By: Rachel Mullen and Mary Wong
August 4, 2021 ~
On June 18, 2021, Iran elected conservative Ebrahim Raisi as their new president to succeed moderate President Hassan Rouhani. In this month's blog, we consider how two new Administration's (Biden and Raisi) foreign policy goals could change the nature of relations between the United States and Iran, specifically in the context of the Iran Nuclear Deal and commercial interests. As background, in 2015 the Joint Comprehensive Plan of Action (JCPOA), also called the Iran Nuclear Deal, was signed by a number of countries (P5+1 and Iran), including the United States, to limit Iran’s abilities to create nuclear weapons. The Trump administration left the Nuclear Deal in 2018 and placed different economic restrictions on Iran. Under the Biden administration, there has been new interest in a revival of the Deal. Might there be room to negotiate for better terms with local communities in mind?
The possibility of the U.S. rejoining the Nuclear Deal has left some of us wondering what the future may have in store for those of us not at the negotiation table. This deal should not just concern the national or federal government, but subnational and local communities as well. This includes local businesses and government, individuals, NGOs (Non-governmental organizations, NFPO (Non-for-Profit Organizations), religious groups etc. When it comes to national security interests, along with foreign relations in general, local communities are often underappreciated. Many don’t realize the important role they play, and their impact, in foreign relations. We specifically look at the impacts of commerce on local communities, along with humanitarian and climate interests. If the sanctions are lifted, Iran’s assets will be unfrozen, and its economy is potentially open for new business, new business that affects a wide range of global and local actors.
President Biden has signaled that he wishes to accept the Nuclear Deal with additional restrictions. However, President Raisi has thus far shown little interest to meet with Biden until the economic sanctions are lifted. With this demand, Raisi seems to connect the future of the nuclear deal with that of the sanctions. If Biden continues to fail at even getting a meeting with Raisi, he might be forced to consider lifting some level of the sanctions. Certainly, there are multiple ways the talks can go, and thinking through some of these options and what they could mean for some of these local communities is one approach for how the Biden administration may be able to implement his foreign policy for the middle class.
As a result of U.S. sanctions in place on Iran over the past several decades, what industries have been/are most likely to be affected? The main industry as shown by Figure 1 below is oil, which makes up around 65% of Iran’s exports. According to the World Bank, “per capita welfare is expected to rise by 3.7 % mainly because of the lifting of the oil embargo imposed by the EU and the liberalization of cross-border trade in financial and transport services.” That’s great news for Iran, but what about U.S economies.? Oil prices could potentially go down as more oil floods the markets and an increase in competition forces the other oil companies to lower their prices. Prices should concern just about everyone, as most people use some kind of transportation that requires oil, as seen in the figure as the second main industry. Besides the prices, a new market also means new jobs, a concern for not only the national government, but the local governments as well. Other affected industries include shipbuilding, petroleum, financial institutions, energy, and insurance sectors.
The Wisconsin Project on Nuclear Arms Control put together a Business Tracker that logged the exodus of businesses across the globe from Iran. Some of those from the United States include the American International Group (New York, NY), Boeing (Chicago, IL), Dover (Downers Grove, IL), General Electric (Boston, MA), Honeywell International (Charlotte, NC), and Nike (Beaverton, OR). These are all businesses that lost revenue and jobs, which is a consequence that will trickle down to all levels of the company and local economies. Many of these companies are recognizable, and you yourself might work at one. These sanctions affect the economy and the job market. This isn’t just true for the United States, but all the countries that were limited by the secondary sanctions, which the U.S. imposed on non-U.S. actors that engaged in transactions with specific sectors of Iran’s economy.
Businesses are not the only group that has a stake in the Nuclear Deal. Humanitarian groups and climate activists have expressed their concerns. Human Rights Watch believes that US sanctions have left Iran unable to provide humanitarian aid, and they threaten their right to health by restricting access to medicine. The national government is not the only body that has an effect on what happens with this deal. Individuals, or large lobbying groups, also have the ability to make an impact. The average person can care about such seemingly large, and out of reach, issues. The topic of the Iran Nuclear Deal and economic sanctions may seem complicated and irrelevant to the lives of the average person, but it’s much more understandable than it seems. After the sixth round of talks has ended, we are still left with the question of a possible revival, and perhaps a time for everyone to consider what this actually means to them and the impact this deal will have on local communities.