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The Danger of New Iran Sanctions

December 31, 2013 Topic: EconomicsSanctions Region: Iran

The Danger of New Iran Sanctions

Congressional proponents of additional sanctions believe Iran will buckle under the pressure. History suggests otherwise.

The Geneva “interim” agreement reached in November between Iran and the so-called P5+1 (the United States, Britain, China, France, Germany, and Russia) freezes Tehran’s nuclear program in exchange for modest sanctions relief, with the goal of enabling further talks to comprehensively resolve one of the world's thorniest challenges. Yet despite the landmark accord, more than two dozen Senators introduced legislation on December 19 to impose new oil and financial sanctions on Iran. The Senate could vote on the measure soon after it returns from recess in January. Powerful lobby organizations are mobilized in support of the bill, and it could certainly pass.

The legislation defies a request by the Obama administration and ten Senate committee chairs to stand down on sanctions while negotiations continue. It also flies in the face of an unclassified intelligence assessment that new sanctions “would undermine the prospects for a successful comprehensive nuclear agreement with Iran.” Proponents of the bill note that the proposed sanctions would only come into force if Iran violates the Geneva agreement or fails to move toward a final deal, and would not kick in for months. But the White House warns that enshrining new economic threats in law now runs counter to the spirit of the Geneva pledge of no new sanctions during negotiations, and risks empowering Iranian forces hoping to scuttle nuclear talks. The legislation also defines congressionally acceptable parameters for a final deal that Iran experts almost universally believe are unachievable, namely the requirement that Iran completely dismantle its uranium enrichment program. For these reasons, the administration believes the bill represents a poison pill that could kill diplomacy, making a nuclear-armed Iran or war more likely.

Sanctions hawks disagree, arguing that the legislation will enable, not thwart, diplomatic progress. “Current sanctions brought Iran to the negotiating table,” Senator Robert Menendez, the bill’s leading champion, contends, “and a credible threat of future sanctions will require Iran to cooperate and act in good faith at the negotiating table.”

But this logic badly misreads the historical effect of sanctions on Iranian behavior and under-appreciates the role played by Iran’s fractious domestic politics. A careful look at Iranian actions over the past decade suggests that economic pressure has sometimes been effective, but only when it aligns with particular Iranian political dynamics and policy preferences. And once domestic Iranian politics are factored in, the lesson for today’s sanctions debate is clear: the threat of additional sanctions, at this critical juncture, could derail negotiations toward a peaceful solution.

In the fall of 2003, under Iran’s reformist president Mohammad Khatami and his lead nuclear negotiator, national-security adviser Hassan Rouhani, the so-called E-3 (Britain, France, and Germany) persuaded Tehran to voluntarily suspend its uranium enrichment activities. Iran also agreed to implement the Nuclear Non-Proliferation Treaty Additional Protocol, allowing International Atomic Energy Agency (IAEA) inspectors more expansive access to Iranian nuclear facilities. According to the 2007 U.S. National Intelligence Estimate and a November 2011 IAEA report, the Iranian regime previously halted its organized effort to design a nuclear warhead. François Nicoullaud, the French ambassador to Iran during this period, suggested that Rouhani may have played a key role in convincing Supreme Leader Ayatollah Ali Khamenei to order the halt to Iran’s weaponization work.

These decisions came in the aftermath of the August 2002 revelations that Iran had constructed a secret uranium enrichment facility at Natanz and was building a heavy water reactor at Arak. Iranian leaders feared that the IAEA Board of Governors would refer Iran to the United Nations Security Council for violations of Iran’s nuclear safeguards agreement, raising the prospect of multilateral sanctions. (In the aftermath of the initial lopsided U.S. military victory over Saddam Hussein’s forces in Iraq, the Iranian regime may also have feared they would be targeted next for pursuing weapons of mass destruction.) A year later, the parties signed the Paris Agreement, which extended the temporary suspension of Iran’s nuclear activities, pending negotiation of a comprehensive framework.

In March 2005, Iran presented a proposal to the E-3 offering to cap Iran’s level of enrichment at 5 percent, a level appropriate for civilian nuclear power plants but far from weapons-grade. Tehran also offered to limit the number of operating centrifuges to 3,000 and ratify the Additional Protocol. But negotiations broke down when the E-3, backed by the Bush administration, balked at allowing Iran to continue low-level enrichment. With the resurgence of hardline forces, many affiliated with the Islamic Revolutionary Guard Corps, in the 2004 Iranian parliamentary elections and the June 2005 presidential election of Mahmoud Ahmadinejad, it became impossible for Iranian moderates to sustain elite consensus for nuclear compromise. Moderates were accused of appeasement and retreat, and hardliners demanded a tougher stance. Rouhani was singled out for particular derision. Hardliners showed little concern about possible UN sanctions or U.S. military action, advocating for the abandonment of diplomacy in favor of “resistance” and the creation of irreversible technological facts on the ground.

And that is exactly what happened during the Ahmadinejad period. Iran ended its temporary suspension of nuclear activities in the summer of 2005 and resumed enrichment at Natanz in early-2006. Tehran also stopped voluntarily implementing the Additional Protocol. Iran increasingly viewed its nuclear activities as inalienable rights, and uranium enrichment in particular became a central symbol of national pride.

In late-2006, the UN Security Council passed the first of six resolutions imposing economic sanctions and calling on Iran to suspend its enrichment and reprocessing activities until such time that it restored the confidence of the international community in the peaceful nature of its program. The most recent and significant of these resolutions, negotiated by the Obama administration and passed in June 2010, set the stage for a series of crippling unilateral U.S. sanctions, including potent provisions aimed at preventing third parties from buying Iranian oil or engaging in transactions with Iranian banks. The European Union and other like-minded nations followed suit with similar punishing measures. Sanctions severed Iran’s links to the international financial system and cut the country’s oil exports by more than fifty percent, costing the Islamic Republic more than $80 billion in revenue since the beginning of 2012, according to White House estimates. The value of Iran’s currency plummeted, and inflation, government debt, and unemployment soared. In 2012 alone, Iran’s economy contracted by five percent, and the 2013 numbers are expected to be similar.

Yet despite the escalation of sanctions during the Ahmadinejad period, Iran did not halt its nuclear activity. On the contrary, when Ahmadinejad entered office, Iran possessed several hundred centrifuges enriching to the 3.5 percent level, but by 2013, Iran had nearly nineteen thousand centrifuges, including almost one thousand at the deeply buried Fordow facility (another once-secret site constructed during the Ahmadinejad period) enriching to the much-closer-to-bomb-grade 20 percent level. In total, Iran accumulated enough low-enriched uranium during this time to produce, if further enriched, as many as half a dozen nuclear weapons. Iran also began installing much more advanced centrifuges at Natanz, and made substantial progress toward making the Arak reactor operational, opening up a potential plutonium pathway to nuclear weapons.

None of this changed until the June 2013 presidential election. In a six-way race, Rouhani vanquished several more conservative candidates, including Ahmadinejad's chief nuclear negotiator Saeed Jalili, who campaigned on continued economic and nuclear resistance in the face of international pressure. Rouhani, in contrast, emphasized the dangers of Iran’s isolation and the economic damage from sanctions. He pledged to repair relations with the world and have a softer touch at home. Rouhani’s sweeping victory—which surprised internal and external observers alike—gave him a strong public mandate and, for the time being, implicit support from Ayatollah Khamenei to change course.

Aware that he needed to act fast, Rouhani put together a largely technocratic unity government, including the Western-educated foreign minister Mohammad Javad Zarif, another member of the 2003 negotiating team, who was given the nuclear file. Rouhani and Zarif immediately set off on a “charm offensive” designed to signal a more moderate Iranian path, including a historic phone call between Rouhani and president Obama in September. The new approach culminated in Tehran’s willingness to accept the interim nuclear deal signed in Geneva—a deal very similar to one that Jalili had rejected in previous nuclear talks.

Iran’s behavior over the last decade clearly shows that there is no inevitable or linear causal relationship between applying “more pressure” and obtaining “more concessions,” as many sanctions advocates claim. Sometimes, as was the case in the 2003-2005 period, the threat of sanctions motivated nuclear compromise; but at other times (2006 to mid-2013), the actual imposition of sanctions appeared to have the opposite effect. There is little doubt that the economic deprivations produced by crippling sanctions—worsened by profound mismanagement under Ahmadinejad—compounded popular dissatisfaction with the regime and played a role in Rouhani’s recent election. And sanctions certainly influenced the Iranian regime’s apparent willingness to move toward nuclear accommodation in Geneva. But there is also little doubt that had Jalili become president, as some Western analysts predicted, Tehran’s nuclear intransigence would have continued despite the same level of economic hardship.