MBA admissions are serious business. After intense entrance exams come - GD-PI-WAT, where they go two steps ahead in testing a candidate’s personality, knowledge, mental ability, and more. GD-WAT topics are unpredictable, hence one has to be prepared for anything, especially current affairs (both India and world). In this year's interview season, out of all the things happening out there, the Iran-US conflict is a big possibility when it comes to WAT-GD-PI topics. Apart from political unrest, the situation is also expected to have some major economic ramifications. Here's everything you need to know about Iran and the US, to form an opinion and aid you in getting a special seat in your b-school!
The Trigger
The New Year started with a big bang in Iran. This has induced us to stay glued to news channels, newspapers and websites to get the latest updates on the situation. On 3rd January 2020, Iran’s formidable military and intelligence leader, Maj. Gen. Qassim Suleimani was killed by the American military through an airstrike at Baghdad International Airport. Suleimani was the general of Quds Force - a unit in Iran's Revolutionary Guard Corps (IRGC) specializing in unconventional warfare and military intelligence operations. In a recent interview with CNBC, Roman Schweizer, Aerospace and Defence Director, Cowen Washington Research Group, called the act out by commenting, “This is the equivalent of Iran killing the U.S. Chairman of the Joint Chiefs of Staff or the Director of the Central Intelligence Agency and then taking credit for it.”
The Buildup
Before we dig deeper into the current situation and we need to understand its effect on the global socio-eco-political situation. Here is the timeline of the various turn of events that led to the current situation.
Note: the timeline here begins from 2009, but the seeds of animosity were sowed all the way back in 1953.
- In 2009, Britain, France and the United States announced that Iran is building a secret uranium-enrichment site at Fordow, and breaching the Non-Proliferation Treaty.
- In 2013, Iranian oil sales dropped, sparking an economic downturn due to the Obama administration, sanctioning (banning trade) foreign banks if they fail to cut Iranian oil imports.
- After Hassan Rouhani's election as Iran’s president, U.S. and Iranian relations improved. In 2015, Iran agreed to sign the Joint Plan of Action nuclear deal, in return for limited sanctions relief.
- In 2018, U.S. President Donald Trump withdrew from the nuclear deal and reimposed crippling economic sanctions on Iran.
- In May 2019, Iran planned to increase uranium production, bucking its commitments under the nuclear accord.
- In May 2019, US Oil tankers were attacked in the Gulf. The US blamed Tehran (Iran’s Capital), a charge that Iran denied.
- In June 2019, Iran shot down a U.S. drone, defending their action by telling the international media that it was in the Iranian airspace.
- In September 2019, Saudi Arabia’s state-run oil company was attacked by drones and missiles believed to be from Iran. Tehran denied involvement.
- In December 2019, U.S. military bases in Iraq were attacked, killing a U.S. citizen. The US blamed Iranian-backed militia inside Iraq.
- In Jan 2020, a U.S. airstrike in Baghdad killed Qasem Suleimani, commander of Quds Force (Iran’s elite para-military force) and architect of the military influence in the Middle East.
- 'STANDING DOWN' - Trump vowed to ramp up economic sanctions on the Iranian regime.
Latest News!
On 8th January 2020, it seemed like the United States and Iran could have been on the brink of war after Tehran responded to the killing of Gen. Qasem Soleimani by launching missile strikes against al-Asad airbase and Erbil airport in Iraq (both host to US troops), albeit with no American lives lost. Trump didn't respond except to tweet "all is well". He pledged more sanctions on Tehran. This seemed like a signal in scaling down of tensions, but maybe not. Iranian officials on 9th January 2020 (Thursday) claims to mistakenly shot down a Ukranian passenger jet. The plane crashed soon after take-off from Tehran's airport, killing everyone on board. After this, the Iranian government has been under the heat both internally and externally, as 82 of the 176 passengers were Iranian. Meanwhile, the Iranian government is blaming the ‘human error’ to US adventurism.
Economic Implications On The World
- The incident will impact the macroeconomy and cause fluctuations in currency and stock markets.
- There is an immediate rise in the price of oil and gold. Oil prices spiked nearly 4% on 3rd January,2o19 and were likely to rise further unless the situation was relieved.
- The incident will prompt investors to hold low-risk assets and cause the price of gold to rise.
- Due to Iran and the US military standdown, the Strait of Hormuz is now closed. This will have a direct effect on the oil price and cargo transport would be affected. As 20% of global marine oil shipments pass through the Strait of Hormuz.
- Tourism-lead economies in the Middle East will also get affected negatively in the name of “risk aversion.”
Ramifications On Indian Economy
- Rise in Petroleum prices: You might have noticed that petrol prices change every day, but petroleum has spiked up for the 5th consecutive time. The retail price of petrol rose to Rs. 75.69 per litre. It is the highest price since November 2018. This is because since 2019 Iran was India’s top exporter. Due to economic sanctions in Iraq (as they are terminating agreement that allows the US forces in Iraq soil, in support of Iran), India is looking for other exporters, which is an expensive exercise.
- Impact on Sensex: The US-Iran conflict has an impact on Sensex as well. Investors collectively lost Rs 3 lakh crore. Sensex fell by 788 points. Rupee fell below 72 against one dollar. Gold prices hit a lifetime high of Rs 41,730 for every 10 grams.
- Military aid to Pakistan: In 2018, US suspended military training in Pakistan and accused Pakistan of not doing enough to eliminate terrorism from its soil. This was a piece of welcome news to India. But, due to fallout with Iraq, America is in need of an ally and base in Asia - and Pakistan will be that friend to them. This is bad news for India.
My Two Cents
- Many newspapers and online articles are calling this conflict “World War 3”. But, I don’t think that will happen. Both the parties know the cost of war, as there is no “winning in this war.” They will only lose - in lives, in money, time and resources that are already on the brink of ending.
- The world is already ailing from climate change, pollution and global warming. Every time countries start fighting each other, they are neglecting the bigger and more important fight - the habitability of the planet.
- Economically speaking, Countries like the US spend $738 billion on war machines and several other billions on their military. Peace is more economical.
Reference
US-Iran standoff: A timeline of key events
US-Iran tensions: What war powers does Trump have?
At the Edge of a War, the U.S. and Iran Appear to Step Back
‘The puppet master is dead’: Iranian Gen. Qasem Soleimani’s power, and why his death is such a big deal
What's behind the Qassem Soleimani assassination? | Start Here
After Suleimani, Iran will hit back hard – possibly on multiple fronts
A timeline: How the US and Iran got to the edge of war — and then stepped back
Iran says it "unintentionally" shot down Ukrainian airplane
Iran's strikes seem intended to avoid US deaths. Here's why that might be the case
A lasting US-Iran conflict would cause ‘broad economic, financial shock,’ Moody’s says