A year after US stopped Iran’s oil exports, tensions are on the rise again

While Iran has been betting on a reset of relations with the US after a possible defeat of Trump in November’s election, the wait-and-see approach is thrown into doubt by the worsening economic situation.
Sunday 19/04/2020
Iranian President Hassan Rohani chairing a cabinet session in the capital Tehran, April 15. (AFP)
Economic slide. Iranian President Hassan Rohani chairing a cabinet session in the capital Tehran, April 15. (AFP)

ISTANBUL - New frictions between the United States and Iran are driving up tensions between the two countries at a moment when Tehran is struggling to deal with the coronavirus pandemic.

Eleven vessels from Iran’s Islamic Revolutionary Guard Corps Navy (IRGCN) came dangerously close to US war ships in the Gulf, the US military said on April 15, calling the moves “dangerous and provocative.” The incident came shortly after armed men believed to be from the Revolutionary Guard seized a Hong Kong-flagged tanker.

Nader Hashemi, director of the Centre for Middle East Studies at the University of Denver in the United States, said the end of US waivers on Iranian oil sales a year ago was “an important milestone” that explained the rise of increased tensions since the cut-off date on May 2, 2019.

“At this point, Iran started to feel the financial pressure and lashed out,” Hashemi said by phone. “We saw the attacks on oil tankers in the Gulf, the attack on Saudi oil facilities in September and a number of other close calls that almost led to war in January after Iranian missile attacks on US facilities in Iraq and the assassination by Iranian general Qassem Soleimani by the US.”

Ali Fathollah-Nejad, a visiting fellow at the Brookings Doha Centre, said the coronavirus pandemic had worsened an economic situation for Iran that had already been very difficult to begin with because of US oil sanctions.

Iran is the country hardest hit by the pandemic in the Middle East, reporting more than 80,000 infections and over 5,000 deaths. The daily numbers of fatalities have dropped below the mark of 100 since April 14 according to health ministry bulletins, but a report by Iran’s parliament research centre said the real death toll is likely nearly double the official figures.

“The coronavirus crisis has affected two pillars of the Iranian economy, domestic demand and regional trade,” Fathollah-Nejad said by phone. “The pandemic also coincided with the oil price war” that has driven down prices down for the relatively small amount of oil that Iran is still able to sell despite the US ban.

The US government funded Radio Farda reported that Iran’s crude exports dropped to 248,000 barrels per day (bpd) in February. Exports stood at almost 1 million bpd before May 2019 and at close to 1.8 million before the re-introduction of US sanctions in November 2018.

The government of President Hassan Rohani is also trying to use the coronavirus pandemic to get at least some US sanctions lifted. Rohani is even said to entertain the idea of taking steps to save the Joint Comprehensive Plan Of Action (JCPOA), a 2015 agreement designed to prevent Iran from developing nuclear weapons, if the US lowers the pressure, Fathollah-Nejad said.

But while Iran has received some sympathetic feedback from Europe and US Democrats and liberals, Tehran has not made any headway with the administration of US President Donald Trump. Washington argues that sanctions do not prevent the delivery on humanitarian aid to Iran and should remain in place. “This is a miscalculation on Iran’s part, because the White House is not changing its position," Fathollah-Nejad said.

While Iran has been betting on a reset of relations with the US after a possible defeat of Trump in November’s election, the wait-and-see approach is thrown into doubt by the worsening economic situation. “The big question is whether Iran can make it until a new US president would be in office,” Fathollah-Nejad said.

The confrontation between the US and Iran has all but destroyed the JCPOA. Trump withdrew the US from the deal in 2018 to force Iran to accept stricter limits on its nuclear activities. In response, Iran has violated some of the JCPOA’s rules. In an effort to save the agreement, European nations have created Instex, a trading mechanism for exchanges with Iran.

But that has failed to stop Iran’s economic slide. The International Monetary Fund says Iran’s economy is expected to contract by 6% this year, following a 7.6% contraction in 2019.

“Iran’s strategy of scaring the Europeans by violating the terms of the JCPOA has not been successful. Instex has not significantly helped the Iranian economy,” Hashemi said.

Even though Tehran does not have any good options, regime change is unlikely, he added. “The Islamic Republic is not close to collapse. If anything, the Revolutionary Guards are stronger and the opposition is weaker. The coronavirus won’t be the straw to break the camel’s back.”

Fathollah-Nejad said Iran’s government was facing one of two scenarios. “There could be regime stabilisation by suppressing any discontent and legitimising the suppression with the necessity to fight the pandemic, or there could be regime destabilisation if criticism directed against the government gets stronger.”

Talks between Iran and the US are unlikely. Iranian Supreme Leader Ayatollah Ali Khamenei, an anti-US hardliner, has rejected American offers of help against coronavirus, saying the US was the “number one enemy.”

“Negotiating a new nuclear deal with Trump is not an option for Khamenei due to ideological reasons,” Hashemi said. “Khamenei wants to manage the crisis and look for opportunities down the road.”

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