US-Iran, A Forged Nexus?

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Dr Hasnain Javed

Only in 2022 alone, the global oil and gas exploration and production market grew by 27.5 per cent and is estimated to be a five trillion dollar industry

For far too long, Iran has been seen in the light as an extremist Islamic state. In 1997, US-Iran relations turned for the worst after 52 American citizens were kept hostage for an entire year. The fate of Iran seemed to spiral out of control as the international community officially labelled Iran as the “sponsor” of many terrorist activities throughout the 80s. This was followed by the first of many sanctions on Iran, famously known as the “Iran Sanctions Act of 1996.”
Fast forward to the year 2022, February, when Russia attacked Ukraine, bringing shock and dismay to the world. The global community unanimously discouraged the Russian attempt to sabotage European peace and sent the European states into a frenzy over its looking energy crisis. Now, as I look at things, the world blames Russia for the ongoing oil crisis. But that, to me, is only one side of the picture. Many are not factoring in the “tight global supplies” for several reasons, which are primarily structural, while the demand is constantly on the rise. The pre-pandemic oil demand was estimated to be around 100.3 million barrels per day; the supply was about 100.6 million barrels per day. Today, the oil demand has soared to 103 million barrels per day while the production stays stagnant at 100.6 million barrels per day – after factoring in the loss of about a million barrels from Russia. Hence, the world has always been undersupplied.
The global community is banking heavily on sanctions on Russia in response to the war. However, I have an essential question: “If Iran survived sanctions after sanctions, why can’t Russia?” Only in 2022 alone, the global oil and gas exploration and production market grew by 27.5 per cent and is estimated to be a five trillion dollar industry. I was returning to the question of Iran’s survival throughout the extensive sanction period. The Trump administration maximised pressure on Iran by targeting to cut off 80 per cent of the country’s oil revenue. Yet Iran’s economy sustained the $200 billion loss in foreign income and investment, as President Rouhani confessed.
The truth is that even the global economic pandits missed and miscalculated Iran’s economy’s complexity. The world also failed to reasonably assess Iran’s resistance and persistence in the face of these “crushing sanctions.” With years of experience in withstanding sanctions, Iran also has a diversified economy. Iran’s basket of goods relies on manufacturing products such as automobiles, metal, and plastic, accounting for one-fifth of the country’s employment. Also, the food and consumer products have remained unaffected by sanctions. However, most importantly, it is the informal payment mechanism that is kept the country afloat. This, coupled with strong regional relationships for trade and barter deals, has allowed Iran to dodge the sanctions bullet.
Now Russia-Ukraine war truly is a blessing for Iran, which is again in this sentence in the energy conversation. And this time, for all the right reasons. As the Europe energy crisis becomes a reality, the need to look for alternatives is forging an interesting Nexus between the US, Iran and Europe – or the world thought so. In my opinion, the US and Europe’s convenience at sanctioning and attempting to normalise relationships with Iran for its own needs speaks of the superficiality of things. But once again, as the world hoped Iran to react expectedly, it threw a tantrum no one saw coming. Iran’s Mohammed Marandi, an advisor to Iran’s negotiating team, commented, “Iran won’t accept impact is in loopholes in the text. Winter is approaching, and Europe is facing a crippling energy crisis.”
Joseph Borrel expressed his ill-confidence in the short-lived US-Iran romance by saying, “I am sorry to say that I am less confident today than 48 hours ago.”
While the US’s response further confirmed Europe’s nightmare. “The president will only conclude that he determines in the national security interest of the US,” commented National Security Council spokesperson Adrienne Watson.
As this statement justifies a country’s right to prioritise its national security, Iran’s claims for a guarantee on lifting sanctions and resolution of safeguard issues also stand corrected.
Once again, the Russian factor seems to play a critical role here. One must think that Iran’s survival all these years must have kindled some spark between Russia and Iran. In recent news, we hear Iran’s interest in purchasing the Russian SU-35 Flanker-E-Fighter Jet, its role in handing over the “peace initiative” proposal by a senior European representative and most importantly, Iran’s latest bid for non-competitive oil trade with Russia – the global arena may now slightly begin to understand the larger play at hand. If Iran and Russia agree to the benefits Iran’s re-entry into the international oil market would have for both countries, that could very well be the final nail in the coffin for a US in Iran Nexus and a tragic end to Europe’s energy alternatives.
Also, since the re-entry would be the approval of the global powers, going back on its decision will change the international and regional alliances tremendously. I see a strong future relationship forging between China, Iran and Russia. A coalition that the US and its allies may have a really difficult time breaking through. And one that could open new economic possibilities for China and its allies, Pakistan included.