Nuclear deal with Iran offers hope for regional stability

The agreement struck in Geneva between Iran and the West unnerves the GCC and Israel but has been welcomed by others. Published in MEED, 28 November 2013

November was a month of despair and then triumph for Iranian diplomats; from the bombing of its embassy in Beirut on 19 November, which left 23 dead, to the breakthrough in negotiations over its nuclear programme in Geneva in the early hours of 24 November.

The first event highlights the often fraught nature of Iran’s relations with the Arab world; the second holds out the prospect of Iran being able to escape the grip of sanctions and fundamentally altering its relationship with other regional powers.

The Geneva deal agreed between Iran and the P5+1 group, made up of the US, UK, Germany, France, Russia and China, is an interim measure, due to last for just six months. Although both sides have agreed it can be extended beyond that, the coming months will be an important period of confidence-building so that momentum can be maintained towards a more expansive, longer-term agreement.

There is no guarantee that will happen. As the negotiators have acknowledged, a permanent settlement is likely to be far harder to secure than this interim deal. That is not just because of the differences between Tehran and the US and its allies. In the coming weeks and months, Washington and its European friends can expect to be the focus of intense lobbying from Israeli and Gulf Arab leaders deeply concerned about what it means for them too.

“This is potentially a significant moment, but I’m not going to stand here in some triumphal moment and suggest to you that this is an end unto itself,” said US Secretary of State John Kerry at a press conference soon after the agreement was signed. “It is not. It is a step towards the much more significant goal and the much harder to achieve goal of having a programme that is absolutely … peaceful. And that’s what we have to work for now.”

Wide-ranging deal

The terms of the interim deal are more wide-ranging that many observers had expected. Iran has agreed to halt all enrichment of uranium beyond 5 per cent, above which it becomes much easier to produce weapons-grade uranium. It will also disable or dismantle its stock of 20 per cent-enriched uranium. It has vowed to stop any expansion of its facilities at Natanz, Fordow and Arak and provide far greater access to inspectors from the International Atomic Energy Agency (IAEA). In return the US and EU will lift some sanctions, on gold, petrochemicals and automobiles, and allow Iran to repatriate some funds from international oil sales.

There are many sceptics who will wonder if even this interim deal can be made to stick, not least some of Washington’s closest allies in the Middle East who tend to see the hand of Iran in most places. “Iran today is a common denominator in the region. It is related to every situation. Wherever you look you see Iran,” says one senior politician in the region.

For now the Gulf states have broadly fallen into line behind their US ally, putting their suspicions about Iran’s real intentions to one side, at least in public. The UAE has perhaps the most to gain from the rapprochement. Over the years, Dubai has played an important role linking Iran’s economy to the outside world. That position has been usurped to some degree by Turkey and others, but the authorities must be hoping trade can return to its previous levels and help to underpin Dubai’s economic recovery.

Other GCC countries including Bahrain, Kuwait and Qatar also welcomed the deal, noting the potential for defusing tensions around the region. Saudi Arabia also suggested the deal could improve regional stability, although it could not quite bring itself to say that it welcomed the deal.

Israel will prove even harder to convince. Prime Minister Benjamin Netanyahu gave a typically forthright rejection of the deal, saying: “What was achieved last night in Geneva is not an historic agreement; it is an historic mistake. Today, the world has become a much more dangerous place because the most dangerous regime in the world has taken a significant step toward attaining the most dangerous weapon in the world.”

Israeli’s opposition is likely to embolden some of President Obama’s domestic opponents in Congress and elsewhere. One group, United Against Nuclear Iran, was quick to issue a statement condemning the Geneva agreement, saying it provides “disproportionate sanctions relief to Iran”.

In Iran itself, the opposition from Israel and some corners of the US, coupled with the evident discomfort of Saudi Arabia, will make it easier for President Hassan Rouhani to secure support for the deal. He is also helped by having clear backing from Supreme Leader Ayatollah Ali Khamenei, who described the Geneva accord as a success.

“My first reaction is that if it makes the Israelis squirm then we have hit the mark and it must be good,” says one local in Tehran. “The Saudis had threatened all kinds of punishments to the US to stop the process and are now silently sulking, which is also good. The leader sent congratulations for the success of the deal to the negotiating team which shut up the radical elements here. All are happy here since there is less likelihood of war.”

Syrian negotiations

In the longer term, however, Iran will have to come to a better understanding with its Arab neighbours. That will clearly be a difficult task, not least because of Iran’s heavy involvement in the Syrian civil war, its close ties to the government of Nouri al-Maliki in Baghdad and the repeated assertions by GCC governments, albeit never substantiated, that Tehran is meddling in their internal affairs.

Both Israel and Saudi Arabia fear the deal over the nuclear issue will simply give Iran a freer hand in the rest of the region, whether in Syria or elsewhere. Yet the fact that Iran has been willing to compromise on its nuclear programme suggests that it could be open to negotiations on other issues too.

“The most important thing for [Iranian Foreign Minister Mohammad] Zarif will be to start to rebuild bridges with the Gulf Arab states as soon as possible, but Iran will need to show some flexibility on Syria to get a deal done,” says Ali Ansari, director of the Institute for Iranian Studies at St Andrews University in the UK.

The progress of recent weeks has been far more rapid than most had imagined possible. Before an earlier round of talks began in Geneva in mid October, one Iranian observer told MEED he didn’t expect anything concrete to emerge for months. “The points of disagreement are significant. I don’t think we will see a breakthrough very soon,” he said. “Maybe in about four or five months.”

The fact that he was proved wrong is in large measure because of the individuals involved. The deal would have been unthinkable under the previous Iranian president, Mahmoud Ahmadinejad, but since Rouhani took over in June, there has been a concerted effort to repair relations with the West, solve the nuclear issue and try to get sanctions lifted.

The position taken by the Obama administration has also been vital. The US has imposed the harshest sanctions on Iran and has been doing so for far longer than any other country. So its willingness to make bilateral concessions was vital for the deal going ahead. The process was eased by a parallel set of secret talks between Tehran and Washington that have been taking place since September.

Economic relief

The concessions that have been made by the US and EU will provide some welcome, if limited, relief to Iran’s struggling economy. The financial benefits of the interim deal include Iran being able to repatriate some $4.2bn in international oil sales, which would otherwise have been held in inaccessible overseas accounts. It will also be allowed to restart petrochemicals exports that could provide another $1.5bn in revenue over the next six months, while automobile exports could bring in a further $500m.

In total the deal could provide up to $7bn of relief to the Iranian economy according to US officials. The most enticing prize for Iran is not that $7bn, however, but the prospect that other sanctions could be lifted in the future, which would have a transformative effect on its economy

How quickly the benefits from the latest deal materialise will depend on how the US and its European allies go about suspending the sanctions that are due to be eased. International law firm Clyde & Co says the relevant US measures can be lifted relatively easily by President Obama without the need for Congressional approval, but the EU will need to pass new legislation to allow the trade in petrochemicals and in gold and other precious metals. France’s Foreign Minister Laurent Fabius has said this will happen in December.

The US and EU have emphasised that any gains for Iran could be quickly reversed if they find Tehran is not keeping to its commitments and most sanctions remain in place, including the most onerous restrictions on Iran’s oil and banking sectors. US officials estimate the oil sanctions alone cost Tehran around $5bn a month in lost sales.

And it also has to be remembered that this deal is only an interim arrangement. Unless all involved decide to renew it or replace it with something else, it will expire within six months. This is not an idle concern. In the past there have been smaller steps forward that have led nowhere. In March 2000, the Clinton administration rolled back sanctions on some Iranian goods including carpets and foodstuffs, but it was not long before more restrictions were being imposed.

The key differences this time are that both sides appear committed to fundamental change and, as part of the interim deal, they have already agreed the outline of a comprehensive agreement. In broad terms this would lift all nuclear-related sanctions in return for Iran meeting its obligations to the Non-Proliferation Treaty (NPT) and the IAEA.

Iran and the P5+1 powers have vowed to try and reach that full agreement within a year. This will be easier said than done, but as British Foreign Secretary William Hague indicated in a statement to the UK parliament on 25 November, the prospects for a long-term deal now look brighter than at any time for years.

“The fact that we have achieved for the first time in nearly a decade an agreement that halts and rolls back Iran’s nuclear programme, should give us heart that this work can be done and that a comprehensive agreement can be attained,” he told the House of Commons.

Such a deal would help to restore President Obama’s increasingly battered reputation, and could be even more significant for Rouhani. For that to happen, though, both presidents will need to keep their opponents in check and their allies in line.