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IRAN: Resumed Iran Diplomacy Will Provide No Easy Path

Table of Contents

  • Iran is likely to restrict UN inspectors’ access to nuclear sites on 23 February, following the expiration of a deadline the Iranian parliament imposed on European countries to provide sanctions relief.
  • Iran’s hostile actions, including the attack last on a US base in Iraqi Kurdistan by forces tied to Iran, are signs that Iran is preparing to enter negotiations with the United States.
  • Teheran’s actions in the coming months are likely to mix antagonistic actions with diplomacy, introducing greater volatility into Gulf security, and by extension into oil markets.

The Biden administration has taken deliberate steps to indicate it intends to resume negotiations with Iran over its nuclear program following the Trump administration’s May 2018 renunciation of the 2015 Joint Comprehensive Plan of Action (JCPOA). In his first weeks in office, Biden appointed a negotiator well known to the Iranians, Rob Malley, as its lead Iran negotiator. Last week the Biden administration accepted an EU invitation to engage in direct, multilateral talks with the Iranians on the country’s nuclear program.

Iran has also taken deliberate steps toward negotiating, although at first glance they seem to be in the opposite direction. On 15 February, forces tied to Iran launched rockets on a US base in Iraqi Kurdistan, killing a contractor and wounding five, including a US service member. Iran is also poised to implement a law passed in early December, ending Iranian compliance with the additional protocols of the nonproliferation treaty (with which Iran agreed to comply as part of the JCPOA) and limiting Iran’s cooperation with UN nuclear inspectors. The law was an Iranian response to the assassination of senior Iranian nuclear expert Mohsen Fakhrizadeh in late November, reportedly at the hands of an Israeli assassination team. In recent weeks, Iran has also advertised its production of uranium metal (which has weapons applications and was barred by the JCPOA), as well as stockpiles of 20% enriched uranium far in excess of those permitted by the agreement.

Iran’s economy has been badly squeezed by sanctions, which the Trump administration ratcheted up as part of its “maximum pressure campaign” against Iran. The sanctions reduced Iran’s oil exports by somewhere between half and three-quarters. Combined with lower oil prices for much of the last year and the economic impact of a catastrophic response to the COVID-19 pandemic, the Iranian economy is reeling.

Precisely because Iran is under pressure, the Iranian government is determined to demonstrate that it feels no urgency for an agreement and is pushing its adversaries to negotiate on Iranian terms. Iranian foreign minister Javad Zarif has argued that the way to bring Iran back into compliance with the agreement is to lift all sanctions on Iran—effectively asserting compliance for compliance. Zarif also met with his Qatari and Iraqi counterparts last week, and with the UN envoy on Yemen, implicitly making clear that Iran has a role resolving regional disputes.

The Iranian pattern, which we have seen before, is to remind negotiators that it can be a harmful actor if it is not engaged. For example, in May 2019, Iranian forces are thought to have attacked four commercial ships in the Gulf of Oman, and in September 2019, Iranian forces attacked Saudi oil facilities from the air. Reportedly, Saudi Arabia sought talks with Iran after the latter, but the Trump administration dissuaded them from following up.

As negotiations resume, Iran will engage in the full spectrum of behaviors to advance its negotiating position. That is, Iran will offer to be helpful on the nuclear file and a range of other issues of concern to Western powers, while simultaneously seeking to apply pressure. It will do that partly through apparent violations of its JCPOA commitments, and partly through the actions of Iranian forces and those with which it has influence. Iran can turn up the temperature in Syria and Lebanon (and through them, in Israel), Yemen and Iraq.

These Iranian actions will increase US domestic resistance to negotiating with Iran, and they will also agitate US partners in Israel and the Gulf. Arguably, signs of “successful” Iranian resistance will soften the skepticism of Iranian hardliners who oppose an agreement on concessionary terms. Aligning the politics in the United States and Iran as an agreement grows closer will be a concern.

Neither side is willing to merely return to the JCPOA. In part, the US believes the sunset provisions must be extended significantly, but both sides came to believe that the agreement had a range of defects. The US will seek to constrain more tightly Iranian missile development, and the Iranians will seek certainty that sanctions relief will not be held up by sluggish US implementation. In addition, Iran will need to find a fix to the problem of a future US president who simply abrogates the agreement.

Iran’s June presidential elections will complicate Iranian politics around negotiations. The JCPOA is closely tied to Iran’s outgoing president Hassan Rouhani, and most Iranians see it as a failed experiment since it did not reintegrate Iran with the world or invigorate the Iranian economy. Rouhani is term limited against running for re-election, but candidates are likely to make it politically difficult for Iranian negotiators to show much flexibility.

We are likely to see a slow and incremental return to negotiations, punctuated by acts of hostility. Iran is likely to engage in a measure of constructive and destructive behaviors, which it sees as reinforcing its leverage. These acts, combined with a generally tighter oil market, are likely to create greater oil price volatility in the next 6-9 months. Millions of barrels of Iranian crude are currently at sea and could enter markets quickly, and Iranian acts of violence in the Gulf and elsewhere would create a risk premium for oil; both are likely to occur.

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IRAN: Resumed Iran Diplomacy Will Provide No Easy Path

Iran is likely to restrict UN inspectors’ access to nuclear sites on 23 February, following the expiration of a deadline the Iranian parliament imposed