How should SA respond to US President Donald Trump’s decision to exit the nuclear deal with Iran? A measured degree of irritation would be appropriate.
The problem for SA is not just the international ramifications but the fact that the US plans to reimpose sanctions on Iran — and that affects SA intimately because SA has resumed oil imports from Iran, mostly because the quality of Iranian oil suits SA’s refineries. In addition, MTN is a major player in the Iranian cellphone market. A calculation by Bloomberg Economics suggests SA is the country that will suffer most from Trump’s decision to exit the Iran nuclear accord.
The macroeconomic consequences are worrying, too, and not just for SA. The government has plugged several holes in its revenue through increasing the excise tax on petrol, mainly based on the belief that oil prices are unlikely to increase dramatically.
How the decision will affect the international foreign policy environment is also a huge problem. Trump’s act increases the risk of violence in the region. But this is just the regional aspect
In fact, they have. Brent crude hit $78 a barrel last week after the decision. A year ago, few were prepared to bet on oil reaching more than $100 again. Now it is an open question, which could weigh on the South African Reserve Bank’s decision next week on interest rates. Much depends on how wide the sanctions will be. They could be as little as 200,000 barrels a day or as much as 1.5-million barrels a day. But if there is one thing the oil price does not like it is instability in the Middle East.
How the decision will affect the international foreign policy environment is also a huge problem. Trump’s act increases the risk of violence in the region. But this is just the regional aspect. He took the decision after several European nations strongly encouraged him to desist.
Former Swedish PM Carl Bildt wrote in the Washington Post that it would be unwise to underestimate the long-term damage to the transatlantic relationship caused by "Washington’s assault on Europe". "I certainly disagree with Trump’s policies on the Iran nuclear agreement, but I’m even more opposed to his assault on Europe’s sovereignty," he wrote.
Beyond the posturing, what is Trump’s strategy (apart from diverting attention from his own domestic problems), assuming he has one? It’s possible he is emboldened by his belligerence with North Korea, which has now resulted in a major summit and holds the possibility of a breakthrough in relations between North and South Korea.
In his statement on the issue, the US national security adviser, John Bolton, went to great lengths to make the connection. Trump could also be hoping that the regime in Tehran, which has already seen widespread protests, will collapse. The US president himself mentioned the frail Iranian economy in his statement.
But both these ideas are flawed. First, the analogy with North Korea is stretched. There was little international dispute that North Korea was the principal wrongdoer. No serious nuclear expert thinks Iran was aggressively pursuing nuclear goals following the dropping of sanctions. But with sanctions already in place, the incentive to reactivate the programme increases. And that relates to the frailty of the current Iranian regime since; if it does fall, the country is much more likely to revert to a hardline regime than become more moderate.
It is not impossible that some compromise could still be worked out, or that the Iranian government could back down further, particularly since Saudi Arabia is adding to US pressure. But after Trump pulled out of the Paris climate-change agreement and put restrictions on international trade, European leaders are becoming thoroughly sick of it all.
It is noteworthy that when the US tried to enforce its trade embargo against Cuba on third parties, European governments retaliated. In a sense, this creates an opportunity for SA to reject the decision but still stay within the parameters of international consensus by partnering with Europe and other nations on the African continent and elsewhere. In so doing, it is possible that the US will find itself more isolated than the target of its isolation.
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