Effects of Donald Trump’s Withdrawal from the Iran Deal

Donald Trump has unilaterally decided that America wants to withdraw from the Iranian deal. The deal was signed by Trump’s predecessor, i.e., Barack Obama. Trump has been critical of this deal from the days of his election campaign. However, proponents of this deal were hoping that President Trump would take a softer stance on the Iranian deal. However, Trump decided to go the other way. He decided to withdraw from the Iran deal unilaterally.

This has several economic and military implications for different parties. In this article, we will have a closer look at the probable economic impacts of this pullout.

Economic Effect on Iran

The Iranian economy never really felt the positive economic effects of this deal. This is because the agreement was signed in Nov 2015 by Barack Obama. Soon after that, the campaign for United States president started, and Trump was very vocal about his disregard for the deal. As a result, companies from all over the world knew that Iran deal is not really permanent. Since there was fear that this deal might be called off, not many investments were made into Iran. However, it would be wrong to say that America’s withdrawal from the agreement will not affect Iran.

First of all, the economic sentiment surrounding Iran has suddenly become negative. Also, it is likely that the foreign exchange market may be adversely affected..

The Iranian rial has already lost a third of its value since the rumors of America pulling from the Iran deal began. Higher inflation and a falling currency would increase the operating costs for Iranian companies. This would make them uncompetitive at an international level. This will be truer of industries like oil refining which rely extensively on imports in order to build modern refineries..

The primary Iranian industries are likely to be devastated because of Trump’s withdrawal.

The final outcome of all this will be increased unemployment in Iran. This is dangerous from a security point of view because of the presence of radical elements in Iranian society. If Iran cannot gainfully employ its youth, it is likely that they will turn to terrorism.

Effects of Europe

First of all, European leaders had suggested President Trump to not withdraw from the Iranian deal. However, Trump has simply ignored all the suggestions. This instance of American highhandedness does not seem to have gone down well with the Europeans.

Europe’s first instincts will be to continue trading with Iran despite American sanctions. However, doing so would involve tremendous costs to European companies. This is because American sanctions penalize any firm that deals with Iran. As a result, Europe may not be able to oppose America because the economic costs are too high.

European companies would have to give up the American market in order to enter the Iranian market, and that is not the kind of deal that European companies are looking for. However, there is a strong sentiment to continue trading with Iran. This is because Europe is geographically closer to Iran. As a result, an unstable Iran would have a massive impact on the security of Europe.

If Iran is crippled economically, there is a possibility of increased terrorist attacks. If not terrorist attacks, Europe may once again have to accommodate a large number of refugees fleeing an oppressive regime.

A Syria-like situation in Iran is detrimental to Europe’s interests. The general feeling in Europe is that America is only thinking about itself and ignoring other allies. This is the reason why it is likely that European nations will find some way to circumvent the sanctions and continue dealing with Iran.

China and Russia

China and Russia have also been at the receiving end of American dominance just like Iran.

Although Russia itself has abundant oil reserves, both China and Russia are eager to ink a pact with Iran. They want Iran to provide them with a cheap and reliable source of supply. However, the problem is that dollar is the only currency used to price oil worldwide. Hence, Russia and China will try to find out mechanisms to find non-dollar payment methods.

Since America is already raised tariffs on a lot of Chinese imports, China is expecting to lose its stronghold in the American market. If America lifts any more sanctions on China, it may end up creating an ally for Iran.

Iran and China have supplementary needs. China needs oil for its rapidly growing economy whereas Iran would need banking services and consumer goods to meet the needs of ordinary Iranian people.

It is likely that these nations are able to form a small economic ecosystem wherein they can trade with each other and proposer and merely remove America from the picture.

Trump’s sanctions will end up destabilizing the entire region. Countries neighboring Iran will soon start smuggling goods into the economy. Black markets tend to benefit anti-social elements.

Trump’s decision may have just opened up new trade routes for organizations like ISIS. Leaders all over the world are of the opinion that Trump’s decision has been rash and confrontational in nature.

Other countries are trying to mitigate the destabilizing effects of this move. However, there has been a significant amount of trust lost because of Donald Trump’s actions which are being perceived as self-centered by an international audience.

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