Analysis

As U.S. Congress Mulls Nuclear Deal, Iran Builds Up Economic Defensive Shield

The more Tehran’s economic cooperation with Russia, China and EU expands, the greater Iran’s interest will be in implementing the nuclear agreement

Russian President Vladimir Putin  meets with Iranian Supreme Leader Ayatollah Ali Khamenei in Tehran,  November 1, 2017.
Dmitry Azarov / AFP

Gen. Mohammad Ali Jafari, commander of the Iranian Revolutionary Guards, had news to deliver this week. Iran, he said, will suffice for now with developing missiles with a range of up to 2,000 kilometers (1,243 miles). “These missiles satisfy our needs,” he said, explaining that this order had come directly from Iran’s supreme leader, Ali Khamenei.

These tidings won’t calm Israel, which is within that range, but Israel was never the target of his message. It was intended for the U.S. Congress.

Congress will soon have to decide whether to impose new sanctions on Iran, after President Donald Trump refused to recertify the Iranian nuclear deal but declined to impose any new sanctions himself, leaving the decision to the legislature. Trump thereby sentenced the agreement and Iran to a nerve-racking waiting period, during which lobbyists from both sides of the barricades are trying to persuade Congress to make “the right decision.”

Ninety leading American scientists, including Nobel laureates in physics and Richard Garwin, the nuclear scientist in charge of designing the hydrogen bomb in the 1950s, sent a letter to Congress warning that new sanctions would kill the nuclear deal. They said most of Trump’s demands could be achieved through other means, like greater monitoring by inspectors from the International Atomic Energy Agency, especially since under the agreement, inspections of Iran’s nuclear program won’t end in a decade but will continue at least until 2035.

On the other side, the Foundation for Defense of Democracies, a conservative think tank that maintains close ties with Israel, is lobbying for new sanctions and a U.S. withdrawal from “the worst deal ever negotiated,” to quote Trump.

But it’s not just Americans who are awaiting the other shoe that Washington will drop on the agreement. The European Union has already made clear that it doesn’t intend to quit the deal even if the United States imposes new sanctions.

In addition, Russian President Vladimir Putin, who visited Tehran this week, stressed that the IAEA is the only party authorized to decide whether Iran is complying with the deal, not Trump and his friends. Putin was referring to IAEA Director General Yukiya Amano’s statement that Iran has complied with all the agreement’s provisions, and that his inspectors haven’t run into any problems in their work.

Iranian Revolutionary Guard Gen. Qassem Soleimani, center, in Tehran on September 18, 2016, in this photo released by an official website of Iranian leader Ayatollah Ali Khameini's office.
AP

Putin’s argument, which is also made by Iran’s leaders, is correct, but it isn’t accepted by either Israel or Trump, who say Iran isn’t allowing inspections of its military facilities. True, those facilities aren’t included in the list of sites subject to inspections, but there are suspicions that activities that could violate the agreement take place there.

Russia and China do business

Still, there’s no real evidence of this yet, and as long as it remains a mere suspicion, it will be insufficient to generate a U-turn in the positions of the EU and the United Nations.

The position adopted by Russia, the EU and China, all of which continue to do business and sign long-term economic agreements with Iran, not only exposes the strategic fault line running through the world, but also sends a clear message to the U.S. administration: Even if Washington imposes more sanctions on Iran, those sanctions will end up hurting America no less than Iran. After all, what’s the point of sanctions when Russia this week signed several economic agreements with Iran and plans to invest $30 billion there, when China will continue buying huge amounts of oil from Iran, and when European companies will continue expanding their investments in Iran?

German Foreign Minister Sigmar Gabriel (who is expected to leave office in light of the German election results) warned two weeks ago that U.S. policy toward Iran could push the EU closer to Russia and China on issues related to Iran. Germany’s position is deeply entwined with its extensive economic interests in Iran.

German companies have announced plans to invest some $12 billion in Iranian infrastructure and oil projects, including 6 billion euros by the chemical giant BASF in building petrochemical plants in southern Iran. According to the research department of Iran’s Chamber of Commerce, Iranian trade with the EU has doubled in the first seven months of this year, to 13.1 billion euros.

Russia plans to build a gas pipeline to India that will run through Iran, and Russian businessmen are keen to invest in Iranian real estate, since Iran’s chronic shortage of hundreds of thousands of homes means prices will only rise. Those Russian developers will discover that Turkish colleagues are already building new neighborhoods for Iran’s cities.

A BASF chemical plant in Ludwigshafen, Germany, February 13, 2016.
Bloomberg

Thus in the two and a half years since the nuclear deal was signed, Iran has managed to build an economic defensive shield through cooperation with the world powers, who will presumably ensure that the agreement doesn’t collapse. But this isn’t a one-way shield, because the more this economic cooperation and foreign investment in Iran expands, the greater Iran’s interest will be in scrupulously implementing the agreement.

Also, don’t forget that the engine that drove the agreement was fueled by the economic rewards Iran was promised. This provided Iranian President Hassan Rohani’s government with great leverage, letting him quiet his rivals’ criticism and secure Khamenei’s backing.

They’re not so crazy

So for now, there seems to be an inverse relationship between those economic rewards and Iran’s desire to develop nuclear weapons. The bigger and more tangible the rewards are, the less interest Iran will have in furthering its nuclear program. That’s how a rational country operates. And anyone who thinks Iran isn’t a rational country will have to explain what the point of imposing sanctions on a crazy country would be.

Jafari’s announcement that Iran will limit the range of the missiles it makes is further evidence of a rational dialogue with the West in which Iran not only comprehends what’s worrying the West but also seeks to brand itself as being completely different from North Korea, which is seen as a crazy country headed by a wacko leader who controls a proven nuclear threat against the United States.

For Iran, the nuclear deal is reality, not a transient episode awaiting its end. The agreement’s impact on the regime’s viability is huge, since it’s not only a vital economic resource but also a diplomatic lever that gives Iran the status of a regional power.

Ostensibly, nuclear weapons were supposed to give Iran that status. But it’s becoming increasingly clear that the job is actually being done by the nuclear deal, because fear that Iran will violate it has come to resemble the fear that it will develop nuclear weapons. Consequently, it’s hard to understand the logic of the Americans, who seek to negotiate a new agreement that would achieve the same end.

Rohani has said that even if Washington imposes sanctions, Iran will consider itself committed to the agreement. It’s not clear whether his statement also reflects the positions of Khamenei, the Revolutionary Guards and influential clerics, but it does reflect his confidence that the deal will remain in force. Some Iranian analysts even see advantages in a possible American withdrawal from the agreement; they say this would probably unravel the “Western alliance” and isolate the United States.

Yet Rohani, now in his second and last term, can’t afford to be dismissive of the threat of sanctions. He has obligations to his voters, and to Iranian reformists in general, whose criticism of the president is only growing.

Improvements in housing prices, the cost of living, raging inflation, factory closings, rampant unemployment, severe restrictions on freedom of expression, systematic violations of human rights, corruption and nepotism are just a few of the promises he has broken or not yet kept since his election in 2013. These promises were linked to the nuclear deal, which was presented as a cure for all Iran’s ills and all the failings of its regime.

Political battles in Iran no longer revolve around the axis of support for or opposition to the nuclear agreement, but rather around how the deal will be exploited in the political arena – who will get a share of the profits it’s expected to generate, whether the military and religious oligarchy will continue to hold a monopoly over the spoils, how conservatives can exploit the deal for their own benefit, and what power reformists will have to promote their demands in light of “their” president’s success in securing this deal “for them.”

In the background of all these battles looms the question of who will be the next supreme leader after Khamenei. Counting the days of sick leaders has frequently proved to be a charm for a long life, but every leader ultimately dies, and in Iran, his death could cause a major shake-up. Thus it’s vital not to throw the bombshell of wrecking the nuclear agreement into this already heated arena.