By Jofi Joseph:
In mid-July, negotiators from the so-called P5+1 (the United States, United Kingdom, France, Germany, Russia, China and the European Union) reached a mutual agreement with Iran to extend an interim six-month agreement for another four months. The agreement extends concrete constraints on Iran’s nuclear program — in particular, a halt to Iran’s production of 20 percent enriched uranium — in return for modest and temporary sanctions relief for the Islamic republic. It will provide more time for negotiators to conclude a permanent agreement defining the future size and scope of Iran’s nuclear program in exchange for comprehensive sanctions relief.
Although reports indicate the two sides have made significant progress in recent months on key elements, the extension should not be a major surprise.
First, given the magnitude of what the negotiations cover – a peaceful resolution of an issue that has bedeviled relations between Iran and the international community for over a decade and a starting point for a potentially broader rapprochement with Iran – it is to be expected that diplomats are taking a methodical approach to discussions.
Second, given the vehement opposition of some domestic constituencies, especially in the United States and Iran, neither side wanted to appear as if it compromised too soon or too easily. An extension allows both sides to demonstrate to internal audiences that they are engaged in tough bargaining and will not concede on any red lines until the last possible minute.
However, the back and forth over the past six months and the clues negotiators have dropped in public allow us to better understand what a final agreement would look like and its likely reception upon announcement. Here are three key conclusions we can draw:
1. It’s all about enrichment.
Negotiators appear to have significantly closed gaps on matters of the future disposition of the Arak heavy water reactor, the fate of the underground Fordow facility, andtransparency and verification measures to ensure Iran’s nuclear program is peaceful in nature. Yet significant gaps remain over the big ticket item in the negotiations: the size of the domestic enrichment program Iran is allowed to retain.
As former U.S. negotiator Bob Einhorn laid out recently, Iran has steadily expanded its definition of what it needs – from an initial position demanding only recognition of the so-called “right to enrich” to an insistence that its domestic nuclear power program will require a large enrichment infrastructure along the lines of 190,000 centrifuges, or 10 times the size of its current program.
The P5+1 is willing to countenance a very small program of several thousand centrifuges, but is unwilling to go further due to concerns over potential Iranian “breakout.” One side will have to give in, and if it is Iran, it will likely be because of the next issue.
2. Iran will remain in the penalty box for only so long.
An underappreciated aspect of the current negotiations is that the P5+1 has already acknowledged, in the Joint Plan of Action agreed to in November 2013, that any permanent agreement will have a limited duration, to be agreed upon by all sides.
Whether that duration is five years, as Iran has reportedly sought, or closer to the 20 years Washington apparently wants, one conclusion is inescapable: At some point in the future, Iran will be able to develop any and all aspects of a large civilian nuclear program, including unlimited enrichment capacity and a heavy water reactor infrastructure that could produce plutonium.
Although the P5+1 would have been hard pressed to insist on any agreement that applies unique restrictions to Iran on a permanent basis, this concession also speaks to the underlying hope among some that the Iranian regime will evolve in a more moderate direction over the course of an agreement.
3. Investment uncertainty for Iran will remain, deal or no deal.
Despite the predictions by some, the international sanctions regime against Iran has shown few cracks during the implementation of an interim agreement. The primary reason that multinational corporations and others have refrained from returning to Iran is the uncertainty factor; with no guarantee that the temporary relief offered in the interim deal would be renewed or made permanent, these firms had little incentive to risk capital for only a short-term opportunity.
But even a permanent agreement may not yield the stability that global investors will seek.
First, spoilers on both sides will be doing their best to frustrate implementation of a deal. Inside Iran, supporters of the Iranian Revolutionary Guard Corps (IRGC) and other factions skeptical of Western engagement may seek to slow roll Iranian implementation.
Equally concerning, skeptics in the U.S. Congress will oppose any large-scale lifting of sanctions against Iran. While the president retains the authority to suspend most sanctions on his own authority, only Congress can permanently lift key U.S. sanctions. We may not know how Congress will act until several years into an agreement, which only prolongs the uncertainty.
Secondly, the U.S. has made clear that it is only prepared to lift those sanctions explicitly related to Iran’s nuclear program. But its unilateral sanctions, and some secondary sanctions, linked to Iran’s conduct on terrorism and human rights, will remain, limiting the flexibility of even those entities outside the United States.
This piece is cross-posted from OilPrice.com with permission.