Analysis: It’s difficult to think of a war in contemporary history in which a smaller nation has not only repulsed its aggressors on the battlefield, but has negotiated a materially better position in the peace deal. Perhaps Israel’s ultimate victory in the Yom Kippur war, more than half a century ago.
The official agreement between the US and Iran, published overnight by the White House, puts Iran’s hardline Islamist clerical regime in a far stronger position than it was before Israel and the US launched their first airstrikes on February 28 this year.
It feels like a lifetime, and for some, it was. Because Iran’s political gains must be set against the human cost: more than 3600 Iranian deaths according to press agency HRANA; another 3800 Lebanese deaths, 120 Iraqis, 61 Israelis and 15 Americans.
The damage to infrastructure across the Middle East is enormous. Not just energy infrastructure wiped out by missile and drone strikes – Rystad Energy analysts estimate it will cost at least US$58 billion (NZ$100b) to replace – but also, the destruction of hospitals and schools and businesses and homes.
Beyond that, there’s a less tangible harm to a nation’s psyche, when citizens come under attack in their own homes. Whether the Blitz or Pearl Harbor, Vietnam, or the Yom Kippur War, any attempted invasion causes an enduring change to how people think about their security.
For many years, Israel’s PM Benjamin Netanyahu has cited the lessons learnt in 1973’s Yom Kippur War, in which he fought, as justifying preemptive strikes on Iran and other enemies.
Similarly, US presidents have framed Pearl Harbor as a pivotal turning point in history. In a meeting with Japanese PM Sanae Takaichi in March, Donald Trump casually used the World War II attack to justify his secrecy before launching the war against Iran. “Who knows better about surprise than Japan?”
The perspective of Iranian leaders and their loyalists will be similarly hardened by this year’s war. And the 14-point agreement to end hostilities provides them new tools with which to express their disdain for the West.
The only good news for the US, in this agreement, is that Trump extricates himself from a war that has undermined his political power base, and that even he must realise will go down in world history as a ghastly error of judgment.
For Iran, on the other hand, there is much to celebrate.
1 / The US undertakes to end all types of sanctions against the Islamic Republic of Iran – not just unilateral US sanctions but also UN Security Council resolutions, alongside International Atomic Energy Agency resolutions. So this will actually make it easier for Iran to progress its nuclear weapons programme, despite it paying lip service by “reaffirming” it won’t develop nuclear weapons.
Some of the UN sanctions currently in place date back as far as 2005, imposing an initial asset freeze and banning the supply of nuclear-related technology. The US has agreed to lift all such sanctions.
2 / Iran has up to $US120b of frozen bank accounts and assets worldwide, mostly consisting of revenues from oil sales blocked by international sanctions. The US undertakes that all frozen or restricted funds and assets of the Islamic Republic of Iran will be released and made fully available.
The Gulf News reports some of these frozen assets date back to the Islamic Revolution and the start of the US embassy hostage crisis in 1979, though most are more recent.
3 / Iran’s agreed to make arrangements for the safe passage of commercial vessels with no charge, for 60 days only, from the Persian Gulf to the Sea of Oman and vice versa. After that, all bets are off – Iran wants to toll oil tankers US$2 million to pass through the Strait of Hormuz. That would work out at about one American dollar per barrel of oil. The only modern comparison is the tolling of the Panama Canal, but that runs through the middle of the nation of Panama and that country pays for its upkeep.
By contrast, the UN Convention on the Law of the Sea defines the Strait of Hormuz as an international strait, and ships of all nations are granted the right of transit passage for continuous and expeditious navigation. Iran has never agreed to this treaty, but until this year, had begrudgingly allowed unimpeded transit. That may now change. Economists at the Belgian thinktank Bruegel estimate Iran may raise US$14b a year (NZ$24b) from tolls on oil tankers.
4 / On top of that new revenue, the US undertakes to ensuring financing of at least US$300b (NZ$520b) for the rehabilitation and economic development of the Islamic Republic of Iran. Vice-President JD Vance and American officials are adamant the US won’t contribute to that fund – instead, they expect to spend the next 60 days negotiating for Gulf states to bankroll it.
Like the shipping tolls, that money can realistically come from only one place: the prices charged to oil consumers. This means the whole world – including NZ – will pay for Iran’s reconstruction through our fuel prices. For now, Brent crude oil prices continue to drop, but as the US and Iran sign this deal at the Swiss ski resort of Burgenstock this weekend, that trajectory may change.
So, for the rest of the world, the only good thing about this peace is that it’s an end to war. Beyond that, it will be costly.
On Thursday morning, NZ’s transport select committee was told of the ongoing impact of fuel price rises on the road, rail, maritime and aviation sectors. Transport Minister Chris Bishop warned this was extending into an impact on infrastructure; a well-signalled delay to hiking the fuel levy will in turn impact on the National Land Transport Fund that pays for road-building and maintenance.
“In the last few days the world has changed again,” Bishop says. “There’s been a deal done in the Middle East. We’ve got to wait to see how that plays out, but fuel prices are down compared to a month ago. It may lead to more sustainable lower oil prices over time – it also may not. We just don’t know.”
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