There have been sanctions, or economic punishments, on Iran for a long, long time. The USA has imposed sanctions on Iran off and on since 1979.
What happened in 1979? There was a revolution in Iran, where the people overthrew the ruler. It was the end of monarchy or king-making in Iran, and the start of the rule of the Islamic Republic. The ruler of Iran who was overthrown was supported by the USA and its allies.
Why was this important? Iran is a country that is rich in oil. It is one of the world’s largest producers of oil. Oil, as you know, is a very popular way to generate energy to be used in everyday human life and in powering our businesses.
The United Nations has also imposed sanctions on Iran off and in in the 2000s. Everybody has been worried because Iran has been developing nuclear weapons and the developed world doesn’t want to see nuclear weapons in the hands of unstable regions.
The sanctions have meant that no one has really been trading with Iran for many years. Trade is a way for countries to generate revenues, to sell the products that they make, and to buy what they need. Countries have not been buying oil or much else from Iran. This has meant that Iran’s currency has lost a lot of value, and that prices of food and other essential items have gone very high. The Iranis are industrious people and have been advancing nevertheless, but their growth has been crippled by these sanctions.
Got it. So what is the Iran nuclear deal? In 2015, US President Barack Obama and other major World Leaders succeeded in finally making a deal with Iran. The deal (amongst other things) said that Iran would cut down its investment in the development of nuclear capabilities and that it would allow International inspectors to visit their nuclear facilities and see what they are upto. In return, the world was ready to trade with Iran!
When US President Donald Trump took office, he voiced his disapproval of this deal. He didn’t think that this was a great deal for the rest of the world, and wanted tighter control on Iran’s nuclear capabilities. He has just pulled the USA out of the nuclear deal with Iran. This means that once again, the USA will not trade with Iran.
What happens now? The rest of the countries in this agreement include China, Russia, the United Kingdom, France, Germany and the European Union. They have some decisions to make. They had appealed to President Trump to stay in this deal that took decades to reach an agreement on, and that they would all work hard to make the terms better. In the face of this pullout, it remains to be seen what they do. It also remains to be seen what Iranian President Hasan Rouhani will do.
How will business get affected? Watch the oil prices. Increased supply means prices go down. Lower supply means prices will go up. If other countries trade with Iran, there may be a curb on oil prices, which means that it will be easier for businesses to make a profit. There are also companies that have made other business deals with Iran – French carmakers Peugeot and Renault, for example, had made a deal to make parts of their cars in Iran and to sell them there. A lot of this hangs in the balance. Let’s see what happens and what other countries have the power to do.
Written by: Sunaina Murthy