US-IRAN ISSUES

The history of US-Iran relations: Timeline

1953: The coup
• US and British intelligence agencies orchestrate a coup, overthrowing democratically elected Prime
Minister Mohammed Mossadegh and restoring power to the Shah, Mohammed Reza Pahlavi. As prime
minister, Mossadegh worked to nationalize Iranian oil against British interests, which had exploited the
country's resources for decades. Failing to bend Mossadegh's will, the British worked to bring about his
outster, enlisting US support. With the help of a few key Iranians, they unleashed a propaganda campaign
against the prime minister and persuaded the Shah to participate in the coup. Eventually, the coup was
hailed in Washington as a success — but it sowed strong resentment and distrust against the US, and set
Iran from the path toward democracy to that of a dictatorship.

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1957:Nuclear Cooperation
• The US and Iran sign the Cooperation Concerning Civil Uses of Atoms, a civilian nuclear cooperation
agreement, through the Atoms for Peace program. An initiative of US President Dwight Eisenhower, the
program shared nuclear technology and education with states around the world — including Israel,
Pakistan and Iran. The program provided Iran with the foundation for its current, highly controversial
nuclear program.
1968: Nuclear non-proliferation
Iran becomes a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons, ratified in 1970. In
exchange for a commitment to not acquire nuclear weapons, Iran is permitted to maintain a civil nuclear
program.

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1963-1973: Decade of growth
• In the aftermath of the coup, the US pours resources into Iran, shoring up its military and political power.
Iran enjoys a decade of impressive economic growth in the 1960s and 70s. But the Shah's autocracy
grows as well, espoused in his notorious secret police, SAVAK, which grew out of CIA training.
•
In 1972, US President Richard Nixon visits the Shah to ask him to guarantee US security interests in the
region, allowing Iran to buy any weapon system it wants in return. As the 1973 Arab-Israeli War sent oil
prices surging, the Shah buys huge quantities of high-tech weaponry. US officials are unsettled but have
no alternative plan.
• In the background, resentment against the Shah — and the US — is building through mosques. Ayatollah
Ruhollah Khomeini is key to this religious opposition and is sent into forced exile in 1964, and eventually
settles in Iraq. But he continues to preach against the Shah and the US; his sermons are smuggled into
Iran. The US doesn't take religious opposition seriously at the time.

1984: Sponsor of terrorism

The US designates Iran a state sponsor of terrorism and unleashes severe sanctions. The CIA documents
more than 60 Iran-backed attacks against the US, France and moderate Arabs in 1984, including an attack
on the US Embassy in Lebanon.

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1985-1986: Iran-Contra affair
• Despite an arms embargo, Reagan administration officials continues to sell weapons to Iran, allegedly to
secure the release of hostages in Lebanon. The revenue from the weapons sales circumvent US Congress
to fund Contra guerrillas fighting against the left-wing Sandinista government in Nicaragua in a US effort
to stop the spread of socialism in Latin America. The scandal later becomes known as the Iran-Contra
affair and Reagan administration officials are charged with lying to Congress about the backdoor efforts
to sell weapons to Iran.

July 3, 1988: Passenger plane downed

• In the midst of a skirmish with Iranian ships in the Persian Gulf, US Navy Vincennes warship shoots
down Iran Air Flight 655. The Airbus A300 is a passenger plane carrying many pilgrims on their way to
Mecca. All 290 people on board are killed. Americans say the large plane was mistaken for an F-14
fighter jet.

1992-1997: US sanctions ramp up

In 1992, Congress passes the Iran-Iraq Arms Nonproliferation Act, imposing sanctions on goods or
technology that could contribute to advanced weaponry. In 1996, Congress passes the Iran-Libya
SanctionSAct, later known as the Iran Sanctions Act, penalizing investments in Iran's petroleum industry. In
the mid 1990s, US President Bill Clinton issues executive orders that expand sanctions and generally ban the
exchange of goods and services between the US and Iran.

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2001-2002: 9/11 and the 'Axis of Evil'
• In his State of the Union address, President George Bush denounces Iran as part of an "axis of evil" with
Iraq and North Korea. The speech causes outrage in Iran.

2009
• In 2002 an Iranian opposition group reveals that Iran is developing nuclear facilities including a uranium
enrichment plant.
• The US accuses Iran of a clandestine nuclear weapons programme, which Iran denies. A decade of
diplomatic activity and intermittent Iranian engagement with the UN's nuclear watchdog follows.
• But several rounds of sanctions are imposed by the UN, the US and the EU against ultra-conservative
president Mahmoud Ahmadinejad's government. This causes Iran's currency to lose two-thirds of its value
in two years.

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2012-2013: Economic downturn and upturn in
negotiations
• US law goes into effect giving Obama the power to sanction foreign banks, including the central banks of
US allies, if they fail to significantly reduce their imports of Iranian oil. The result is a drastic reduction in
Iranian oil sales and a sharp downturn in the Iranian economy.
• On Nov. 23, with the groundwork laid by the secret US-Iran talks, Iran and six major powers reach an
interim pact called the Joint Plan of Action (JPOA) under which Iran agreed to curb its nuclear work in
return for limited sanctions relief. The six powers are the United States, Britain, China, France, Germany
and Russia.

2015: JCPOA
• On July 14, Iran and the six powers strike an agreement, under which Iran agreed to take a series of
steps, including slashing its number of centrifuges and disabling a key part of its Arak nuclear reactor — in
return for significant easing of US, UN and EU sanctions.
• The deal is called the Joint Comprehensive Plan of Action (JCPOA).

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2018: Trump walks away from Iran deal
• In May 2018, US President Donald Trump abandons the nuclear deal, before reinstating economic
sanctions against Iran and threatening to do the same to countries and firms that continue buying its oil.
Iran's economy falls into a deep recession.

2019
• Relations between the US and Iran worsen in May 2019, when the US tightens the sanctions targeting
Iran's oil exports. In response, Iran begins a counter-pressure campaign.
• In May and June 2019, explosions hit six oil tankers in the Gulf of Oman, and the US accuses Iran.
• On 20 June, Iranian forces shoot down a US military drone over the Strait of Hormuz. The US says it
was over international waters, but Iran says it is over their territory.
• In December 2019, U.S. military bases in Iraq were attacked, killing a U.S. citizen. The US blamed Iranian-
backed militia inside Iraq.
• Iran begins rolling back key commitments under the nuclear deal in July.

2020
On 3 January 2020, Iran's top military commander, Gen Qasem Soleimani commander of Quds Force
(Iran’s elite para-military force), is killed by a US drone strike in Iraq. Iran vows "severe revenge" for his
death and pulls back from the 2015 nuclear accord.
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 Effect On Global Economy
• A lasting conflict would have wide-ranging implications through broad economic and financial shock that
significantly worsen operating and financing conditions, according to Moody’s
• In one possible method of retaliation, Iran could try to close off the Strait of Hormuz, a key passageway
for more than a fifth of the world’s global petroleum liquids consumption and a region the U.S. Energy
Information Administration has called “the world’s most important chokepoint.” The country
has previously threatened to disrupt shipments in the Strait of Hormuz in response to U.S. attempts to
choke the Iranian economy.
• In that scenario, Brent crude prices would rally to $150 per barrel – pushing inflation up by some 3.5-4.0
percentage points in OECD countries. higher oil prices create “a tax on oil consumers and a windfall for
producers.”
• World oil consumption is about 100M barrels per day, so each five dollars on the prices is equivalent to
an annualized tax of about $183B per year, or 0.1% of global GDP.
• The wild card is whether turmoil in the Middle East triggers a sustained sell-off in equities, depressing
business and consumer confidence to the point where labour market and inflation concerns become
secondary problems.

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Effect On Global Economy
• The price of oil can spike much more than a basic supply-demand model would suggest, because many
oil-dependent sectors and countries will engage in precautionary stockpiling. The risk that Iran could
attack oil production facilities or disrupt major shipping routes creates a “fear premium”. Hence, even a
modest oil-price increase to $80 per barrel would lead to a sustained risk-off episode, with US and global
equities falling by at least 10%, in turn, hurting investor, business and consumer confidence .
• Leaving aside the direct negative impact of higher energy prices, fears of an escalating US-Iran conflict
could lead to more precautionary household saving and lower capital spending by firms, further
weakening demand and growth.
• Sectors like travel, manufacturing and agriculture are highly sensitive to oil prices. However, the effect on
the global economy will likely not be as great as that caused by oil shocks of the 1970s. Economies are
increasingly less sensitive to oil prices.
• Finally, a full-scale war could drive the price of oil above $150 a barrel, ushering in a severe global
recession and a fall of more than 30% for equities markets.

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Implications for India
• Because oil prices would heavily increase, India would have to spend much more on oil. This means that
less money would be allocated to integral areas such as affordable housing, healthcare and infrastructure
and development.
• This increasing rise in crude oil will also undesirably affect India’s energy supply. It will result in an
increase in India’s exports and deplete foreign exchange reserves. There is a more than definite
probability that the value of the rupee will go down. And at a time where India’s economy is facing
temporary slow growth, this could have severe consequences to national development and
infrastructure.
• Tensions also affect approximately eight million Indians who live and work in West Asia. India currently
receives a whopping $70 billion in remittances from Indian nationals. If eight million are affected by
tensions, this means India stands to lose $40 billion in remittances overall. That’s over 57 per cent of
received money instantly gone!
• But even if there isn’t all-out conflict, heightened tensions could hurt the economies of the region, and
endanger the jobs of many Indians. Already the events of the last few years, including inter-regional
conflict between Saudi Arabia and Qatar, employment nationalisation drives in a number of countries
and Dubai’s struggles to recover from economic crisis, have hurt the diaspora.

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The Impact on India’s Foreign Policy
• Rising US-Iran tensions massively hinders India’s foreign policy agenda. Development of the Chabahar
Port would be halted or, in grave circumstances, ceased altogether.
• On one hand, India and Iran carry good relations and cooperate on trade, oil and development. India,
Iran and Afghanistan had also recently signed a trilateral agreement to increase trade, collaboration and
transit. On the other hand, India carries very strong relations with America as well. We even have a
preferred military partnership with the USA. Notably, in 2019, India had to stop importing Iranian oil to
comply with US sanctions on Iran to appease Trump’s continued cooperation at a preferred level.

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Conclusion
• The United States of America and Iran are incredibly strategic for India; a rapidly developing country.
Prime Minister Modi has actively worked to meaningfully improve India’s relationship with America over
the past few years. India cannot lose such an important ally. Simultaneously, however, our energy
security is heavily dependant on Iran. If the USA and Iran cannot work this out and war becomes a stark
reality, India faces severe drawbacks to growth, progress and relations.
• What is the best plan of action? PM Modi should step up and play an active role in any capacity to
ensure that these two countries can somehow work it out without resorting to a full-scale conflict. A
hand of help should be offered to both Iran and the USA to help in any way to alleviate tensions.

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