The Day After Tomorrow: Preparing for the Aftermath of an Iranian Nuclear Deal

Here is what we should expect once a nuclear agreement is signed by Iran and the P5+1.

With the June 30 calendar date for a final, verifiable nuclear agreement fast approaching, Iranian and P5+1 negotiators in Geneva are swiftly nearing the time when incredibly difficult decisions need to be made. Diplomacy between Tehran and the P5+1 over Iran’s nuclear weapons program has been ongoing for roughly twenty-one consecutive months; indeed, the first round of preparatory talks started even before Hassan Rouhani was elected as Iran’s president in a resounding victory in August 2013. The last week and a half will determine whether or not all of this time and expended political capital—an effort that has been particularly controversial in Washington and Tehran—will ultimately result in a comprehensive agreement that all parties can live with.

Predictably, the last few days approaching the June 30 deadline have been the toughest and most politically fraught for all of the countries currently at the table. How fast the Iranian Government will receive economic sanctions relief; the amount of money Tehran will receive once a nuclear deal is signed; the extent to which IAEA inspectors will be granted access to Iran’s military facilities across the country; and the mechanism to ensure that an Iranian violation will be met with a quick re-imposition of sanctions are all open questions.  In fact, the same question can often elicit dramatically different answers depending upon who is asked—if Ayatollah Ali Khamenei had his way, the Iranians would feel economic relief on the very same day that the agreement is signed. U.S. officials, meanwhile, are adamant that any loosening of economic sanctions is tied specifically to Iranian compliance. And, of course, President Rouhani has his own assessment of the situation, telling reporters during a news conference that it will take only “a couple of months” for the Iranians to access the money that has until now been frozen in overseas bank accounts.

This is to say nothing of the political dynamics in Washington, where a large segment of the U.S. Congress remains concerned about the type of deal that the Obama administration is negotiating and the amount of concessions that the White House is willing to provide to a state sponsor of terrorism.

Yet, even with all of these issues yet to be sufficiently resolved, there is a reasonable enough chance that the United States, its negotiating partners, and the Iranians will in fact find the political will necessary to sign on the dotted line. For the first time in the tumultuous 35-year history between the United States and the Islamic Republic of Iran, officials in both countries are openly talking about the possibility of coming together to resolve a conflict.  This shift in tone by itself is a vast improvement in the relationship.

It is therefore necessary, indeed prudent, to survey the regional landscape after an agreement is signed by the June 30 negotiating deadline. What will the oil market look like once Tehran is permitted to sell its crude oil without restrictions? Will Iran’s foreign policy in the Middle East change in any discernible way? And will a successful U.S.-Iran nuclear accord drift into other areas of policy?

Iranian Oil After Sanctions

Whether or not one agrees with what the international community is prepared to offer Iran in exchange for nuclear restrictions, there is a universal belief that United States, EU, and UN sanctions hurt Tehran’s economy to such an extent that Ayatollah Khamenei was forced into a dialogue. According to U.S. Government estimates, the Iranian Government has lost approximately $160 billion of its own money as a result of prohibitions on overseas banking transactions. The cap on the amount of crude oil Iran can export to customers around the world—the sanctions prohibit Iran from exporting more than one million barrels per day, well below the 2.5 million barrels per day the government was selling before 2012—has hit its bank account hard. So hard, in fact, that the Iranians are losing $1.6 billion in oil revenue every month judging by its own figures. For a country that relies on oil money for a big percentage of its national budget, this loss is incredibly distressing.