UAE stance on Iran nuclear deal offers lessons to West

It has virtue of hard-headed pragmatism and country's interests can be advanced even if US pulls out

By Sandeep Gopalan

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Published: Mon 7 May 2018, 10:15 PM

Last updated: Tue 8 May 2018, 12:17 AM

The May 12 deadline that will determine the fate of the Iran nuclear deal is fast approaching. As recently as last week, President Donald Trump stated during a press conference with French President Emmanuel Macron: "Nobody knows what I'm going to do on the 12th .This is a deal with decayed foundations. It's a bad deal, it's a bad structure, it's falling down. It should have never, ever been made."
Previously, President Trump has referred to the "deal .(as) an embarrassment to the United States," and as "the worst deal in history."
So, what will Trump do and should the UAE care?
Notably, unlike Iran's other major trade partners, the UAE has not advocated for the preservation of the deal. Macron and German Chancellor Angela Merkel made special trips last week to Washington to campaign for the deal's continuation. The EU and the UN Secretary General have also advocated likewise claiming that the deal contributes to regional stability and nuclear non-proliferation.
None of this is surprising. European nations have much to gain from the deal's survival. France-Iran trade grew 118 per cent during January-October 2017 compared to the same time-frame the previous year. Germany's exports to Iran recovered from lows at the height of sanctions to be worth $3.5 billion in 2017 and is on an upward trajectory.
The EU was Iran's third largest trade partner after China and the UAE in 2017. Exports to Iran grew at an annual rate of 31.5 per cent whereas imports grew 83.9 per cent during 2016-17. Over 2013-17, the annual growth rate for imports was a staggering 89.7 per cent and exports was 18.7 per cent. Several EU countries have benefited from the restoration of relations with Iran. Iran-Austria trade grew 34 per cent last year compared to the corresponding previous period. Spain's trade with Iran amounted to ?1.67 billion whereas the Netherlands' was worth ?1.34 billion in 2017. Italy's trade with Iran grew 117 per cent year-on-year during 2016-17.
The UAE also has substantial skin in the game. Iran was the second largest market for exports from the UAE in 2016 with trade worth $8.8 billion. For the fiscal year ended March 2018, total non-oil trade between Iran and the UAE was worth $16.83 billion. Iran imported $10.06b worth of goods from the UAE and exported $6.76b worth back to the country. The UAE's exports to Iran grew 57 per cent by value year on year for the 2017-18 period.
Despite this significant commercial relationship, the UAE has claimed that Iran is in violation of the nuclear agreement and is apparently supportive of Trump's position to abrogate it. The UAE foreign ministry issued a statement in late 2017 welcoming and endorsing the new US strategy: "We reaffirm our commitment to working with the US and our allies to counter the full range of Iran's destabilising activities and its support for extremists." It criticised Iran's "growing ballistic missile programme, support for terrorist organisations such as Hezbollah and the Houthis, cyber-attacks, interference in its neighbours' affairs, and threats to the freedom of navigation."
So, why is the UAE's stance at odds with that of France and Germany despite similar trade considerations with Iran?
To be sure, UAE's foreign policy - like that of France and Germany - is likely to be based on rational self-interest. If its position with regard to the nuclear deal is at variance with EU countries, the rationale is because the UAE might not lose much from the deal's collapse and the re-imposition of sanctions. The UAE could gain from sanctions because it has previously served as a valuable intermediary during similar periods. Goods that could not be sold to Iran directly due to sanctions were routed through the UAE. This, of course, requires the UAE's trading companies to be insulated from the application of US law for breaching sanctions. Whether the Trump administration's more aggressive stance changes that calculus remains to be seen. Regardless, France and Germany do not have a similar luxury of being intermediaries in a post-sanctions era.
The UAE's current low-key strategy in relation to the Iran nuclear deal is a notable contrast to European nations. It has the virtue of hard-headed pragmatism and is founded on the reality that UAE interests can be advanced in either scenario. By avoiding inflammatory rhetoric, the UAE is positioning itself to gain prime position as an intermediary for a variety of scenarios including a nuclear deal without US participation. In that unlikely situation, EU countries will have to find ways to avoid US sanctions if they wish to continue trade with Iran. Again, the UAE has an opportunity to benefit here just as it does if the deal is terminated and sanctions are imposed.
The UAE's version of foreign policy based on pragmatic self-interest rather than overt hostility offers important lessons for the rest of the world. The EU and the US have much to learn from it.
Dr Sandeep Gopalan is the pro vice-chancellor for academic innovation and professor of law at Deakin University

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