ZTE sanctions withdrawal: Possible channel to address US stance on Iran Nuclear Deal?

Ms. Sunaina Bose, Research Intern, Institute of Chinese Studies

The United States Department of Commerce announced in the early hours of 7th June, that a deal had been stuck between the Trump administration and ZTE (Zhongxing Telecommunication Equipment) withdrawing the sanctions previously imposed on it. ZTE, a Chinese telecom manufacturing company, was sanctioned in April for violating US laws and exporting telecom equipment which contained American parts to Iran and North Korea. The sanctions were announced amidst the already hardening US stance on the Iran nuclear deal.

Within a few weeks, President Donald Trump pulled out of the Iran nuclear deal, otherwise known as the Joint Comprehensive Plan of Action (JCPOA), leaving his allies across the Atlantic scrambling to save their ongoing investments in Iran. One of the implications of US withdrawing from the deal involve re-impositions of their unilateral sanctions which were withdrawn in 2015 as a result of signing the deal. These include secondary sanctions that prevent non-US entities, conducting commercial transaction with Iran, from accessing US markets and financial systems.

In an attempt to salvage the nuclear deal, the European Union has invoked the ‘blocking statute’, a 1996 regulation that prevents EU companies from following unilateral sanctions and laws of any other nation. The EU has also offered to create alternative financial streams to support the Iranian economy. India, one of Iran’s significant oil partners, has also declared that it will only follow the sanctions imposed on Iran by the United Nations, and not unilateral sanctions imposed by other nations.

The remaining signatories of the deal maintain that JCPOA is still the best way to keep Iran’s nuclear activities in control while respecting its right to enrich uranium for peaceful purposes and have hence extended diplomatic and economic support to the nation. Iranian officials have in turn issued statements deciding to remain committed to deal as long as their economic activities are intact.

However the Iranian economy, especially the oil market, is expected to take a considerable hit, with major companies withdrawing from the Iranian market. Total (France), which is currently engaged in an attempt to secure a sanctions waiver from the US, is expected to hand over its shares of the South Pars oil field to the Chinese state-owned company CNPC. According to reports, Reliance Industries Limited (RIL) plans to stop imports from Iran before the 180 day ‘winding down’ period, due to significant exposure to US financial systems. Lukoil, a Russian enterprise, has also put its plans of investing in Iran on hold soon after US announced its withdrawal. Danish shipping group A P Moller Maersk, the world’s largest oil shipping container firm, ceased operations in Iran.

Under such circumstances experts have expressed concern over the deal entirely falling apart and Iran resuming its nuclear program. However, the recent revocation of sanctions imposed on ZTE has been cited as an example of possible negotiations with the Trump administration with respect to secondary sanctions on Iran.

The punitive measures imposed on ZTE by the United States prevented it from accessing US market for finance or supplies as a result of which it soon announced a shut down of its international operations. Simultaneously, national security concerns were also raised in the US regarding remote surveillance through ZTE equipment.

Nevertheless, the Trump administration decided to take back the injunctions imposed on ZTE in exchange of a $1 billion fine, $400 million in escrows as insurance against future fines and a promise to replace the executive board members within 30 days of the deal being signed. As a show of disapproval, the Senate Banking committee in the US had earlier voted in an overwhelming majority to put in place measures that would prevent Trump from unilaterally revoking the sanctions imposed on ZTE. The president also faced overwhelming bipartisan criticism in the Congress regarding the alleged threat to national security and the precedence it would set with respect to America’s larger policy towards Iran.

One of the many discourses around the ZTE sanctions drop has been regarding the creation of a model that can possibly be used by other signatory states to receive waivers and accommodations and continue their businesses in Iran, thereby weakening the sanctions regime, often referred to as ‘maximum pressure’, that the Trump administration is trying to create. Notably, Total, has begun lobbying the White House for a sanctions waiver over their South Pars oil field development project.

However the Trump administration put speculations to rest by continuing to maintain a harsh rhetoric over the Iran nuclear issue, putting forth its plans for an alternative ‘better’ deal as elucidated by the Secretary of State, Mike Pompeo. The latest sanctions slapped on Iranian entities and individuals for alleged human rights violations and export of terrorism at the end of last month only reiterated the hardliner stance that the US government is presently taking with respect to the West Asian nation.

Although the ZTE deal could potentially be interpreted as a break in the unrelenting sanction regime adopted by the Trump administration, the aforementioned recent development indicates that it is far-fetched to assume that it marks a change in US policies towards Iran and JCPOA.  It is not an inflection in the Trump administration’s narrative towards Iran and may not prove to be a channel to renegotiate the nuclear deal with US. It should perhaps rather be seen in the ambit of the ongoing trade negotiations between US and China and the momentous Kim-Trump nuclear summit in Singapore. However the interesting takeaway from the ZTE episode is that the Trump administration has clearly demonstrated that it does not hold the same commitments to its sanctions when it comes to the Chinese as it does for Iran.

China’s Social Credit System: Descent into an Orwellian era?

Ms. Sharanya Menon, Research Intern, Institute of Chinese Studies

In 2016, lawyer Li Xiaolin was unable to book plane tickets for his impending journey. An enquiry revealed the cause to be the insincere apology submitted by him to the court. The apology, which had been ordered by the court, had been deemed insincere because it had been submitted on April Fool’s day. The result: Li Xiaolin was placed on a government blacklist that barred him from accessing services as per the bold, ambitious new governance system of China, the Social Credit System.

This incident has drawn comparisons to a recent episode from the British science fiction show, Black Mirror which depicted a society that rated people based on their social interactions with others. The Social Credit System is a Chinese Government initiative which aims to assign a score to all its citizens based on a myriad of factors. The Planning Outline of the system, which was released in 2014 by the State Council, threw light on this upcoming system which aims to “establish the idea of sincerity culture [using] encouragement to keep trust and constraints against breaking trust”. To achieve this, the system will monitor the individuals based on their internet activities, personal shopping habits and rather innocuous behavioural tendencies of its people. The system, by seeding all available data and information across databases, will create a comprehensive record on all citizens and it will showcase all the activities that the individual engages in. Thus, the record will be the basis for the assigned score and will determine citizens’ employment opportunities, their access to loans and even potential romantic partners. The system will not be restricted to citizens but will also include business enterprises and industries.

Eight private companies have been provided with licenses to start pilots and experimental phases in regions. The most notable of them is Sesame Credit which is a subsidiary of Chinese retail giant, Alibaba. The final system that will be instituted might draw on the pilots designed by the private companies or might be entirely different.

The Social Credit System has been presented as the panacea to the widespread issue of mistrust in society and the lack of “sincerity” among the Chinese. The promise of a good score and subsequent benefits would incentivise the citizens to work to attain and maintain a good score. The threat of a bad score will act as a check on undesirable behaviour. Thus, incentivised good behaviour and actions will ensure that the underlying issue of mistrust and insincerity will be tackled tactfully.

While the Social Credit System is soon becoming a reality in China, in India, the Aadhar system is attempting to achieve something similar and parallels between the two systems can be drawn. The Aadhar, a 12-digit unique number, functions as an identity proof for residents of the country and is being modelled by the government to be the solution for all issues related to identity fraud plaguing the country. This system acts as a platform for the government to access all records and information available on all its residents. Therefore, the implementation of Aadhar has incited debates on privacy and data security across the country.

The dominant narrative that is being woven by the governments in both countries revolves around national interest and security. The narrative builds on these themes by asserting that the entry into the digital era and digitization is what is required for the countries to finally assert themselves and reclaim their rightful positions in the world order.

The government in India, by introducing welfare schemes that include Aadhar, is creating a system that necessitates Aadhar be the foundation of welfare and governance. Further, like the Social Credit System in China, the Aadhar integrates all available information on the individuals and as a result the individual loses complete control over any form of information or data that is available on them. The Social Credit System in China has been designed as a surveillance apparatus designed to exert control over the citizens and to construct the “ideal citizen”.

Therefore, the Chinese government is very subtly weaving together the notion of an ‘ideal citizen’ and in the process also reworking the conception of what it is to be a citizen and the relationship they enjoy with the state. China has always maintained administrative control over her population through the Hukou system which has been used to actively determine and limit where a person can live. Therefore, the Hukou system predicted an individual’s opportunities and prospects and therefore could be seen as a precursor to the Social Credit System.

The Social Credit System might be straight out of an Orwellian nightmare, but it shows how a country like China, always known to assert control over her citizens is devising new mechanisms to continue doing so. The Social Credit System warrants several questions to be raised; does the implementation of the system signal a shift towards a Big Data driven governance backed by the state? How does this model aim to accommodate the rights of the citizens and negotiate with the state’s need to survey its citizens? At this point, only time will tell.