have roughly returned to pre-sanction levels. Iran’s oil and gas condensate exports in the current December month have doubled compared to the sanctions period and reached approximately 2.8 million barrels per day. This event allowed Iran to hold stronger positions in its confrontation with Saudi Arabia over preserving its share of global oil production. Moreover, all sanctions related to tankers, including insurance, have been largely lifted.
Two) The countdown has begun for Iran’s first oil and gas tender, and 29 major European and Asian companies have been approved by the Ministry of Oil to participate in this tender. If this tender, which is scheduled to be held in about two months, does not encounter unexpected difficulties, Iran will be able to secure some of the necessary capital and technology to repair and develop its gas and oil resources.
Three) Another consequence of the JCPOA is the signing of two very important contracts for the purchase of 180 aircraft from the American consortium “Airbus” and American company “Boeing.” The contract with Boeing can be considered the most important Iran-US agreement in the years following the Islamic Revolution. The value of this contract has been reported as close to 17 billion dollars, but what gives it more importance is its “symbolic” significance.
In relations between countries, especially those that have been in tension for years, symbols carry very great importance. Iran’s national airline (Homa) in the pre-revolution period became one of the leading and renowned aviation companies in the developing world’s non-military aviation sector. This period ended due to the Islamic Revolution and the hostage crisis at the American embassy, and for the past four decades, there has been no direct transaction between Iran and Boeing.
The agreement that Iran has signed with Boeing after this long period is not merely a commercial agreement. Passenger aircraft is not an ordinary commodity that ends in a simple process of buying and selling. American Boeings entail a long period of maintenance services and spare parts, and create the opportunity for lengthy meetings and negotiations between Iran and various American economic circles. The main importance of the Boeing contract lies here.
Four) The JCPOA brought a reduction in foreign trade costs and financial transactions, as well as the possibility of regaining oil revenues for Iran.
Five) Overall, the signing of the JCPOA has helped improve Iran’s international image as a country with a glorious history and enormous potential. The remarkable increase in the number of foreign tourists visiting Iran is one of the most important manifestations of this change. A more important consequence is the fresh look of foreign investors toward Iran. However, transforming this outlook into a practical initiative for investment in Iran requires other conditions that, given the limitations of the JCPOA and Iran’s internal deadlocks, have not yet been established.
Limitations of the JCPOA
Those at the top of the power pyramid in the Islamic Republic, due to lack of understanding of the requirements of international relations and without considering national interests, pushed Iran into the abyss of crippling international sanctions, bearing a very heavy responsibility to future generations. The wounds inflicted on Iran’s economy due to recent years of sanctions cannot be healed overnight merely by signing an agreement called the JCPOA.
Following the signing of this agreement, the level of expectations about its consequences rose dramatically, and an incorrect assumption formed that with this event, Iran had, in a miraculous way, been placed on a new path. However, Tehran business circles soon abandoned their fantasies. About five months ago, the “Market and Monetary Commission” of Iran’s Chamber of Commerce warned in a report that “until sanctions are completely lifted, under optimistic conditions, Iran’s economy will be dealing with the consequences for at least a decade.”
Furthermore, the JCPOA does not mean the “complete lifting of sanctions.” The JCPOA only relates to the lifting of sanctions associated with Iran’s nuclear file (known as secondary sanctions) and its provisions have so far been respected by both the Islamic Republic and the member countries of the group known as “P5+1.” In contrast, what has not received sufficient attention from both domestic and foreign economic circles is the set of sanctions known as “primary” sanctions, which have been imposed by the United States against Iran in recent years following the Islamic Revolution, in relation to issues such as “terrorism” or “human rights.”
It is the existence of these “primary sanctions” that prevents Iran from utilizing the potential capacities of the JCPOA, including attracting foreign capital and technology. The explanation is that immediately after the conditions for signing the JCPOA were established, major European and Asian companies began a rush to invest in Iran, and large economic delegations lined up to enter the country. But it did not take long before, faced with difficulties arising from “primary sanctions,” the enthusiasm of foreigners for entering Iran cooled considerably.
The most important problem is the reluctance of major European banks to provide credit lines for investment projects in Iran. Following the imposition of heavy penalties by the US judicial system against several European banks (particularly a 9 billion dollar fine against French bank BNP), participation in transactions with Iran became a nightmare for these banks. It goes without saying that without bank support, investment in Iran will be severely limited. Similarly, without this cooperation, all operations related to trade and investment, including obtaining insurance and banking guarantees and opening letters of credit, face difficulties.
On the other hand, conducting dollar transactions with Iran faces numerous obstacles. Moreover, regulations governing Iranian banks’ activities in various fields, including money laundering, are not harmonized with international regulations, and this is also a major barrier to cooperation between European banks and investment projects in Iran.
However, the most important obstacle to foreign investment in Iran is the highly critical positions taken by Donald Trump, the elected US President, regarding the JCPOA. One could be optimistic and consider his promise to “tear up the JCPOA” merely an election slogan that is not necessarily expected to become the policy of the next US President. But even if we don’t take “tearing up the JCPOA” seriously, we cannot overlook the fact that some of Mr. Trump’s associates have spoken of a fundamental “reconsideration” of this agreement.
In any case, this great ambiguity weighs heavily on the JCPOA, and until the White House’s position on this agreement becomes clear, Iran cannot become an attractive and risk-free country for foreign investors.
In addition to all these deterrent factors, we must also consider the difficulties arising from Iran’s legal, political, and economic structures. That is another story altogether.
Source: Radio Farda
