Zhao Zhai, MPP, Staff Writer, Brief Policy Perspectives

Introduction

Since the 1950s, Iran has been developing its nuclear programs. At that time, Iran was an American ally in the Middle East. After Iran signed the Treaty on the Nonproliferation of Nuclear Weapons in 1968, the US provided nuclear assistance to Iran for non-military purposes. The US continued to provide assistance until 1979, when the Iranian Revolution took place and the US reversed its assistance due to concerns about national security and nuclear proliferation. During the Iran-Iraq war from 1980 to 1988, the US provided enormous military and intelligence support to Saddam Hussein’s regime against Iran. During the war, Iran suffered huge economic and human losses. In order to ensure its national security and energy development, Iran decided to restart its nuclear program.  In 2006, the Iranian government announced publicly that Iran was engaging in uranium enrichment activities, a necessity for nuclear power. The government, however, claimed this nuclear program was for solely for power generation and unrelated to weapons production. Following this announcement, the UN Security Council adopted six resolutions demanding Iran cease its uranium enrichment activities.

The Obama Administration’ Negotiation Strategies

The 2015 Iran nuclear negotiation was a long-term process, requiring continuous inspections and cooperation with other great powers. Before the negotiation, the Obama Administration analyzed Iran’s technological and industrial capacity to produce nuclear weapons, and determined the program was not advanced enough to build a nuclear weapon. The Obama Administration’s position was consistent throughout the process: Iran can only develop a nuclear program for peaceful purposes. Enriching uranium, the process of isotope separation in order to increase the percent composition of uranium-235, is a critical for both civil nuclear power generation and military nuclear weapons. Under the agreement, Iran can only enrich uranium up to 3.67%, compared to 20% needed for research grade, and 90% for weapons grade. Additionally, Iran would have to eliminate its stockpile of medium-enriched uranium, and cut its stockpile of low-enriched uranium by 98%.

The Joint Comprehensive Plan of Action (JCPOA) agreement was reached on July 14, 2015. As a result of the agreement, Iran has dismantled more than 12,000 centrifuges and poured cement into the core of a reactor. Moreover, as promised, the UN, the EU, and the US  lifted all nuclear sanctions on January 16 2016. “This deal is not built on trust. It’s built on verification,” Obama stated. Under the agreement, the International Atomic Energy Agency can also access all Iranian nuclear facilities at any time to monitor and verify Iran’s compliance. The permanent members of the UN Security Council plus Germany (P5+1) also designed a mechanism for re-imposing economic sanctions if Iran cheats. As a result, it is almost impossible for Iran to take advantage of the US and its allies.

The Sanctions and their Effects:

Two fundamental elements helped make the deal work: 1. Iran relies too much on energy exports to support its economy; and 2. America used its dominant economic power to implement effective sanctions against Iran. The Obama Administration exploited these two elements to make the negotiation successful. Sanctions as bargaining chips are routinely employed during the negotiation processes: Iran can only be free from economic sanctions and be reintegrated into the global market to develop its economy by accepting the terms of the deal.

Since 1995, in order to force Iran to stop its nuclear programs, the US imposed a series of sanctions composed of asset freezes, international arms embargoes, and prohibiting US firms from conducting business activities in Iran. As a consequence, Iran has lost approximately as much as $60 billion annually in energy investment. The Iranian rial devalued up to 80% from autumn 2011 to October 2012, causing widespread economic hardship in the country.

Good News for Iran

After lifting the sanctions, Iran will be able to export millions of barrels of oil to the global market. International oil companies such as Chevron Corporation, ExxonMobil, and Royal Dutch Shell will invest in Iran. These companies can improve Iran’s efficiency and the capacity of Iran’s oil fields and refineries. Iran’s energy supply chain management and business effectiveness will also be significantly improved. With 10% of global oil reserves and 18% of natural gas reserves, Iran had strong incentives to accept the deal. In addition, the US Treasury Department estimated that Iran will recover approximately $100 billion of its assets frozen in overseas banks.

Bad News for Iran

In contrast, it is a bad bargain for Iran in many ways. Lifting sanctions does not guarantee Iran’s future economic growth for two reasons. First, the plunging price of a barrel of oil has fallen more than 70% since June 2014. Iran will reap significantly lower profits from oil exports than it had anticipated. Secondly, other American sanctions remain in force due to Iran’s role as a state sponsor of terrorism and an abuser of human rights. As a result of these restrictions, most American companies are still reluctant to do business with Iran. Furthermore, Iran will lose significant power for its self defense, as it can only enrich limited uranium in the long term and must open confidential facilities to the public. The sanctions have made it harder for Iran to continue its nuclear research because it cannot acquire enough specialized materials and equipment needed for the program.

Conclusion

Iran had no choice but to accept the JCPOA agreement. Although lifting the sanctions is not guaranteed to stimulate Iran’s economic growth as much as some people have predicted, Iran will nevertheless get the opportunity to reintegrate into the global market. In the next 20 years, as the deal could increase more free trade, the political enmity between America and Iran will also have a chance to decrease. The Obama Administration placed the current nuclear issue in an historic context, which can help both sides make better decisions for uncertainty in the future. However, they still have a long way to go.