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Iran's international nuclear agreement

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Angus Taverner

Director- Global Affairs

Tag: Dubai Iran Nuclear Energy UAE
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The news in early April that the P5+1 nations (United States, Russia, China, France, United Kingdom and Germany) had agreed the framework for a final settlement to control and verify Irans nuclear ambitions, was greeted with considerable excitement nowhere more so than on the streets of Tehran where people were filmed wildly celebrating as if Iran had won the World Cup.  This outpouring of popular enthusiasm highlighted the sense of anticipation that the removal of all sanctions, and Irans likely closer relations with the rest of the world, would greatly improve the lives of ordinary Iranians.

At the same time, the Sunni Arab world and Israel have been notably less enthusiastic and more sceptical regarding possible outcomes from this diplomatic triumph.  For Israels newly re-elected Benjamin Netanyahu it clearly represents victory for Irans wolf in sheeps clothing.  For the Gulf states, currently engaged in rolling back the threat posed by the Iranian-backed Houthi insurgency in Yemen, it has been widely portrayed as a source of renewed concern that will enable Iran to continue its efforts to extend hegemonic Shia influence the length of the Middle East.

So what are the likely consequences for a United Arab Emirates which is now seen as a leading strategic opponent to any expansion of Iranian influence ,while at the same time still being the principal economic beneficiary of Irans sanctioned isolation?

While the UAEs leaders have recently been critical of Irans meddling in Yemen, many international commentators believe that this assertion is more imagined than real.  Some analysts have pointed out that Yemen is not in Irans sphere of interest and that its backing for the Zaydi Houthi is more opportunistic than part of a deliberate expansionist strategy; in contrast to Iranian involvement in Iraq and Syria.  Indeed, it may be that Yemen has actually revealed the limits of Iranian power in the region, particularly now that Aden is being blockaded by the Saudi and Egyptian navies.  While Iran can certainly deploy extensive military capabilities, it is suggested that these are no match for the more sophisticated arsenals of the UAE and its Gulf allies.  Moreover, while the UAE leadership has expressed concern over continuing US commitment in the region, President Obamas determination to reassure the Sunni Gulf about the Iran deal and maintain indirect US military support for the Yemen operation, emphasises that Iran will continue to face daunting military retaliation should it ever threaten the UAE or any other Gulf state directly.
Some critics have suggested that the international community has been hoodwinked by President Rouhani and his Western-friendly foreign minister, Mohamed Javad Zarif, and that the nuclear agreement now makes it only a matter of time before Iran acquires its own nuclear weapon.  This has raised the renewed spectre of accelerated nuclear proliferation in the Middle East, as the likes of Saudi, Egypt and Turkey could all scramble to match Irans weapon with their own deterrent capabilities.  When considered objectively, this analysis seems unduly pessimistic.  It has long been accepted that for Iran, its nuclear programme has been pursued both as a source of national pride and as a lever to further Irans influence with the international community.  Its determination to build a nuclear arsenal has always appeared less certain. Arguably, the framework agreement represents success for Iran on both fronts.  Ayatollah Ali Khamenei will be well aware that any indication that his regime is abandoning nuclear co-operation and moving to rapid break out would almost certainly attract a rapid and concerted pre-emptive strike at least from Israel, and very likely from the Gulf states, again with US support.  Moreover, the very essence of the new agreement has been predicated on the need to push Irans break-out threshold back from the currently assessed three months to at least a year.  In short, the agreement should make the UAE less vulnerable to Irans nuclear potential than is currently the case.

Economics and trade
The other major consequence of the P5+1 framework agreement for the UAE is likely to be on the economic front.  As on the strategic front, international opinion is divided between those who suggest that the UAE will suffer economic damage because Iran will no longer be as dependent on its close neighbour to provide its main trading conduit, and those who believe that freeing Iran from the constraints of sanctions will result in a strong economic boost from which the UAE will be a principal beneficiary.
Economic pessimists point out that bilateral trade between Iran and the UAE in 2014 was assessed to be worth $9.7 billion to the UAE exchequer.  They argue that freeing Iran from sanctions will enable Tehran to open trade links with many new countries and that this is likely to be detriment of existing ties with the UAE.  However, it is argued that this interpretation fails to take account of the existing cross-Gulf trading infrastructure that has built up over many years between the UAE and Iran.  This has resulted in some 8,000 Iranian businesses being established in the UAE.  Given that most of these are based in Dubai which is now widely regarded as the unchallenged economic centre of the Middle East, there would seem little sense in these Iranian businesses abandoning this position of advantage in order to take the time and effort to build new commercial relationships elsewhere.  On balance, commercial logic suggests that the UAE should benefit economically from its long history and tradition of cross-Gulf trade with Iran.
At the same time, UAE markets also seem likely to benefit from renewed international interest in Iran, both as a new commercial focus and as an emerging tourist destination.  Certainly in the near future, it seems likely that companies tempted to dip a metaphorical toe into newly de-sanctioned Iranian waters will probably look to do so from the relative safety of Dubai or Abu Dhabi.  At the same time, newly liberated Iranians seem likely to flock to Dubai as the nearest place where they can access international fashion and 21st century levels of service.
Overall, it seems likely that the UAE will be a net beneficiary of the impending P5+1-Iran nuclear settlement.  While alarmist criticism seems overblown, the strategic and economic benefits appear altogether more plausible and likely to lead to a range of positive improvements and outcomes.  While Iran will always represent a potential threat, the April agreement appears to be an important step along the road to settling strategic concerns around Iran for a generation.  And the likely economic benefits that will flow from lifting international sanctions seem certain to outweigh any loss of sanctions unique cross-Gulf trade.


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