July 9, 2015    4 minute read

Iran’s Nuclear Gamble

   July 9, 2015    4 minute read

Iran’s Nuclear Gamble

The Iranian nuclear deal is in its 12th consecutive day of negotiations, but it has been largely dismissed by mainstream media, due to Greece and China’s unpredictable stock market. Little does the world know the stakes are high and as there are no measures implemented to contain the situation if talks go sour, it can potentially generate larger ripple effect than a Grexit.

Throughout history, the United States and Iran haven’t always seen eye to eye and its not just regarding nuclear issues.

To the Iranians, the U.S. is relentlessly hostile and the likelihood of accepting the Islamic Republic is low. They have been under persistent sanctions and threats. Believing and being a peaceful country, they see their nuclear programme as a source for clean energy. Furthermore U.S. is allies with Iraq in the Iran-Iraq war, which means their history together was anything but peaceful.

In perspective to the U.S., Iran is a threat and a sponsor to terrorism. This is due to major U.S. troop fatalities there. They also believe Israel is under constant threat from Iran and with a bad history of violating agreements, the trust U.S. has for them is closer to zero. The U.S. fears the nuclear programme Iran’s been developing will offer a weapons option which may threaten the region and beyond.

In broader perspectives, the aim for this discussion of curbing Tehran’s decades of nuclear work is so economic sanctions can be lifted which have previously obviated Iran’s economy and limited its oil exports.

Despite Tuesday being the deadline set by the negotiators after last week’s deadline of June 30th, this has already been surpassed. However, with the rumoured “heated exchange”, it is clear they have not made much progress and will still require some time. It is expected the negotiation will be completed by Friday at the latest.

No matter when the negotiations end, there are only two possible outcomes: the acceptance of the agreement or back to sanctions (if worse, military strikes). However, the ultimate decision will not only impact the regional – global proliferation and security risk, but also impact upon local human well being.

Hypothetically, if the deal goes well and sanctions are lifted by the end of the week, we can see a new market opening. This is a much needed boost in global economy, given the current bearish market.

If there is a successful outcome, one can expect drop in oil and gas prices, as Iranian supply enters the global market. With the world’s fourth largest oil reserves and second largest natural gas reserves, Iran has great potential for large-scale production at low cost. The Iranian government claim they can increase their current production of 2.8million barrels a year to 3.8million barrels a year. Even before the negotiation talks began, BP and Shell were among the European oil majors showing interest in Iran, contingent on a deal being reached. Shipping will no doubt benefit from the oil boom. Fuel efficiency may increase as routes are shortened due to being less restricted. Countries such as Turkey may receive oil via tankers instead of being solely reliant on a pipeline. It is believed for Iran to increase their oil production to 6million barrels a day, similar to that seen prior to the sanction era, they will require Western capital and technology, which may be made available if sanctions are lifted.

Though the oil prices may fall due to higher supply, this will definitely benefit car manufactures who are all gearing up to return to the market. It was well known, Iran’s car and lorry market was ranked 10th in the world before the imposed sanctions. Therefore companies like Renault and General Motors may seek to return and profit off the country’s lucrative opportunities. It is expected Iran will mass purchase advance technology from the West to boost the quality of their own goods.

Furthermore, the result of sanctions led to unstable growth and high inflation rates in Iran due to international banking restrictions and hard currency shortages. Should an agreement be reached, businesses will soon be able to develop without restrictions, and the nation’s economy could grow as much as by 5-8% per year.

Lifting sanctions will strengthen Iran economically and socially, especially as it would have the opportunity to expand its trade, revenue and overall economic growth. This may however take a negative turn with Iran building up an influential seat in the global political arena, given their reserves. Speculations and predictions can be made but in reality what’s important is the final decision at the negotiating table. It would be advised to keep an eye on the talks and by Friday they will hopefully make history.

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