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Gulf’s 2021 recovery hangs on COVID-19, Iran uncertainties

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30 Dec 2020 01:12:02 GMT9
30 Dec 2020 01:12:02 GMT9

The year 2020 has been hard for the entire world, but it has been especially hard for the Arab Gulf region. The year has been bookended by high-level assassinations in Iran and dominated by a virus from Wuhan, China, that, by March, had become a worldwide phenomenon. The year is ending with the hope of defeating the virus, as vaccines are discovered and tested. If there is anything the region can conclude from these two phenomena that haunted it in 2020, it is that, despite the appearance of fragility, the Iranian regime is quite resilient, while economic growth, despite the appearance of robustness, is quite fragile.

In May 2018, US President Donald Trump withdrew unilaterally from the Joint Comprehensive Plan of Action (JCPOA) nuclear deal and reimposed severe sanctions on the Islamic Republic. A real estate developer, Trump decided to pull out of a bad deal and go aggressive on Iran, introducing tough conditions in the hope of tempting Tehran to negotiate. However, Iran faced Trump with a hard attitude and the strategic patience of a carpet maker. The regime worked according to a plan of raising tensions while keeping them within a set limit, in order to avoid being dragged into a direct confrontation.

The Iranians’ strategy aimed at pushing the US to seek an end to the tensions. They used their proxies to provoke their rivals, just like when they ended 2019 by hitting Aramco facilities. While the Houthis claimed that attack, everyone estimated that it must have been conducted from Iraq. Their mob also attacked the American embassy in Baghdad and shot down a US surveillance drone. The US answered those provocations by killing the mastermind of their operations in the Arab world, Qassem Soleimani. Everyone expected Esmail Ghaani, Soleimani’s replacement, not to be up to the job. He was Soleimani’s deputy in the east, in Afghanistan, and did not speak Arabic, but Iran’s sustained activism in 2020 proves that it has a hierarchy that outlives individuals.

The coronavirus disease (COVID-19) intensified the effects of Trump’s biting sanctions, but the regime displayed resilience and brutality and was able to break the will of the people, who have had enough of ideology and want to live in freedom and dignity. COVID-19 also hit the Arab Gulf hard. With the pandemic affecting the global demand for oil, the Gulf states were forced to realize that the rentier economy model that relies on natural wealth does not work. They need to move to productive economies. A 2020 International Monetary Fund report showed that Arab Gulf countries are financially in a tough situation and that the financial wealth generated from hydrocarbon resources could be over in 15 years. Hence the validity of Saudi Vision 2030, which seeks to revolutionize the Saudi Arabian economy based on innovation.

Iran’s strategic patience paid off and enabled it to wait out Trump. As the American president is soon ending his term of office, the maximum pressure campaign will be brought to an end. President-elect Joe Biden will probably offer Iran incentives and roll back some sanctions to get it back to the negotiating table. Iran will likely try to get the most possible while giving up the least. Endowed with the instincts of carpet merchants, the Iranians know how to get a good deal. They know when it is time to make a concession and they know when it is time to bluff. So far, all their actions have been measured and nothing was done as a knee-jerk reaction. When leading nuclear scientist Mohsen Fakhrizadeh was assassinated in November, President Hassan Rouhani said Iran would respond at the “proper time.”

Now that 2020 is ending and the era of confronting and pressuring Iran will also soon be over, a new era of trying to appease Tehran will begin. Just as Iran shaped the Middle Eastern policies of Barack Obama and Trump, it will remain the focal point of Biden’s policy in the region.

Iran has so far been very patient. But will the killing of Fakhrizadeh make it lose its patience and go nuclear like North Korea?

Dr. Dania Koleilat Khatib

While Trump treated Iran as a regional issue and as a bad actor, Biden is expected to look at Iran from a proliferation perspective. His priority will be to stop Iran from acquiring a nuclear bomb, which would drive a nuclear race in the region. However, the 2015 JCPOA showed that only focusing on the nuclear file while ignoring the other aspects of Iran’s behavior contributed to turbulence in the Middle East.

The original deal had some major flaws. The first was in the assumption that, if a government is offered economic prosperity, it will relinquish its ideology. Germany after the Second World War is a good example of this. However, it was not the case for Iran. Unlike Western democracies, whose purpose is to advance the civil rights of their citizens and their economic prosperity, ideology is at the helm of the Iranian regime’s priorities. It is known that, when the late Ayatollah Khomeini used to be asked about the economy, he replied that the Islamic Revolution was “not about the price of watermelons.” Therefore, as more funds were released as a result of the sanctions on Iran being alleviated, more was invested in Tehran’s proxies, which quickly became more active. This meant that the removal of sanctions did not generate the domestic economic boom that was expected.

Another flaw was the time frame. Obama assumed that, once the Iranian economy opened up and private investors entered to break up the monopoly of Khatam Al-Anbiya — the conglomerate that controls major projects and is affiliated to the Islamic Revolutionary Guard Corps — the regime would lose its grip on the people. This would have ultimately happened, but the question is when? The region cannot live with Iran and its proxies on the loose for a decade before this change takes place.

The third false assumption was that, if the nuclear portfolio was handled by the JCPOA, then Iran and its neighbors could sort out their own problems. However, this move, which was perceived as arrogant by the US’ long-term allies, led each regional actor to fend for itself against Iranian aggression. As a result, the region was transformed into a bloodbath. Also, the JCPOA focused on the proliferation of nuclear weapons, whereas the clear and present threat is from the proliferation of Iranian-backed militias across the region.

The assassination of Fakhrizadeh, who as a civil servant was a noncombatant, has ensured 2020 ends with a new sense of defiance among the Iranian people .The parliament in December passed a law allowing Iran to enrich uranium up to a concentration of 20 percent, bringing it closer to the 90 percent required to make it weapons-grade (90 percent of the effort required to manufacture a nuclear bomb is in reaching the 20 percent enrichment level).

Iran has so far been very patient. But will the killing of Fakhrizadeh make it lose its patience and go nuclear like North Korea?

The year 2020 started with a foggy view, as no one knew how Iran would respond to the killing of Soleimani. Now, as the year ends with the killing of Fakhrizadeh, we don’t know how the new year will start. Will it start with the same deal with the same flaws? Biden said he would discuss Iran’s proxies and ballistic missiles, but what if the Iranians hold their ground the same way they did under Trump? Will Biden bow in the face of their resistance and be content with focusing on nuclear proliferation while Iran causes havoc in the region?

People in the Biden circle are divided. Some have seen the flaws in the initial deal and want to correct them, while others are content with scoring a win on the proliferation front while retrenching from the region. Therefore, the region faces a lot of uncertainty regarding Iran in 2021.

In addition to this issue, the Arab Gulf states have to deal with fragile economies that have been left exposed by the COVID-19 crisis. Thanks to the vaccines, the region’s recovery from the virus might be reached within the next year. But will the Gulf economies recover in that time? COVID-19 has awakened the world’s environmental consciousness and more and more people are calling for clean energy to preserve the ecosystem. Can the Arab Gulf return to business as usual in a post-COVID-19 world? These questions were paused in 2020 but we will get the answers in 2021.

• Dr. Dania Koleilat Khatib is a specialist in US-Arab relations with a focus on lobbying. She is co-founder of the Research Center for Cooperation and Peace Building, a Lebanese NGO focused on Track II. She is also an affiliate scholar with the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut.

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