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Understanding the Iran deal: What, why and what's coming next

US President Trump has withdrawn from the Iran nuclear deal and is set to renew sanctions, but what does this mean?

US President Donald Trump has withdrawn from the Iran nuclear deal and is set to renew sanctions on Iran.

Trump said on Tuesday that the landmark pact, signed under his predecessor, Barack Obama, was "defective at its core" and would lead to a nuclear arms race in the Middle East.

Here is what we know:

What is the Iran nuclear deal? 

  • The nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), is an international agreement that exchanges Iran's nuclear ambitions for international sanctions relief.
  • On July 14, 2015, six countries and the European Union - China, France, Russia, the UK, the United States and Germany - agreed to lift sanctions imposed on Iran, giving it greater access to the global economy.
  • In return, Iran agreed to take steps to curb its ability to make a nuclear bomb. Iran's enrichment capacity, enrichment level and stockpile were limited for specific durations.  
  • Before the agreement, Iran had about 20,000 centrifuges; under the agreement, it can have no more than 6,104 older-model centrifuges at two inspected sites. The centrifuges are used to enrich uranium.
  • Iran changed its Arak heavy-water reactor to so that it was no longer producing or reprocessing weapons-grade plutonium. Instead, the facility would "host peaceful medical and industrial nuclear research".
  • Iran agreed to halt uranium enrichment at its Fordow site and convert it into an isotopic research centre. It also agreed to allow inspections of key nuclear facilities by the International Atomic Energy Agency to ensure compliance.
  • Prior to the agreement, Iran was believed to be only two or three months away from being capable of making a nuclear bomb. But after the accord, it would have taken a year to make the weapon.
  • There was still controversy around parts of the agreement. The restrictions on Iran's centrifuges would be lifted after the eighth year, and 15 years onwards, restrictions on its uranium enrichment and stockpile size would expire. Some critics believe it would be possible for Iran to go back on the nuclear path around the mid-2020s. 
  • Iran also negotiated the eventual lifting of an embargo on the import and export of conventional arms and ballistic missiles, which also sparked criticism. 

Why did Trump pull out of the Iran deal? 

  • President Trump said Iran was violating the spirit of the deal, arguing that Iran was not an ally and that it was working against US interests in the Middle East. 
  • "The Iranian regime supports terrorism and exports violence, bloodshed and chaos across the Middle East. That is why we must put an end to Iran's continued aggression and nuclear ambitions. They have not lived up to the spirit of their agreement," he said in October 2017.
  • The US president also doesn't want the restrictions set out in the deal - such as the one on uranium enrichment and the use of centrifuges - to have end dates. 
  • Trump did hold out the possibility of negotiating a new agreement with Iran.
  • "I have outlined two possible paths forward; either fix the deal's disastrous flaws, or the United States will withdraw," Trump said in January. He proposed new restrictions on Iran's ballistic missile programme, more intrusive inspections of its nuclear programme and removing time limits on uranium enrichment and centrifuge restrictions. 

What does pulling out of the Iran deal mean?

  • The immediate effect of this decision is that the US may re-impose the sanctions it lifted on Iran. 
  • In a 10-page guidance document, the departments of treasury and state explained that sanctions enforcement would be completed over two "wind-down" periods. 
  • The first wind-down period will end on August 6, 2018, and the sanctions reinstated by that date would encompass the purchase of or subscription to Iran's sovereign debt and activities that include Iran's purchase of commercial aircraft and services, export of carpets and food to the US, trade in gold and precious metals. 
  • The second wind-down period ends on November 4, 2018, and it will bring sanctions on industries such as shipping, oil, petrochemicals, and the energy sector. The US will again pursue efforts to reduce Iran's sale of crude oil. 
  • The US is the only country to have withdrawn from the agreement, Iran, China, France, Russia, the UK and Germany are still parties, and their continued compliance may mean that US sanctions would not have the desired effect.
  • If the deal collapses, Iran may restart its nuclear programme. It has said it could restore its uranium-enriching capability quickly, but this could isolate it from Europe. 

What's happening to Iran's oil industry? 

  • Iran is the third-biggest exporter of crude oil within the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq. 
  • During the last round of sanctions, Iran's oil supplies fell by around one million barrels per day (bdp), but the country re-emerged as a major oil exporter after sanctions were lifted in January 2016.
  • Since then, Iran has increased its production to 3.81 million bpd in March 2018, almost four percent of global output. Its crude exports averaged over two million bpd in January-March.
  • When President Trump abandoned the deal, oil prices rose more than three percent on Wednesday, according to Reuters.  
  • Brent crude oil reached its highest point since November 2014 at $77.20 a barrel. The benchmark contract went up to $76.65, and US light crude was up by $1.70 a barrel, to $70.76.
  • Iran is also a major supplier to refineries in Asia. In China, the biggest single buyer of Iranian oil, Shanghai crude futures hit their strongest in dollar terms since they were launched. 

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