Prospects for an Iran Nuclear Agreement

Allen Keiswetter is a scholar at the Middle East Institute and an analyst at the law firm of Dentons. This is an updated version of a paper originally published by Dentons-GPS.

Introduction

At Disney World in the Hall of U.S. Presidents, each chief executive has a two-page entry, one giving his biography and the other his accomplishments as president. In President Obama’s case, the accomplishments will probably first feature domestic matters such as Obamacare, but on foreign policy, what he accomplishes on Iran will doubtlessly be on the list. So far Iran has been the one foreign policy issue that has required daily presidential attention since day one of his administration. As the negotiations with Iran on a comprehensive nuclear agreement pass their four-month mark, this analysis sets out where the negotiations are now, the prospects for a deal by the deadline of July 20, and the longer-term implications for U.S. strategic commitments to the Gulf.

In the months since President Barack Obama spoke with newly elected Iranian President Hassan Rouhani in late September 2013, great progress has been made compared to the four years of futile negotiations beforehand. The P5+1 (the United States, the UK, France, Germany, Russia, and China) and Iran have agreed on a Joint Plan of Action (JPOA) and entered into serious negotiations. In Washington, the White House has held at bay congressional pressure for new sanctions that threatened to disrupt the negotiations, and in Tehran, Rouhani, with Supreme Leader Khamenei’s support, has also held off Iranian hard-line critics. The P5+1 has so far maintained its unity despite the strident differences with Russia about Ukraine, and the United States has managed to keep Israel in check despite outbursts objecting to U.S. “weakness” and threats of unilateral action. In the P5+1 negotiations themselves, a senior U.S. official has described all rounds dealing with the comprehensive agreement so far as “constructive and professional.”

These past several months of earnest negotiations, however, have been the easy part. The negotiations have now hit the point at which both the Americans and the Iranians have difficult choices to make if a deal is to be reached by the July 20 deadline or even the end of the year if the time is extended. The Iranians have been more positive than the P5+1; Iranian Foreign Minister Javad Zarif ventured that the sides had reached 50-60 percent agreement after the April 8-9 session, whereas the U.S. side emphasized that even 95 percent agreement is not enough if the last 5 percent remains unresolved. While the May 13-16 round by accounts from both sides was “difficult” as the negotiators began to consider drafts, both sides kept a positive perspective. Rouhani commented, “Given the ongoing good process of the negotiations, we are on the threshold of settling the (nuclear) issue.” The United States portrayed the difficulties as to be expected and called for the Iranians to make “difficult choices.”

Both the United States and Iran feel pressure to conclude the agreement by the July 20 deadline. Failure to do so could open up a risky competitive cycle of new sanctions by the United States, discord among the P5+1, and expansion of Iranian enrichment activities to shorten the time it would need to develop a nuclear weapon.

U.S. Gulf allies rightly sense the P5+1 talks with Iran have significant strategic importance. A nuclear agreement could provide verifiable assurances of Iran’s peaceful use of nuclear energy and thus buttress Gulf security and lessen the likelihood of military action that could have devastating consequences. It would also mean that more Iranian oil would come on the market at a time when Iraq is seeking to increase its production, the United States is becoming more energy self-sufficient, and world demand for oil has been growing at a more moderate rate than in the past.

In the longer term, the decades of mistrust between Iran and the United States guarantee that progress toward a general amelioration of relations will take time and could easily be checked by domestic factions on both sides. Fears that the opening to Iran could signal strategic shifts harkening back to the 1970s when Iran also figured as a pillar of U.S. defense planning in the Gulf are premature. Progress in Iran’s relations with the West at this point could attenuate the threat posed by Iran to its neighbors and open the door to discussion of troublesome non-nuclear Iranian activities in the region.

Secret Negotiations and the Joint Plan of Action

The cardinal enabler of the P5+1 talks has been the establishment of a direct U.S.-Iranian channel beginning with secret conversations between the United States and Iran in Oman in March 2013. The election of Rouhani in June 2013 prepared the way for public contacts at the UN General Assembly in New York in September. Reportedly, Secretary of State John Kerry and Zarif now regularly email each other, and bilateral meetings between the U.S. and Iranian delegations in the P5+1 negotiations are commonplace.

The results have been two agreements, first the Joint Plan of Action (JPOA) reached in Geneva on November 24 and then the implementation agreement that went into effect on January 20, 2014, exactly three years before Obama leaves office. Together they buy time for the negotiations to reach a comprehensive agreement.

Both sides seem to be substantively meeting their commitments under the JPOA:

-- According to the IAEA, Iran is proceeding on track with downblending half of its stockpile of uranium enriched at nearly 20 percent and converting the other half to uranium oxide. It has honored its pledges not to enrich above 5 percent and not to make any further advances in its nuclear activities at Natanz, Fordow, or Arak. It has abided by the freeze on its number of centrifuges but has continued its “safeguarded R&D” as permitted by the agreements.

-- The IAEA has successfully commenced its intrusive inspections provided for in the agreements and reached an agreement with Iran on a framework to take up the outstanding IAEA concerns.

-- The West has delivered on its promised sanctions relief, including enacting no new sanctions and lifting sanctions on automobile and petrochemical sectors and aviation parts, as well as relieving certain restrictions on insurance and banking. It has made on time required payments of the staged distribution of $4.2 billion from the $100 billion in blocked Iranian assets. Altogether, the P5+1 values these measures at about $6-7 billion over the six-month period.

However, there are areas of contention. The prospects of business with Iran if sanctions are lifted have attracted a flood of business visitors to Tehran. In reaction, the U.S. government has made clear that it will come down hard on any violations of the 95 percent of the sanctions remaining in place, and the Iranians have complained about the lack of any new deals for fear of U.S. prosecution.

On the Iranian side, there seems some merit to Iranian complaints that fears of infringement of U.S. banking sanctions hinder Iranians from taking full advantage of the banking benefits allowed by the JPOA. The Joint Commission charged with overseeing the JPOA’s implementation has addressed the technical problems the Iranians have had in obtaining access to the unfrozen funds because of banks’ fears of violating U.S. sanctions. In response, the U.S. Treasury Department has clarified the rules. Still, the establishment of a humanitarian banking channel as promised by the agreement has not yet happened.

The agreements’ pause in tightening of U.S. restrictions on Iranian oil exports has prompted controversy because Iranian oil exports have increased slightly in the winter months. Experts explain the increases reflect the export of condensates, barter deals (including shipment of oil to Syria), and private transactions not covered by the agreements. So far the United States has dismissed them as not significant, especially in light of decreases of exports in March and April.

The IAEA in its conversations has encountered Iranian resistance regarding clarifications of possible military dimensions (PMD) of its nuclear program that the IAEA suspects occurred prior to a suspension in 2003. IAEA experts have requested visits to the military facilities at Parchin, where they suspect Iranian experiments regarding nuclear triggers took place more than a decade ago. The Iranians have not only blocked IAEA visits to the area but also excavated it. One reason for the resistance may be that official confirmation of such infractions could prove embarrassing to Khamenei, who issued a fatwa branding nuclear weapons as a sin and un-Islamic.

The IAEA and Iran reached a “Framework for Cooperation” in February, and after the latest consultations in May the IAEA noted that “Iran has taken several actions” and
“some related work continues,” but gave no indication that a resolution was at hand that could pave the way for comprehensive nuclear settlement. IAEA Director General Yukiya Amano has stated that “there is no rush” to resolve remaining issues before the July 20 deadline.

Negotiating Approaches in the P5+1 Talks

Substantial compliance with agreements by both sides, direct U.S.-Iranian contact, and some progress in IAEA conversations with Iran have framed constructive discussions in P5+1 negotiations. The negotiators at the political director level have met in February, March, April, and May, and plan to meet monthly through July in Vienna. Staffs are in near constant contact in between sessions, and the United States has appointed Ambassador Brooke Anderson to be stationed in Brussels to facilitate coordination with the EU. After each of the political director meetings so far, both sides have described the discussions in general terms but have avoided revealing details on negotiating positions.

Still, U.S. and Iranian public statements and information from sources who have been involved previously in nuclear issues with Iran give indications of stances.

The goal is clearly set out in the JPOA: a comprehensive agreement in six months with a possible extension for another six months. The agreement should: 1) assure the West that Iran’s nuclear program is peaceful but enable Iran “to fully enjoy its right to the peaceful use of nuclear energy” under the non-proliferation treaty; 2) involve “a mutually defined enrichment program with practical limits and transparency;” and 3) produce “the comprehensive lifting of all UN Security Council sanctions, as well as multilateral and national sanctions related to Iran's nuclear program.” The JPOA provides for negotiations to be conducted through “a reciprocal, step-by-step process” under which “nothing is agreed until everything is agreed.”

The issues themselves fall into several categories: centrifuges and enrichment; Iran’s nuclear facilities at Natanz, Fordow, and Arak; monitoring and inspections; and relief from bilateral and multilateral sanctions, including the six UN Security Council resolutions covering both Iranian nuclear activities and missile systems.

Robert Einhorn, who was part of the U.S. negotiating team until mid-2013 and is now a senior fellow at the Brookings Institution, argues that the United States should aspire to:

-- deter an Iranian political decision to build nuclear weapons because it is unrealistic to seek to eliminate Iran’s capability to produce them or dismantle the country’s enrichment capabilities completely;

-- emphasize early detection of breakout through robust and specially devised IAEA monitoring and inspections;

-- lengthen the breakout time from the current two months to six to twelve months or longer if possible so as to allow time not only for detection but also for diplomatic alternatives before resorting to the use of force;

-- signal a strong unilateral and multilateral response if Iran violates the comprehensive agreement through a UN Security Council resolution to meet urgently to consider an appropriate response, congressional approval of the use of force in such circumstances, and the administration’s commitment to do so publicly.[1]

Iran, for its part, seeks to assure the West of the peaceful intentions of its nuclear program, maintain its nuclear activities to the extent possible, and obtain the lifting of all unilateral and multilateral sanctions. Iranian sources point out that these aims, while seemingly contradictory, imply a negotiating approach that insists that all nuclear facilities must be retained in some form but signal Iranian willingness to agree to conditions that would make the programs acceptable to the West in return for sanctions relief.

For example, the heart of the negotiations hinge on reaching an agreement on Iran’s indigenous enrichment capabilities. The IAEA reports that Iran has about 19,000 centrifuges but only about 9,000 are active. U.S. nuclear technical experts claim that Iran can have no more than 4,000-6,000 centrifuges to meet the goal of lengthening the breakout time to six to twelve months. Diplomatically, Iran will seek to justify as high a number of centrifuges as possible based on nebulous plans for a large number of nuclear reactors for electricity generation. A possible technical diplomatic solution could be stringent inspections to insure that no more than a certain number of centrifuges are active while Iran retains a larger number overall for later activation if “practical needs,” such as additional reactors, are warranted.

Another example is the heavy water reactor at Arak, which Iran wants to keep but has indicated that it is open to the West’s design changes that limit the proliferation risk from plutonium. U.S. scientists have suggested ways in which this can be done.[2]

Iranian sources assert that the degree to which Iran is willing to compromise in hollowing out its nuclear programs depends on the degree to which the West is willing to lift sanctions.

Prospects and Issues

Two points are clear at this juncture. First, the central axis of the negotiations remains the United States and Iran, and their decisions more than anything else will determine the outcome. Second, there are technical possibilities for a diplomatic solution. Obama in December rated the chances of success of a deal with Iran as not more than fifty-fifty, while Khamenei has supported the negotiations but several times voiced skepticism as to whether an agreement can be reached.

In Iran, the upside effects of an agreement were foreshadowed in a recent Woodrow Wilson International Center for Scholars conference on “Iran: the Next Five Years.” Iranian economist Bijan Khajehpour argues that the advent of Rouhani’s presidency and the anticipation of the possible lifting of sanctions have ignited a turnaround in Iran’s economy. It has now begun growing after a decline at a rate of 5 or 6 percent each of the past two years; inflation is tapering off from a peak of 42 percent at one point in the past year; and high unemployment, estimated at 20-30 percent, has started to ease. While JPOA critics cite such improvements as proving the folly of the deal, Khajehpour argues the opposite: the improving economic climate has intensified public pressure to conclude a deal so that the remaining 95 percent of the sanctions can be lifted.

Wilson Center scholar and journalist Robin Wright, who has talked with senior Iranian officials at length in two visits to Tehran since December, reported that the Iranians feel “strategically lonely,” and many officials see better relations with the United States as part of the solution to counter Iran’s hostile Sunni surroundings. She believes that Khamenei has made a strategic decision to reach out to the West, with his acceptance of the election of Rouhani and the progress in P5+1 talks following from that decision. If she is right, the chances of a deal are good if the West is willing to accept Iran’s approach on a hollowed-out nuclear capability and to lift sanctions. [3]

Reportedly, Khamenei keeps close tabs on the negotiations through briefings by lead Iranian negotiator Deputy Foreign Minister Abbas Araqchi. After the April round of meetings, the Supreme Leader affirmed that the negotiations should continue but insisted, "Our pursuit of nuclear science will never halt. We will not cede any of our gains in nuclear research and development, and our negotiators must not allow the other side to bully Iran. The decision to negotiate doesn't mean we will backtrack on this issue."

In the United States, President Obama’s predilection for diplomatic solutions and insistence that the use of force should be a last resort is well known. This perspective also infuses the administration’s proposed FY 2015 budget, which would reduce the U.S. Army to its smallest size since before World War II.

Diplomatically, the U.S. administration has gone all out to promote the idea of a negotiated solution; this was the principal point of Obama’s March trip to Saudi Arabia, where reassurance of U.S. commitment to Gulf security was a lead item in his talks with King Abdullah. Part of his reassurance to the Saudis was that the United States would not accept “a bad deal” in the P5+1 talks and that it would do whatever is necessary to prevent Iran’s acquiring a nuclear weapon. Questioned by Bloomberg journalist Jeffrey Goldberg about the use of force in a recent extended interview, Obama strongly defended his credibility, citing the 35,000 U.S. troops deployed in the Gulf region and his willingness to use force in other situations.

Obama’s bottom line here is one of deterrence: it would be very risky for the Iranians to bet that he would not use force after his many declarations asserting the opposite. Strategically, there is no doubt that Obama would like to exhaust the diplomatic options to buttress international support if he is forced to take military action. Realistically, however, Obama would disastrously undermine his credibility if he failed to respond forcefully to an Iranian provocation such as movement toward a breakout or sneakout or steps to shorten detection time.[4]

Next Steps

In the latest negotiations in May, political directors began discussing a draft of a comprehensive agreement. Reportedly the session was difficult because of differences over centrifuges and enrichment, among other issues. Undoubtedly, the final issues will not only include bridging these gaps but also coming to grips with revising the six UN Security Council resolutions that address not only Iran’s nuclear program but also its missile delivery systems.

While the JPOA provides the possibility of a six-month extension, many factors put a premium on meeting the July 20 deadline. First, an agreement to extend may be nearly as hard to reach as a comprehensive agreement itself because there would not likely be a simple rollover for the JPOA. Second, an extension could set off a pressure dynamic of Iran’s acceleration of its nuclear activities and U.S. enactment of new sanctions that would make a comprehensive agreement more difficult to conclude. Finally, an extension gives critics more time to block an agreement on both sides. In the United States, a comprehensive agreement would likely face stiffer opposition in a Republican-controlled Senate if the Democrats lose their majority in the November congressional elections. In Iran, Rouhani also needs a quick win to thwart hard-line critics such as those in the Revolutionary Guards. He is commonly thought to have about a year or a little more from when he took office in August 2013 to produce results.

Outcomes: Success, Near Miss, and Failure

A successful agreement among the P5+1 and Iran negotiators only opens the door to ratification in capitals, the two most important being Washington and Tehran. It is clear that while the Obama administration could suspend some sanctions it would need congressional approval to actually lift many of them. The strength of congressional opposition would greatly depend on the agreement’s provisions, especially the length of the breakout time it creates. As Einhorn notes, mustering the votes could also entail contingency authorization for the president to use force in the event that Iran violates its terms, a strong statement by the president that he would do so, and inclusion in any new UN Security Council resolution of a provision that the Security Council would immediately convene to consider appropriate measures. On Iran’s side, the Iranian parliament will undoubtedly have its say as well, but as long as the Supreme Leader supports the deal, Rouhani and his team should prevail.

What if the P5+1 and Iran fail to reach agreement by July 20? If it is a near miss that occurs in a positive negotiating atmosphere, a short-term extension that in essence stops the clock is a well-honored tradition in such negotiations.

A miss in an acrimonious atmosphere invites a return to the competing strategies of the four years prior to the JPOA. The Obama administration would re-impose suspended sanctions and Congress would rapidly enact additional sanctions, which the administration has promised to support. The Iranians, for their part, would restart suspended activities and press to enhance their enrichment capabilities. It is not hard to imagine an unstable situation in which the United States seeks to decimate the Iranian economy and Iran takes measures to reduce its nuclear breakout time from two months to half that or less.

A failure would provide opportunities for outsiders. Congressional defeat of legislation to implement a comprehensive deal would likely fracture P5+1 solidarity and could pave the way for Iranian attempts to reach separate deals with the EU, Russia, and China to lift their sanctions. In short, the multilateral enforcement of sanctions that has made the current sanctions regime so effective could evaporate, leaving the United States rather than Iran isolated.

The Israeli threat of intervention has waxed and waned. Visits to Jerusalem by Defense Secretary Chuck Hagel and National Security Advisor Susan Rice sought to head off criticism by Israeli Defense Minister Moshe Ya’alon declaring that “weak” U.S. foreign policy might necessitate Israeli unilateral action. Moreover, Israel remains constrained because it does not have a good unilateral military option in which it can inflict damage sufficient to stop or roll back the Iranian program. A unilateral Israeli attack would risk accelerating Iran’s nuclear program and breakout, fracturing the P5+1 consensus and increasing Israel’s international isolation. Iranian leaders would accuse the United States of complicity and duplicity, having never intended to accept a negotiated outcome. The potential costs of an Israeli attack to Israel (and to the United States) grow greater as the prospects for an agreement of the P5+1 and Iran increase. The U.S. commitment to protect Israel’s security provides a check on Israeli unilateralism while negotiations progress, but a different dynamic emerges in the case that the negotiations fail, potentially compelling the United States to support Israeli unilateralism.

Strategic Implications for the Gulf

Doubtless, an implicit Saudi question when President Obama visited Riyadh at the end of March was what the president meant in his response when Bloomberg journalist Jeffrey Goldberg recently asked him why his policies made the leaders of Saudi Arabia and other Arab countries nervous: “I think that there are shifts that are taking place in the region that have caught a lot of them off guard. I think change is always scary.”

The president apparently made some headway in reassuring the Saudis in his two-hour meeting with King Abdullah and four hours of conversation with other Saudi officials. He emphasized his determination to prevent Iran from obtaining a nuclear weapon, stressed that the United States is “not naïve” in dealing with Iran and fully realizes Iran’s many nefarious activities in the region, and reiterated his judgment that no deal is better than a bad deal. At the heart of the president’s case is that a good deal would benefit Gulf security because restrictions and monitoring would increase breakout time if Iran were to decide to build a nuclear weapon. This would lessen the risk of military action that could have devastating consequences in the Gulf. A deal could also open the door to discussion of other troublesome regional issues involving Iran, such as its terrorist activities and exploitative intrusion into Shi‘i communities in the region.

A comprehensive deal also has other, more mixed consequences. In the short term, it means that more Iranian oil will come on the market. Just as Saudi Arabia expanded production to meet redirected demand from oil sanctions on Iran, it could now face a decrease in demand as Iranian oil returns to the export market. In the longer term, the decades of mistrust between Iran and the United States guarantee that progress toward a general amelioration of U.S.-Iranian relations will take time and could easily be checked by domestic factions on both sides. The controversy over the U.S. rejection of Iran’s nomination of Hamid Aboutalebi to be its permanent representative to the United Nations is an example.

Conclusion

President Obama observed that change is scary. Obviously, the change in U.S.-Iranian relations affects the fundamentals not only of U.S. policy but also of regional and even world diplomatic calculations ranging from terrorism to oil markets and regional alignments. The prospects for change are not as earth shaking as those of the Arab Spring, but like the Arab Spring, any major recalibration will likely take years to play out, whatever the outcome of the P5+1 negotiations.

At issue for the United States and its allies is whether the Iranian goal is tactical or whether, as Robin Wright contends, the P5+1 negotiations embody a foundational decision by Supreme Leader Khamenei. For the Iranian leadership it is a question of whether the United States and the West seek regime change or merely want behavior modification. All leaders must worry about carrying elite and public opinion with them. The inscription on President Obama’s accomplishments page at Disney World will undoubtedly use the word Iran, but the verbs and adjectives are yet to be determined.