THE IRAN NUCLEAR DEAL:
PERSPECTIVES 2022





Brief n.23, June 2022



The past year was considered by many experts and analysts as a favorable time to resolve the Iranian nuclear issue. It was conditioned by the following:


1) The Iranian leadership's interest to return to the 2015 JCPOA1, was partly dictated by the significant deterioration of the Iranian economy after the unilateral withdrawal of the U.S. from the treaty.


2) Joseph Biden's administrations focus shifted from Iran and the Middle East to China and Russia. In the Middle East, the U.S. has two long-term strategic tasks — ensure the security of Israel and to guarantee uninterrupted oil supplies and shipping safety in the Persian Gulf.

3) EU, China and Russia’s maneuvering to accelerate the deal, prompted by the desire to intensify trade and economic cooperation with Iran.

Talks on the nuclear-weapon-free zone

Negotiations on the latest nuclear agreement began in Vienna in April 2021. To date, eight rounds of talks have taken place; the last round ended on March 11, 2022. Their main difference from the previous talks was that Iranian diplomats were not communicating directly with their U.S. counterparts. The negotiation process was mediated by European diplomats. Until the end of March, the perspectives of negotiations looked bright. On March 12, Iranian Foreign Ministry Spokesman Saeed Khatib-Zadeh said that the text of the document was 95% agreed upon. On April 3, Iranian Foreign Minister Hossein Amir Abdollahian confirmed to the UN Secretary General António Guterres that all sides were close to an agreement and that the ball was now “on the U.S. side.”


However, over the past month, despite such positive assessments, there has been a clear slowdown in the negotiation process, and its results are becoming increasingly unclear. Iranian political class, media and experts are less and less optimistic about the outcome of the negotiations. U.S. diplomats are not very enthusiastic about returning to the JCPOA either. Asked by Al-Arabi Al-Jadeed on April 22 about the JCPOA, Linda Thomas-Greenfield, U.S. permanent representative to the United Nations, accused Iran of blocking the agreement.


On May 4 U.S. State Department spokesman Ned Price admitted that the U.S. is now equally ready for the conclusion of the JCPOA or for a situation in which there will be no agreement. He stated: "Since the prospect of a mutual return to the JCPOA is not yet clear, we are also prepared for another scenario.”


Iranian experts from Allamah Tabatabai University have identified three main reasons for impeding a return to the JCPOA. First, Iran wants the Islamic Revolutionary Guard Corps (IRGC) to be removed from the list of terrorist organizations. This is not just a matter of image as the IRGC has vested interests in the Iranian economy, and controls thousands of affiliate companies throughout Iran. The IRGC's inclusion in the “black list” causes direct economic damage to Iran. Second, there are no guarantees that this agreement will be long-lasting. Tehran fears that a new Republican administration that might to come to Washington after the end of Biden's term could initiate another American withdrawal from the treaty. Third, the position of Russia demanding written guarantees from the US that Washington would not create barriers to Russian trade with Iran, was cited as an obstacle.


The last obstacle is no longer relevant, since Russia has settled the matter with the United States. Nevertheless, some more liberal Iranian journalists and experts believe that Russia is deliberately delaying negotiations and preventing the signing of the agreement because it benefits Moscow. These assessments do not represent the majority of Iranian experts, but they point to a certain dissent within the Iranian elite. For example, an interview with Feridoun Majlisi, an expert on international relations and former career diplomat, was published on the website Diplomasiye Irani (Iranian Diplomacy.) Majlisi commenting on a recent a statement of the Russian representative to the JCPOA negotiations2, accused Moscow of not wanting a positive outcome to the negotiations from the start. In his opinion, Russia is afraid that Iran will compete in the energy market when the sanctions are lifted. He also notes that it is beneficial for Russia to keep Iran listed as a “rogue state” in order to influence the situation in the country.


The Russian invasion of Ukraine has made the US revise its position to the JCPOA.

Mobilizing the international community to counter Russia-led invasion, Washington had to offer concessions to its allies in order to induce them to join the anti-Russian coalition. Iran supported Russia from the beginning of the Ukrainian war. On March 2, in a speech dedicated to the Prophet Muhammad's mission, the Supreme Leader of Iran, Grand Ayatollah Ali Khamenei, Khamenei spoke in favor of ending the war, but at the same time, placed all responsibility for the conflict on the United States. Ayatollah Khamenei recalled that both the president of Ukraine and the fugitive president of Afghanistan counted on the U.S. help and both had to acknowledge their deception. “Western countries' support for their puppet governments is a mirage; in reality it does not exist. Let all governments remember this. Let those governments that hope for U.S. and European support learn a lesson from today's Ukraine and yesterday's Afghanistan. We cannot rely on them,” — said the Supreme Leader.


Washington is trying by all means to bring Israel to the anti-Russian coalition. At the beginning, Israel tried to maintain neutrality and refused to supply the advanced air defense system Iron Dome to Ukraine. However, later the Americans managed to persuade Israel to take a more supportive stance on the Ukrainian issue. In late April Israel seems to have abandoned its neutrality, accusing Russia of committing war crimes in Ukraine.


The price of bringing Israel onboard for the US was to accept the Israeli position on the JCPOA. Tel Aviv categorically rejects the removal of the IRGC from the list of terrorist organizations. In late April Prime Minister Bennett assured his constituency that President Biden “will not allow the IRGC to be crossed off the list of terrorist organizations. The IRGC is the largest terrorist organization in the world.”


In the U.S., pro-Israeli law-makers like Chairman of the Congressional Committee on Foreign Affairs Bob Menendez, are actively opposing the signing of any deals with the IRI. The chairman of the Joint Chiefs of Staff, General Mark Milley, recently noted that in his personal opinion, “the IRGC is a terrorist organization, and I personally strongly oppose its removal from that list." In a recent letter to President Biden, 46 retired US generals and admirals urged the president not to return to the JCPOA. Finally, during a recent meeting of the foreign ministers of the UAE, Bahrain, Morocco, Jordan, Egypt, Israel and the US, the UAE and Israeli emphasized the inadmissibility of a hasty signing of the nuclear deal with Iran. It appears that the current administration is actually returning to former President Donald Trump's foreign policy line of building a coalition of Israel and "moderate" Arab states in the Middle East.

The pros and cons of an accelerated nuclear deal for Iran

Concluding the JCPOA is important for Iran primarily for economic reasons. Before the first round of sanctions in 2010/15, the European Union was Iran’s most important trade and economic partner. In 2017, Iran's trade turnover with the EU was $20.9 bn: Iranian exports were valued at $10.8 bn and imports from the EU at $10.1 bn.


In 2015-2016, the Iranian leadership pinned great hopes on the inflow of investment and technology from the EU. Former President Hassan Rouhani during his January 2016 visit to Europe, Iranian officials signed numerous agreements with the EU members states like Italy and France. Contracts signed in Italy concerned energy, shipbuilding, steel and infrastructure sectors, totaling $18.49 bn. They involved a €3.7 bn contract with Saipem to upgrade Iranian oil production facilities, a €5.7 bn contract with the Italian steel producer Danielli, €4 bn contract with Condotte d'Aqua for infrastructure projects, and €400 million contract with Leonardo S.P.A., for the maintenance of the Iranian civil aviation aircraft. In July 2017, an agreement was signed between Iranian Railways and Ferrovie dello Stato Italiane, Italian national railway operator, to build the €1.3 bn euro Arak-Kum high-speed railway. At the same time, the Tehran-Hamadan high-speed railroad project worth €5.74 bn euro was discussed.


During the same visit, Iranians expressed its interest in acquiring 118 Airbus planes for a total cost of €25 bn. French oil giant Total pledged to buy 200,000 barrels of oil a day from Iran. PSA Peugeot Citroen, the largest French automobile maker, announced its intent to invest €400 million in the Iranian automobile industry over the next five years. The French national railway operator SNCF and Iranian Railways signed a protocol of intent to build new train stations and high-speed railways in Iran. French construction majors Bouygues and Vinci were to participate in the modernization of three Iranian airports.


However, when Washington unilaterally withdrew from the nuclear deal in May 2018, the Europeans, while verbally condemning Trump's decision to abandon the JCPOA, accepted the U.S. sanctions. The INSTEX (Instrument for Supporting Trade Exchanges), a financial mechanism designed to allow European companies to trade with Iran bypassing US sanctions, never became operational. Leading European companies like Total, Siemens, and Maersk left Iran. As a result, the Iranian leadership, while not rejecting the prospect of resuming cooperation with the EU, is now seeking to improve its economic cooperation with China and Russia. In his recent statements, Iranian President Ebrahim Raisi remarked that Iranian economic troubles cannot be explained by sanctions alone, and a return to the JCPOA is not be a panacea for it. Raisi condemned his predecessors - President Hassan Rouhani and Foreign Minister Zarif — for "putting everything at stake in the nuclear agreement without implementing structural reforms in the economy or developing relations with our natural partners, China and Russia".


In this regard, the Iranian government, with the blessing of Supreme Leader Ali Khamenei, has developed the so-called "Look East" concept, prioritizing economic relations with its Eurasian partners. In March 2021, a comprehensive cooperation agreement was signed between Iran and China. The agreement implies Chinese investment in Iran's oil, gas and petrochemical industry at around $280 bn over the next 25 years. At the same time, China will invest $120 bn in Iran's transportation and industrial infrastructure. In return, China receives exclusive right to access the Iranian fuel and energy complex. The Chinese side also gets the right to buy oil, gas and petrochemical products at a 12% discount. Chinese companies are also entitled to a discount of 6-8% for deals that may be viewed as high risk. At the same time, they receive the right to up to two years of installment payments. Even if the amount of investment is exaggerated, and the Chinese invest a quarter of what they promised in the Iranian economy, it will already be a lot.


The current Iranian leadership also counts on improving economic ties with Russia. In January 2022, President Raisi went to Moscow to talk about strategic partnership and economic cooperation. Iran wants to acquire modern Russian weapons systems including 24 Su-35 fighter jets and two S-400 batteries. Raisi also discussed the issue of re-equipping the Iranian MiG-29 and Su-24K, as well as the retraining of Iranian pilots. According to the Iranian side, Iran was already in the process of negotiating the delivery of weapons worth more than $10 bn.


Raisi's intention was to convince Russian leaders to increase bilateral trade and to encourage Russian companies to actively invest in various sectors of the Iranian economy. In late May 2022 Iran and Russia agreed to a major barter deal to facilitate trade between the two countries. Iran could import steel, zinc, lead and alumina from Russia in return for exports of car parts and gas turbines to the country.

Conclusions

The prospects for returning to the JCPOA seem further away today than they were six months ago. This pessimism stems from the fact that neither the U.S. nor Iran today have sufficient political will to bring the negotiation process to a conclusion. Both are counting on unilateral concessions from the other side, which is not a good negotiating strategy.


For Washington return to the JCPOA is no longer a priority. In early 2021, this goal was in line with the overall mood of the new administration. Foreign policy strategy in the early days of Biden’s administration was to resolve the issue with Iran in order to address the confrontation with China and Russia. After the start of the Ukrainian war, the military and economic defeat of Russia became a priority. For this purpose, Washington needs to strengthen its strategic partnership with the staunchly anti-Iranian Israel and the Arabian monarchies.


Raisi’s government does not consider finding a compromise on the Iranian nuclear program a top priority. The previous administrations of Hassan Rouhani and Mohammad Javad Zarif staked everything on the nuclear deal and lost. The current Iranian government wants either an agreement with "ironclad" guarantees or no agreement at all. Tehran hopes that the improving trade and economic relations with China and Russia can, at least partially, compensate for the damage caused by Western sanctions. Tehran also hopes that European companies will begin to return to the Iranian market in spite of the lack of regulation of the nuclear issue, and that the US, absorbed by Russia, will have neither the time nor the strength to prevent this.


The ongoing antagonism between Iran and Israel has sharply escalated in the last couple of years. The assassination in December 2020 of the leading Iranian nuclear scientist Mohsen Fakhri-Zadeh, increasing rate of cyber-attacks on Iranian nuclear plants, and the recent death of one of the IRGC leaders, Hassan Khadai, point in that direction. In these circumstances, Tehran does not rule out an attempt by Israel to bomb Iranian military facilities. Since Iran has now reached the threshold of becoming a nuclear power, the Iranian leadership views this as a factor of deterrence in its confrontation with Israel.





NOTES

  1. The Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), is an accord reached between Iran and several world powers, including the United States, in July 2015.
  2. Mikhail Ulianov, Russia’s Permanent Representative to International Organizations in Vienna had written that in the current environment of Western sanctions against Russia, Russia can no longer influence the negotiations and act a mediator between Iran and the West.