The impact of Iran nuclear deal on international business

Keywords: Realism, Institutionalism, Constructivism, Similarity and differences between theories, International relations assignment writing services

This essay analyzes and evaluates the recent Iran nuclear deal and its impact on international business in the light of the international relations theories.

According to Neumann and Wigen (2014), international Relations involve the study of the interaction between the states present in the global interstate system. Moreover, it examines the interactions of the behavior of one country against another country. International relations examine the political issues as well as the business environment from a macro perspective.

International relations is useful to understand the psychological element involve in the decisions of policy makers as well as explain the relations between states, multinationals and intergovernmental based on the power and control in the world as single unit (Guzzini, 2015).

Literature Review

Realism

‘Realism’ is focused on the political constraints which are imposed by the human selfish (egoism) and the absence of the ‘anarchy’ (international government). This makes the international relation a monarchy of the interest and power (Burchill et al., 2013, p.34).

Waltz (2014) added that in the light of realism the universal principles of the morals are not possible to apply to the actions of all states. Therefore, realism is power and security dilemma faced by all states and the relationship between the states is based on the competition for power as well as protection of the state itself.

Furthermore, Hobbes argues that inequality based on material characteristic reduce the number of effective players which mean one state is clearly superior among the other members and known for having great power (Williams, 2016).

In such context, the state with greater power has had the capacity to punish, damage, the threat of death or any other kind of power in the system. Consequently, Hobbes theories of realism emphasis on the great power which assume that relation between unequal powers are based on the logic of interaction (Flathman, 2015).

Institutionalism

Institutionalism emphasis that rather war and power; a state should focus on governance and international organization to resolve the conflicting issue and protect itself. In the light of Institutionalism, international organizations have greater ability to ensure cooperation between the states (Fioretos, 2011).

Keohane and Martin (2015)  analyzed that institutionalism rejects the realist perspective which assume that struggle for power is top priority and believe that every state directly participate in the politics of world and power is not an effective instrument and policy to resolve the conflict.

Institutionalism believes that cooperation can jointly benefit all states and institutions are useful to resolve the states issues through setting a focal point for coordination make commitments more credible as well as facilitate the cooperation’s (Elman and Jensen, 2014).

Realism makes an unqualified assumption which result in anomalies and he believe that institutions do not have an independent effect on the states actions. Nevertheless, Hughes and Lai (2014) contradicts with realism assumption and believe that institution are useful in controlling the power and interest of states where they exist as well as it involves the interaction which mean influencing the variables and there outcome (Savigny and Marsden, 2011, p.120).

Moreover, Reus-Smit and Snidal (2014) specified that institutions are useful to prevent the war irrespective of the structure in which they operate. For example, NATO has successfully managed to stop the world war III through mitigation the conflict between states.

Constructivism

Guzzini and Leander (2015) explained that constructivism focus that states are social rather material and their interaction is based on more than just behavior but also include identities and interests of the states. The two fundamental assumptions of the constructivism are that states are considered as ‘unit of analysis and the states are not material but are inter-subjective.

According to Meckled-Garcia (2014), constructivism theory believes political actors construct international relationship based on their own ideas and assumption. Therefore, relationship the states exist the way people want it and believe it should be. Constructivism believes that anarchy between the states could emerge in different form such as cooperation and conflictions.

Carlsnaes, Risse and Simmons (2012) argued that the application of the constructivism exists at two which is individual and state level. Constructivism believes that states and societies characteristic are useful to determine the interest and identities. This contradicts with realism theory which takes state behavior for granted. Therefore, constructivism focuses on the meaning which is assigned to materials of the subject rather focusing on the objects itself which makes identifies and norms as key drivers of the constructivism (Dixon, 2015).

Similarity and differences between theories

Institutionalism has many common assumptions with realism on the international system which mean it is anarchic, rational actors are seeking to increase their material conditions as well as states are self-interested. Nevertheless, realism is largely focus on power and interest whereas institutionalism involves game theory and micro-economic principles. Realism denies that cooperation between the states can exist based on the behavior of the state (Oatley and Winecoff, 2014).

Both constructivism and Institutionalism has more focused on the role of the non-state actors such as international organizations as well as role of they act as an actors to persuade, negotiated and lobbying.

The major differences exist between realism and constructivism where one focus on the need of the power whereas other focus on the identities and norms. The changing dynamic of the world such as globalization as made technology and economic as large factor of the international relations which was previously consider as matter of power and self-interest (Brechet and Harvey, 2016, p.75).

The Case Study

The Case

The Iranian revolution of 1979 has resulted in cut off on the international nuclear cooperation for Iran. The international community stopped the supplies of uranium to Iran, but later agreement with Argentina has helped the country to provide low enriched uranium.  Despite the willingness of IAEA (International Atomic Energy Agency) and china willingness to help the country on nuclear program but the direct intervention of United States had stopped the process (Cordesman and Al-Rodhan, 2016).

Nevertheless, Krause (2015) highlighted that in 1984, Germany reported that Iran might nuclear bomb. In the late 1990s, the country signed a research agreement with Russia which will provide experts and information to the Iran on nuclear matters. Iran continues its nuclear program over the years from the support from china and Russia and in 2003 IAEA has reported that Iran have undeclared uranium enrichment facilities.

The recent development marks the meeting between Iran and P5+1 (US, China, France, UK and Russia) + Germany (non-permanent member in UN) to resolve the Iranian nuclear concerns. The first meeting was held in 2009 and afterwards number has been held to come up with an agreement. At last on 14 July 2015, an agreement was reached which end a 12 years stand-off between Iran and west (BBC, 2015).

Lewis (2015) mentioned that the agreement marked a start of era of relationship between Iran and west through providing sanctions relieve. The prominent factors are that Obama has vows to veto any attempts of the republican in which this deal could be derail.

PEST analysis

On the political ground, the Iran nuclear deal marks major implication. The Iran nuclear threat has significant important for number of countries of world. The foreign policy of Iran is aggressive and with nuclear it poses greater threat to the world. Moreover, the Iranian weapon poses threats to US and its allies in the region such as Israel and Saudi Arabia. The Iran nuclear program could provoke a serious race for nuclear program in the world and destabilize the volatile region. Nevertheless, militant groups such as Hezbollah and Hamas are operational from Iran and nuclear program could threat the security of the world (Cannon, 2015).

Frum (2015) discussed that the nuclear deal will prevent the Iran from acquiring nuclear weapons and stabilize the region. The most prominent factor is that it Iran-US relation will change, international sanction on Iran will be lifted, Iran will be able to develop a relation with the west. Even from the regional perspective deal marks significant changes in the political landscape. Israel has major concerns on the deal and the post-deal role of the Iran in the region.

Over the year, realism theory has prevailed over the Iran nuclear program in which power and interest of Israel and Middle East countries factors. The realism has failed to balance the interest of states and resulted there is three decades-long standoffs between the Iran and US which has produced a threat of war and sanction on Iran (Gibson, 2015).

From economic perspective, the deal has two-folded benefits. First the Iran itself, will able to participate in the international and natural resources of Iran will provide revenues for the country (The Economist , 2015).

The GDP growth of the country has remained low over the years and mainly supported by export of oil. In 2010 and 2013, country has negative growth of -6% and -2 respectively as shows in graph below. However, after the deal it is expected that country will have positive GDP growth.  International isolation since 2011 has reduced the oil revenues and deprecation value of dollar. The deal is likely to relive the currency of the country and economic growth. The prominent feature of deal (lifting trade sanctions) will change the oil and gas industry, financial services industry as well as larger economy rejoining the global economic system (Bremmer, 2015).

Myre (2015) debated that the social impact of the deal involves integration of the Islamic culture with European markets. The changing demographic of the region will impact the other Middle Eastern countries. The burnt economy of Iranian because of sanctions will be able to relieve. According to OECD, 25% of Iranian with post-graduate degree lives outside the country and it economy $50 billion per annum. The removal of sanction is likely to minimize the brain for the country.

The trade integration with Iran will open an entirely new market where people have suffered years of economic hardship. The sanction will allow the foreign companies will enter the country and provide employment to local resident. The current employment level in the country is relative low and removal of sanction will increased employment level in the country (Bremmer, 2015).

Shane (2015) analyzed the technology benefits attached to Iran nuclear deal shows that a new market will open for tech-giants and especially Silicon Valley will be able to get benefit from the local Iranian companies. From industrial development perspective, foreign and local business is likely increase. The entry of foreign firm will increase industry in the country and provide better employment opportunities through increased production of product and services in the country.

The investment in various sectors is likely to improve the life of the young people and entrepreneurs in the field of education and business. The development in number of industries such as retail, construction, telecommunication, food and aviation improve the economic condition and support the economy development of country (Peterson, 2015).

Holistic review

Effects on individuals

The effect of the deal on the individual level is mainly the resident of the Iran. According to Meckled-Garcia (2014) constructivism theory believe political actors construct international relationship based on their own ideas and assumption. Therefore, relationship the states exist the way people want it and believe it .The sanction burnt country have experience ban in many fields of life which has limited their life experiences (Szirmai, 2015).

According to Fioretos (2014), in the light of Institutionalism, international organizations have greater ability to ensure cooperation between the states. Moreover, uplifting of sanction means that large investment in the infrastructures projects by government as well as public- private partnership.

The frozen assets of the country will be release and the money will be spent on the welfare of the public which result in improvement in quality of life. From business perspective, local Iranian companies can invest aboard as well as international companies will invest in Iran (Chang, 2016).

Effects on states

According to Keohane and Martin (2015), Institutionalism rejects the realist perspective which assume that struggle for power is top priority and believe that every state directly participate in the politics of world and power is not an effective instrument and policy to resolve the conflict. The effects on states are significant in case of Iran nuclear deal. In the regional, Afghanistan, china and India will have number of economic opportunities in the Iran as well as they can get benefit from natural resources of Iran.

Realism is power and security dilemma faced by all states and the relationship between the states is based on the competition for power as well as protection of the state itself. Many believe Saudi Arabia has disadvantage because of the Iran deal as well as OPEC view Iran oil as strong competitive pressure. The export and investment of these countries are likely to provide benefit in terms of economic growth (Carlsnaes, Risse and Simmons, 2015).

On the other hand, for Middle East, it presents different scenario. Institutionalism believes that cooperation can jointly benefit all states and institutions are useful to resolve the states issues through setting a focal point for coordination make commitments more credible as well as facilitate the cooperation’s. The investment outflow from Iran is likely to boost the Dubai real estate sector and provide economic development in the Iran itself and neighboring countries (Baker, 2016).

Effects on international cooperation

According to Flathman (2014) the state with greater power has had the capacity to punish, damage, the threat of death or any other kind of power in the system. On the international level, economic opportunities offered by the deal is numerous from trade to lower commodities prices.

The emergence of Iran as big economy and ally with many middle-eastern countries will impact the trade and political scenario around the world. The prominent force in the Middle East ‘Israel’ will have less threat from the Iran and bring positive change to people of the country.

The geopolitical impact of Iran on Asian countries and Middle-east is likely to change the trade and political preferences of the country. The politically stable Iran will encourage the international community to deal with Iran which ultimately benefits Iran and other countries. Constructivism believes that states and societies characteristic are useful to determine the interest and identities (Burchill et al., 2015).

Conclusion

Realism and institutionalism have failed in the context of Iran nuclear deal. The three decades log standoff between Iran and West along with threats has mitigate the problem. IAEA has spent years to resolve the in the light of institutionalism which has failed to reach a deal through negotiation.

Constructivism theory believes political actors construct international relationship based on their own ideas and assumption and this approach has resolved the issues. Obama administration on foreign policy marks the change along with Iran wiliness to reach a deal on nuclear agreement.

The Iran nuclear deal has numerous geo-political changes, economic opportunities and social impact which will bring changes to region as well as whole world. The Iran relationship with West and economic development will change the face of Iran and international community will receive economic benefits.

 

 

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