April 25, 2016

Iran Nuclear Deal at Risk

Concern has recently grown over the ultimate sustainability of the Iran nuclear accord. Having withstood the full-frontal attack of congressional hawks last summer, the Obama administration faces the challenge of securing the agreement’s viability beyond its own tenure in office.

Recent news is not encouraging. Two principal threats to the nuclear accord have come into stark relief these past few weeks. First, Iran’s ballistic missile program has inspired a bipartisan push in Congress to pass new sanctions that would put the deal at risk. Second, certain surviving U.S. sanctions and reputational concerns continue to represent a prohibitive bar to Iran’s economic re-integration in the world economy.

Provided that these issues remain unresolved before the close of the Obama administration’s tenure in office, the Iran nuclear accord—President Obama’s signature foreign policy achievement—could be in significant danger.

Iran’s Ballistic Missile Program

Since the conclusion of the nuclear accord, Iran has undertaken successive ballistic missile test-launches. Although the tests were not unexpected, the manner in which Iran has conducted them has been callous. For instance, “Death to Israel” was written in Hebrew on the last test-fired missiles. This is no surprise: Those in Iran behind these test-launches are hostile to the nuclear agreement and seek to inspire further tensions between the U.S. and Iran.

Nonetheless, Iran’s ballistic missile program is not a serious threat. Without any real offensive capabilities, the program is second-rate and possesses only deterrent value. Surely, when compared to the current problems in the region, Iran’s ballistic missile program ranks low as a factor playing into the ongoing tumult.

The real danger to the nuclear accord, instead, lies with the congressional response to Iran’s ballistic missile test-launches. As certain U.S. hawks have recognized, Iran is unlikely to suspend development of its ballistic missile program, regardless of the costs the United States imposes. After all, Iran’s ballistic missile program has important historical meaning for Iranians following their experiences during the Iran-Iraq War. Tehran’s ballistic missiles are one of its few deterrents to potential external aggression, which has been widely threatened over the past decade.

Nonetheless, congressional hawks view the ballistic missile issue as instrument with which they hope to undermine the nuclear accord. Indeed, we have now entered into a dangerous cycle, wherein Iran test-fires a ballistic missile, the Obama administration responds with a new round of sanctions designations, and Congress threatens more drastic legislative action to adequately deal with the threat. This cycle is, by its very nature, escalatory, as Iran will continue to test-launch ballistic missiles and Congress will increasingly view the Obama administration’s response as inadequate to the challenge. Congressional hawks will ramp up the pressure on Democrats to accede to their legislative efforts. Such legislation will target Iran’s banks, which will be alleged to provide financial support for entities involved in the development of Iran’s ballistic missile program. Congress will argue that such sanctions do not technically violate the nuclear accord. Although that point is debatable,,the re-imposition of any banking sanctions would fatally undermine Iran’s incentive to continue to comply with the nuclear agreement.

Underperforming on Sanctions Relief

In addition, there remains an open question as to whether the sanctions the United States lifted after the nuclear accord will lead to practical benefit for Iran. Right now, most foreign banks continue to refuse to re-engage their Iranian counterparts or to support the trading activities of home companies. Even more significantly, Iran has proven unable to access the full sum of its overseas oil revenues—revenues previously held in escrow—because some of these revenues were denominated in U.S. dollars upon deposit. According to Secretary of State John Kerry, Iran has only had access to $3 billion of an estimated $50 billion-plus in non-committed overseas oil revenues since the implementation of the nuclear accord. In sum, Iran is not merely failing to see substantial trade and investment in Iran by foreign parties, but it is also unable to fully access much of its overseas oil revenues. These diminished expectations in Tehran could ultimately undermine the Rouhani government.

Indeed, critics of the nuclear accord in Tehran were quick to jump on the remarks of Iran’s Central Bank Governor Valiollah Seif when he stated before a Washington audience last week that Iran had seen “almost nothing” in economic benefit from the nuclear accord. Absent a fix to Iran’s banking problems, the U.S. will soon be open to the charge that it’s not implementing its commitment under the nuclear agreement in good faith. The complaints are not just coming from the Iranians, either. European firms have reportedly expressed their frustration with U.S. diplomats in recent weeks.

Should Iran continue to be denied practical value from the sanctions-lifting under the nuclear accord, Iran’s own adherence to its obligations under that agreement will also be thrown into question. The Obama administration recognizes this problem. The nuclear accord was an effective quid pro quo under which Iran rolled back elements of its nuclear program in return for sanctions relief. If sanctions relief does not translate into economic benefit for its people, Iran will no longer have an incentive to continue restraining its nuclear program.

What to Do? 

Iran’s ballistic missile program—and the congressional response to it—is provoking a new crisis. U.S. opponents of the nuclear accord have somehow managed to supplant concern over Iran’s nuclear program with concern over Iran’s ballistic missile program. The roadmap for these Iran hawks is clear: push the envelope when it comes the re-imposition of sanctions on Iran and inspire the Iranians themselves to walk away from the nuclear accord. Although some in the Obama administration recognize the trap that is being set, the administration itself has done precious little to counter it. It is thus time for the Obama administration to adopt a new narrative regarding Iran’s ballistic missile program, identifying the precise challenges that arise from Iran’s ballistic missile program, enunciating a clear policy as to the steps that this and successive administrations should take to counter Iran’s program, and managing expectations of what the U.S. can do to limit future developments with Iran’s missiles. The administration should clarify that Iran’s ballistic missile program is a conventional deterrent whose development the U.S. can impede and counter but not altogether eliminate, and that U.S. efforts should be focused on interdicting trade in missile technologies with Iran—which can be accomplished through existing multilateral regimes.

Action will also need to be taken on the sanctions front. Some of us wrote about the troubles surrounding sanctions relief that were likely to arise far in advance and urged the administration to make preparations should Iran fail to see early benefit from the nuclear accord. That advice has unfortunately gone unheeded. The Obama administration has proven reluctant to take action that would incite the furor of its domestic political opponents. As a result, Iran’s current problems are likely to persist into the indeterminate future. Some in the Obama administration hold out the hope that time will remedy all problems, but time does not favor either the U.S. or Iran. Instead, the Obama administration will need to learn that continued inaction may prove riskier than action when it comes to the issue of sanctions relief.

Several months remain before the Obama administration departs office. Although the situation is not yet dire, affirmative steps do need to be taken to secure the nuclear accord before a successor moves into the White House.

This piece originally appeared in LobeLog.

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