How Trump Can Strike Gold for America in Iran

There is a curious line in the Omani statement issued following the latest round of nuclear negotiations between the United States and Iran in Rome, which concluded on Saturday. The statement declares that Iran’s foreign minister, Abbas Araghchi, and Trump’s special envoy, Steve Witkoff aim to “seal a fair, enduring and binding deal which will ensure Iran [is] completely free of nuclear weapons and sanctions.” The sentence is striking because it implies that the US is considering lifting primary as well as secondary sanctions, something that goes beyond the sanctions relief provided under the Joint Comprehensive Plan of Action (JCPOA).

Is this just a case of sloppy drafting by the usually diligent Omani mediators? Well, the Wall Street Journal has reported that Iran has offered Trump a high-level meeting in Washington if a deal can be reached, something that would be difficult to imagine if Iran were to remain under an effective US embargo after the deal’s implementation.

Iranian officials have certainly been touting the possible economic benefits of a renewed nuclear deal for the US. When Araghchi described Iran as a “trillion-dollar opportunity” in a recent op-ed, he had one investor in mind—Donald Trump. As the US and Iran take further steps in the nuclear negotiations, Iranian officials have been eager to make clear that agreeing a new nuclear deal, which would at a minimum require the US to lift secondary sanctions on Iran, could prove a boon not just for the Iranian economy but also for the American economy. To emphasize the point, Iranian President Masoud Pezeshkian even announced that Iran’s Supreme Leader, Ali Khamenei, has “no objection” to American investment in Iran—an attempt to conjure a positive atmosphere ahead of the first round of indirect talks between Araghchi and Witkoff in Muscat.

It remains unclear whether the Trump administration will be able to achieve a viable deal with Iran. The administration’s position on key issues, such as Iran’s ability to maintain uranium enrichment, remains ambiguous, and there is significant distrust on both sides. If the negotiations are to succeed, they will need to find a win-win formula—hence the Iranian insistence on portraying any new agreement as not just a nuclear deal, but also a business deal. Iranian leaders have been watching Trump’s recent moves—his aggressive use of tariffs, his imposition of a critical mineral deal on Ukraine—and they have smartly concluded that Trump cares more about American enrichment than Iranian enrichment.

Is Iran really open for American businesses? The answer is yes, especially if Iranian and American policymakers make the restoration of their bilateral economic relationship a priority alongside restoration of a nuclear deal. Lifting primary sanctions would have a dramatic impact on US-Iran economic relations. But even if those sanctions remain in place, there are ways in which the US and Iran can structure their bilateral economic relations, opening new channels for trade and investment.

The heyday of US-Iran economic relations dates to the 1960s and 1970s. American firms like General Electric, General Motors, and DuPont played a central role in Iran’s industrialization, helping the country’s oil and manufacturing sectors achieve global prominence. Consumer brands like Gillette, Colgate, and Coca‐Cola were beloved by Iranian households.

The 1979 Islamic Revolution brought an end to diplomatic relations between the United States and Iran. That year, the US imposed sanctions targeting the Iranian economy for the first time. The New York Times reported on the exodus of American firms from Iran with a report titled, “Iranian Festival Is Over For American Business.”

But the change in Iran’s geopolitical and ideological orientation did not change a basic economic reality—the 1990s were an era of unipolarity and it was prudent to do business with the world’s largest economy. Iranian President Hashemi Rafsanjani tried to rekindle economic relations with the United States, believing that higher levels of trade and investment would help restore relations between the two countries. He offered the Islamic Republic’s first post-revolution oil field development contract to ConocoPhillips, maneuvering around domestic opposition to the deal. But the deal was blocked by the Clinton administration, which subsequently tightened US sanctions on Iran. The episode served as an early warning that the hardliners most capable of thwarting diplomacy were those in Washington, not Tehran.

American firms maintained a small presence in Iran in the early 2000s while European firms emerged as Iran’s preferred partners. The Europeans established joint ventures and wholly owned subsidiaries in the country and did brisk business. French oil giant Total took over the deal first offered to Conoco-Philips. French and German automakers retooled the Iranian automotive industry, making it one of the largest in the world. European brands flew off supermarket shelves as Iranian household purchasing power recovered on the back of 16 consecutive years of economic growth.

Iran’s economy hit a stumbling block in 2012 as the international community tightened international sanctions—with the measures hinging on President Obama’s unprecedented package of financial sanctions imposed at the start of that year. Subsequent nuclear negotiations focused on restoring Iran’s trade and investment ties with Europe, but the Obama administration did understand that enabling more trade between the US and Iran could create broader constituencies in Washington who backed the JCPOA, which was implemented in January 2016.

While primary sanctions remained in place after implementation of the deal, the JCPOA opened three pathways for US business that wished to pursue opportunities in Iran. First, certain US companies were able to apply for specific licenses from the Office of Foreign Asset Control (OFAC), part of the Treasury Department, permitting deals that would otherwise be blocked by primary or secondary sanctions. Among the contracts licensed in this way were the roughly $20 billion in deals Boeing negotiated for the sale of commercial aircraft to Iranian airlines, contracts that became symbolic of the nuclear agreement’s broader potential.

Many American companies took advantage of General License H, which stipulated that non-US subsidiaries of US companies could broadly engage with the Iranian economy. For example, Procter & Gamble, which ran its Iran operation out of its Swiss subsidiary, rapidly re-entered the Iranian market, where it could reliably generate over $100 million in annual revenue. American technology companies took advantage of a similar license called General License D-1 to export digital services to Iranian users.

Finally, American companies were even able to export to directly Iran without relying on a licensing regime if their sales were consistent with longstanding exemptions for humanitarian trade. Medical device companies like GE Healthcare and Baxter enjoyed bumper sales to Iranian hospitals. Pharmaceutical giants like Eli Lilly and Pfizer also increased sales, taking advantage of an opening in financial and logistics channels. American commodities giants like Cargill and Bunge sold wheat, sugar, and soybeans to Iranian buyers, including crops grown on American farms.

In short, American companies were making inroads in Iran as recently as eight years ago. It was President Trump’s unilateral decision to exit the Iran nuclear deal and reimpose secondary sanctions that brought an end to these renewed economic relations, leading to the cancellation of billions of dollars of contracts.

Immediately after Trump’s election, Boeing began to lobby the administration not to withdraw from the JCPOA—something Trump had promised to do on the campaign trail. The planemaker argued that the huge Iran contracts supported “tens of thousands of US jobs” and tried to appeal to Trump’s interest in reviving American industry. The appeals did not work. But it is easy to imagine Trump grasping benefits of a massive Boeing deal at this juncture, given the how darling of American industry has lost its shine. Demand for aircraft in Iran could also help compensate for the impact of Trump’s new China trade war on Boeing. Earlier this week, China banned the purchased of American aircraft, putting hundreds of Boeing orders in doubt.

The JCPOA experience makes clear that there was no prohibition in Iran against doing business with US companies. In fact, relations with the US nosedived after Trump’s abrogation of the nuclear deal, but some direct economic links persisted. Iran offered a lifeline for many American soybean farmers who were hammered during Trump’s first trade war with China. When China retaliated by ending the import of American soybeans, crashing the price, Bunge stepped in, delivering multiple cargoes of American-grown soybeans to Iran, even as Trump brought secondary sanctions back in force.

Clearly, a new nuclear deal could rekindle US-Iran economic relations. But the rebound in trade and investment will likely be modest unless there is a concerted effort by both the American and Iranian governments to make deeper economic relations a cornerstone of a new deal—especially if primary sanctions remain in force. Most American firms will be wary about entering the Iranian market given the inherent concerns that any deal between the two countries could break down, leading Trump to reimpose sanctions once again. Companies are also increasingly risk averse in the face of a volatile global economy. Leaving it to the private sector to singlehandedly realize the economic opportunities of the nuclear deal, the strategy taken back in 2016, is unlikely to work. Bilateral trade may rise from its low base, but investment will not materialize given risk perceptions, meaning there will be little in the way of shared incentives to bind the US and Iran together. A more structured plan for cooperation is needed.

Iranian negotiators are seeking structured cooperation, although their vision remains somewhat ill-defined. Reprising a demand from the talks that were undertaken with the Biden administration, Iranian negotiators continue to target some form of “guarantees” that would ensure the US cannot easily and costlessly withdraw from the nuclear deal while Iran remains in compliance with its obligations. Political and legal guarantees will have little weight. But deeper US-Iran economic cooperation can act as a kind of “technical guarantee” that serves to increase the credibility of the long-term commitments enshrined in any new nuclear deal.

Trump’s turn towards a decidedly “America First” economic policy might actually help Iran as it tries to find a win-win formula for economic cooperation that goes beyond increased purchases of American consumer goods, pharmaceutical products, and agricultural commodities. As economist Djavad Salehi-Isfahani has recently detailed in a review of investment data, Iran desperately needs to renew its capital stock and reverse a decade of technological regression. Meanwhile, the US is trying to rekindle domestic manufacturing of capital goods. The interests align nicely.

The economic commitments related to any new US-Iran nuclear deal should be structured to enable Iranian industrial giants to make major purchases of American-made capital goods—machinery, equipment, aircraft, and vehicles.

Iran’s capital stock is primarily European and was installed around 20 years ago, when European firms were making major investments in the country. But a significant portion of this machinery remains American in origin or design—a reflection of the fact that large parts of Iran’s industrial sectors have not been updated since the 1970s. Many turbines spinning in Iranian power plants and diesel locomotives chugging on Iranian rails are based on GE designs. Many drill heads used to bore oil wells are derivatives of Schlumberger designs—the Texas company’s former Iran subsidiary lives on. Another former American subsidiary, Iran Combine Manufacturing Company, was once called “Iran John Deere.” The company continues to produce trademark green and yellow tractors and combine harvesters—using American designs from 50 years ago. American engineers will find familiar technologies in use at Iranian industrial plants. Renovating and upgrading these facilities will be straightforward, especially given the incredible acumen of Iranian industrial engineers and technicians who will be eager partners.

Importantly, a surprisingly small portion of Iran’s capital stock is Chinese. Chinese exports of capital goods to Iran totaled $6 billion in 2023. But this is the same level as achieved in 2017, the last year that Iran enjoyed sanctions relief. Meanwhile, Chinese investment in Iran has languished under sanctions, plateauing since 2014. There are no major Chinese manufacturing investments in the country and Iran has not been able to substitute the loss of its European industrial partners with Chinese partners. That leaves a uniquely large and open market for American exporters—perhaps the last major economy in the world where the US could reasonably overtake China as an industrial partner.

Given the aligned interests of their respective industrial policies, the US and Iran should think ambitiously about the scope of their economic relations. Iranian firms will be eager customers for new machinery and equipment. Crucially, this kind of trade does not make Iran dependent on the US. Rather, it restores the strength and resilience of the Iranian industrial sector. Once capital goods are installed, they can last for decades—a kind of guarantee that the benefits of a US-Iran deal will last.

Finally, Iranian purchases of American equipment must be financed by American banks. This will make it more likely that the financial logjams associated with JCPOA sanctions relief will be solved. If US banks do business with Iran on Trump’s instructions, global banks will follow. Notably, Trump’s efforts to revitalize the Export-Import Bank could give American exporters access to crucial export credit, insurance, and guarantees.

Trump loves gold. If he remains pragmatic and focused when it comes to Iran, he could strike gold in several ways. He could forge the kind of nuclear deal Thomas Pickering once called the “gold standard for non-proliferation agreements,” once again subjecting Iran to the strictest IAEA verification regime ever devised. He could earn billions in export revenue for the US—and given the US is unlikely to import much Iranian oil—generate a rare trade surplus with a country that is poised to return to its position as one of the twenty largest economies in the world. Finally, if Trump is ambitious and if Iran’s leaders are courageous, he could finally earn the gold medal he has always wanted—a Nobel Prize.

Photo: The White House

Can Abbas Araghchi Reshape Iran's Foreign Policy?

On August 21, Iranian lawmakers confirmed veteran diplomat Abbas Araghchi as the country’s new foreign minister. Araghchi secured the support of 247 out of 288 MPs in Iran’s parliament, the Majles. Despite the vote total, Araghchi’s nomination was fiercely contested by hardliners. His confirmation hearing reflected the ongoing struggle between pragmatism and hardline revolutionary ideals that continue to shape the country’s foreign policy, and previewed many pitfalls he will face as foreign minister.

To secure his confirmation, Araghchi, like all of President Masoud Pezeshkian’s cabinet nominees, reaffirmed his unwavering loyalty to revolutionary ideals of the Islamic Republic and the Supreme Leader’s directives. Araghchi was addressing a legislature dominated by hardliners. During the parliamentary elections in March, the Guardian Council, a vetting body, had disqualified many moderate candidates. Voters responded by boycotting the elections and hardliners solidified their hold on the legislature.

While many of Pezeshkian’s nominees faced resistance, Araghchi’s confirmation as foreign minister was especially fraught. The confirmation hearings also took place while Iranian officials await the outcome of the Gaza ceasefire negotiations and continue to warn they will hit back at Israel for the assassination of Hamas political leader Ismail Haniyeh in Tehran on July 30. In Iran’s current political climate, loyalty to the revolution is often measured by one’s stance on foreign policy issues, particularly regarding the U.S., Israel, and Iran’s support for “resistance front” groups such as Hezbollah and Hamas. Any deviation from the hardline position on these issues is characterized as betrayal.

Iran’s Supreme Leader, Ali Khamanei, sets the strategic framework, redlines, and priorities for foreign policy, as underscored during his endorsement of Masoud Pezeshkian’s election on July 28. While the foreign minister and president must operate within these parameters, they still hold a vote in the Supreme National Security Council and can use public statements to put pressure on unelected bodies in Iran. Additionally, their personal ties to other national security figures, such as senior leaders of the Islamic Revolutionary Guard Corps (IRGC), can enable them to influence policy.

Despite these means, the outgoing administration did not seek to actively shape Iran’s foreign policy. Neither President Ebrahim Raisi nor Foreign Minister Hossein Amir-Abdollahian, who were both killed in a helicopter accident in May, sought to advance a foreign policy that conflicted with the Supreme Leader’s redlines, the IRGC’s influence, or the parliament’s lawmaking. By contrast, the Rouhani administration, during which Araghchi was deputy foreign minister, publicly clashed with other power centers. This dynamic explains why Araghchi, like other nominees who served under Rouhani, drew sharp criticism from staunch hardliners.

Critics focused on Araghchi’s past as Iran’s lead nuclear negotiator, a role he held from 2013 to 2021. MPs like Mohammadreza Ahmadi Sangar and Mohammadreza Sabbaghian argued that the Joint Comprehensive Plan of Action (JCPOA), which Araghchi helped craft, was flawed from the start—a misguided deal that left Iran vulnerable to the whims of President Donald Trump, who withdrew from the agreement in 2018. Amirhossein Sabeti, a protégé of Saeid Jalili, who lost the presidential election to Pezeshkian, was perhaps Araghchi’s most vocal opponent. Sabeti argued that in the last months of the Rouhani administration, Araghchi was seeking a new nuclear deal that went beyond Khamanei’s redlines and would have effectively dismantled the resistance front. He also criticized the loss of nuclear capabilities that were key concessions of the JCPOA, including the decommissioning of the Arak reactor.

Iranian legislators have been seeking a greater role in defining Iran’s foreign policy. They want the kind of influence wielded by the U.S. Congress over international negotiations. In 2020, the Majles passed the Strategic Action Law, which effectively bars attempts to revive the JCPOA in its original form. The law, which was pushed by hardliners and endorsed by Khamenei, is as a double-edged sword—it provides leverage but also limits the flexibility needed to strike a deal that would relieve Iran’s economic woes.

For Araghchi, the JCPOA represented a calculated risk that preserved Iran’s position on the global stage, even as the Trump administration tried—and failed—to bury the deal at the United Nations Security Council. It is a legacy he has defended. During his hearing, Araghchi pointed out that the Raisi administration undertook its own nuclear negotiations. Even so, he indicated that he will take a fresh approach to any new talks and “strive to get the best agreement” in light of the Strategic Action Law. During his speech, he vowed to prioritize sanctions neutralization, a priority set forth by the Supreme Leader. But he also highlighted the necessity of lifting sanctions.

Araghchi understands that solving the nuclear issue is the key to addressing many of Iran’s economic challenges. The Pezeshkian administration aims to implement the ambitious 7th Development Plan, which targets an 8 percent annual growth rate—a goal that seems far-fetched given Iran’s economic isolation under sanctions. Iran needs around $60 billion in annual foreign direct investment. According to Hadi Ghavami, an MP who spoke in favor of Araghchi’s nomination, the country currently receives one-thirtieth of that amount.

During his confirmation hearing, Araghchi emphasized that while relations with the U.S. will continue to be defined by antagonism, his goal is to manage the rivalry and avoid escalation. This is part of the “heroic flexibility” needed to return back to the negotiating table. He also called upon Europe to enhance its ties with Tehran and to “return back to the list of areas of priorities for Iran.” The relationship with Europe remains fraught, clouded by the fallout from the JCPOA, the Woman, Life, Freedom protests, and Iran’s support for Russia in its war on Ukraine. Yet Araghchi emphasized that constructive global engagement is essential for any vision for development and managed to get hardliners to vote for him despite this vision.

Iranian officials have heavily invested in the country’s “Eastward turn” in recent years. The push for closer alignments with Russia and China began during the Rouhani administration but reached new heights under Raisi. But the strategy has not paid off. While Iran’s security relationship with Moscow is deeper than ever before, it has also become a liability, isolating Iran further from the international community. In a similar vein, China’s role as a key economic partner for Iran cannot be understated. Yet, there’s growing concern in Tehran that the relationship has become too one-sided, especially as Iran’s neighbors enjoy economic rewards from their trade with China.

At the same time, Tehran has recognized the opportunities presented by a shifting global landscape. Iran is looking to expand its influence into the Global South—Latin America, Africa, and East Asia. Through this understanding, multilateralism is a key factor in Iran’s core foreign policy strategy, reflected in the increasing involvement in platforms like BRICS, the Shanghai Cooperation Organization, and the Eurasian Economic Union. For Tehran, these alliances are more than symbolic; they are part of a broader effort to counterbalance sanctions pressure while positioning Iran as a significant player in a multipolar world. Pezeshkian has been invited to attend the upcoming BRICS summit in Russia in October, soon after he participates at the UN General Assembly in New York for the first time in September.

To secure the trust of the hardliners, Araghchi declared that “resistance diplomacy” is at “the foundation of Iran's foreign policy approach.” In this view, supporting groups like Hezbollah and Hamas is not just policy; it is a core principle of the revolution. Araghchi’s challenge is to convince the international community that Iran’s continued support for the resistance front is not an inherent threat to regional or global security. This is a difficult task when considering the fragility of the growing rapprochement and diplomatic engagements between Iran and the Arab states. There is considerable skepticism amongst Iran’s southern neighbors about the trajectory of the country’s foreign policy and whether deescalation can be sustained.

Ultimately, Araghchi will need to strike a balance when reshaping Iran’s foreign policy. He must find a way to pursue pragmatic diplomacy in a way that coheres with the ideas of resistance that hold sway over Iran’s hardline politicians. A cautionary tale can be seen in the legacy of Foreign Minister Javad Zarif, under whom Araghchi served as deputy foreign minister. Despite securing major concessions for Iran in various high-stakes negotiations, he failed to penetrate the conservative decision-making circles that ultimately dictate Iran’s broader foreign policy.

Araghchi may have more success. MPs appear encouraged by Pezeshkian’s effort to form a “unity cabinet” and seem to appreciate Araghchi’s closer alignment to key power centers. Iran’s new foreign minister has an opportunity to reshape the country’s foreign policy, cutting a creative path through the rigid confines of the political landscape. Whether he succeeds will depend on his ability to recast pragmatism as a tool of resistance.

Photo: IRNA

Do Sanctions Pose an 'Irreversible Knowledge' Problem?

As the deadlock over the future of the Joint Comprehensive Plan of Action (JCPOA) continues, there is growing concern that Iran’s nuclear activities are hollowing out the benefits of the nuclear deal, even if it were to be successfully restored. Western governments believe that Iran’s enrichment activities are allowing Iranian nuclear scientists to gain “irreversible knowledge.” Even if Iran comes back into full compliance with its non-proliferation commitments under the JCPOA, it will have edged closer to becoming a threshold nuclear state.  

Irreversible knowledge is powerful shorthand. A joint statement issued by France, Germany, and the United Kingdom in March 2021 noted that the recent breaches of the JCPOA were “providing Iran with irreversible knowledge gain that it did not possess prior to signing the JCPOA, as well as permanently and significantly enhancing Iran’s enrichment capacity.” In January of this year, Republican lawmakers sent a letter to U.S. Secretary of State Antony Blinken to urge him to abandon the nuclear talks and increase pressure on Iran, in part because Iran was continuing “to gain irreversible knowledge” as it produced more enriched uranium. In May, Israeli Defense Minister Benny Gantz warned that “Iran continues to accumulate irreversible knowledge and experience in the development, research, production, and operation of advanced centrifuges.”

Clearly, the concept of irreversible knowledge is well defined among those parties seeking renewed non-proliferation commitments from Iran, as well as those parties seeking to scupper any deal. According to Kelsey Davenport, the Biden administration will remain committed to the nuclear talks so long as the “the non-proliferation benefits of restoring the JCPOA outweigh the irreversible knowledge that Iran has gained.” Crucially, the nuclear deal prevents Iran from gaining further nuclear knowledge—commitments to cease significant enrichment activities and to dismantle advanced centrifuges reflect concrete measures that prevent the kind of nuclear research and production activities consistent with a weapons programme. By preventing additional knowledge gains, the JCPOA restricts Iran’s inherent nuclear capabilities.

In return for its compliance with these restrictions and strict monitoring, Iran receives significant sanctions relief—this is the basic quid-pro-quo of the JCPOA. Iran continues to place significant value on sanctions relief, especially as its economy languishes, but even so, the terms of the agreement are not as fair as they might seem. 

Countries that apply sanctions (sanctionists) regularly use economic coercion to achieve non-proliferation goals. The Biden administration, like its predecessors, believes that the economic pain of sanctions forces uncooperative countries like Iran to the negotiating table, where non-proliferation agreements can be hammered out. Whether Iran entered into the nuclear negotiations because of economic pressure is up for debate. Notwithstanding, non-proliferation experts have heralded sanctions as a critical part of the arms control toolbox.   

But what if the use of sanctions as part of non-proliferation diplomacy introduces another kind of irreversible knowledge problem, one overlooked by Western policymakers? Afterall, non-proliferation agreements impose no restrictions on the ability of sanctionists to further develop their means of economic coercion. Even after a deal like the JCPOA is adopted and implemented, sanctionists can continue to advance their understanding of how to apply and enforce sanctions with devastating effect. This irreversible knowledge is gained in three ways.

First, sanctionists can continue to study the target’s economy even after the implementation of a non-proliferation agreement. Some Iranian critics of the nuclear deal have complained that re-entering the JCPOA will make Iran more vulnerable to sanctions by increasing economic dependence on the West. But the issue is more subtle than that. Whether or not trade increases with Western companies after the lifting of sanctions, Western governments can continue to study the Iranian economy to understand its composition and its vulnerabilities in ways that will aid the design of future sanctions, whether those are broad sectoral measures or specific designations. Indeed, the U.S. continued to apply sanctions on Iran even after the nuclear deal was agreed, designating additional entities on the basis of terrorism or human rights related authorities. Even if these moves did not amount to a direct violation of the JCPOA, they did reflect how the U.S. was continuing to gain knowledge about how to target Iranian individuals and firms even after the deal’s implementation. 

Second, sanctionists can continue to apply sanctions on other countries in ways that advance knowledge about how to make sanctions hurt. Were the JCPOA restored in full today, the United States and Europe would still be applying sanctions on a wide range of countries, most notably Russia. The application of sanctions in Russia, for example, provides practical experience that can inform how future sanctions on Iran might be made more harmful. Were Iran to gain irreversible nuclear knowledge in an analogous manner, Iranian nuclear scientists would be enriching uranium outside their borders, while ceasing the problematic research in Iran. In this way, even if sanctionists were to completely abstain from applying sanctions on Iran after the implementation of the JCPOA, they would still retain the ability to use sanctions in other countries in ways that expand capabilities.

Third, sanctionists can continue to strengthen the institutions responsible for designing and imposing sanctions. Whereas Iran could not install more centrifuges were it to re-join the nuclear deal, the U.S. can continue to increase staff within key offices such as the U.S. Treasury Department’s Office of Foreign Assets Control. As a result, the JCPOA actually exacerbates the escalation dominance of the U.S. over Iran. Sanctionists are inherently better prepared for the breakdown—whether wilful or accidental—of any non-proliferation agreement in which sanctions relief has been traded for non-proliferation commitments.

In this way, the irreversible knowledge gained by sanctionists represents a serious challenge to non-proliferation efforts. Conceptually, as U.S. and European officials increasingly conceive of sanctions as “economic weapons” and describe themselves as “nerd warriors” it is appropriate to apply to sanctions the concept of irreversible knowledge that has so far been only been invoked in the context of Iran’s nuclear programme.

The threat posed by the irreversible knowledge of sanctionists has weighed on Iran’s participation the nuclear negotiations. It is not merely the possibility of Trump’s re-election in 2024 that has cast a shadow over the talks, but also the fact that any administration that might wish to reimpose sanctions on Iran in the future will have a much deeper understanding of Iran’s economic responses to maximum pressure. For example, when the Trump administration sought to drive Iran’s oil exports down to “zero,” they did not expect that Iran would end up maintaining exports above 1 million barrels per day, with oil passing through the UAE and Malaysia, before heading to China. The role of intermediation in sustaining oil exports under sanctions is now a known feature of Iran’s economic resilience strategy. This datapoint can be incorporated into future sanctions design. There are countless other examples of where real and actionable knowledge has been gained by the U.S. and Europe that can be used to hammer Iran’s economy. As demonstrated by the circumstances of Trump’s withdrawal, Iran’s compliance with its commitments under the nuclear deal offers no guarantee that it will avoid the return of sanctions. 

Western negotiators have tried to account for Iran’s fears about another U.S. withdrawal from the JCPOA by engaging in a dialogue on possible political or technical guarantees that might serve to make the nuclear deal robust. But the discussion over guarantees is focused on reducing the probability of sanctions “snapback.” No solutions have been offered to try and curtail the impact of snapback. Theoretically, the impact of snapback gets worse as the U.S. and Europe gain more knowledge about how to deploy sanctions for maximum effect. Truly mitigating the risks for Iran means addressing both probability and magnitude.  

Western diplomats will no doubt continue to use sanctions to advance their non-proliferation agenda and the JCPOA is a good deal that ought to be restored. But Iran’s bitter experience under the nuclear deal makes clear that to create more durable and equitable non-proliferation agreements, Western officials must find ways to account for the fact that there is a fundamental asymmetry in the manner in which non-proliferation agreements deal with the issue of irreversible knowledge. Sanctions work by weaponising normal economic interdependencies. This makes it difficult to imagine that the knowledge gains of sanctionists can be curtailed. At best, these knowledge gains must be compensated for, either by limiting the non-proliferation demands made of countries like Iran, for example by granting them more leeway to undertake certain kinds of research, or by devising other more complex mechanisms, such as some kind financial annuity for non-proliferation agreements that kicks-in irrespective of the fault for the deal’s demise. 

For now, the solutions are unclear. But if they are to be found, policymakers and experts committed to global non-proliferation must recognise their one-sided approach to irreversible knowledge within the context of non-proliferation regimes. Under the JCPOA, Iran’s ability to gain nuclear knowledge is constrained, but the U.S. and Europe can continue to hone their sanctions. This asymmetry is emblematic of a significant flaw in all agreements that trade sanctions relief benefits for nuclear restrictions and monitoring commitments.

Photo: state.gov

Removing the IRGC from the FTO List Risks Nothing

As we wait for the resumption of the Iran nuclear negotiations, reports indicate that the “final hurdle” is Iran’s demand for the removal of a key sanctions designation. Iranian negotiators are seeking the removal of the Foreign Terrorist Organisation (FTO) designation placed on the Islamic Revolutionary Guard Corps (IRGC), part of Iran’s armed forces. The FTO designation was imposed by the Trump administration in April 2019.

President Biden will probably lift this designation to clear the way for the mutual restoration of the Joint Comprehensive Plan of Action (JCPOA). The restoration of the JCPOA would see Iran’s nuclear programme once again placed under the strictest monitoring and verification regime ever devised, ending a four-year period of growing concerns over possible Iranian proliferation. But even with the enormous security gains on offer, Republic lawmakers and other critics are suggesting that the removal of the FTO designation is an unacceptable concession to make.

The arguments being made against the removal of the FTO designation are weak. More judicious critics of the move concede that little is at stake. Matthew Levitt of the Washington Institute for Near East Policy has written that the designation “was largely symbolic” and that its removal “would have few if any legal implications.” Still, he considers removing the FTO label to be a “terrible idea”—a determination that reflects how politics can trump pragmatism in American policymaking.

Levitt makes four arguments as to why Biden should not remove the FTO designation. First, he argues that Iran is treating the removal of the FTO designation as a red line because the leadership “wants something it can point to when attempting to persuade investors that it is not really involved in terrorism.” Levitt ignores the fact that the Iranian leadership has not demanded the undoing of October 2017 designation of the IRGC as a Specially Designated Global Terrorist (SDGT). Nor has Iran insisted that its status under US law as a State Sponsor of Terror be rescinded. Iran is obviously not seeking to change the minds of foreign investors, whose decisions to engage in the Iranian market will remain predicated on significant due diligence to avoid transacting with IRGC entities, all of which will remain under sanctions. Iranian negotiators are seeking the removal of the FTO designation to demonstrate to the IRGC’s leadership that a constructive stance towards diplomacy with the United States can bear fruit. It is precisely because the imposition of the FTO designation was politically symbolic that its removal is being sought.  

Second, Levitt argues that because Iran has insisted that the “nuclear negotiations must remain focused on its nuclear activities alone,” it would be a mistake to “provide relief from any terrorism-related sanctions.” Doing so would “undermine the efficacy of other non-nuclear sanctions.” But this argument is undercut by the Trump administration’s own messaging. The White House statement on the FTO designation makes clear that the move was not imposed as a discrete action to counter Iranian terrorism, but rather as a means to “significantly expand the scope and scale of our maximum pressure on the Iranian regime.” A central feature of the “maximum pressure” campaign was the “sanctions wall,” a rapid expansion in the scope of the Iran sanctions programme intended to make it more difficult for President Biden to re-enter the Iran nuclear deal.

Given that the FTO designation was symbolic and that its removal will not meaningfully change the legal status of the IRGC, the designation was clearly imposed with another goal in mind. The FTO designation was a non-nuclear sanctions measure imposed to make nuclear diplomacy more difficult. If removing the designation is necessary to secure the tremendous national security benefits of the JCPOA, then doing so is justified. In fact, failing to remove the designation would undermine the efficacy of US sanctions policy because it would prove that presidents can tie the hands of their successors in ways that make diplomacy nearly impossible to conduct.

On a related note, Levitt claims that “to protect the credibility of US sanctions authorities worldwide… the IRGC should not be removed from the FTO list until there is evidence it has ceased terrorist activities.” This is, on face, the most logical argument being made by those opposed to the removal of the FTO designation. The IRGC will almost certainly continue to engage in its “forward defence” activities, including support for proxies that the US considers terrorist groups, in the aftermath of the nuclear deal. At the same time, removing the designation would not increase the threat posed by the IRGC. Speaking to reporters last week, CENTCOM commander General Kenneth McKenzie explained that he did not expect the removal of the FTO designation on the IRGC to impact US forces. “In terms of the way we think about [the IRGC], in the terms of the way we think about the threat, and what they do on a daily basis across the theatre, I don't think much would change,” he stated.

Given that any operational impact will be limited, there are two reasons why the removal of the FTO designation is warranted absent a change in behaviour. First, the removal of the FTO designation cannot be construed as a signal that the IRGC has ceased its support for terrorism. The organisation will remain subject to wide range of sanctions, including the SDGT designation and there will be no change in messaging from the Biden administration on this point. Second, the US government also assesses that the IRGC has major influence over Iran’s national security doctrine. That the nuclear negotiations have reached this late stage clearly demonstrates that there is a consensus among Iranian policymakers, including among the ranks of the IRGC, that restoring compliance with the JCPOA is in the country’s interest. Returning to Levitt’s concern over the credibility of US sanctions, a symbolic move to recognise the IRGC’s inherent support for the successful conclusion of the Iran nuclear negotiations is sensible, especially as the Biden administration aims for future dialogue on a wider set of security concerns.

Finally, Levitt points to a “serious messaging problem” and claims that “America’s partners and allies in the region” would be dismayed if the US were to “take pressure off the [IRGC] by delisting it.” Israeli Prime Minister Naftali Bennet and Foreign Minister Yair Lapid have written a joint letter urging President Biden not to scrap the FTO designation. Reports claim that UAE leaders are “shocked” that the FTO designation may be removed. But these various protests appear to be part of the horse-trading by partners and allies that has long burdened Biden’s efforts to restore the nuclear deal. By seeking to impose political costs at this late stage, regional leaders are aiming to extract their own concessions from the Biden administration as part of their acquiescence to a nuclear deal that looks increasingly likely.

Even so, GCC leaders have yet to directly comment on the possibility that the FTO designation will be removed. The possibility of removal became public knowledge in the summer of last year. The GCC issued a joint statement with the United States in support of the JCPOA last November. It is highly unlikely that the GCC leaders would treat the removal of the FTO designation as a kind of red line given their interest in maintaining a regional security dialogue that includes bilateral engagement with Iran. Senior Saudi and Emirati officials have held meetings with Iranian officials, including those linked to the IRGC, over the past year. Consider also that the UAE just hosted an unrepentant Bashar al-Assad, leaving the Biden administration “troubled.” Clearly, regional leaders are ready to set optics aside when there are hard security benefits to be gained.  

Given the noise about the FTO issue over the last few weeks, the Biden administration is already paying a political cost for the anticipated removal of the designation. But the administration should not lose sight of what will be gained. Removing the designation in no way changes the legal or political status of the IRGC, but it does enable the restoration of the Iran nuclear deal. For those who care about US national security, the choice is clear.

Photo: IRNA

How to Think About Getting Foreign Firms Back into Iran

When the Joint Comprehensive Plan of Action (JCPOA) was adopted in July 2015, a wide range of companies began to explore commercial opportunities in Iran, anticipating the lifting of international sanctions that would follow about six months later. But the initial rush of commercial interest never became a cascade—while a significant number of foreign companies did commence or resume operations in Iran, there was no larger, second cohort that followed. Companies that did attempt to enter the Iranian market faced significant legal and financial challenges. The experiences of these companies deterred other entrants. Then, a little over two years after the lifting of sanctions, President Donald Trump made good on a campaign promise and withdrew from the Iran nuclear deal, unilaterally reimposing US secondary sanctions. The companies that had rushed into Iran quickly rushed out.

This history poses a dilemma for Iran’s negotiators as they seek to restore the JCPOA. While “modest progress” has been made during the 8th round of negotiations, one sticking point continues to be Iran’s demands around not only how US secondary sanctions will be lifted, but whether additional non-nuclear sanctions will be imposed by the US. In a recent interview, Iranian foreign minister Amir Abdollahian stated, “We demand guarantees that include not imposing any new sanctions, and not reimposing sanctions after lifting them under any pretext.”

Articulated this way, Abdollahian’s demand is problematic. Can Iran, with its reputation as a missile proliferator, proxy supporter, and human rights violator, really expect that the US won’t impose any new sanctions? The answer is no, but it is likely that Abdollahian knows this. His comments point to a legitimate concern as to whether sanctions relief commitments can be considered credible if sanctions imposed for transgressions beyond the nuclear file make it harder to conduct the trade and investment explicitly envisioned in the nuclear deal. For example, if the US were to maintain a tempo of human rights sanctions designations in the period of JCPOA implementation, it would contribute to a chilling effect that may deter companies and banks from proceeding with the trade and investment envisioned in the JCPOA, even if those sanctions are targeted on specific non-commercial actors. Of course, the US and Europe are not going to take sanctions, now the primary tool of Western statecraft, out of their toolkit. So how should the negotiators in Vienna balance the need to deliver economic benefits to Iran with the realistic expectation that coercive measures will continue to be used for non-nuclear reasons?

Timur Kuran’s seminal work on cascade theory—much of it completed in collaboration with Cass Sunstein—can help answer this question. Cascade theory is a heuristic that can be used to analyse a wide range of situations in which private preferences, perceptions, and thresholds combine to determine whether band wagoning will take place. While cascade theory has most often been used to analyse the decisions of individuals, it can also be applied to the commercial decision-making of firms. Firms can be understood to have their own preferences and thresholds, which are shaped by the perception of risk, whether commercial, legal, or reputational. For example, this body of research includes work on “reputation cascades” that influence political decision-making by corporations, and cascades observed in the decision making of investors in capital markets.

Along these lines, cascade theory offers a way to understand how the application of sanctions can lead to changes in firm behaviour. Major sanctions enforcement actions, such as the fines levied on a series of European banks by the Obama administration between 2012 and 2014 for knowing violations of US primary sanctions, can serve to change perceptions of perceived risk among other firms. These fines contributed to “de-risking” among many banks and multinational corporations which opted to limit their exposure to jurisdictions in which sanctions have been imposed, even in cases in which their commercial activities remained clearly compliant. In such a situation, cascade theory helps us understand how enforcement actions can serve as a signal to firms. In the cases in which the newly perceived risks exceed the firm’s threshold, behaviour is likely to change. One type of cascade occurs when companies decide to withdraw from risky jurisdictions. By 2016, responding to heightened regulatory risk, 75 percent of major banks reported having reduced their correspondent banking connections, a trend which predominantly saw major American and European banks limit ties with banks in the Global South.  

The global trend of de-risking is an example of cascading among firms, triggered by the punitive and deterrent power of sanctions and related enforcement actions. But cascade theory may also be insightful examining the inverse situation—what happens when policymakers decide to lift sanctions on a country, and seek to encourage firms to engage in trade and investment? In recent years, there has been increased focus on the “credibility” of sanctions relief—while American and European governments may lift sanctions, the move does not necessarily lead to the envisioned trade and investment, compromising the diplomatic agreements in which sanctions relief is a critical part of the negotiated quid-pro-quo.  

The sanctions relief afforded to Iran in January 2016 as part of the implementation of the JCPOA did not lead to a cascade. While an initial cohort of multinational companies did re-enter the Iranian market, many companies, and especially banks, opted not to reengage, perceiving that the risks remained high. The lower-than-expected level of economic engagement that followed from the implementation of the JCPOA arguably made it less costly—both politically and economically—for President Donald Trump to unilaterally withdrawal from the agreement in May 2018, at a time when Iran remained in full compliance with its nuclear commitments.

As the P5+1 and Iran continue to seek the restoration of the nuclear deal, Iranian negotiators have demanded that the world powers intervene to ensure that sanctions relief occurs “in practice” and not simply “on paper.” The difficult history of the JCPOA makes clear that successful implementation of sanctions relief requires cascading, and the design of implementation policies ought to consider how those policies will impact the perceptions and thresholds of firms. Adapting from Kuran’s general model, it can be stated that firms with different preferences and risk appetites will have different market entry thresholds (T). To illustrate this variation, we can create the following threshold sequence, notating the thresholds for ten firms:

A = (0, 20, 20, 30, 40, 50, 60, 70, 80, 100) 

In this sequence, Firm 1 (T1=0) is willing to begin conducting business in Iran immediately after the lifting of sanctions.  At the other end of the sequence, Firm 10 (T10 = 100) will never enter the Iranian market. But the thresholds of other firms are responsive to a value we can call S, the proportion of firms that have already entered the market. For example, Firm 2 (T1=20) will only enter the market when at least 20 percent of firms have done so—a condition not met by the market entry of Firm 1 (T1=0), the entry of which means that S=10. Under such conditions, there is no cascade—the thresholds of most firms remain too high.

The variation in thresholds across such a sequence reflects the trade-off between external and internal payoffs faced by firms. For example, even if the external payoffs represented by entering a formerly sanctioned market are clear, such as new revenue streams, the internal costs may remain too high for the firm to decide to act on the evident economic opportunity. In this way, the internal payoff can itself be expressed through a threshold sequence comprised of the departments necessary to make a firm-level decision. For example, a firm’s decision to operate in a formerly sanctioned market will typically require buy-in from the business development department, the finance department, the legal department, and often the board of directors. Top executives and individuals in legal and compliance roles in firms conducting business in sanctioned jurisdictions can be held personally liable for compliance failures. These individuals have among the highest thresholds for supporting a business decision to work in a market like Iran and can veto the plans of other departments willing to pursue the opportunity, in effect setting the threshold for the firm. Broadly speaking, engaging in business shortly after the lifting of sanctions requires evaluating a trade-off between the external reward of previously untapped business opportunities with the internal cost of onerous operational and compliance requirements. Additional sanctions designations made after the lifting of JCPOA-related sanctions will inherently impact these trade-offs.    

Policymakers seeking to encourage commercial activity following the lifting of sanctions must therefore try to increase the external rewards and minimise the internal costs. This can be done through a series of policy interventions that go beyond the simple lifting of sanctions. If the sanctions relief implemented “on paper” results in a threshold sequence given by A, then we can conceptualise a different threshold sequence for sanctions relief implemented “in practice,” which we can call A*: 

A* = (0, 10, 20, 30, 40, 50, 60, 70, 80, 100)

In this sequence, as in sequence A, Firm 1 (T1=0) is ready to engage in business simply because sanctions have been lifted. But let’s assume that some new policy intervention has caused the threshold of Firm 2 (T1=10) to fall from 20 to 10. This means that the decision of Firm 1 to enter the market will trigger Firm 2 to do the same because S=T2. That small change is also sufficient for A* to become a cascading sequence, as the decision of Firm 2 triggers market entry by Firm 3 and so forth until nine-tenths of the firms are active, with Firm 10 (T10=100) the only holdout. But, if some subsequent policy intervention, such as the application of new sanctions, causes the threshold of Firm 4 (T4=30) to rise, the cascade will be interrupted because S will longer be equal to T4.

What the sequence A’ illustrates therefore is that the policy intervention needed to trigger a cascade does not necessarily need to be so significant as to shift the thresholds of all firms in the sequence. Rather, it should be targeted to create a change in behaviour among those firms whose decision to enter the market would trigger the cascade. Policymakers seeking to make sanctions relief commitments more credible can therefore use cascade theory to conceptualise different sets of interventions intended to encourage more companies to engage in trade and investment in formerly sanctioned jurisdictions more quickly.

These interventions ought to focus on calibrating the external and internal payoffs. First, to change external payoffs, policymakers, including in Iran, must seek to make the economic benefits of early market entry more significant. Presently, being among the early movers after the lifting of sanctions means contending with high costs of doing business. These costs include higher transaction fees and risk premiums related to banking services and financing, or surcharges related to the importation of equipment or technology necessary to operate local facilities or infrastructure. These costs could be reduced through incentives, such as grants and loans that would see the state shoulder some of the costs and financial risks in the initial period of sanctions relief, increasing the external payoff. While some European countries did seek to provide state-backed credit lines to support companies aiming to engage in trade with Iran, the operationalisation of these credit lines was clumsy, meaning that no facilities were available to companies even two years after the lifting of US and EU sanctions, and that there was no impact on the perceived external payoff.  

Second, policymakers will also need to address the internal costs that can keep companies from pursuing the opportunities afforded by sanctions relief. Practically speaking, these interventions would reduce the perceived legal risks of commercial activities in formerly sanctioned jurisdictions. Here, policymakers should provide greater legal clarity around the activities made permissible following the lifting of sanctions and provide opportunities for firms to confirm, for example through the solicitation of so-called comfort-letters, the specific permissibility of their planned activities beyond the blanket guidance currently provided by regulatory authorities. Moreover, there should be an effort to reduce the threat of personal liability around inadvertent sanctions violations. Finally, the possible impact of additional sanctions designations, such as sanctions imposed after the implementation of the JCPOA on human rights grounds, need to be considered in the context of the trade-off between internal and external payoffs. If Western governments decide that a sanctions designation must be made, the impact of that designation on internal payoffs needs to be considered. Of course, targeted sanctions imposed on human rights grounds are not intended to interfere with the broad implementation of the JCPOA, and so the unintended consequences ought to be mitigated, most likely by ensuring that the external payoff continues to outweigh the internal risks. Such an approach will increase the likelihood that firms perceive a better trade off in conducting business in formerly sanctioned jurisdictions—this will lead to a more favourable threshold sequence, in which there is a higher probability of a cascade.

Designing policy interventions to make sanctions relief more credible and effective will be crucial not only for the restoration of the nuclear deal, but also for the long-term viability of sanctions as a tool of economic statecraft. Cascade theory is a compelling heuristic to understand how such interventions will need to influence firm behaviour to create the conditions necessary for an increase in trade and investment in post-sanctions environments.

Photo: IRNA

The Case for Optimism on Iran in 2022 and Beyond

Back in October, I was given a piece of advice. I was having coffee with an admired journalist who has covered Iran for many years. This was before the Raisi administration had decided to restart the nuclear talks—the journalist and I were discussing the growing concern in Western capitals that Iran would never return to the negotiating table. I did not share this concern.

I explained to the journalist that given the way in which the Raisi administration had talked about its goal of lifting sanctions and given the direction of its regional foreign policy, I had little doubt that the talks would resume. Across the table there was some polite nodding, but eventually I was offered some well-intentioned advice, a nugget for a naïf. I was told to be careful about being optimistic, because if I was wrong too many times “people would stop listening” to me. The conversation has bothered me for months.

Of course, the nuclear talks did restart five weeks later—a minor vindication. But in the subsequent weeks, in conversations on the likely trajectory of the talks, officials and journalists told me again and again that I was the only optimistic person they had spoken to. Most of the coverage and commentary on the negotiations struck a decidedly pessimistic tone. More articles were written about “Plan B” than there were about “Plan A”—there was startlingly little analysis on what it would take to make the talks successful, but ample analysis of how to plan a new pressure campaign or military strikes. The assumption was that the talks would fail, leading either to an Iranian nuke or a regional war. Grim stuff.

So far, the talks have not failed, though it seems that the only policymakers actively seeking to inject some optimism in the talks are the Iranian delegation and Russia’s chief negotiator, Mikhail Ulyanov, whose Tweets read like the encouragements of a cheerful uncle. Western officials have pointed to “modest progress” in the talks but have so far failed to declare with any conviction that the restoration of the JCPOA is actually achievable. Most of the Western messaging insists that “time is running out” and implies failure is likely because Iran wants the talks to fail.  

I recently came across a quote adapted from Dennis Gabor, who won the Nobel Prize in Physics in 1971. Gabor suggests that “the best way to cope with the future is to invent it.” The future is inherently uncertain and as human beings we are uncomfortable with uncertainty—if we cannot see what lies around the corner, we are hardwired to be wary. As Gabor notes in his 1963 book, Inventing the Future, from which the quote is adapted, the typical approach to dealing with this uncertainty is to try and “predict” the future. We tend to evaluate what could happen and prepare ourselves accordingly. But Gabor’s insight is to remind us that the future is, to a significant degree, what we make it. We have a capacity for invention.

Yet, for those working on policy issues on Iran or the wider Middle East, it is prediction, not invention, that appears to be the primary focus of their intellectual outputs. This is a major reason why the outlook for the region is always so grim. Prediction rewards pessimism. Consider the meteorologist, whose job it is to predict the weather, but who has no means to influence whether the sun shines or the rain pours. If the meteorologist predicts sunshine, and then it rains, those who were drenched in the unanticipated downpour will rue him and his forecast. If it happens one too many times, they will stop listening to his forecast altogether. But if the meteorologist predicts rain, and it ends up being a bright and sunny day, few will complain that they had prepared for gloomy weather by taking along an umbrella.

If I were a meteorologist, I would heed the advice I was given in October. It makes sense—if your sunny forecast is wrong too many times, people will stop listening to you. But I am not a meteorologist, and prediction is not the extent of how I can cope with the uncertainty of the future. Policymakers, policy experts, and even journalists—who shape how we think about complex problems and who chronicle the effectiveness of attempted solutions—have forgotten, at least in the case of Iran, that they have a capacity to invent the future.

Over the last few months, I had been speaking to Western officials and making the case for optimism. Each time I set out the facts that support my generally optimistic outlook, I am told “that is an interesting theory.” Implicit in this response is a surprising discomfort with the theoretical. The officials are characteristically diplomatic, but I can sometimes tell that they are asking themselves “what planet is this guy living on?”

The funny thing is that I am, “in a sense I am unable to explicate further,” on a different planet. Writing about the ways in which scientists may differ in their interpretations of observable phenomenon, Thomas Kuhn, the 20th century’s foremost philosopher of science, writes that “the proponents of competing paradigms practice their trades in different worlds.” Kuhn’s observation makes clear that while most policymakers and analysts might understand the factual basis for my optimistic outlook, the existence of a plausible theory suggesting that the future may be better is not seen as a sensible way to cope with uncertainty. Given the fraught history of Iranian foreign policy, having low expectations makes sense. The story of the Iran nuclear deal is a story of profound disappointment—at least so far. But even if low expectations help those of us working in this space to cope at some personal level, it is difficult to see how pessimism serves us if we are professionally committed to fixing things.

In 2018, when the Trump administration withdrew from the JCPOA, European governments scrambled to find some means to preserve the economic benefits of the deal for Iran. The reimposition of US secondary sanctions was going to have a major impact on Iran’s links with the global financial system, and this was quickly identified as a problem for continued trade and investment. The EU and E3 began discussing whether some kind of “special purpose vehicle” could be established to facilitate payments for trade absent direct banking links. Over the next two years, working first with Axel Hellman, and then Sahil Shah, I wrote some of the first detailed policy briefs exploring how such a special purpose vehicle could work. These briefs helped, in a small way, to shore up the case for the establishment of INSTEX, a novel state-owned trade intermediary.

As with many inventions, the early iteration of INSTEX unfortunately failed. It has not had any real impact on Iran’s ability to trade with the world in the face of US secondary sanctions. There are numerous reasons for this failure, but I find it fascinating that implicit in a lot of the criticism of the INSTEX project is the idea that it was foolhardy for European officials to try to invent something new. As INSTEX faltered in its initial stages, eliciting criticism, pessimism crept back in, and this has prevented European governments from giving the project adequate support. Imagine if Thomas Edison, when working on the incandescent light bulb, was so perturbed by the failure of his first prototype that he questioned whether an electric light can be created at all. When it comes to Iran policy, setbacks have a troubling tendency to lead policymakers to reject optimistic scenarios, even when those scenarios remain theoretically possible. To put it another way, when policies fail, policymakers change their interpretation of the facts, rather than tweaking their policies. As the INSTEX project lost momentum, European officials began to speak more forcefully and negatively about Iran’s missile program and its nuclear escalations—the future looked uncertain, and pessimism seemed the easier way to cope.

But when it comes to Iran policy, what is easy, is not always what is best. This is precisely why there are so few new ideas about what US and European policy on Iran should look like. There is no positive vision for what Iran’s place in the world should be in five, ten, or fifty years. There is little effort made to create new tools or craft new strategies that could help bring about some new vision of the future. Sure, repeating pessimistic predictions is the intellectually and emotionally easier means of coping with an uncertain future. But to pursue optimistic invention is the better means.

As we look forward to 2022, the case for optimism on Iran is clear. This case does not depend on some newfangled set of facts or observations. Iran is thoroughly analysed and reported upon—the facts are well-known. The case for optimism rests instead on how we choose to interpret these facts and whether we marshal them to find new, innovative, and inventive pathways for policy, or whether we choose instead to make dire predictions and gird ourselves accordingly. In this sense, the choice we face as those working on Iran policy is not about choosing between Plan A or Plan B—it is much bigger than that. The choice is about whether we want to live on Planet A or Planet B.

In 2022, I’ll be tinkering away on Planet A. It’s a different world.

Photo: IRNA

Trade, Not Investment, is Iran's Sanctions Relief Must-Have

Last week, the seventh round of the negotiations over the fate of the JCPOA saw Iran table an initial proposal on sanctions relief. The proposal led to complaints from Western officials that the Iranian negotiators were being unreasonable. Iranian officials responded by insisting their proposals were “pragmatic.” The initial exchange suggested to some that disagreements over sanctions relief issue are going to prove the intractable because what Iran wants—significant investment—is impossible for the P5+1 to guarantee. Gérard Araud, former French ambassador to the United States and an astute observer of the nuclear talks, tweeted that “Even if the JCPOA was restored, no Western company would dare invest a cent in Iran.”

Even if the JCPOA was restored, no Western company would dare invest a cent in Iran, no Western bank would finance any deal in Iran with the threat of the return of US sanctions in 2025. Once was enough. The Iranians know it.

— Gérard Araud (@GerardAraud) December 3, 2021

Araud is rightly concerned. Western companies will be reluctant to invest in Iran due to fears that a Republican president could reimpose sanctions in 2025, putting their investments in jeopardy. In the months following the implementation of the JCPOA in January 2016, a flurry of big-ticket investment deals were announced. These deals became the symbols of the economic benefits of sanctions relief and of Iran’s moves towards normalised economic relations, namely with Europe and China. The deals included planned investments in Iran’s oil fields by Total and CNPC, the joint ventures planned by PSA Group and Volkswagen in Iran’s automotive sector, and Novo Nordisk’s decision to build a manufacturing plant in Iran, among others. But following President Trump’s decision to withdraw from the nuclear deal, essentially all European and Chinese efforts to invest in Iran unravelled (the Novo Nordisk project, with its humanitarian dimension, proved a rare exception).

For the P5+1, a significant technical interventions will be necessary to create conditions conducive to foreign direct investment. But, the economic value of the nuclear deal does not actually hinge on increased foreign direct investment, which was primarily sought by Iran as a commitment mechanism for technology transfer.

But for most Iranian manufacturers, the ambition is not to produce high-technology products. Rather, the ambition is to use high-technology equipment to more efficiently produce the wide range of basic goods that can be sold in the domestic and regional markets. Iran will receive most of the benefits on offer from sanctions relief when Iranian manufacturing firms can purchase new equipment from foreign suppliers that can be used to increase the quality and quantity of output. Such purchases represent a critical example of domestic investment deferred due to sanctions related pressures.

The industrial equipment on which Iranian factories depend is overwhelmingly imported from just two sources: the European Union and China. This trade can be tracked by looking at the relevant chapters of the so-called Harmonized System used by customs agencies categorise goods. Chapter 84 covers equipment such as boilers, pumps, turbines, furnaces, freezers, ovens, pulleys, cranes, forklifts, and other machinery that would be seen on a factory floor. Chapter 85 covers electrical equipment such as motors fuses, switches, lasers, heaters, magnets, batteries with various industrial applications. Looking at European and Chinese exports to Iran across these two categories offers a measure of whether Iranian factories are proving able to maintain or upgrade the equipment on their assembly lines. What’s clear is that sanctions significantly reduced European and Chinese exports of these goods to Iran, with significant consequences for Iranian productivity. Between the first quarter of 2018, prior to Trump’s withdrawal from JCPOA, and the last quarter of the year, by which point US secondary sanctions had been reimposed in full, Iran’s industrial output fell by 20 percent.

Part of the drop in production can be attributed to reduced demand. But many manufacturing firms also struggled to maintain output given difficulties not only in importing raw materials and intermediate goods, but also the parts and equipment necessary to keep assembly lines running at high capacity. Moreover, it wasn’t the wind down of foreign investment that was responsible for the drop in production—few investment projects had broken ground. Rather, it was disruption in the availability of European and Chinese industrial goods that saw Iran’s manufacturing sector regress.

In 2016, the first year of sanctions relief, European industrial exports to Iran averaged EUR 250 million per month. Over the first 8 months of 2021, the monthly average has been just EUR 80 million. That means, on an annualised basis, Iran is importing about EUR 2 billion less industrial goods from Europe than prior to the reimposition of US secondary sanctions.

The trends are similar when looking at Chinese exports to Iran. In 2016, average monthly exports to Iran totalled about USD 453 million. Over the first 10 months of 2021, the monthly average has been just USD 241 million. On an annualised basis, that is a difference of about USD 2.5 billion.

Looking at the European and Chinese data together suggests that sanctions relief could be worth around USD 4.8 billion in additional annual industrial exports to Iran from its two largest suppliers, if trade returns to pre-sanctions levels. A significant portion of the goods imported in these two categories are purchased as part of fixed capital investments by Iranian manufacturing companies, meaning that Iranian firms can be expected to invest billions of dollars in their own production capacity if sanctions are lifted and European and Chinese exports rebound.

Such a rebound is probable. For European and Chinese companies, the decision to enter the Iranian market as a supplier is far less risky than the decision to enter as an investor. Even with concerns that JCPOA implementation may falter again in 2025, the data from 2016-2017 makes clear that trade in industrial goods can rebound quickly, even in an environment where banking challenges and legal ambiguities persist. Many European and Chinese companies will be able to make lucrative sales to Iranian customers within the 2-3 year window in which sanctions relief is basically assured, especially those suppliers who are currently selling to Iran while US secondary sanctions remain in place.

Importantly, the fact that trade in industrial goods can rebound in a short period of time does not mean that the benefits will be short-lived. Equipment like pumps and furnaces have lifespans up to 20 years. Many Iranian factories are hampered with old equipment. Sanctions relief would enable these firms to finally upgrade old equipment, much of which was installed in the early 2000s during which Iranian industry underwent a critical development phase characterised by the installation of European manufacturing equipment. Should more Iranian companies be able to avail themselves of the opportunity to invest in new industrial equipment following the restoration of the JCPOA, Iran industrial output would benefit from higher productivity and greater resilience for a decade or longer, a fact that makes sanctions relief, even if cut short by political events, fundamentally attractive.

Economically speaking, trade, not investment, is the key for robust Iranian growth in the years immediately following restoration of the JCPOA. Attracting foreign direct investment would of course maximise Iran’s developmental outcomes, and has a crucial role to pay should Iran aim to return to its pre-sanctions growth trajectory, but such investment is not essential for Iran’s short-term economic recovery. The primary goal for the P5+1 should be to ensure that trade rebounds as quickly and robustly as possible. Here, the provision of trade finance is important and technical work will need to be done to ensure that global export credit agencies can serve companies that wish to sell equipment to Iran. Still, finding solutions to extend billions in trade finance will prove far easier than facilitating billions in foreign direct investment in the short term.

Politically, facilitating foreign direct investment would usefully demonstrate that the P5+1 is making good on economic commitments set forth in the JCPOA. On one hand, the Raisi administration would surely welcome more intensive efforts on the part of Western governments to ensure foreign investments can materialise, particular in sectors where such investment is really necessary like the energy sector. On the other hand, the fact that trade, and not investment, is the real economic must-have will suit the Raisi administration just fine. President Raisi is unlikely to make Western foreign investment a major target of JCPOA implementation given the emphasis on economic self-reliance that colours his administration’s economic planning and the reluctance to undertake deeper structural reforms on which many foreign investors will insist. But by focusing on trade, Raisi will have a compelling story to tell—sanctions relief will enable Iran to buy the industrial goods that will undergird the country’s economic resilience for the next two decades.

Photo: IRNA

For Iran, the JCPOA is Worth Restoring, Even if Trump Returns

The Raisi administration appears poised to resume negotiations over the US re-entry into the Joint Comprehensive Plan of Action (JCPOA). But there remain many critics of the JCPOA in Iran who question whether restoring mutual compliance with the nuclear deal makes sense given that a Republican president might once again tear up the agreement in 2025. It is a reasonable fear. Trump has an iron grip on the Republican party and has shown interest in running for president again. Other aspirants to the Oval Office, such as Nikki Haley and Mike Pompeo, are decidedly Trumpian in their views, including towards Iran. Given the JCPOA’s nature as a political agreement, there is no way for Biden to provide a legal guarantee that future administrations will remain in the deal.

But if Iranian leaders are concerned that the “economic war” might resume in 2025, they ought to remember that they are in an economic war right now. What the restoration of the JCPOA represents, therefore, is an opportunity for a ceasefire. The spectre of a Republican president taking office in 2025 reduces the likelihood that this ceasefire will become a durable peace. Still, the possibility of the deal’s future demise does not negate the certain benefits of sanctions relief on offer now. Political leaders and parties frequently pursue policies that might be overturned in the future because they wish to reap the benefits for as long as they can. In rare cases, reputational concerns may dissuade political actors from adopting a policy that is bound to be overturned—such an outcome may be viewed as a failure of implementation, as was the case in the Rouhani administration’s experience with the JCPOA. But this reputational concern is probably less significant for Iran’s new president, Ebrahim Raisi, given the political consolidation and electoral engineering that brought him to office. On the other hand, not pursuing a genuine opportunity to secure sanctions relief will likely deepen social grievances. The Raisi administration has consistently signalled that it will “definitely seek to eliminate and lift the tyrannical sanctions.”

This framing helps us reconsider the primary role of the “objective guarantees” sought by Iran’s negotiators as they prepare for a seventh round of talks over the restoration of the JCPOA. Iran is not seeking guarantees to eliminate the risk that the nuclear deal is undone by a future American president. Rather Iran needs to guarantee that it gets significant benefits from the deal for the remainder of Biden’s term—the period of approximately three years during which mutual compliance would not be in doubt. Should the deal be implemented successfully during this period, Iran will be able to achieve two things.

First, Iran can seek to maximise the economic benefits of sanctions relief, providing Iranian companies and households a much-needed reprieve after a decade of economic stagnation. The period of boosted growth, even if limited to about three years, will provide companies and households a chance to either make long-delayed investments or replenish their savings. In both cases, companies and households will be increasing their resilience in the face of any future economic crisis, including one precipitated by reimposition of sanctions. At the same time, the Iranian government, with the benefit of more fiscal space and renewed access to its ample reserves, can bolster the welfare state and rein in inflation, giving those Iranians hardest hit by the recent years of economic recession a chance to recover.

Second, Iran can use the period of sanctions relief to make its economic system more resilient in the face of future shocks. Trump’s reimposition of secondary sanctions taught Iranian leaders harsh lessons about the impacts of unilateral sanctions on the country’s trade relations and the mechanisms behind those impacts. With these lessons in mind, Iran can work to gird its economy against the exogenous shock of sanctions. Iranian policymakers have been remarkably successful at building a “resistance economy,” relying in large part on the grit of Iranian businesses and households. But when it comes to economic war, rebuilding defences is best done under a ceasefire.  

It is true that the uncertainty over the long-term future of the JCPOA may diminish the economic benefits in the short-term. As Darya Dolzikova wrote in an analysis for the Bourse & Bazaar Foundation published in January, “the possibility of another snapback of US nuclear-related and secondary sanctions on Iran under a future change of administration in Washington will also discourage businesses investment.” But Dolzikova’s analysis also made clear that this is a problem that can be addressed as part of the deal’s implementation. Iran has cited the “verification” of sanctions relief as a key demand for this reason. While there may be a smaller pool of companies willing to do business with Iran, a greater proportion of those companies that are interested in conducting trade or making investments should be able to see their projects through. For Iran, successful sanctions relief does not mean that one hundred oil companies or one hundred automakers flock to the Iranian market, but rather that the likes of Total and Shell and Peugeot and Volkswagen, thwarted in their previous attempts to invest in Iran, are able to get to the stage of ribbon cutting this time around.  

Despite these challenges, the economic benefits of sanctions relief are not in doubt. As Bijan Khajepour has projected, by the Iranian calendar year ending in March 2025, Iran’s economy would be 13.5 percent larger if sanctions were lifted than if they remained in place. It is difficult to project exactly what sanctions relief will entail for the Iranian economy—but the outcome will certainly be an improvement over the economic malaise of the status quo. American negotiators should make clear to their Iranian counterparts that they wish to help deliver these economic dividends. In doing so, they would be building a kind of “sanctions relief wall” that can help protect the nuclear deal from any economic war waged by a future Republican administration.

Finally, we should be careful about overstating the probability that the JCPOA will be torn-up in just a few years. There is no guarantee that Trump nor another Republican will win. Even if they did, there is no certainty that they will focus their political energies on undermining the nuclear deal. By 2025, the political context could be dramatically different. Given the current trajectory of regional diplomacy, it is possible that US partners in the Middle East will lobby against an unwarranted US withdrawal from the JCPOA, which would again destabilise the region, threatening the achievements of the regional diplomacy underway today, however meagre those achievements might be. Looking at the trajectory of American politics, it is very possible that Democratic and Republican hawks will be laser-focused on China in the next few years, with Iran ceasing to be the lightning rod it was in the final years of the Obama administration. Plus, if the regional dynamics continue to improve and attentions turns towards China, it is reasonable to expect that fewer think tanks and lobbying shops in Washington will be agitating against the deal.

In deciding to let the US back into the deal and restore mutual compliance with the JCPOA, Iranian policymakers are weighing the certainty of a meaningful economic reprieve against the prospect that the reprieve will be cut short. Trump’s return in 2025 is a possibility that Iran must face. Lifting the “tyrannical” sanctions is an opportunity to prepare.

Photo: IRNA

Here's What Iran Wants From Sanctions Relief

Back in February, Iran’s Supreme Leader, Ali Khamenei, set out an early condition for new negotiations over the fate of the JCPOA. In a major speech outlining Iran’s “final” stance on U.S. reentry into the nuclear deal, Khamenei declared that sanctions relief must be implemented “in practice” and not just “on paper.” Iran would also “verify” that sanctions relief commitments had been met before fulfilling its own commitments under the restored agreement.

Khamenei’s demands were shaped by the bitter experience of the Trump administration’s withdrawal from the JCPOA and unilateral reimposition of sanctions. The issues surrounding sanctions relief and Khamenei’s demands hung over six rounds of negotiations in Vienna. They are again being cited as a possible reason for the Raisi administration’s slow return to the nuclear talks. But what exactly Iranian leaders envision for verifiable sanctions relief has been unclear.

A new report, published by the Office of the Deputy for Economic Research of the Majlis Research Center, the influential research body of the Iranian parliament, offers the first detailed assessment of what verified sanctions relief might look like. The report, entitled “Verifying Sanctions Relief,” does not represent the official position of the Raisi administration, but given the timing of its publication and the affiliation with parliament, it likely represents an emerging consensus about how best to meet Khamenei’s demands while also assuaging the concerns of Iranian parliamentarians who feel the JCPOA is inherently unfair. Many of the details in this new report are drawn from an April 2021 report published by the same research centre that also looked at issues around the verification of sanctions relief. But the new report is more detailed in its diagnosis of the problem sanctions verification seeks to address and the mechanisms that should be used.

In particular, the report aims to address the perceived imbalance between paragraphs 26 and 36 of the JCPOA. Iran interprets paragraph 26 to allow it to lessen its commitments under the deal if sanctions relief is not fully implemented—an interpretation that is disputed by the P5+1. Paragraph 36, meanwhile, allows any party to trigger the dispute resolution mechanism and begin the process of “snapback” of sanctions—a provision that Iran considers a tool for the West to renege on the deal. Additionally, the report outlines an asymmetry in the ways in which Iran’s nuclear commitments under the JCPOA and the sanctions commitments of the P5+1 are overseen and implemented. Unlike nuclear commitments, sanctions relief commitments lack a verification and monitoring mechanism, can be obstructed, are slow to implemented, and can be undone unilaterally through snapback. The report summarises this asymmetry in the following table (translated here):

To address this asymmetry, the report calls for measures to be taken in three broad areas. What is striking about these measures is their practicality. The report basically calls for a more institutional and technical approach to sanctions relief in which a checklist provides Iranian policymakers an ability to assess the implementation of sanctions relief on an ongoing basis. As part of this approach, the report also sets out targets for oil exports and bilateral trade with Europe.

New Verification Body

The report calls for the designation of an Iranian body or institution to oversee verification of sanctions relief. This could be the Supreme National Security Council or it could be a new body established with its own staff and active secretariat. The body would have three tasks:

1. Observe and assess the actual impact of sanctions removal.

2. Establish a mechanism so that any Iranian person or entity can submit a complaint about issues related to sanctions relief.

3. Prepare an action plan for decreasing nuclear commitments in the event that other parties to the JCPOA renege on their commitments. Actions might include ceasing the voluntary application of the Additional Protocol, producing uranium metal, increasing enrichment above 20 percent, or expanding the number of operational IR6 centrifuges.

Verification Checklist

The new verification body would perform its mission in accordance with a defined “checklist.” The checklist would have two sections. The first section relates to specific actions and targets related to American and European sanctions relief commitments. The stipulations include:

1. Iran should be able to export oil and gas condensate according to its rightful market share of 2.5 million barrels per day (bdp) with an initial target of 2 million bdp.

   This target is feasible—during the sanctions relief afforded Iran under the JCPOA in 2016-2018, Iran exports hovered between 2 and 2.5 million bpd.

2. Iran should be able to increase bilateral trade with key European partners and conduct normal banking transactions to facilitate that trade. The report stipulates an initial monthly target of $3 billion in transactions with EIH Bank in Germany, rising to $4.2 billion. Monthly transactions with the French branch of Tejarat Bank are targeted at $1 billion, rising to $1.5 billion.

   Here, the report has highlighted Iranian-controlled financial institutions in Europe as the key conduits, perhaps reflecting how in recent years Europe-Iran trade has been increasingly run through smaller European banks without Iranian ownership or management. While the report stipulates “transactions,” the targets here are high when likely trade totals are considered. Even if we interpret that key Germany and France-based banks may process most EU-Iran trade, the total initial transaction volume envisioned of $48 billion is significantly higher than the total value of EU-Iran trade in 2016 following the lifting of sanctions. That year, bilateral trade reached just over EUR 20 billion. While the transaction targets could include foreign investment in Iran, it is unlikely that either EIH or Tejarat Bank can scale-up to handle the envisioned volumes.

3. Iran will also seek to verify a range of sanctions lifting measures taken by the Biden administration. This includes the removal of executive orders issued by “two American presidents,” a likely reference to Trump and Biden that suggests a desire for non-nuclear sanctions designations, such as the Foreign Terrorist Organization designation of the Islamic Revolutionary Guard Corps, to be lifted. In addition, the report calls for the update of the website of the Office of Foreign Assets Control (OFAC), the sanctions enforcement body of the U.S. Department of Treasury. OFAC is to cease publishing notices, advisories, and fact sheets that dissuade trade with Iran and should increase the issuance of licenses and exemptions to ease trade

   This stipulation that means the report authors understand U.S. primary sanctions will continue to pose a challenge for Iran’s engagement with the global economy.

The second section of the checklist focuses on ongoing efforts to decrease the risks of doing business with Iran once sanctions have been lifted. These stipulations reflect the perception in Iran that following the lifting of sanctions “on paper” in January 2016, the Obama administration took a lackadaisical approach to supporting the normalisation of global trade and investment in Iran. The continued characterisation of Iran as a high-risk jurisdiction is seen to have hampered economic engagement. Therefore, the checklist would require:

1. The removal of all measures that have presented Iran as a jurisdiction with high risk of money laundering and adoption of measures to normalise economic relations with Iran.

2. Changing the basis of guidance to banks issued by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) from risk-based to rule-based.

3. Maximal removal of sanctioned individuals and entities from the SDN list and a substantive review of SDN and non-SDN sanctions lists.

4. Removal of statements by OFAC and other institutions that dissuade humanitarian trade and maritime trade with Iran. In addition, there should be new licenses issued to all banks that hold Iranian oil revenues in order to ensure the timely release of frozen assets.

5. A written commitment from neighbouring countries not to take action against foreign entities willing to engage Iran economically.

6. Official statements proclaiming that medium and long-term economic engagement with Iran is permissible and refraining from any action that would damage engagement with Iran.

Notably, the report does not indicate that Iran would make progress on key measures such as implementation of the Financial Action Task Force (FATF) action plan that would substantially change the perceived risk associated with engaging with the Iranian financial system. While the demand that FinCEN changes its guidance from risk-based to rule-based is unrealistic, it does point to a desire for a more prescriptive approach from the U.S. government that may create a basis for reciprocal regulatory reforms in Iran. Here, the report is pointing to the issue of over-compliance by international banks, which deem the risks and costs of transacting with Iran, even in support of clearly permissible trade, to be too high. FinCEN’s risk-based guidance essentially places the burden on financial institutions to determine the appropriate level of due diligence, putting bank managers in an uncomfortable position where minimising risk means maximising administrative burdens. A more prescriptive approach, like the rule-based approaches taken by some European regulators, may reduce the incidence of over-compliance by eliminating the uncertainty around just how much due diligence is required to mitigate anti-money laundering or counter-terrorist financing risks.

Ongoing Monitoring

Finally, the report envisions that the verification of JCPOA-related sanctions relief will be take place on an ongoing basis. The verification body would produce a quarterly report that would certify that Iran is benefiting from sanctions relief in accordance with the checklist. This monitoring function would track developments in five key sectors: baking and finance, transportation and logistics, oil, gas, and petrochemicals, aviation, and industry and mining. The body would also consult across government and with the private sector. As part of its report, the body would offer its recommendation as to whether Iran should remain in the JCPOA, decrease its commitments, or cease participation. The quarterly reports would be used by Iran to inform its engagement with the JCPOA Joint Commission. Interestingly, the report envisions an Iranian body tasked with verification and does not outline the creation of an international third-party body that would be the true analogue for the IAEA. This may reflect a lack of trust that the third-party body would be impartial.

Outlook for Negotiations

As the Raisi administration has delayed its return to the Vienna negotiations, fears have grown that Iran will not continue the talks where they left off in the sixth round, instead returning to the table with new and unreasonable demands. But there is little to indicate that Khamenei’s “final” stance on the talks have changed since February, meaning that the key unknown is how reasonable Iranian negotiators will be in seeking to secure his core demand for verified sanctions relief. To this end, the new report from the Majlis Research Center should be reassuring. While some of the demands are unreasonable, for example the high targets for Europe-Iran trade and the insistence on changes to how FinCEN provides guidance, they are undeniably technical. Should this report reflect an emerging consensus about how to “improve” the JCPOA not by changing its terms, but by improving its implementation, then the outlook for negotiations may be less dire that many predict. A focus on technical shortcomings rather than political or strategic flaws indicates that Iran sees the value of a restored JCPOA but wishes the benefits to be assured and durable. Should the Biden administration be prepared to acknowledge the shortcomings in the sanctions relief provided to Iran between 2016-2018, there are ways in which verification can be addressed within the context of the deal.

Photo: IRNA

As Iran Faces Domestic Crises, Raisi Must Seek Stability in Foreign Policy

This article was originally published in Persian in the Iranian newspaper Etemad.

The Raisi administration faces numerous challenges. In the domestic sphere, the resurgence of COVID-19, the limping economy, and the spectre of a climate emergency have tested the patience and resilience of the Iranian public, who increasingly doubt the ability of the government to respond to the many crises facing the country. The Raisi administration must make these internal crises its foremost priorities.

But in order to do so, the administration must ensure that Iran’s foreign policy serves to minimise external challenges, so that the capacity of the government can be focused where the needs are most acute. In this regard, the Raisi administration is not unique—governments throughout the region and the world are responding to unprecedented internal crises. The regional and global situation therefore requires a foreign policy doctrine that is rooted in pragmatism and multilateralism. For the Raisi administration, such a doctrine should focus on three priorities. 

 First, Iranian leaders have rightly pointed out that the sanctions relief provided by the P5+1 following the implementation of the JCPOA was imperfect, lacking the necessary “verification.” While trade did rebound, Iran’s reintegration into the global economy was impeded by the hesitance of banks to engage in Iran-related transactions. By the time President Donald Trump withdrew from the JCPOA in May 2018, reimposing secondary sanctions, little foreign direct investment had materialised, and the most important energy and infrastructure projects had yet to break ground. For this reason some Iranian leaders, consider the JCPOA fundamentally flawed. But the Raisi administration must recognise that the only means for addressing issues related sanctions relief is to remain a party to the nuclear deal, ensuring the U.S. renters the agreement, and then demanding greater attention to issues of implementation from the P5+1. There were only 11 months between the implementation of the JCPOA and the election of Donald Trump—too short a time for many of the complex issues surrounding sanctions relief to be solved. Of course, arriving at solutions will also require economic reforms by Iran, such as full adoption of the FATF action plan. These reforms will also take time as they are carefully considered by Iranian lawmakers. Should the Raisi administration move swiftly and confidently to restore the JCPOA on the basis of mutual compliance, there will be at least three years under the Biden administration, and possibly seven years, in order to work with the P5+1 in a multilateral manner to ensure that the trade and investment promised under the JCPOA materialise, returning Iran’s economy to robust growth.

Second, President Raisi needs to expand Iran’s regional policy to more successfully include multilateral diplomacy with Central Asia. One of the most positive developments of the last year has been an upswing in regional diplomacy. Iran has resumed bilateral negotiations with Saudi Arabia and the United Arab Emirates. The recent initiative of Iraqi Prime Minister Mustafa al-Kadhimi to organise a regional summit in Baghdad is an excellent opportunity to build on this recent dialogue in a larger multilateral format. But there have also been important developments to Iran’s northeast, with a growing effort among the Central Asian states to address regional challenges through multilateral formats. Despite the shared interests over regional connectivity, economic development, and security, Iran has yet to participate in these formats in a serious way. The deteriorating situation in Afghanistan will in particular require coordination with Central Asian neighbours. Javad Zarif completed a tour of Central Asia earlier this year, showing the potential for high-level engagement. But the Raisi administration must develop a clearer strategy for multilateral engagement in Central Asia in parallel with its engagement with Arab neighbours, thereby completing a regional policy that encompasses all of West Asia.  

Finally, for the sake of multilateral diplomacy, the Raisi administration must ensure that the Iranian public can access global digital and communications platforms. While the debate in Iran has largely considered it an internal issue, definitive filtering of cyberspace would negatively impact foreign policy in two ways. First, it is important consider that Iran’s most effective diplomats are its own people, who have an outsized impact on the global discourse through their presence on social media platforms. To deny Iranians access to these platforms would prevent Iranians from seeing themselves as global citizens, engaging in a global exchange of ideas, and participating in global commerce. Second, limiting access to cyberspace in the manner proposed would fundamentally change the perception of Iran in the international community, making it more difficult for Iran to engage as an equal and respected party in multilateral formats. In short, should Iran isolate itself in cyberspace it will isolate itself on the world stage.

Iranian has demonstrated remarkable resilience in a period when the country has been isolated and embattled. Because Iran’s strength will not be doubted, the Raisi administration should confidently pursue a foreign policy of pragmatism and multilateralism, ensuring that the country does face the many crises alone.

Photo: IRNA

Making Peace With Iran and North Korea Could Be Good for U.S. Workers

By Christopher Lawrence

When now-retired Republican Sen. Bob Corker put a hold on U.S. arms sales to Saudi Arabia in 2017, White House trade advisor Peter Navarro drafted a memo titled “Trump Mideast arms sales deal in extreme jeopardy, job losses imminent.” The memo, along with the Trump administration’s subsequent decision to lift the hold, is often framed as cynical trade-off: Billions of dollars’ worth of U.S.-made military hardware were helping to sustain a humanitarian crisis in Yemen, but those same dollars could help support thousands of American jobs. Faced with the choice between workers at home and human rights abroad, the Trump administration appeared to have put “America first.”

But bombs aren’t the only thing the American worker can build for the Middle East. Just as President Donald Trump was ramping up arms sales in the Gulf, he was also working to kill the Iran nuclear deal. A primary component of that deal was economic—as sanctions lifted, Western companies could help rebuild Iran’s aging civilian infrastructures by resuming trade and investment in Iran. One of the earliest contracts that Iran signed called for American aerospace manufacturer Boeing to build 110 jumbo jets—worth roughly $20 billion—to help revive Iran’s civilian air fleet. The estimated nearly 20,000 U.S. manufacturing jobs the civilian contract could have created was strikingly similar to number associated with the Saudi arms deal, yet it was terminated when Trump backed out of the Iran deal and reimposed sanctions.

These two episodes highlight what could be a turning point for U.S. foreign policy. Trump and his challenger Joe Biden both campaigned on promises to revitalize U.S. manufacturing and reduce U.S. military interventions abroad. Yet for the last four years, both Trump and his critics painted a false trade-off between those endeavors by overlooking the economic dimensions of U.S. diplomacy. Now that Biden is president, his administration can either accept that false trade-off or design new policies that pursue his domestic and diplomatic agendas in tandem. One of his biggest foreign-policy challenges is to reengage Iran and North Korea, two countries whose regimes have sought political and economic relations with the West for decades.

Under U.S. sanctions, Iran’s and North Korea’s infrastructures are in disrepair, their natural resource sectors are underdeveloped, and their populations are largely cut off from Western economies. But absent sanctions, Western firms could pursue untapped opportunities in such sectors as oil and mineral extraction, transportation, and port infrastructure, many of which would involve industrial equipment that U.S. workers could build at home.

Connecting diplomacy with domestic economics could help resolve a fatal defect of past nonproliferation agreements: They’ve generally lacked substantial domestic stakeholders in the United States with a vested interest in implementing America’s diplomatic commitments. In the case of the Iran deal, this meant that even though the Obama administration had sunk considerable political capital in crafting an effective solution to the Iran nuclear crisis, the subsequent Trump administration faced little political cost in abandoning it.

Another promising nonproliferation deal—the 1994 Agreed Framework, which substantially set back North Korea’s nuclear program—suffered a similar fate when a hostile George W. Bush administration entered office and scuttled it. In both cases, American negotiators focused on enforcing strict nuclear constraints to guard against cheating from the other side, but they neglected to ensure implementation of U.S. commitments or protect their diplomatic achievements from future U.S. administrations.

Had those deals been better connected with domestic economic benefits, they might have been more robust in the face of changing political tides. Today, now that the credibility of U.S. nonproliferation diplomacy is in tatters, other governments will expect a Biden administration to future-proof U.S. commitments by cultivating supporters of diplomacy at home.

But could economic development in a country help curb its nuclear program? History suggests that it can, and the Agreed Framework is an illustrative case. In that deal, North Korea agreed to dismantle its plutonium-production reactors in exchange for civilian power reactors from the West. North Korean negotiators explicitly described the civilian reactor project as an “indication of U.S. good faith” and a sign that the U.S. government might end its “hostile policy” toward North Korea. As construction on the civilian reactors commenced, the regime essentially gutted its plutonium infrastructure. This suggests that economic engagement can help a regime feel less committed to nuclear weapons.

Critics of engagement will reject any policy that appears to reward a country for simply abiding by the international nonproliferation norms that the rest of the international community already respects. But this misses the point of economic diplomacy. Experts have long warned that in order to truly resolve nuclear proliferation crises in Iran and North Korea, the United States must fundamentally change its relationships with those countries.

The trick, however, is that after decades of animosity and unpredictable policies, U.S. negotiators can’t simply promise to change those relationships. Instead, the U.S. government must commit some durable act that goes beyond mere words and written agreements.

In the case of the 1994 Agreed Framework, this was the point of building civilian power reactors in North Korea. In the words of one U.S. diplomat, nuclear reactors “are not the sort of things a country gives to an enemy,” and had those reactors been fully constructed, the United States and its regional allies would have been “hardwired” into the technological and economic relationships that would be required to safely operate those reactors in North Korea. Thus, reactor-construction steps helped signal that the United States would eventually normalize diplomatic relations with North Korea if the Agreed Framework were to survive, and this was just what the regime needed to feel secure in rolling back its nuclear weapons program.

A similar opportunity was missed with Iran in the 1990s, when Iranian President Akbar Hashemi Rafsanjani sought to collaborate with U.S. oil company Conoco to develop its oil infrastructure. His political goal was to facilitate a durable form of Iran-U.S. engagement to pave the way for broader reconciliation, and U.S.-based opponents of that reconciliation quickly foiled his plan. But the U.S.-Iran relationship might look different today if that project had gone forward.

Physical investments like these, if properly designed and carried out, could create a shared vested interest in preserving more positive relationships that might transcend partisan politics in Washington and regime politics in Tehran and Pyongyang. And they can send a more credible signal that nuclear rollback will lead to the secure and prosperous future that the U.S. government has promised in previous campaigns of nonproliferation diplomacy.

As Biden attempts to reengage Iran and North Korea, he should seek to establish a form of economic diplomacy that outlasts his administration. And infrastructure investments that promote both nonproliferation objectives and American jobs might finally do the trick.

Ironically, the Trump administration may have left Biden with the perfect tool for connecting diplomacy with U.S. manufacturing: a revived U.S. Export-Import Bank. While Trump reauthorized the Ex-Im Bank as part of his strategy to counter China’s Belt and Road Initiative, it could be the key to linking nonproliferation diplomacy with U.S. manufacturing.

When the Iran deal was signed and Western companies sought to do business in Iran, the main barrier they faced was that major banks did not want to finance their projects for fear that sanctions might be reimposed. The Boeing deal was among the contracts that were delayed for this reason. Facilitating some of these transactions will need to be a major part of resurrecting the Iran deal. Meanwhile, the Ex-Im Bank specializes in underwriting international transactions that benefit U.S. workers, and it has a long history of enabling U.S. businesses in exactly the sectors that need to be developed in Iran.

As for engaging North Korea, South Korean President Moon Jae-in has already proposed a series of ambitious development projects in North Korea under the heading of his “New Economic Map,” but these projects are currently barred under sanctions. If renewed U.S.-North Korea negotiations unfold, the Biden administration should not only put sanctions relief on the table but also offer Ex-Im Bank financing for some of those projects in exchange for nuclear rollback steps in North Korea. For example, if U.S. financing could help develop North Korea’s mining infrastructure to tap its deposits of rare-earth minerals, that could give North Korea a new and influential role on the world stage that doesn’t depend on nuclear weapons. At the same time, the U.S. government could tie ultimate completion of those projects to future rollback steps.

In both the Iran and North Korea cases, economic engagement that connects nonproliferation diplomacy to U.S. jobs offers the most promising path both for rolling back nuclear programs and for incentivizing future administrations to continue building on U.S. diplomatic achievements rather than squandering them and starting from scratch.

Christopher Lawrence is Assistant Professor of Science, Technology and International Affairs in the Walsh School of Foreign Service at Georgetown University. Follow him at @cclawr_law2.

Photo: Wikicommons

U.S.-Iran Talks Will Falter Unless Abdolnaser Hemmati Is at the Table

By Esfandyar Batmanghelidj and Saheb Sadeghi

The United States and Iran may soon be sitting at the negotiating table once again. In just the last week, the Biden administration has offered to restart negotiations, and Iran has struck a deal with the International Atomic Energy Agency to slow moves to limit inspections of its nuclear program. A window of opportunity has emerged for the two sides to talk, likely in a format facilitated by the European Union. If and when the United States and Iran sit across from one another again, there is a key figure who ought to be present—Abdolnaser Hemmati, the governor of Iran’s central bank.

In many respects, Iran’s central bank was the primary target of former U.S. President Donald Trump’s economic war on Iran. Much of the economic hardship that Iran has experienced due to the reimposition of secondary sanctions can be attributed to the Trump administration’s success in limiting the central bank’s access to its foreign exchange reserves.

According to the International Monetary Fund (IMF), Iran retains access to just $8.8 billion of readily available foreign currency, roughly one-tenth of its total reserves. Without access to its reserves held in countries like Iraq, South Korea, Japan, and Germany, the central bank has struggled to forestall the weakening of Iran’s currency, which is today worth less than one-fifth of its value prior to Trump’s withdrawal from the nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). This deep depreciation made imported goods more expensive, contributing to annual inflation rates of nearly 50 percent.

Hemmati, a veteran banker, was appointed as central bank governor in July 2018, parachuting in just a few months before secondary sanctions were fully reimposed on Iran. He has performed remarkably well in difficult circumstances. Iran’s currency was regaining value for most of 2019, a trend disrupted by the COVID-19 crisis, which hit the country’s economy hard, throwing trade into disarray.

Since reaching a historic low in October 2020 of just over 320,000 rials to the dollar on the free market, the currency has since stabilized at around 250,000 rials to the dollar—with this stability helping to undergird Iran’s slow economic recovery. Along the way, Hemmati has proved an adept communicator, using his Instagram account, the central bank’s website, and even select interviews with international media to outline his priorities and reassure the Iranian public about the bank’s capacity to defend the rial from hyperinflation.

Iran has not faced a full-blown economic meltdown, despite the best efforts of the Trump administration. But the country finds itself in a painful period of economic stagnation, and sanctions relief will be needed should any government wish to deliver on promises of prosperity. However, Trump sought to make sanctions relief more difficult.

In September 2019, the Trump administration designated Iran’s central bank under a terrorism authority, a move that jeopardized long-standing exemptions permitting the bank to play a crucial role in facilitating the purchase of humanitarian goods such as food and medicine.

In February 2020, the U.S. Treasury Department issued a new general license to allay those concerns. But more troubling was the intention behind the terrorism designation, which was applied to Iran’s central bank for the express purpose of making it harder for a potential Democratic administration to lift sanctions on the bank in the future.

The Biden administration will likely need to remove this designation to bring the bank back to its original status under the JCPOA—but removing a designation ostensibly tied to Iran’s purported support for terrorism may prove politically tricky as part of U.S. reentry into an agreement focused exclusively on the country’s nuclear program.

Lifting sanctions was difficult even before the Trump administration’s cynical moves. Iran’s experience of sanctions relief following the implementation of the JCPOA was disappointing. International banks remained hesitant to process Iran-related transactions, citing unclear guidance on how to conduct business in a compliant manner and the risks of punitive fines if the remaining sanctions were inadvertently violated.

This limited the rebound in trade and, particularly, investment in Iran. While there had been some technical exchanges on banking during the JCPOA negotiations, including working-level exchanges with Iran’s central bank, these were largely focused on the unfreezing of Iran’s assets—the challenges Tehran faced in mundane banking blindsided the JCPOA parties.

In March 2016, then-Treasury Secretary Jacob Lew noted that the “experience with Iran demonstrates how difficult [sanctions lifting] can be.” Despite what Lew referred to as “widespread global outreach” by officials at the U.S. Treasury and State departments, the banking challenges persisted and continued to stymie trade and investment until Trump’s eventual withdrawal from the nuclear deal.

In an interview last July, Valiollah Seif, who was central bank governor at the time of the JCPOA negotiations, suggested that Iran had not had the right experts in the room. “The JCPOA could solve the problem related to oil sales at that time, but it could not solve our banking problems. … Our economic and banking expert team was weak in the JCPOA talks,” he said.

Understandably, Iranian leaders are keen to get sanctions relief right this time around. In a recent speech, Iran’s supreme leader, Ayatollah Ali Khamenei, insisted that any sanctions relief offered by the United States must take place “in practice” and not just “on paper.” Moreover, the efficacy of that sanctions relief will need to be “verified.”

What’s clear is that as new negotiations approach, the JCPOA parties cannot rely on diplomats to untangle the complex knots that have constricted Iran’s banking ties for so long. To ensure sanctions relief succeeds, Hemmati ought to be in the room as part of a high-level technical dialogue, which could eventually include top officials such as U.S. Treasury Secretary Janet Yellen and French Finance Minister Bruno Le Maire.

There are a few reasons why a dialogue on sanctions relief, which would be similar in structure to the pre-JCPOA exchanges on nuclear issues between then-U.S. Energy Secretary Ernest Moniz and Ali Akbar Salehi, the head of Iran’s atomic energy agency, ought to center on Hemmati.

First, Hemmati has emerged as a key figure of Iran’s economic diplomacy. In the last two years, he has made trips to Iraq, Oman, South Korea, and China in order to ensure Iran retained functional financial channels with key trade partners while the Trump administration sought to put pressure on the governments of these countries. His participation in the new talks would be a natural extension of this global outreach, and most of the sanctions relief benefits promised by the United States will need to be delivered via third countries. Hemmati is the only stakeholder to have full technical knowledge of the challenges U.S. sanctions have posed in economic relations with key trade partners.

Second, Hemmati’s stewardship will be critical for the implementation of both early and late-stage sanctions relief measures. Whether it is the easing of access to foreign reserves or the granting of Iran’s COVID-19 IMF loan—both under consideration as early economic gestures by the Biden administration—or the consideration of new economic incentives such as reauthorization of the “dollar U-turn,” an exemption revoked in 2008 that allowed U.S. banks to process Iran-related transactions in cases where a payment is being made between two non-Iranian foreign banks, effective implementation depends on Iran’s central bank.

Importantly, the international community will also expect Iran to continue to reform its banking sector in line with international standards. On this point, Hemmati has been a key champion, stating recently that if the JCPOA were revived, Iran would need to complete adoption of the action plan set forth by the Financial Action Task Force, a standards-setting body, in order to see the benefits of sanctions relief in the banking sector.

Finally, Hemmati would bring some technocratic continuity to the economic implementation of a restored JCPOA. There is considerable concern that the possible arrival of a new Iranian president in August could leave any diplomatic agreement vulnerable to changing politics in Tehran.

While it may be possible for some of Iran’s top diplomats to remain in their posts in a new administration, it is Hemmati, whose term ends in 2023, who is best positioned to offer institutional continuity on implementation issues. He has proved to be an adept political operator. By insisting on the central bank’s technocratic independence, he has largely avoided the attacks regularly made against members of the Rouhani government.

He also maintains a good relationship with Khamenei and has been able to turn to the supreme leader to insulate the bank’s policies from political attacks. It is often argued that restoring the JCPOA would help boost the fortunes of Iran’s political moderates, but it is equally important for U.S. President Joe Biden to strengthen the hand of Iran’s technocrats who work on policies, not politics.

The Biden administration’s early appointments made clear that when it comes to Iran, personnel is policy. The same holds true in Tehran. If the right people are not in the room during upcoming negotiations, not only will the agreed policies be deficient, but so too will implementation falter. The United States, the other permanent members of the U.N. Security Council, and Germany need to provide Iran a pathway to the normalization of its banking ties—to do so, it would make sense to engage Iran’s top banker.

Esfandyar Batmanghelidj is the founder of the Bourse & Bazaar Foundation.

Saheb Sadeghi is a columnist and foreign-policy analyst on Iran and the Middle East.

Photo: IRNA

The Middle East’s Next Conflicts Won’t Be Between Arab States and Iran

By Vali Nasr

For more than two decades, the United States has seen the politics of the Middle East as a tug of war between moderation and radicalism—Arabs against Iran. But for the four years of Donald Trump’s presidency, it was blind to different, more profound fissures growing among the region’s three non-Arab powers: Iran, Israel, and Turkey.

For the quarter century after the Suez crisis of 1956, Iran, Israel, and Turkey joined forces to strike a balance against the Arab world with U.S. help. But Arab states have been sliding deeper into paralysis and chaos since the U.S. invasion of Iraq in 2003, followed by the failed Arab Spring, leading to new fault lines. Indeed, the competition most likely to shape the Middle East is no longer between Arab states and Israel or Sunnis and Shiites—but among the three non-Arab rivals.

The emerging competitions for power and influence have become severe enough to disrupt the post-World War I order, when the Ottoman Empire was split into shards that European powers picked up as they sought to control the region. Although fractured and under Europe’s thumb, the Arab world was the political heart of the Middle East. European rule deepened cleavages of ethnicity and sects and shaped rivalries and battle lines that have survived to this day. The colonial experience also animated Arab nationalism, which swept across the region after World War II and placed the Arab world at the heart of U.S. strategy in the Middle East.

All of that is now changing. The Arab moment has passed. It is now the non-Arab powers that are ascendant, and it is the Arabs who are feeling threatened as Iran expands its reach into the region and the United States reduces its commitment. Last year, after Iran was identified as responsible for attacks on tankers and oil installations in Saudi Arabia and the United Arab Emirates, Abu Dhabi cited the Iranian threat as a reason to forge a historic peace deal with Israel.

But that peace deal is as much a bulwark against Turkey as it is against Iran. Rather than set the region on a new course toward peace, as the Trump administration claimed, the deal signals an intensification of rivalry among Arabs, Iranians, Israelis, and Turks that the previous administration failed to take into consideration. In fact, it could lead to larger and more dangerous regional arms races and wars that the United States neither wants nor can afford to get entangled in. So, it behooves U.S. foreign policy to try to contain rather than stoke this new regional power rivalry.

Iran’s pursuit of a nuclear capability and its use of clients and proxies to influence the Arab world and attack U.S. interests and Israel are now familiar. What is new is Turkey’s emergence as an unpredictable disrupter of stability across a much larger region. No longer envisioning a future in the West, Turkey is now more decidedly embracing its Islamic past, looking past lines and borders drawn a century ago. Its claim to the influence it had in the onetime domains of the Ottoman Empire can no longer be dismissed as rhetoric. Turkish ambition is now a force to be reckoned with.

For example, Turkey now occupies parts of Syria, has influence in Iraq, and is pushing back against Iran’s influence in both Damascus and Baghdad. Turkey has increased military operations against Kurds in Iraq and accused Iran of giving refuge to Turkey’s Kurdish nemesis, the Kurdistan Workers’ Party (PKK).

Turkey has inserted itself in Libya’s civil war and most recently intervened decisively in the dispute in the Caucasus between Armenia and Azerbaijan over Nagorno-Karabakh. Officials in Ankara are also eyeing expanded roles in the Horn of Africa, and in Lebanon, while Arab rulers worry about Turkish support for the Muslim Brotherhood and its claim to have a say in Arab politics.

Each of the three non-Arab states has justified such encroachments as necessary for security, but there are also economic motivations—for example, access to the Iraqi market for Iran or pole positions for Israel and Turkey in harnessing the rich gas fields in the Mediterranean seabed.

Predictably, Turkish expansionism runs up against Iranian regional interests in the Levant and the Caucasus in ways that evoke Turkey’s imperial past. Turkish President Recep Tayyip Erdogan’s recent recitation of a poem lamenting the division of historic Azerbaijan—the southern part of which now lies inside Iran—during a triumphant visit to Baku invited a sharp rebuke from Iran’s leaders. This was not an isolated misstep.

Erdogan has been for some time suggesting that Mustafa Kemal Ataturk was wrong to give up Ottoman Arab territories as far south as Mosul. In reviving Turkish interest in those territories, Erdogan is claiming greater patriotism than that of the founder of modern Turkey and making clear that he is breaking with the Kemalist legacy in asserting Turkish prerogatives in the Middle East.

In the Caucasus, as in Syria, Turkish and Iranian interests are interwoven with those of Russia. The Kremlin’s interest in the Middle East is expanding, not only in conflicts in Libya, Syria, and Nagorno-Karabakh but also on the diplomatic scene from OPEC to Afghanistan. Moscow maintains close ties with all of the region’s key actors, sometimes tilting in favor of one and then the other. It has used this balancing act to expand its advantage. What it wants from the Middle East remains unclear, but with U.S. attention on the wane, Moscow’s complex web of ties is poised to play an outsized role in shaping the region’s future.

Israel, too, has expanded its footprint in the Arab world. In 2019, Trump recognized Israel’s half-century-old claim to the Golan Heights, which it seized from Syria in 1967, and now Israeli leaders are planning out loud to expand their borders by formally annexing parts of the West Bank. But the Abraham Accords suggest that the Arabs are looking past all of that to shore up their own position. They want to compensate for America’s dwindling interest in the Middle East with an alliance with Israel against Iran and Turkey. They see in Israel a crutch to keep them in the great game for regional influence.

The tensions between Iran and Israel have escalated markedly in recent years as Iran has reached farther into the Arab world. The two are now engaged in a war of attrition, in Syria and in cyberspace. Israel has also targeted Iran’s nuclear and missile programs directly and has been blamed most recently for the assassination of Iran’s top nuclear scientist.

But the scramble for the Middle East is not just about Iran. Turkey’s relations with Israel, Saudi Arabia, the UAE, and Egypt have been deteriorating for a decade. Just as Iran supports Hamas against Israel, Turkey has followed suit but has also angered Arab rulers by supporting the Muslim Brotherhood. Turkey’s current regional posture—extending into Iraq, Lebanon, Syria, and the Horn of Africa while staunchly defending Qatar and the Tripoli government in Libya’s civil war—is in direct conflict with policies pursued by Saudi Arabia, the UAE, and Egypt.

This all suggests that the driving force in the Middle East is no longer ideology or religion but old-fashioned realpolitik. If Israel boosts the Saudi-Emirati position, those who feel threatened by it, like Qatar or Oman, can be expected to rely on Iran and Turkey for protection. But if the Israeli-Arab alignment will give Iran and Turkey reason to make common cause, Turkey’s aggressive posture in the Caucasus and Iraq could become a worry for Iran. Turkey’s military support for Azerbaijan now aligns with Israel’s support for Baku, and Iran, Saudi Arabia, and the UAE have found themselves in agreement worrying about the implications of Turkey’s successful maneuver in that conflict.

As these overlapping rivalries crisscross the region, competitions are likely to become more unpredictable, as will the pattern of tactical alliances. In turn, that might invite meddling by Russia, which has already proved adept at exploiting the region’s fissures to its advantage. China, too, may follow suit; its talk of strategic partnership with Iran and nuclear deal with Saudi Arabia may well be just the opening act. The United States thinks of China in terms of the Pacific, but the Middle East abuts China’s western frontier, and it is through that gateway that Beijing’s will pursue its vision for a Eurasian zone of influence.

The Biden administration could play a key role in reducing tensions by encouraging regional dialogue and—when possible—use its influence to end conflicts and repair relations. In response to change in Washington, feuding adversaries are signaling a truce, and that provides the new administration with an opportunity.

Although relations with Turkey have frayed, it remains a NATO ally. Washington should focus on improving ties between not just Israel and Turkey but also among Turkey and Saudi Arabia and UAE—and that means pushing Riyadh and Abu Dhabi to truly mend ties with Qatar. The Gulf rivals have declared a truce, but fundamental issues that divided them persist, and unless those are fully resolved, their differences could cause another breach.

Iran is a harder problem. U.S. officials will have to first contend with the future of the nuclear deal, but sooner rather than later Tehran and Washington will have to talk about Iran’s expansionist push in the broader region and its ballistic missiles. Washington should encourage its Arab allies, too, to embrace this approach and also engage Iran. Ultimately reining in Iran’s proxies and limiting its missiles can be achieved through regional arms control and building a regional security architecture. The United States should facilitate and support that process, but regional actors have to embrace it.

The Middle East is at the edge of a precipice, and whether the future is peaceful hinges on what course the United States follows. If the Biden administration wants to avoid endless U.S. engagements in the Middle East, it must counterintuitively invest more time and diplomatic resources in the region now. If Washington wants to do less in the Middle East in the future, it has to first do more to achieve a modicum of stability. It has to start by taking a broader view of regional dynamics and making the lessening of new regional power rivalries its priority.

Vali Nasr is the Majid Khadduri professor of Middle East studies and international affairs at Johns Hopkins University’s School of Advanced International Studies. He served in the U.S. State Department from 2009 to 2011.

Photo: IRNA

Relations Between France and Iran in the Biden Era

The French government has welcomed the election of new US President Joe Biden, who disapproves of former President Donald Trump’s withdrawal from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), and has confirmed his desire to return to it. France, like the rest of Europe, is mostly pleased by Biden’s declared intent to rebuild transatlantic relations and consult European allies on Iranian matters, as well as on other regional tensions. Biden’s early steps to rejoin the Paris Agreement, the World Trade Organization and the World Health Organization confirm that he is following through on his campaign promises: that the United States is back and that it will play the multilateralism role, consulting allies and partners and ending the previous administration’s abrasive practices.

Against this backdrop, France, together with Germany and the United Kingdom—the E3 parties to the nuclear agreement—is facing several challenges with both Tehran and Washington. Paris seeks a clear understanding of Washington’s true intentions with Tehran, whilst also needing to realistically assess Iran’s posture and develop a European-wide vision for relations with Iran.

An Enduring Hawkishness

France’s current approach to Iran can be traced back to former President Nicolas Sarkozy, who introduced a new Middle East policy based on neoconservative intellectual visions shaped by a team of strategists nicknamed “The Sect” and led by the late Thérèse Delpech. Paris not only maintained its hawkish approach under François Hollande as president and Laurent Fabius as foreign minister, but it also hardened this approach during the painstaking negotiations leading to the Iran nuclear deal in 2015. At a series of tense meetings, Fabius endlessly added complexity to talks, claiming that US negotiators were naive and ready to make undue concessions to Iran while neglecting critical safeguarding details. The French felt that former US Secretary of State John Kerry and Iranian foreign minister Mohammad Javad Zarif were poised to strike a hurried, weak deal without taking France’s expert guidelines into consideration. Fabius nearly killed the negotiations.

Fabius and other members of The Sect also sympathised with Israeli Prime Minister Benjamin Netanyahu and included some Israeli priorities within French positions. Saudi Arabia has become a growing consumer of French weapons and Riyadh’s views were likewise taken into account, and Saudi pressures to prevent or slow Iran’s nuclear capacity have been considered. Some in France hoped for more pragmatic behaviour when Emmanuel Macron became president, but the new foreign affairs minister, Jean-Yves Le Drian, who previously worked as the defence minister, is the guardian of the hawkish line.

Macron occasionally distances himself from his more hawkish advisers. He opposed ousting Syrian President Bashar al-Assad by force before a political solution could be reached, and Macron has stated that he wants an end to a neocon policy. Macron showed his independent streak when he invited Zarif to the 2019 G7 Summit in Biarritz, bringing a four-point plan to Trump and genuinely attempting to arrange a phone conversation between the US president and Iranian President Hassan Rouhani on the sidelines of the UN general assembly later in the year. The conversation did not end up happening because Trump did not take the opportunity and Rouhani did not have the necessary political support. But the facilitation efforts were sincere and significant.

Short-Term Gains but Long-Term Costs?

French officials have repeatedly stated that they want to see the JCPOA survive. But their messages can appear to contradict that mission. In a phone call on Tuesday, Macron told Rouhani that Iran must make “clear gestures” to revive the nuclear deal. In an interview last month with the French weekly newspaper Journal du Dimanche, Le Drian said that tough discussions on ballistic proliferation and regional destabilisation by Iran will be necessary in the course of new negotiations. While the content of the message does not differ much from that set out by the Biden administration, the tone is more aggressive—an ultimatum rather than an offer to negotiate. Unsurprisingly, Iranian responses were harsh, but France’s top diplomats do not seem to understand—or do not want to understand—that posing diktats to a nationalist state is a big miscalculation.

Another miscalculation was made when Macron participated in an interview hosted by the Atlantic Council on February 4. Macron stated that Iran is closer to the atomic bomb now than before the 2015 agreement, that concerns about ballistic missiles, and the new negotiations should be global and inclusive—including even Saudi Arabia and Israel.

Macron added that the nuclear agreement cannot work if regional governments are not satisfied, but his vision of potential Saudi and Israeli involvement in the future of JCPOA is ambiguous. Is the involvement limited to consulting these “partners,” or will they be invited to the negotiation table? Biden will likely consult his regional partners without inviting them to the negotiation room—Washington is under no illusions as to the impact such a move would have. Officially inviting the Saudis and Israelis to be consulted is itself an affront to Iran. Unsurprisingly, Saeed Khatibzadeh, the spokesperson of the Iranian foreign ministry, immediately rejected the idea of new participants in nuclear deal talks after Macron’s comments were publicised.

Categoric opposition from Tehran was certain, so why did Macron make such a statement? According to Al-Quds Al-Arabi, a pan-Arab newspaper, the French president is set to visit the Saudi capital of Riyadh soon and may discuss the Iranian nuclear program with King Salman and Crown Prince Mohammed bin Salman. This will certainly please the Saudis, who will appreciate receiving France’s political support, but the Iranians see this move as deliberately provocative. On 9 February, François Nicoullaud, a highly respected expert and France’s former ambassador to Iran, commented on Macron’s proposals, saying that the mediator’s job is listening to and exploring opinions from both sides and then developing a step-by-step solution in a manner that’s as neutral as possible and that’s acceptable to everyone. Al-Quds Al-Arabi reports that talks would include reinforcing bilateral cooperation, notably military. If this is true, it might indicate that Paris is seeking advantages from Biden’s intention to review US military cooperation and weapons deliveries to the Saudis. France is likely to see this as an opportunity for juicier military contracts.

France’s flirtation with Saudi Arabia undermines its bilateral relations with Iran, depriving Macron of his claimed ambition of being a major facilitator of a “demanding dialogue” between Iran and the United States. During his interview with the Atlantic Council, Macron reiterated the role he is willing to play as a mediator. The French-Saudi alignment, even if France does not agree with all of the Kingdom’s actions and policies, will convince Iran that Paris cannot mediate impartially. If Le Drian distrusts Iran, the reciprocal is also true.

Repairing Bilateral Relations

Bilateral relations are in bad shape, and polite diplomatic language cannot hide the cracks. But it is not too late for a fix. The priority now is to safeguard the possibility of an orchestrated return to the JCPOA. Zarif has suggested that Josep Borrell, the European Union’s High Representative, could “choreograph the actions that need to be taken” by the United States and Iran. Here, France might play a role by showing that as a de facto leader of the E3, it can lend visible support to such an initiative. Macron would have the opportunity to implement its “honest broker” status. Another issue might allow France to gain credibility not only with Tehran but also with other Europeans. The Instrument in Support of Trade Exchanges (INSTEX), which facilitates transactions for European trade with Iran despite limitations in direct banking channels, deserves more attention. France, joined by other Europeans, should press Biden to quietly bless the operation of INSTEX. If France, supported by other EU member states, manages to persuade Biden to make such a step, the impact on bilateral trade between France and Iran could help repair some of the lost bilateral trust.

On regional issues, France should use its influence on Saudi Arabia, Iraq, Qatar and the United Arab Emirates to encourage direct dialogue with Iran. Paris could make suggestions both on confidence-building measures and on the practical steps for a dialogue with Iran on regional concerns, such as ballistic missile proliferation, and particularly Yemen, working in coordination with the UN envoy. First, France should try sharing these views and reactions with Tehran, and later it could present new ideas on a future region-wide security system. Excluding talks on nuclear issues would be more palatable to Tehran, unless all participants, including Saudi Arabia and Israel, start negotiating on regional denuclearisation. However, this move will likely not be seen enthusiastically by all.

France can have a fresh start with Iran, but it will take time, prudence, and humility. France’s policies towards Iran must use strategic criteria when assessing the field and devising a policy. Professional advice from governmental departments and agencies as well as from external experts, including the business sector, should not be neglected, and lessons must be drawn from past mistakes.

Photo: Wikicommons

Why Qatar Wants to Facilitate a US-Iran Breakthrough

On February 15, Mohammed bin Abdulrahman Al Thani, the foreign minister of Qatar, travelled to Tehran in the latest instance of Doha's efforts to act as a facilitator for the resolution of international conflicts.

Al Thani delivered a letter from the Emir of Qatar to Iran's President, Hassan Rouhani. Beyond matters related to bilateral issues, the contents of the letter likely included Qatar’s offer to facilitate dialogue between Iran and the United States on issues related to the Joint Comprehensive Plan of Action (JCPOA).

This trip was not the first time Qatar has attempted to play a role in resolving the conflict between Tehran and Washington. Just over a year ago, a day after the assassination of Iranian military commander Qassem Soleimani, the Qatari foreign minister made an unannounced trip to Tehran to deescalate tensions. Shortly afterward, Emir Tamim bin Hamad Al Thani's made his first official visit to Iran.

Qatar's diplomatic efforts surrounding the conflict between Iran and the United States cannot be characterized as mediation. After all, Qatar does not have direct involvement in the negotiations between Tehran and Washington, nor is it overseeing any meetings or presenting any initiatives. But the less significant role of facilitator is nonetheless important.

Until recently, Oman and, to a lesser extent, Kuwait took on the role of facilitators in the Middle East, be it in between Iran and the United States, or Iran and Saudi Arabia, or between Yemeni factions. Qatar is trying to take a further step in this regard and act as a facilitator for a wide range of international conflicts. The Qatari Foreign Ministry touts that the emirate “hosts negotiations between conflicting parties and contributes as a facilitator of dialogue between them." Examples of diplomatic achievements include "an important role in reaching Doha Peace Agreement in Darfur, releasing of Djiboutian prisoners of war in Eritrea, releasing hostages in Syria, [and] ending the presidential vacuum in Lebanon." Moreover, Qatar is involved in the Palestinian-Israeli conflict through a humanitarian capacity, it is hosting the most recent intra-Afghan talks, and attempted to facilitate the resolution of the issue between Iran and South Korea over the oil tanker in the Persian Gulf just recently. 

The focus on the US-Iran tensions reflects not just the significant security issues these tensions pose for the Persian Gulf region, but also the appreciation of Qatar’s leadership for Iranian assistance during the blockade imposed by fellow members of the GCC. The recent détente between Qatar and the other GCC states marked by the Al Ula Summit are unlikely to negatively impact the deeper relations built with Iran over the past years. This is despite the fact that curbing diplomatic and economic ties with Iran was one of the conditions set when the blockade was first imposed. Qatar did not comply with these demands.  

In contrast, the blockade propelled Qatar's post-conflict regional approach to enhance its relations with Iran. While Qatar had recalled its ambassador from Tehran in solidarity with Saudi Arabia following the January 2016 incidents at Saudi diplomatic facilities in Iran, Doha restored its diplomatic representation in Tehran by reinstating its ambassador soon after the blockade was imposed. Furthermore, to guarantee the food security of its population, to ensure an air-route for its leading international airline, and to secure regional diplomatic support, Qatar continued to deepen its relations with Iran. 

Iran and Qatar share the largest gas reserves in the world—a unique feature in the bilateral relationship between the two countries that has provided a basis for constructive relations. Along with expressing a desire to bring Iran and the United States back to the negotiating table, Qatar has repeatedly called for an inclusive GCC-wide dialogue with Iran. Statements from Qatar's Emir, foreign minister, and defence minister have described Iran as "our neighbor" and "part of [the region’s] fabric" and noted that Iran’s stability is "[Qatar’s] stability." 

In an interview a day before Joe Biden's inauguration, Foreign Minister Al Thani stated that he hopes that Iran and the United States "will reach a solution with what has happened with the JCPOA" and that Qatar will welcome the invitation if it is asked by the stakeholders to play a role. Additionally, according to Al Thani, resolving the issues around the JCPOA "will help relations between the GCC and Iran" as everything is "interconnected at the end of the day." He has further argued that "the time should come when the GCC will sit on the table with Iran and reach a common understanding between the countries that we have to live with each other, we cannot change geography." 

The Emir of Qatar was among the first world leaders to welcome the JCPOA, calling it "a positive and important step" in his address during the 2015 United Nations General Assembly, not long after the deal was struck. Since then, Doha has been vocally supportive of the agreement—it even tried to persuade the Trump Administration to stick with the deal.

The diplomatic outreach has picked-up since the election of Joe Biden. The Qatari foreign minister has been in contact with the U.S. National Security Adviser, Jake Sullivan, and the Special Representative for Iran, Robert Malley. It can be expected that he will speak to Secretary Anthony Blinken in the coming days as well. Iran is likely to be high on the agenda for this call.

In the end, the European parties to the nuclear deal—France, Germany, and the United Kingdom—are best positioned to formally mediate between the US and Iran in any period before direct talks. However, Qatar’s diplomacy may help facilitate this subsequent stage of mediation, in a role similar to that played by Sultan Qaboos of Oman in 2013. 

While in Tehran, Al Thani made clear his hopes for renewed diplomacy, stating, "We hope that with the return of the US to the nuclear deal as soon as possible, challenges and sanctions can be alleviated within the framework of the deal and Qatar will not spare any efforts to make that happen." Doha is certainly eager to notch another diplomatic success.

Photo: IRNA

Reviving the Nuclear Deal Gives the U.S. More Leverage Over Iran

By Mahsa Rouhi

As officials in Washington consider returning to the 2015 Iran nuclear deal, much of the debate has centered on whether the U.S. government will lose leverage. Some experts and officials argue that if the Biden administration rejoins the deal—also known as the Joint Comprehensive Plan of Action (JCPOA)—the United States will squander the leverage built in recent years through former President Donald Trump’s maximum pressure strategy.

While U.S. sanctions have caused Iran’s economy major challenges and limited Iran’s access to financial resources, they have not succeeded in changing Tehran’s behavior regarding its nuclear program. Indeed, Iran has not offered additional concessions. Instead, it has engaged in its own leverage-building strategy by ramping up its nuclear activities, missile program, and regional activities. Iran is not only closer to having the capacity to build a bomb, but even the political discourse of key officials on whether to cross that threshold has been shifting.

Leverage is only meaningful if it can be effectively used to produce desired policy outcomes. Continuing to build leverage merely for the sake of inflicting pain or adding pressure is neither an effective nor sustainable negotiating strategy. It leads to a vicious cycle of chasing a perfect deal that does not exist and ignoring the opportunities for incremental progress as Iran inches closer to a nuclear weapons capability. By reviving the nuclear accord, the U.S. government will not squander any sanctions leverage, but if it plays its cards wisely, it could enhance its position for follow-on negotiations on Iran’s nuclear program and regional activities.

In response to the maximum pressure effort, Tehran sought to increase its own leverage. Iran’s Islamic Revolutionary Guard Corps (IRGC) has ramped up its naval military operations in the Persian Gulf, targeting maritime trade routes through the Strait of Hormuz to signal its ability to harm U.S. interests and those of its allies. The most recent example was in early January when the IRGC seized a South Korean-flagged vessel most likely in reaction to the $7 billion in Iranian funds frozen in compliance with U.S. sanctions.

Iran has increased its nuclear activities to bring it closer to having the capacity to build a nuclear weapon if it chooses to do so. Iranian officials indicated in January that they would expand their nuclear program by resuming uranium enrichment to a 20 percent level, which is much higher than the low-level 3.67 percent limit set by the 2015 deal. Furthermore, to minimize the impact of sanctions and U.S. leverage, Iran has focused on investing in a resistance economy infrastructure to diversify the economy in ways that it will be more inward-looking and less reliant on foreign trade, particularly with the West. Today, Iran is nowhere near the brink of collapse. The country, rather, is projected to see an economic recovery in 2021.

The United States should swiftly attempt a clean return to the deal with a compliance-for-compliance approach because it can stop Iran’s quickly-growing nuclear program in its tracks. This move would not undermine U.S. leverage but rather enhance it. It would allow the United States to stop the ticking clock on Iran’s nuclear advancements, mitigate the possibility of a military confrontation between Iran and Israel or the United States, and restore multilateral diplomatic efforts. More importantly, returning to the deal would allow more time for follow-on agreements on regional issues and other areas of contention. These issues are critical to the security interests of the United States and its regional partners, and Tehran is unlikely to engage in any talks on these issues unless the JCPOA is restored.

An important component of U.S. leverage is sanctions relief. With both sides committed to compliance, lifting sanctions on Iran will not give Tehran an overnight economic boost strong enough to disincentivize further negotiations or to fund its destabilizing regional activities as some fear. Non-JCPOA-related sanctions will remain in place, and even with the JCPOA-related sanctions lifted on paper, the practical side of operationalizing trade and transactions will not be swift. Iran would only begin a slow process of economic recovery. But relief will give the United States the upper hand at the negotiating table, exchanging more immediate economic incentives for additional concessions.

Should Iran violate the deal, the U.S. government can reimpose sanctions not only with the support of Europe but also potentially from China and Russia. These other parties to the original deal all share a common interest: preventing Iran from having a nuclear weapons capability. The common interest of global nonproliferation is what created this coalition in the first place. If Iran crosses the red line on its capabilities, these countries have an inherent interest in applying pressure to pursue their own nonproliferation objectives, and a multilateral response to any violation is much more likely with a U.S. return to the deal than if Washington stays out.

The threat of reimposing sanctions is stronger today than it was four years ago. While the maximum pressure strategy failed to produce Washington’s desired policy outcomes, it showcased the power of U.S. unilateral sanctions despite international opposition. The dire consequences of isolation when facing U.S. sanctions have become crystal clear to most Iranians.

Iranian President Hassan Rouhani is under pressure both from hard-line factions and due to growing public dissatisfaction with the country’s economic challenges. He needs to secure at least the start of a process to revive the JCPOA in the coming weeks. There is a growing perception among Tehran’s political elite that the best strategy to push the United States to end the maximum pressure campaign is to present it with the choice between an unresolved confrontation escalating to war and a nuclear-capable Iran.

The assumption is that Tehran can take advantage of Washington’s reluctance to engage in military confrontation to advance its political agenda—and that it can do so by pushing the limits on its nuclear program and regional activities to a point where the U.S. government has to choose between accepting an Iran with a nuclear weapons capability and a military strike against Iran—both of which are anathema to the Biden administration.

Leaders in Tehran assume that the unattractiveness of the alternatives can make Washington conclude that time is not on its side to continue its pressure campaign through sanctions and will need to take action quickly to revive the agreement.

Iran’s brinkmanship could invite military confrontation over its nuclear program as Israel is threatening. Iranian hard-liners are overly confident about their nuclear leverage and the long-term sustainability of the resistance economy. Iran’s resistance economy faces serious challenges: There is increasing internal dissatisfaction with the pace of economic growth that is turning into political pressure. As Iran struggles to manage the pandemic, its “pre-purchase” of nearly 17 million COVID-19 vaccines from the vaccine-sharing facility COVAX had reportedly been delayed due to U.S. financial sanctions.

But maintaining this stance will come at a dire cost of domestic dissatisfaction and delayed economic development. Expanding nuclear and military activities could also endanger the political support still provided by Russia and China. Thus, by hanging on to what it perceives as leverage, Iran risks squandering a unique opportunity to reach an agreement with a U.S. administration that has signaled its willingness to engage diplomatically with Iran and is in a unique position to deliver on that.

For the Rouhani administration to be able to convince the hard-liners to reverse the steps on nuclear advancement and return to compliance with the agreement, it will need to kick-start the process of returning to the deal within the next few weeks. If there is no clear prospect of reviving the accord, then the Rouhani administration may take more drastic measures, such as halting international nuclear inspections, in a show of strength to political opponents prior to the presidential elections in June, which Rouhani will lose if he doesn’t revive the deal. Already, inspections are set to be scaled back if the United States does not return to the deal by February 21 in order to signal the time pressure on the government in Tehran.

A return to the deal would not jeopardize U.S. leverage; it would bolster it for future negotiations. Continuing to focus on holding on to leverage and adding pressure simply to inflict pain will continue to lead to the same results—namely, a lack of progress on key policy objectives. Meanwhile, it will squander the opportunity for diplomatic outreach that could rein in Iran’s nuclear weapons program.

By returning to the deal, the United States would both retain the leverage it has built by demonstrating the devastating economic effects of its unilateral sanctions and use its leverage through sustained diplomacy and multilateral efforts to produce more desirable policy outcomes. Restoring the deal would also put the Biden administration in a much stronger position moving forward to negotiate a follow-on agreement that addresses other issues and concerns, such as Iran’s missile program and destabilizing activities abroad in a regional forum.

Four decades of sanctions and the history of U.S. and European negotiations with Iran indicate that it has only pushed back on pressure by doubling down on its nuclear program and regional proxies. It has only accepted and complied with clearly defined and desirable concessions through an agreed framework such as the 2015 deal. After four years of failure to coerce Iran into changing any policies for the better, it is time for Washington to rethink how to employ leverage effectively.

The analysis and conclusions presented here are based on individual research and do not necessarily represent the policies or perspectives of National Defense University, the U.S. Defense Department, or the U.S. government.

Mahsa Rouhi is a research fellow at the National Defense University’s Institute for National Strategic Studies. She is also an associate with the Project on Managing the Atom at the Harvard Kennedy School's Belfer Center for Science and International Affairs. Follow her at @MahsaRouhi.

Photo: IRNA

Verification and the Credibility of Sanctions Relief for Iran

Following a week of speculation about the Biden administration’s foreign policy priorities, Iran’s Supreme Leader, Ali Khamanei, gave an important speech today in which he outlined Tehran’s “final” stance on US re-entry into the nuclear deal. Khamenei kept the door open for the US to rejoin the Joint Comprehensive Plan of Action (JCPOA), while declaring that the Biden administration must “completely lift” US sanctions before Iran returns to its nuclear deal commitments in full. 

Despite this stance, it appears likely that the US and Iran can find a way to “choreograph” a mutual restoration of their obligations under the nuclear deal. What was significant about Khamenei’s speech was not his declaration on sequencing, but rather the introduction of a new requirement for any choreography that would enable the US to re-enter the agreement. 

While the sequencing tango was a major part of the negotiations that led to the JCPOA and of Iranian concerns over the optics of that sequencing, Khamenei’s specific concern over the verifiability of sanctions relief is new. To understand the context of this concern speech, it is useful to refer back to a speech made by then Treasury Secretary Jacob Lew five years ago, just a few months after the implementation of the JCPOA. 

Taken together, these two speeches point to a fundamental—if overlooked—asymmetry within the JCPOA. Iran’s commitments under the nuclear deal are subject to extensive verification. The International Atomic Energy Agency (IAEA) has in place the world’s most extensive inspection regime to keep tabs on Iran’s nuclear program. In return for compliance with limitations on its nuclear program, the JCPOA parties committed to the lifting of a wide range of UN, EU, and US sanctions. But there is no verification mechanism in place to ensure that sanctions relief has been implemented “in practice,” and not just “on paper”—a distinction Khamenei highlighted today. 

Iran’s experience with sanctions relief under the JCPOA has been bitter. Even prior to the Trump administration's reimposition of secondary sanctions in May 2018, Iran had felt that it was not receiving the full benefits of sanctions relief. There were a number of reasons for this, but the primary barrier to increased trade and investment was the reluctance of major banks to facilitate transactions or provide financing for Iran-linked projects. As a result, most of the milestone deals signed around the time the JCPOA was implemented—including orders for Boeing and Airbus aircraft, joint ventures with automakers Renault, Peugeot, and Daimler, energy deals with Total and CNPC, and rail projects with Siemens and Alstom—hit a roadblock even before Trump was elected to office and the future of the nuclear deal was thrown in doubt. Obama administration officials acknowledged these challenges at the time. Lew and Secretary of State John Kerry were even drafted in to provide reassurances to global banks and economic actors about the reliability of US sanctions relief commitments. But their efforts largely failed. 

In March 2016, just a few months after the implementation of the JCPOA, Lew gave a major speech on the future of US sanctions policy—sanctions lifting was a key focus. He noted how the “experience with Iran demonstrates how difficult [sanctions lifting] can be, essential as it is.” Commenting on the quid-pro-quo of the nuclear deal, Lew noted that “since Iran has kept its end of the deal, it is our responsibility to uphold ours, in both letter and spirit.” He cited the “global outreach” that the Treasury Department was undertaking to provide guidance to foreign business and governments on how to conduct compliant trade with Iran. But reading Lew’s remarks today, it’s clear that he knew at the time that this guidance would prove insufficient and that a dilemma had presented itself for US foreign policy. “Since the goal of sanctions is to pressure bad actors to change their policy, we must be prepared to provide relief from sanctions when we succeed. If we fail to follow through, we undermine our own credibility and damage our ability to use sanctions to drive policy change,” he warned. Not only would the Obama administration fail to deliver sanctions relief in the manner envisioned, but the Trump administration would take the betrayal one step further, reimposing secondary sanctions despite Iran’s verified compliance with its commitments under the deal. 

It is the Biden administration’s undermined credibility, five years in the making, that led the Supreme Leader to insist that the US must lift sanctions “in practice, not verbally or on paper” and that Iran would seek to “verify” the implementation of sanctions lifting before fulfilling its own commitments. Importantly, the Supreme Leader believes that verification is possible, stating that if the international community wants “Iran to return to its obligations under the JCPOA,” it will do so after the US verifiably lifts sanctions.

The focus on verification suggests that Iranian leaders see dealing with the United States as a technical challenge. Iran is not going to take it on faith that the Biden administration will make good on its obligations—it will seek to ascertain that obligations have been met. This is an interesting echo of how President Obama justified the nuclear deal to the American public in July 2015, insisting that the deal was built “not on trust, but on verification.” The key difference, of course, is that the US had the means by which to perform its verification—the authority and access afforded to IAEA inspectors put American stakeholders at ease that Iran was making good on its commitments. It would seem that some effort needs to be made to give Iran similar tools of verification, both for its own sake, but also for the sake of Europe, Russia, and China, whose economic relations with Iran so vastly outweigh those of the United States. It is through these relations that the economic benefits of the deal must flow. 

The Biden administration should work closely with the other JCPOA parties to devise new mechanisms to verify that sanctions relief is being successfully implemented and identify where relief may be following short. One option might be to establish a new panel of experts or special rapporteur at the United Nations responsible for gathering, interpreting, and assessing evidence on the implementation of sanctions relief. 

There are several reasons why the United Nations may be the ideal organisation to establish such a verification mechanism. First, the nuclear deal is enshrined as a matter of international law in United Nations Security Council Resolution 2231, establishing an obligation for “promoting and facilitating the development of normal economic and trade contacts and cooperation with Iran.” Second, a United Nations agency, the IAEA, is already involved in verifying half of the nuclear deal’s quid-pro-quo. Third, Iran has itself turned to United Nations bodies to seek recourse for the failure of the United States to hold up its end of the nuclear deal, for example by filing suit at the International Court of Justice against the US. Fourth, the issue of sanctions relief impacts Iran’s relationships with the wider international community, and not just its relations with the United States or the other parties to the JCPOA. Countries which are not parties to the deal may not wish to raise politically sensitive concerns over the impact of sanctions on their bilateral economic relations with Iran in a forum that will be dominated by the United States. The UN offers as much impartiality as is possible in the international system. Finally, the issue of credible sanctions relief is not relevant to the Iran nuclear deal alone, but will be of concern for the growing number of economies subject to restrictive measures. A UN verification capacity could prove important for countries such as Venezuela, Cuba, Syria, and North Korea should a political breakthrough lead to the prospect of sanctions relief in any of those cases. 

Of course, setting up a new verification mechanism for sanctions relief won’t be possible in the short period of time that Tehran and Washington have to save the nuclear deal. But should the Biden administration acknowledge this concern and set in motion steps to create a verification mechanism, it may reassure stakeholders in Tehran that the bitter experience of the JCPOA is not bound to be repeated. This would also be consistent with the interim step of “freezing” Iran’s moves away from the nuclear deal—an approach that is reportedly being considered by the Biden administration. The provision of economic relief, whether in the form of oil waivers or eased access to foreign exchange reserves, would offer an instance where Iran could “verify” that the US has made good on a promise of sanctions relief prior to the delicate choreography of mutual restoration of the nuclear deal. Such a step would enable Khamenei and other voices in Iran to suggest that a new condition of JCPOA re-entry, set by Iran, had been provisionally met, opening the door to talks around fuller sanctions relief.

What’s clear is that Iran to wishes to build a deal not on trust, but on verification. The international community ought to afford Iran the means to do so.

Photo: IRNA

The Plan to Save the Iran Deal Needs Private-Sector Buy-In

With the election of Joe Biden to the US presidency dialogue, between Washington and Tehran appears to once again be possible. Both Tehran and the Biden team have expressed a willingness to consider a “clean” return to the terms of the Joint Comprehensive Plan of Action (JCPOA, better known as the Iran nuclear agreement) if the other does the same. Namely – Iran would revert its nuclear activities to within the limits set out in the JCPOA, which it began breaching in May 2019, and the US would once again lift sanctions on Iran as prescribed by the agreement.

Reality, of course, will be more complicated. Securing economic benefits will be a priority for Tehran in any dialogue on the future of the deal, or any agreement that may succeed it. However, as became clear following the initial removal of US and international sanctions on Iran in 2016, the degree to which sanctions-lifting on paper translates to economic relief in practice depends in no small part on the willingness of the private sector to engage with the Iranian market. If the US and E3 hope to present renewed trade and investment as a credible and meaningful incentive for Iranian cooperation, it will be necessary to both address private sector concerns and manage Iranian expectations.

At the moment, many businesses around the world have opted out of engaging with Iran. The scope and complexity of US economic measures against Iran, as well as the high costs of potentially losing access to the US market and financial system in case of an accidental breach, is sufficient to turn even the most well-resourced compliance departments off of engaging with Iran. Iran is also one of only two countries—alongside North Korea—on the “blacklist” put forth by the Financial Action Task Force (FATF), the global standard-setter on countering financial crime. As a result of Iran’s failure to address “strategic deficiencies” in its financial crime regime the FATF currently requires jurisdictions to apply “enhanced due diligence” to their transactions with Iran, leading many banks to opt out of transacting with the country altogether. This means that businesses struggle to access financial infrastructure necessary for doing business with Iran.

There is some indication that, even if US sanctions on Iran were lifted, the uptake for private sector engagement with Iran would remain slow and limited. A few weeks ago, Iranian president Hassan Rouhani reportedly requested that Iran’s Expediency Council reprise its review of legislation that would address the deficiencies in Iran’s financial crime legislation called out by the FATF, which may help address some private sector concerns. However, persistent challenges in relations between Iran and the US and E3 will continue to create uncertainty for businesses. On December 17, the European Parliament passed a resolution condemning Iran’s detention and execution of human rights defenders and prisoners of conscience and called for the application of targeted financial sanctions on the Iranian individuals responsible. A few days earlier, a European Union-funded virtual business conference was postponed following the execution in Iran of journalist Rouhollah Zam.

Furthermore, some key US economic measures against Iran—for instance, sanctions on the Central Bank of Iran and on the Iranian Revolutionary Guard Corps (IRGC), as well as the designation of Iran as a jurisdiction of primary money laundering concern—are not related to Iran’s nuclear activities and may not be lifted as part of a return to the nuclear deal. These sanctions will continue to create complexity for banks and other businesses and will factor into private sector risk calculus. The possibility of another snap-back of US nuclear-related and secondary sanctions on Iran under a future change of administration in Washington will also discourage businesses investment. Persistent concerns over exposure to US sanctions within the financial sector in particular will complicate renewed economic engagement with Iran, as businesses will have trouble finding banks willing to support financial transactions with Iranian counterparts. Efforts by the incoming Biden administration to figure out the legal and regulatory logistics of sanctions-lifting, while ensuring that sanctions remain an effective tool of US foreign policy, will therefore also have to address challenges in the practical  implementation of sanctions-relief.

Reversing the economic impacts of private sector reticence to engage with Iran will be top of mind for the Islamic Republic as it engages with the new Biden administration. Tehran has previously called for compensation for “damages” to the Iranian economy caused by US sanctions – although Iranian leadership appears to have dropped such demands as a pre-condition for an Iranian return to compliance with the JCPOA in recent statements. And while Iran’s Supreme Leader Ali Khamenei expressed support for seeking sanctions-removal in recent marks directed at Iranian officials and the Iranian public, he also stressed the importance of “nullifying” the impact of sanctions on the Iranian economy. He distinguished “neutralizing” sanctions from sanctions-lifting and seemed to express scepticism over US and European ability to deliver on the former.

Assessing business’ levels of interest in re-engaging with the Iranian market and addressing concerns where possible will lend greater weight to US and European incentives of economic relief, hopefully encouraging greater cooperation from Iran in any future diplomacy—whether on its nuclear programme or more broadly. Relaying to Tehran the results of these private sector consultations may also help manage Iranian expectations on the level of foreign economic interest it can expect following sanctions lifting while also stressing the need for Iran to get its financial regime in order. On the part of Washington, this may include preparing comfort letters, granting sanctions exemptions, updating general licenses and expanding the guidance issued via the Office for Foreign Assets Control “Frequently Asked Questions” on Iran sanctions.

By consulting with their private sectors, the European governments can also better-understand business concerns and uncertainties around engagement with the Iranian market and how these may shift—or fail to do so—with the lifting of US sanctions. In October 2020, the European Commission launched a “Due Diligence Help Desk” aimed at supporting European companies in navigating European sanctions on Iran. While the platforms are well-intentioned and may provide businesses with helpful guidance, it is unclear how effective they will be in practice. The platforms do not address some of the key challenges raised earlier, including the lack of financial infrastructure to support transactions with Iran and concerns over exposure to US sanctions. The UK and European governments may wish to identify and reach out to specific sectors that are likely to be of greatest importance to renewed trade with Iran—for instance, the banking sector or those engaged in energy trade—to ensure they have the assurances, guidance, and infrastructure they need to proceed with confidence. Coordinated efforts across capitals—for instance, through the issuing of joint guidance by American, British, and European financial regulators, as well as dialogue with the US on the concerns of UK and European businesses—will also be valuable.

As renewed diplomacy on the Iranian nuclear question gets underway, it will have to be supplemented by consultations with businesses to assess whether the private sector will be able to make good on economic promises made at the negotiating table, as well as to manage Iranian expectations. At the same time, understanding and, where possible, addressing private sector concerns will help businesses do what they do best—moving goods, people, and capital to ensure that the lifting of sanctions on paper translates into real economic uplift for Iran.

Photo: IRNA

How Biden Can Stop Iran’s Conservatives From Undermining the Nuclear Deal

By Saheb Sadeghi

U.S. President-elect Joe Biden has so far spoken sparingly on Iran, including an op-ed on the CNN website and in an interview with the New York Times. As part of a step-by-step strategy, he has said that he would return to the nuclear deal as the first step and then address other concerns about Iran’s regional influence and missile capabilities. But how will the Iranian government react to the United States’ demand that the regional issues and the missile capabilities should be part of the negotiation?

There are two different approaches in Iran to handling comprehensive negotiations with the United States.

There is broad consensus within the Iranian establishment that Iran will not make any concessions regarding its deterrence and defense strategy.

Iran has traditionally used a deterrent strategy to strengthen its national security and defend its territorial integrity in recent years. This strategy has two prongs. The first is strengthening and supporting regional allies and militant movements in Lebanon, Iraq, Syria, Yemen, and elsewhere; the second is enhancing its missile capabilities and building and testing short- and long-range missiles, as well as ballistic missiles.

This strategy has expanded since the U.S.-led wars in Iraq and Afghanistan, which brought hundreds of thousands of U.S. troops into the region just a few miles from Iran’s eastern and western borders, dramatically increasing the risk of an imminent military strike on Iranian territory. Tehran has pointed to security threats in its vicinity and the fact that it is not a member of any regional military coalitions as the reasons it needs to develop missile capabilities and expand its influence in the Islamic countries in the Middle Eastern region.

Despite this general consensus on deterrence strategy, the Iranian government’s approach to Biden’s call for comprehensive negotiations can be divided into two camps.

The first group is made up of conservatives, who recently gained an absolute majority earlier this year in parliamentary elections and are expected to win the next presidential election. The conservatives strongly reject any talks with the United States on non-nuclear issues and their position has been further strengthened by the assassinations of the commander Gen. Qassem Suleimani in early 2020 and more recently the prominent nuclear scientist Mohsen Fakhrizadeh.

In their view, these assassinations were an attempt by Iran’s enemies to paralyze Iran’s deterrence, and now is the time to revive this deterrence, rather than negotiate. Reflecting this view, Saeed Jalili, a senior member of Iran’s Supreme National Security Council (SNSC) and the former nuclear negotiator during the presidency of Mahmoud Ahmadinejad, harshly criticized President Hassan Rouhani for discussing the missile issue with French President Emmanuel Macron in a telephone conversation. (He called for the refusal of such talks on the part of Rouhani, declaring that non-nuclear talks are prohibited and unacceptable.)

Conservatives believe that just as the West sought to limit Iran’s nuclear capabilities in past nuclear talks with the country, any negotiations on missile and regional issues would inflict a crushing blow to Iran’s national security. The hardline speaker of the parliament, Mohammad Baqer Qalibaf, recently said, “Negotiations with the United States are absolutely harmful and forbidden.” During Ahmadinejad’s presidency, when conservatives were in power, the world witnessed six years of fruitless negotiations between Iran and the West from 2008 to 2014, and this trend could repeat itself if the conservatives win the next presidential election.

The other group is made up of pragmatists and moderates who, despite emphasizing the need to strengthen Iran’s deterrence strategy, do not see non-nuclear negotiations as a threat to Iran’s national interests. Even so, they will not accept that the implementation of the nuclear agreement should be conditional on regional and missile negotiations.

In their view, if Biden’s foreign policy team focuses on the alleged need for so-called Middle East security and arms control talks instead of insisting on countering Iran’s regional influence and the need for limiting and disarming its missiles, it will be possible to reach an agreement between Iran and the West with the cooperation of countries in the region.

To them, when “countering Iran’s regional influence and its missiles,” is on the U.S. agenda, it means an aggressive approach toward Iran that does not consider the country’s legitimate security concerns. Such an approach will not be effective as the Iranians have shown with their resilience in the face of unprecedented U.S. sanctions, resulting from outgoing President Donald Trump’s maximum-pressure campaign.

The pragmatists believe that Iran’s missile policy is entirely defensive and deterrent in nature; Tehran has already stated that its missiles’ range will not exceed 2,000 kilometers (1,240 miles) while some Arab states in the region such Saudi Arabia have purchased missiles with a range of 5,000 kilometers (3,100 miles).

The pragmatists believe that in potential future region-wide negotiations, if pressure is put on Iran to limit its missile capabilities, Iran could rightfully bring up the issues of Saudi Arabia’s missiles, Israel’s nuclear warheads, and modern arms purchases by the Persian Gulf states as a justification for its insistence on keeping its own missile capabilities. The purchase of F-35 fighter jets by the UAE and Israeli nuclear weapons could be on the agenda of the possible future talks, which will give Iran the upper hand in those negotiations.

In such a situation, the United States and regional actors must decide whether to move toward a broader arms-control process in the Middle East or to recognize Iran’s right to have a missile capability. The pragmatists think that there should not be any fear of negotiation; instead, they argue that the opportunity of negotiations should be used to consolidate Iran’s regional and defense achievements. They see Biden’s victory as an opportunity to resolve Iran’s regional and international problems and see his approach to solving the Middle East’s problems as balanced in contrast to Trump’s.

This pragmatists’ view is even more relevant given Biden’s talk about reconsidering the U.S. position on Saudi Arabia. During his presidential campaign, he vowed to reassess the U.S. relationship with the Saudis and put an end to U.S. support for Saudi Arabia’s war in Yemen.

The pragmatists argue that former President Barack Obama was moving in that direction, and now Biden could step into Obama’s shoes and continue along that unfinished path. In an interview with the Atlantic in May 2015, Obama emphasized that an approach that rewards Arab allies while presenting Iran as the source of all regional problems would mean continuing sectarian strife in the region. Obama stressed that Saudi Arabia had to learn to share the Middle East region with its sworn enemy, Iran.

Biden’s pick for national security advisor, Jake Sullivan, said in a lengthy interview with The Center for Strategic and International Studies that the Biden administration will stop Trump’s maximum pressure campaign against Iran and would not hold the nuclear deal hostage for regional and missile talks, but by returning to deal it would put pressure on regional actors—including Iran and Saudi Arabia—to undertake regional talks. He also said that the United States will hand over these negotiations to regional countries and will not take the lead. Such a position aligns with Iranian Foreign Minister Mohammad Javad Zarif’s recent statement reiterating Iran’s readiness to hold talks with countries in the region on security and stability in the Middle East.

Even China’s foreign minister has recently called for Middle East security talks. Russian Foreign Minister Sergei Lavrov recently reiterated Putin’s proposal for talks between the U.N. Security Council permanent members and Iran to establish a collective security order in the Persian Gulf.

Iran’s readiness to use the influence it enjoys over the Houthis to end the Yemeni war—which Biden has insisted on and which lies at the core of Saudi Arabia’s national interests and security—seems to be a golden starting point. Iran can persuade its Yemeni allies to sign a peace agreement with Saudi Arabia.

However, there are serious barriers to regional and missile negotiations, the resolution of which will depend on the approach of the Biden foreign policy team. The atmosphere of mistrust between Iran and the United States, influenced by Trump’s maximum-pressure campaign and the assassinations of Suleimani and Fakhrizadeh, is the primary obstacle.

The second obstacle is the short period that Rouhani is still in office. With Biden taking office on Jan. 20, 2021, the two countries have only five months before Iran’s upcoming presidential election to revive the nuclear deal and work on other issues.

If the Biden administration’s plans to revive the JCPOA and lift sanctions do not go ahead as predicted, the two sides will be in serious trouble in early February, when the deadline included in a bill pushed by hardliners as an intentional spoiler and recently passed in the Iranian parliament expires.

Iran’s parliament has given European countries and the United States two months to lift sanctions. The Rouhani administration has expressed its opposition to the bill, describing it harmful to diplomatic efforts. However, because it has become law, they cannot prevent it from being enforced. Zarif has said the government will be forced to implement the law, according to which Iran will abandon almost all its nuclear obligations.

If such a law is implemented, it is possible that the JCPOA—which has survived four years of Trump administration’s immense pressure—would die in the first month of Biden’s presidency. Biden could lift the sanctions that were suspended by the nuclear deal with several executive orders, and then, as Rouhani recently announced, Iran will return to its nuclear obligations.

Saheb Sadeghi is a columnist and foreign-policy analyst on Iran and the Middle East. Follow him at @sahebsadeghi.

Photo: Wikicommons

What Archaeology Can Achieve in US-Iran Relations

This article is the fifth in a five-part series.

• Read Part 1 here

• Read Part 2 here

• Read Part 3 here

• Read Part 4 here

In the 1920s, relations between the United States and Iran had reached a low point, marked by the failure of Arthur Millspaugh’s financial mission (1922-27), the murder of Vice Consul Robert Imbrie (1924), and the withdrawal of American financiers from a railroad syndicate (1928-29), among other imbroglios. According to historian James F. Goode, the American chargé d’affairs at the time, Hugh Millard, wrote to the US State Department’s Near East Bureau Chief, Wallace Murray, stating that there had been “one flub after another in American efforts in Persia” but that ‘‘archaeology is about the only thing [the United States] are likely to be interested in which stands much chance of bringing results.” Perhaps the situation today is not so unlike that of the early 1930s, when—despite the accumulated ill will of the previous decade—American interest in Iran’s heritage brought the two countries into more sustained diplomatic engagement with each other.

***

Clearly, the past four decades have seen much more acrimonious relations between the US and Iran than the 1920s, with much higher stakes. As historian John Ghazvinian writes in America and Iran: A History, 1720 to the Present, for the past forty years, the United States and Iran have had few official relations at all. Between America’s support for the Shah, its arms sales to Saddam Hussein, and its policy of isolating Iran on the world stage since the Israel-Palestine Madrid Conference of 1991, a gulf in mutual understanding has opened that appears insurmountable. Decision makers on both sides operate in a context of severe and deleterious ignorance of each other’s motivations and aspirations. Indeed, bilateral relations between the two countries are so strained that they must be mediated indirectly by third parties: Switzerland (American affairs in Iran) and Pakistan (Iranian affairs in America). As Ghazvinian points out, even at the lowest depths of the Cold War, the chasm between American and Soviet leadership was not as wide as that between the US and Iran today.

More concerning still, according to Ambassador John Limbert—who was one of the diplomatic staffers held in the Embassy Seizure of 1979-81—is the fact that, since the 1980s, the American government has lost its cadre of diplomats with Iran expertise. In the past four decades, the US has trained few Persian speakers, and those it has trained have had almost no opportunity to use the language in an immersion setting. As Limbert writes, “those with both language and country expertise have aged and retired, leaving a gap that, with the best will in the world, will take at least a decade to fill.” Even prior to the embassy seizure, however, American foreign policymaking vis-à-vis Iran was sclerotic and ineffective. According to James A. Bill, a professor of international relations and government at William and Mary and an expert on US-Iran relations, the ineptitude of American diplomacy towards Iran in the late 1970s, leading to the deterioration of US-Iranian relations, was due to an institutionalized system of organizational conflict within the State Department. This allowed America’s Iran policy to be captured by special interests, and to be unduly influenced in equal measure by both ideology and ignorance.

William J. Burns—one of the diplomats who ran the Oman backchannel that led to the negotiation of the JCPOA—argues that the Trump administration has repeated and exacerbated many of these mistakes. For Burns, however, Trump’s Iran policy is a bellwether of a broader and more concerning trend. In his view, American diplomacy has slid adrift at a moment in history when American leadership is needed more than ever.

How might America regain its position of moral authority and respect on the world stage in the post-Trump era? Burns argues that American diplomacy will need to be reconstructed, from the individual on upward, requiring years of investment in the fundamentals of the craft: “smart policy judgement, language skills, and a sure feel for the foreign landscapes in which they serve and the domestic priorities they represent.” Wendy Sherman—the chief American negotiator in the P5+1 process that led to the signing of JCPOA—concurs. Sherman contends that diplomacy is most likely to succeed when its agents are not only deeply experienced, but also deployed in positions where they can draw on and that experience and put it to work. For Sherman, negotiation is not a set of stratagems, but rather comprises authentic person-to-person engagement. Unfortunately, as made clear by Limbert and Bill, for too long, the United States government has neglected to honor this principle in its dealings with Iran.

For some observers, renewed engagement with Iran is in fact key to the revival of American diplomacy. As Flynt Leverett and Hillary Mann Leverett write in “Going to Tehran,” American strategic recovery must start with a thoroughgoing revision of the US Government’s Iran policy. Similarly, Ghazvinian writes there is no problem that the US faces in the Middle East that cannot be tied one way or another to its haphazard and ineffective Iran policy. He argues that the only way that the US and Iran can resolve their differences once and for all is through an unconditional, sustained, and high-level set of negotiations. Like the Leveretts, he believes that what is most needed is an historic summit meeting between the two countries’ leaders, an international peace conference of the same magnitude as Reagan and Gorbachev’s meeting in Reykjavik or Nixon and Mao’s in Beijing. As the Leveretts argue, if America does not do this, it runs the risk of condemning itself to a future as an “increasingly flailing—and failing—superpower.”

While I am sympathetic to these calls for rapprochement through a grand bargain, an October 2019 white paper by Chatham House researchers Sanam Vakil and Neil Quilliam found that foreign policy experts from the US, Europe, Russia, the Middle East, and China were highly skeptical of the possibility of such an agreement under present conditions. A year later, however, with the coming administration of Joe Biden, it appears that good-faith engagement is back on the table.

In this series, I have shown how heritage management—in the form of cultural tourism, museum exchanges, and international scientific cooperation—have suffered under American sanctions. Clearly, renewed diplomacy and sanctions relief would benefit those whose livelihoods have been impacted by these policies. I would like to suggest here that American diplomats attempting to reestablish cordial exchanges with Iran have something to learn from the experiences of archaeologists and cultural heritage professionals. The precedents set by the University of Pennsylvania Museum of Archaeology and Anthropology and the Oriental Institute of the University of Chicago—in keeping positive relations between the US and Iran alive even during dark times—should be followed and honored.

Cultural heritage is one of the only fields in which person-to-person contacts between Americans and Iranians have been sustained through these four decades of hostility. For this reason alone, the Biden administration should create space for and leverage cultural exchanges as part of its reengagement strategy. More broadly, however, as all of the experts quoted above make clear: when those with deep knowledge of and investment in each other’s culture and history are involved in diplomatic negotiations, all stand to benefit. On whatever time-scale, no matter the form that renewed engagement between the US and Iran takes—whether a grand bargain, a direct meeting between heads of state, or some other expression of goodwill toward repairing broken ties—it can only be for the good of the people of our two countries.

My hope is that no matter the forum, American leadership chooses to call on envoys who speak Persian, or at the very least have some degree of appreciation for Iranian culture, rather than under-qualified appointees with an axe to grind. May our two governments recognize—as Hugh Millard so presciently did in the 1930s—the special role that archaeologists have played and can continue to play in improving ties between America and Iran and follow our lead in delving into a shared past to bring about a better future.

 Click here to read Part 5 of this five-part series.

Photo: Wikicommons