Understanding the Iran deal: What, why and what’s coming next

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US President Donald Trump has withdrawn from the Iran nuclear deal and is set to renew sanctions on Iran.

Trump said on Tuesday that the landmark pact, signed under his predecessor, Barack Obama, was “defective at its core” and would lead to a nuclear arms race in the Middle East.

Here is what we know:

What is the Iran nuclear deal? 

  • The nuclear deal, also known as the Joint Comprehensive Plan of Action, is an international agreement that limits Iran’s nuclear ability. 

  • On July 14, 2015, six countries and the EU – the United States, the United Kingdom, France, Russia, China, Germany – agreed to lift sanctions imposed on Iran’s nuclear programme, giving it greater access to the global economy.

  • In return, Iran agreed to take steps to curb Iran’s ability to make a nuclear bomb. Iran’s enrichment capacity, enrichment level and stockpile were limited for specific durations.  

  • Iran previously had about 20,000 centrifuges, under the agreement it can have no more than 6,104 older-model centrifuges at two inspected sites. Centrifuges are devices that spin rapidly and are used to enrich uranium.

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  • Iran changed a heavy-water reactor so it was not able to produce plutonium. It agreed to convert its Fordo enrichment site into a research centre. The country also allowed  inspections of key nuclear facilities by the International Atomic Energy Agency to ensure compliance.

  • Before the agreement, Iran was capable of making a nuclear bomb within two or three months. But after the accord, it would have taken a year to make the weapon.
  • There was still controversy in the agreement. The restrictions on Iran’s centrifuges disappear after the eighth year, and fifteen years after the deal, restrictions on Iran’s uranium enrichment and stockpile size expire. Some critics  believe it’s possible for Iran to go back on the nuclear path around the mid-2020s. 

  • Iran also won the eventual lifting of an embargo on the import and export of conventional arms and ballistic missiles, which also sparked criticism. 

Is the Iran deal set to unravel?

Why did Trump pull out of the Iran deal? 

  • President Trump said Iran was violating the spirit of the deal, he argued that Iran is not an ally and that it is working against American interests in the Middle East. 

  • “The Iranian regime supports terrorism and exports violence, bloodshed and chaos across the Middle East. That is why we must put an end to Iran’s continued aggression and nuclear ambitions. They have not lived up to the spirit of their agreement,” he said in October 2017 .
  • Also the US President doesn’t want restrictions of the deal – like the one on uranium enrichment and the use of centrifuges – to end. 

  • Trump also held out the possibility of negotiating a new agreement with Iran.
  • “I have outlined two possible paths forward: either fix the deal’s disastrous flaws, or the United States will withdraw,” Trump said in January. He proposed new restrictions on Iran’s ballistic missile programme, more intrusive inspections of its nuclear programme and remove the limits on uranium and centrifuge restrictions. 

Donald Trump declares US withdrawal from Iran nuclear deal

Why does pulling out of the Iran deal mean?

  • The immediate effect of this decision is that the US would impose the sanctions it lifted on Iran’s nuclear programme. 
  • In a 10-page guidance document, the Treasury-State explained sanctions enforcement would begin on August 6, 2018 on activities that include Iran’s purchase of commercial aircraft and services, Iran’s exports of carpets and food to the US, trade in gold and precious metals, and sanctions on the purchase, subscription to the Iranian sovereign debt. 

  • On November 4, 2018 sanctions begin on industries that include shipping, oil, petrochemicals, and sanctions on Iran’s energy sector. The US will again pursue efforts to reduce Iran’s sale of crude oil. 

  • Britain, China, France, Germany and Russia are still parties, if they don’t withdraw sanctions might not have the same effect.

  • If the deal ends, Iran is likely to restart its nuclear programme. Iran has said it could restore its uranium-enriching capability quickly, but this could end isolating the country from other European countries. 

What’s happening to the oil industry? 

  • Iran is the third-biggest exporter of crude within the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq. 

  • During the last round of sanctions, Iran’s oil supplies fell by around 1 million barrels per day (bdp), but the country re-emerged as a major oil exporter after sanctions were lifted in January 2016.
  • Since then Iran increased its supplies, producing 3.81 million bpd in March 2018, almost 4 percent of global output. Its crude exports averaged over 2 million barrels per day in January-March.

  • When President Trump abandoned the deal oil prices rose more than 3 percent on Wednesday, according to Reuters.  

  • Brent crude oil touched its highest since November 2014 at $77.20 a barrel. The benchmark contract was at $77.00 US light crude was up by $1.90 a barrel, at $70.96.

  • Iran is also a major supplier, especially to refiners in Asia. In China, the biggest single buyer of Iranian oil, Shanghai crude futures hit their strongest in dollar terms since they were launched in late May. 

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