Iran at 40: The Iran Deal

Iran at 40: The Iran Deal

11th February 2019 marked the 40th anniversary for the Iranian Revolution. The US withdrew from the Iran Deal on the 8th May 2018, leaving Iran’s future uncertain.

Text: Knut Joachim Tanderø Berglyd, Bachelor i Internationale Studier
Photo: Tasnim News Agency 

The Iran Deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), is an agreement concerning Iran’s nuclear program established between Iran, the European Union and the P5+1 (The five permanent members of the UN Security Council – United Kingdom, USA, France, Russia and China – plus Germany). In simple terms, the deal forces Iran to restrain its nuclear program to solely civilian purposes – to be verified by international nuclear inspectors. In return, various international sanctions on Iran have been lifted, affecting crucial economic sectors such as oil and gas, banking, trade and investment. But ever since the US withdrawal, fears of nuclear proliferation and escalation of conflict in the Middle East – or even between the US and Iran – have intensified.  

Why the deal? 

Internationally, concerns that Iran was developing nuclear weapons drove the P5+1 and the EU to sign the Iran Deal on the 14th July 2015. According to the Obama administration, Iran had enough enriched uranium and centrifuges to create eight to ten nuclear bombs prior to the agreement. Also, the time needed to develop a bomb was estimated to two or three months. In other words, fears of Iranian nuclear capabilities in an unstable region brought an otherwise polarized group of international actors together.  

The fact that Iran has remained thus far bolsters its credibility and legitimacy on the international stage, which Rouhani described as a “[…] political, legal and moral victory […] for the Iranian nation”.

In Iran, economic hardship produced by decades of sanctions and felt by the common Iranian led to the election of the moderate candidate Hassan Rouhani in the 2013 presidential elections. To improve Iran’s economic situation, Rouhani quickly initiated negotiations with the P5+1 concerning Iranian sanctions. The Iran Deal was concluded in 2015 and, as the sanctions were lifted in the following year, the GDP went from -1% to a stunning 12% growth rate, according to a 2018 BBC report. 

What now? 

Since the US withdrawal, many in the international community fear that Iran might do the same. The reimplementation of US sanctions has already been put in force. As a result, Iran’s economic prospects already look grim, with international firms pulling out of deals with Iranian firms, and Iran’s inflation rate skyrocketing. The Trump administration hopes that sanctions will curb Iran’s support of militant groups in Lebanon and Gaza and involvement in wars in Syria and Yemen.  

The Rouhani’s moderate government vows to remain in the Deal if the other parties manage to fill the economic vacuum left by the US. The fact that Iran has remained thus far bolsters its credibility and legitimacy on the international stage, which Rouhani described as a “[…] political, legal and moral victory […] for the Iranian nation” in September 2018.  However, once the renewed sanctions started to bite and the economic situation to deteriorate, Iran’s working class and poor took to the streets to demonstrate against the regime. Now there are fears that the conservative hardliners in Tehran might gain support at the expense of the moderates.   

Options for Iran 

There are seemingly only two viable options for Iran. The first option is that the Deal continues without the US. This depends on the ability of the remaining parties to uphold economic incentives for Iran. France, Germany and Britain recently developed the EU-backed “special purpose vehicle” (SPV) called INSTEX to circumvent US sanctions. It will coordinate trade of non-sanctionable goods, such as essential household wares, agricultural goods, and medical and pharmaceutical supplies. Iran is currently creating a SPV of its own to complement the process. However, whether it will include oil or not is uncertain, which makes the SPV an unlikely replacement as sanctions bar countries from buying Iranian oil, Iran’s most important export. 

In the second scenario, Iran remains in the Deal until the US presidential elections in 2020. Here there are two possible outcomes: A pro-Deal candidate wins, and the US rejoins the Iran Deal to the benefit of all parties. The second option looks grimmer: Trump is re-elected and the SPV-alternative does not work as a replacement, so Iran sees no benefit of remaining in the Deal. This could possibly lead to renewed tensions not only between Iran and the West, but also regionally in the Middle East as Iran attempts to assert its dominance. Furthermore, Iran could possibly develop closer ties with Russia and China thereby becoming a strong opponent to the West. 

The future of the Iran Deal looks uncertain. Whereas the Europeans try to convince Iran of their commitment to the Deal, the US, the most important economic actor, has distanced itself. One way or another, the attitude of the Iranian people, tested and pressured by sanctions for 40 years, will certainly influence the next Iranian presidential elections in 2021. 

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