By: Rik Larsson
As the deadline to renew looms and Iran struggles with internal dissent, the Trump administration must decide whether to keep “the worst deal ever”
In the coming week, President Trump must decide whether to continue US participation in the Iran nuclear deal negotiated under his predecessor. In July 2015, Iran agreed to a deal with the United States and five other nations, ending Iran’s nuclear weapons program in exchange for a lifting of key sanctions. Relief under the Joint Comprehensive Plan of Action (JCPOA) included unfreezing over $100 billion of Iranian assets and opening up oil exports. In exchange, Iran agreed to dismantle its uranium enrichment program and surrender its uranium stockpile.
As the IAEA confirmed compliance with the provisions of the agreement and Iran handed over its enriched uranium to Russia, Iran began to be re-integrated into the world economy. Leading up to the deal, a majority of Iranians were in favor and expected an uptick in the long-stagnant economy. Opening Iran back up to international markets was expected to pump billions of dollars a year into the system.
Iranian voters lose patience waiting for economic turnaround
Instead of a bringing a windfall of cash for discretionary use, the unfrozen assets went towards rescuing a badly neglected financial industry to attempt to control inflation and attract investment. Iran’s economy has for years been maintained by subsidies and state-imposed controls. The opening of the Iranian banking system to the world has resulted in shock as the financial system struggles to cope with non-performing loans, poor liquidity, and rising inflation.
Instead of the rebound ordinary citizens were hoping for, reintegration of Iran into the world economy has brought home the true extent and impact of cronyism, corruption, and the bloated funding of religious institutions – all proving to be major economic vulnerabilities.
The theocracy is also under attack for being a massive unproductive drain on the economy. Up to a fifth of Iran’s GDP is controlled by ‘bonyads’, ostensible charitable trusts that own, control, and usurp industries, funneling money to the revolutionary institutions. Not only are the bonyads depressing private business, they are criticized as being corrupt and hugely unprofitable. The bonyads rely on government subsidies, taking up thirty percent of the government’s budget. One of the few effective uses of the trusts had been to move assets to evade sanctions. With that purpose currently moot, public anger at these sham charitable trusts only serves to further the unpopularity of the theocracy.
Despite billions of dollars in oil exports since the lifting of sanctions, conditions for the average Iranian have not improved. President Rouhani’s austerity measures aimed at getting the Iran’s economy under control may have been a partial trigger for protests, but it is by now clear the public anger is not principally about grocery bills, but about long-running economic fumbling, corruption, and oppression. Inflation is over 10%. Unemployment in some regions is over 35%. Left without the excuse of internationally imposed sanctions for an underperforming economy, anger over government waste and mismanagement is being felt anew.
In the West, criticism was heaped on leaders who negotiated the JCPOA on the basis that, nuclear concerns aside, dealing with one of the worst abusers of human rights on the planet and enabling access to billions of dollars of frozen funds left the West morally compromised or complicit in the regime’s brutality. Trump called the JCPOA, “The worst deal ever.” However, the impact may just be that the regime has been made newly vulnerable to change from within, empowering the critics of the Islamic revolution.
Theocrats struggle to control dissent
Iran is unlike the other theocratic nations in the region. The political structure of Iran is comparatively modern. While theocratic bodies have controlling oversight of elections and final adjudication of the laws passed, the government functions with some sophistication, and is responsive to voter demands. The revolution did not start with obvious religious fanaticism and the older generation remember that the religious authoritarian regime was not what was promised in the referendum. Iranians are, in general, politically active and far more secular-minded than the ruling regime. Engagement may be showing the Iranian people that their situation is far from hopeless, encouraging this challenge to the theocrats’ control.
In the last few days, Iran has announced a ban on teaching English in primary schools, claiming it is a dangerous avenue to “cultural invasion” by the West. The move may signal to Iranians that the regime is now feeling particularly vulnerable, after it also repeatedly accused foreign powers of instigating the protests that have spread across the country.
Thanks to a modern education system that emphasizes language ability in addition to science, Iranians are strongly multilingual. After Farsi, the official language, many Iranians are perfectly adept in English, far more than Arabic, and immersed in Western culture. Despite blocks on popular internet sites, Iranians make extensive use of VPNs to access outside content, much of it Western. Even through periods of economic isolation, it has been hard for Iran to keep this influence out of the country, or suppress Iran’s own free-thinking traditions. Farsi news media, while under close state censorship, is not as conservative in nature as Arabic-language TV, leaving Iran less inculcated in Islamicized worldviews.
There is a definite tension between the theocratic laws and the far more modern values of Iranian voters. President Rouhani has drawn sharp criticism from the theocratic elements for perceived Western influence, being popular among voters for his positions on human rights, if not his poor progress reforming the economic system. The recent reconnection of Iran to the outside world may have given people the push necessary to transform the rumblings of criticism of the regime into widespread revolt.
The view from the West
The JCPOA was lambasted by Republican lawmakers at the time it was signed, based on the fact that Iran was not required to give up its entire nuclear capacity, being permitted to operate reactors and maintain a small amount of low-enriched fuel for peaceful purposes. Opponents of the JCPOA also raised considerable noise over fears that unfreezing billions of dollars of Iranian assets would enhance the state’s reach and ability to fund terror and destabilize the region.
Iranian support for pro-Assad militias and Hezbollah in the Syrian Civil War is undisputed, and in the last year, clear evidence has surfaced of Iranian missiles in the hands of Houthi insurgents in a war that has created a humanitarian crisis in Yemen. President Donald Trump and Secretary of State Rex Tillerson have condemned Iran’s actions as a violation of the spirit of the 2015 JCPOA, threatening to scrap the nuclear deal.
At first glance, it appears Iran is back to the nefarious ways that spurred the development of modern terror across the region in the early 1980s, and that the deal’s abandonment of sanctions has given new life to a dangerous Iranian regime.
Or has it?
Iran is not the overtly militant revolutionary state it once was. Even its ideological terror child, Hezbollah, is now comparatively restrained. In 2015, Iran and Hezbollah were omitted from a US list of terror threats. Hezbollah is still designated as a terrorist organization by several countries, including the US, and certainly retains its murderous intent toward Israel, but its global activities pale in comparison to the major Sunni jihadist groups.
Unlike the widespread attacks and US embassy bombings by Iran-backed Hezbollah in the 1980s, the Iranian regime has transitioned away from direct use of jihadist terror to a more calculated brinkmanship with rivals. In the Islamic Cold War between Iran and Saudi Arabia, Iran seems less focused on instigating its own ideologically-inspired terror, and more focused on containing its Saudi rival, as well as the Saudi kingdom’s jihadist progeny, al-Qaeda and ISIS. Iranian support for these Sunni terror groups is scant, and the picture is one of an antagonistic relationship. Even the tactic of selectively supporting rival jihadist militias against ISIS and in proxy wars against Saudi Arabia has proven unpopular in Iran. The protests have revealed significant opposition to Hezbollah’s militant wing and the Iranian government’s isolating foreign policy.
A nuclear Iran narrowly avoided
In terms of ending Iran’s nuclear program, the JCPOA was deeply unpopular in the US Republican Congress, with many members publicly arguing the deal handed Iran the financial means to complete its nuclear development. The deal has been still less popular with Israel. Any scenario in which Iran is left with the remotest possibility of developing a nuclear weapon is understandably an unhappy one for Israel, given the fiery eschatological rhetoric that comes out of Tehran. Yet, at the time the JCPOA was negotiated, the window to render Iran’s nuclear ambitions strictly ‘impossible’ had for all realistic purposes already elapsed.
Technology embargos and clandestine efforts to hinder the Iranian nuclear program had not halted Iran’s progress, and Iran had no shortage of the engineering expertise necessary to construct a bomb. Despite the criticism of the JCPOA that no deal was preferable to one that left Iran with any nuclear capacity, the reality is that by 2015, at the time of the deal, Iran was capable of assembling a weapon within a month if it used its full production, and had enough material for several bombs following further enrichment.
The strong likelihood is that the only thing stopping Iran was the lack of political will to go through with testing a weapon and announcing itself as a nuclear power.
Continuing or increased sanctions thus stood no real chance of inhibiting Iran. Unlike North Korea, Iran is energy-independent and has vast natural resources to suit most of its industries. Despite years of a centrally-planned economy and state subsidies, Iran was relatively stable. Further, thanks to its bonyad system, Iran was partially hardened against the effects of international sanctions.
Militarily boxed in on every border, with a major US presence within striking distance, and its archenemy Saudi Arabia poised to cripple its shipping in the Persian Gulf in the event of war, Iran’s prospects of prevailing in a conventional war have long been bleak. Despite technological successes reverse-engineering captured military hardware and creating new indigenous designs, the bulk of Iran’s military equipment is rapidly deteriorating to the point of uselessness. It is possible that further sanctions or threats of imminent military attack would have pushed Iran to rush testing a nuclear weapon as its best chance to maintain deterrence if it failed to reach a deal.
The lifting of sanctions, fortunately, has not provided the feared springboard for Iranian nuclear development. As far as the IAEA and intelligence services have ascertained, Iran has been in compliance with the nuclear restrictions. Although the effect of the protests on its foreign policy remains to be seen, Iran, for the most part, seems to be playing the part of a rational actor responsive to economic persuasion. Taking away Iran’s incentive to continue cooperation when in the grip of domestic unrest opens the door to outcomes that are hard to predict. A destabilized regime rushing to complete a renewed nuclear program, and reactions from rival states, is a scenario for which the region is ill-prepared.
Scrapping the JCPOA could destroy the counter-revolution along with the regime
While President Trump has threatened to walk away from the Iran nuclear deal over Iran’s support for belligerents in Yemen and Syria, and threats to Israel, Israel may prefer a parallel deal to lift the remaining sanctions in exchange for curbing Iran’s missile program and reining in Hezbollah. While the other signatories to the JCPOA are unlikely to join the US in withdrawal, it could nevertheless implode the deal. On Monday, Iran announced it may discontinue cooperation with inspectors if the US withdraws from the JCPOA. At that point the Iranian government – as well as the protesters fighting against it – would return to the previous levels of isolation.
Whether conceived or not when the JCPOA was signed, renewed engagement with Iran may have helped galvanize the Iranian people’s dissatisfaction with the government, upset with both the theocratic rulers and ‘reformists’ like Rouhani. Many people are seeking fundamental change to the system. The underlying cultural and social factors separate the current Iran protests from the Arab Spring, making successful change more likely, even absent outside intervention.
The Iranian government is now in a tough position. If protests to continue, it may lose negotiating power as markets and other governments respond to uncertainty over regime stability. If it brutally cracks down on protests, it may lose relief from sanctions. Neither one is good for foreign investment. If Iran, through sanctions or civil unrest, loses access to markets, it would have little recourse. If Iran walks away from the JCPOA, it would take Iran many months and possibly years to get back the progress it had on a nuclear weapon before the deal. In the meantime, fresh sanctions would plunge Iran further into economic crisis, and possible civil war. If Iran is not very careful, it will lose its newly reclaimed place at the world table, increase the risk of conflict, and perhaps even leave the Iranian people with no choice but to redo the revolution.