The implications of US’s exit from Iran nuclear deal

President Donald Trump announced late on Tuesday that the US will withdraw from the Iran nuclear deal. In July 2015, when Barack Obama was at the helm, the US, the UK, Iran, China, France, Russia, Germany and the European Union adopted the so-called Joint Comprehensive Plan of Action (JCPOA), under which Iran would eliminate stockpiles of enriched uranium in return for lifting nuclear-related economic sanctions. Trump also announced the re-imposition of sanctions.

Why did the US exit the deal?

Since his 2016 election campaign, Trump has opposed the deal, calling it a “disaster” and “one-sided”. Exiting the deal was part of his campaign pledge. On Tuesday, he accused Iran of exporting missiles and fuelling state-sponsored conflicts across West Asia. He added that if the deal continued to stand, there would soon be a nuclear arms race in West Asia.

What are the implications?

Oil prices are likely to rise and could lead to volatility in financial markets. The US has given European companies six months to wind up their businesses in Iran or face sanctions. Trump said that any country that helps Iran in its quest for nuclear weapons could face sanctions. Experts say the hard line will give Trump an upper hand while negotiating with North Korean leader Kim Jong-un.

What about the other signatories?

In the run-up to the announcement, European leaders had lobbied for continuing the accord. The UK, France and Germany have expressed concern and regret over the decision and have committed to stay in the deal. French President Emmanuel Macron tweeted that “the nuclear non-proliferation regime is at stake”. These nations have urged Iran to continue to meet its own obligations of the deal.

What will Iran do?

Iranian President Hassan Rouhani asserted his commitment to the deal. “I have ordered the foreign ministry to negotiate with the European countries, China and Russia in coming weeks. If at the end of this short period we conclude that we can fully benefit from the JCPOA with the cooperation of all countries, the deal would remain,” he said in a speech. However, experts fear that in case of failure in reaching any deal, Iran may resume uranium enrichment. Trump’s decision could also give hardliners who opposed the deal an edge over Rouhani.

What does this mean for India?

India may continue to import Iran’s oil. The relationship between the two goes beyond energy. India has committed more than $500 million to develop Chabahar port, which gives New Delhi access to Afghanistan, bypassing Pakistan. Dozens of pacts on trade, regional connectivity and investment were signed during Rouhani’s India visit in February. While the US decision may have implications on India’s foreign policy, trade relations are unlikely to be impacted. After 2015, both nations agreed to pay for investments with the rial and the rupee, cutting their reliance on the dollar.