As Iran’s Ultimatum to Europe Ticks Down, Asia Waits in the Wings

Iran’s government announced on Monday that within ten days, its stocks of enriched uranium will rise above the level permitted by Joint Comprehensive Plan of Action (JCPOA). The nuclear agreement was struck between Tehran and the US, Russia, China, UK, France and Germany in 2015.

Tehran’s warning was principally directed at the three leading EU states who, the Iranians allege, have shown insufficient resistance to US sanctions which were reimposed last year. The sanctions have been consistently expanded to cover most of Iran’s primary industries. Any country that continues to trade with Tehran without an American-issued waiver faces the threat of secondary sanctions, shutting them out of the US market.

In January of this year, Germany, France and the UK introduced the ‘Instrument in Support of the Trade Exchange,’ (INSTEX) as a means to circumvent the US financial system and continue trade with Tehran. However, US trade officials speaking to Bloomberg in recent days have raised the possibility of applying sanctions to the EU’s counter-sanctions instrument, effectively killing it on arrival.

Such a measure would further pressure the Iranians to follow through on their threat to withdraw from the JCPOA altogether, risking renewed European support for the American sanctions-regime.

It was against this backdrop of escalating pressure, and a wave of still unexplained attacks on oil-tankers in the Gulf of Oman, that, last week, Iran took part in the annual summit of what may now be its best chance of breaking Washington’s economic strange-hold; the Shanghai Cooperation Organisation (SCO) .

Speaking to the assembled heads of government in the Kyrgyz capital Bishkek, Iranian president Hassan Rouhani declared that his country would grant preferential trading terms to any SCO-member state that continues or expands its economic ties with Tehran. He also called upon member states to collectively challenge US domination of the world’s economic and financial structures.

“The US government over the last two years, violating all the international structures and rules and using its economic, financial and military resources, has taken an aggressive approach and presents a serious risk to stability in the region and the world,” he said.

The joint declaration by the states represented in Bishkek crucially included the aspiration to build what it termed a “multi-polar world.” In other words, this means a world without American and European economic dominance.

Largely ignored by much of the western press, the SCO is an international political, economic and security alliance led by China and Russia, formed in 1996 along with Kazakhstan, Tajikistan, and Kyrgyzstan. Since then, its membership has grown to include Uzbekistan in 2001, as well as India and Pakistan in 2017. The Turkish government has also shown an increasing interest in abandoning its long-frustrated bid for EU membership and joining the SCO instead.

Iran, along with Belarus, Mongolia and Afghanistan, holds observer status, having applied in 2008 for full membership of the bloc. Tehran’s candidacy initially had the backing of Russia, but not China, on the basis that states subject to United Nations sanctions are barred from membership.

However, Iran now finds itself far from alone in facing sustained economic pressure from the United States. US and EU sanctions on Russia have steadily intensified and remained in place over the continuing conflict in eastern Ukraine. Perhaps more crucially, US-Chinese trade relations have come under unprecedented strain, with the US president threatening ever steeper tariffs on goods manufactured in China as a means of securing favourable terms in a future trade agreement.

Since the lifting of UN sanctions after the 2015 nuclear agreement, Iran has feverishly pursued ambitious infrastructure projects and economic agreements with leading SCO-member-states. The port of Chabahar, just outside the Persian Gulf, is being jointly developed by Iran and India to grant Afghanistan and other Central Asian states maritime access to the Subcontinent.

In the wake of the US’ unilateral withdrawal from the JCPOA last year, Iran quickly signed a preliminary preferential-trade agreement with the Eurasian Economic Union, a bloc led by Russia and comprising mostly former USSR states. The agreement is set to enter into force this summer and talks on Iranian membership of the EEU are reportedly in the advanced stages.

Perhaps most crucially for Tehran, however, is its central position in Chinese ambitions for its Belt and Road Initiative. The SCO’s annual summit, particularly this one, has increasingly become a forum for Beijing to advocate its program of integrating states across Europe and Asia through infrastructure development and investment.

This year, perhaps in reaction to American trade-policy, Beijing’s tone on Iranian membership has noticeably improved, with Xinhua News Agency quoting president Xi Jingping pledging to further develop economic ties regardless of the nuclear deal’s fate.

Unlike the years preceding the JCPOA, Iran is just one of several significant Eurasian states subject to sweeping US sanctions-regimes, creating a common interest in pursuing trade among Eurasian economies through institutions and channels outside of American control.

With American policy unlikely to shift, Iran is increasingly pinning its hopes for economic security on the East, having tried, and now it seems, failed, at rapprochement with the West.