Even as the chicken-and-egg game is being played between the U.S. and Iran on the Joint Comprehensive Plan of Action (JCPOA) as to whether Iranian compliance comes first or the lifting of sanctions by the U.S., the International Atomic Energy Agency (IAEA) is back on the stage to rescue the JCPOA.
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The U.S. tried to pressurise Iran by proposing a resolution in the IAEA Board of Governors (March 1-5) meeting criticising Iranian non-compliance with the JCPOA and its alleged IAEA safeguards violations amidst rumours that Iran might withdraw from the Non-Proliferation Treaty (NPT) and proceed to develop nuclear weapons.
Iranian Intelligence Minister Mahmoud Alavi had hinted at it in an interview with Iranian State television in February. Mr. Alavi’s widely reported remark — that “a cornered cat may behave differently from when the cat is free” — was interpreted as a warning that Iran might abandon the JCPOA and proceed with unbridled nuclear activities.
The Indian model
Even though the Supreme Leader Ayatollah Ali Khamenei’s fatwa against nuclear weapons still stands, Foreign Policy recently noted: “Wide swaths of Iranian society, among the public and policymakers alike, seem to increasingly see the weapon not just as an ultimate deterrent but as a panacea for Iran’s chronic security problems and challenges to its sovereignty by foreign powers.”
If the stalemate continues on JCPOA, because of the U.S. pressure, public opinion may shift towards the Indian model of creating a deterrent and then seeking a special dispensation to avoid severe sanctions. But the risks involved in such a policy will be grave, including the possibility of military action by Israel.
The Iranian elections in June make it imperative for the country to have at least an initial breakthrough before the polls. If not, the new government, which might be more radical than the present one, would be tempted to adopt a policy of creating a de facto deterrent as the only option for survival.
IAEA’S two service functions
A technical ‘understanding’ reached in February by IAEA Director General Rafael Grossi allowing monitoring by the IAEA to continue in Iran for three months augured well for a possible IAEA effort in case the JCPOA talks broke down.
Iranians had also agreed to an early April visit to Iran by an IAEA technical team to discuss outstanding safeguard matters. It was against this backdrop that Mr. Grossi persuaded the Americans not to move a resolution in the IAEA Board, so that the IAEA did not get entangled in the U.S. position on Iran. It was important for the IAEA to pursue its non-proliferation efforts with Iran outside the JCPOA.
Perhaps, Mr. Grossi expects that in the event of the present efforts to renew the JCPOA failing altogether, it should be possible to consider a fresh initiative by the IAEA to deal with the issue. The IAEA is neither the Secretariat of the NPT nor is it empowered to request States to adhere to it. It does, however, have formal responsibility in the context of implementing Article III of the Treaty.
The IAEA’s mandate, expertise, and experience also equip it well to assist in the implementation of other Articles. At the broadest level, the IAEA provides two service functions under the NPT. It facilitates and provides a channel for endeavours aimed at the “further development of the applications of nuclear energy for peaceful purposes, especially in the territories of non-nuclear-weapon States Party to the Treaty, with due consideration for the needs of the developing areas of the world.” Its other major function is to administer international nuclear safeguards, in accordance with Article III of the Treaty, to verify fulfilment of the non-proliferation commitment assumed by non-nuclear-weapon States party to the Treaty.
The NPT assigns to the IAEA the responsibility for verifying, at the global level, through its safeguards system, that non-nuclear weapon States fulfil their obligations not to use their peaceful nuclear activities to develop any nuclear explosive devices of any kind.
Accordingly, the Iranian file could go back to the IAEA to start fresh negotiations to restrain Iran to remain within the permissible level of enrichment of uranium. In effect, this may mean going back to the pre-six nation initiative, when the IAEA could not certify that Iran was not engaged in weapon activities.
With the experience of the JCPOA, any new arrangement has to ensure that Iran must have sanctions relief, the stockpile of enriched uranium should not exceed the limits established, and there should be iron clad guarantees that Iran will not violate the safeguards agreement. The test is whether these can be accomplished within the framework of the IAEA.
Discussions at a technical level
Since the IAEA is a technical body, its deliberations may be kept at the technical level. At the same time, since it is open for the IAEA to report to the Security Council for necessary action, the IAEA will have the necessary clout to insist on the implementation of the NPT and its additional protocol.
A new avenue may open for Iran to continue its peaceful nuclear activities as permitted in the NPT. Iran may have a certain comfort level in the IAEA as some members of the Board will be supportive of Iran’s aspirations to develop nuclear power for peaceful purposes without unnecessary restraints.
If the beginning of the new negotiations on the JCPOA drag on in the new circumstances in West Asia, particularly the interest of Saudi Arabia and the UAE to be part of any arrangement with Iran, which the U.S. supports, the IAEA may provide an alternative venue to open discussions on Iran’s obligations under the NPT, which do not have a time limit.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.