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CLARIN

Iran Deal Could Redraw Entire Middle East Power Map

The West's accord with Iran was not just about a nuclear threat. The U.S. has bigger plans to recalibrate the region's balance of power among Saudi Arabia, Israel, Egypt and beyond.

U.S. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif
U.S. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif
Marcelo Cantelmi

-Analysis-

The United States and Iran have taken a colossal step whereby two seething enemies of 35 years — recently turned into uneasy, circumstantial allies — will change the balance of power across the Middle East. The scope of the recent accord goes well beyond the rhetoric about Iran's nuclear threat, which motivated the talks, and is the result of changes in the Middle East strategic agenda. It is not about Iran changing or becoming more friendly, but about a historic coincidence of interests created by this changing agenda.

International politics are about setting priorities, as the former Secretary of State Henry Kissinger once remarked. Iran needed to break the isolation that has strangled its economy, and which grew worse during the eight-year presidency of the ultranationalist Mahmoud Ahmadinejad.

The sanctions have crushed Iran's economy and undermined the huge wealth that could have otherwise been obtained from its oil and gas resources. In 2013, Iranian GDP shrank 5%, while unemployment rose above 30%. A U.S. Congressional study indicates that the Iranian economy is 20% smaller today than it would be without sanctions.

This is the situation that led to the election in 2013 of moderate cleric, Hassan Rouhani: The economic crisis explains the political change. The new president immediately set a new course from his predecessor and opened the doors to dialogue with the West.

The recent accord pulverizes the Iranian nuclear program. It will provide the United States and its allies a negotiating ploy to defend it before the UN Security Council and allies like Saudi Arabia and Israel, which have vigorously opposed talks for the possible scenario they open in their area of influence.

As sanctions are lifted Tehran will receive the economic impact of foreign investment, which explains the celebrations on the streets of Tehran on April 2. Iranians are deeply pragmatic when it comes to seeking agreements, and their needs to develop economically have in this case coincided with Western desire to pacify the Middle East as far as possible.

Iran will henceforth become an inevitable power in the region. It has the knowledge and power to relieve the United States of the weight of its lengthy war in Afghanistan, where the two states share an enemy in the Taliban. Iran's backyard also extends the other way, in Iraq, Syria, Lebanon and further afield now in Yemen. There, with the war they have launched against pro-Iranian Houthis, the Saudis are showing how inflexible they are prepared to be.

Iran's very evident political and strategic value was a key part of President Barack Obama"s calculations on the need to turn Tehran from enemy into partner. Israel's fury at the talks, which Prime Minister Benjamin Netanyahu personally denounced in a speech to the U.S. Congress, is not for the nuclear threat to Israel alone, but a reaction to changes happening on the ground. The United States wants, against the interests of Riyadh and Tel Aviv, a greater balance among the regional powers — Saudi Arabia, Turkey, Israel, Iran and Egypt.

It is a risky bet, at least until the balance mechanism is in place and working, especially in a zone where a new fire breaks out just as one is being put out. If there is significant détente between Washington and Tehran, this could prompt questions about why Israel will not move toward the U.S. position favoring a Palestinian state. The future may also look much more complicated for the various Arab monarchies that have been ruled with an iron fist for decades. The United States is not about to deprive them of its support, but certainly, the conditions of its support may soon change.

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Economy

Will China Invade Taiwan? Volkswagen's €180 Billion Bet Says 'No'

German automobile giant Volkswagen will invest billions in China to manufacture electric vehicles. It has deemed the risk of China invading Taiwan "unlikely," a peek into the calculations that private-sector conglomerates make, just like state actors.

Photo of workers at the production line of SAIC Volkswagen in Shanghai

Workers at the production line of SAIC Volkswagen in Shanghai

Pierre Haski

-Analysis-

PARIS — Automaker Volkswagen has decided to accelerate its investments in electric vehicles: €180 billion, mainly in the United States and China. The Financial Times has reported that the company's management evaluated the risk and concluded that China would not invade Taiwan in the short term. It decided as a result that it was reasonable to invest in China, one of its main markets.

It's an interesting vantage point to undertand events. Governments around the world are questioning China's intentions towards the island of Taiwan, which Beijing claims as its own. What is less known is that large companies also need to calculate geopolitical risk and conduct their own analyses.

A few months after Russia's invasion of Ukraine, the President of the European Chamber of Commerce in China, which represents thousands of companies, sounded the alarm in an interview with an economic magazine. Joerg Wuttke mentioned the trauma of Western companies forced to leave Russia and lose everything, and warned Chinese authorities that the same thing could happen if China invaded Taiwan.

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