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A Way Out of the U.S.-Iranian Impasse
A Way Out of the U.S.-Iranian Impasse
Ayatollah Khamenei receives Iranian officials, ambassadors of Muslim countries, on 18 May 2015. khamenei.ir
Report 166 / Middle East & North Africa

Iran After the Nuclear Deal

Some in the West hope the nuclear deal with Iran will empower the country’s moderates. But playing Iranian domestic politics directly could backfire. The West should recognise that any change will be gradual, best supported by implementing the nuclear accord, resuming trade, and diplomacy that balances Iranian and Arab interests in the Middle East.

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Executive Summary

With the nuclear accord between Tehran and world powers in force, a chief question is what it means for Iran. The clash between competing visions of the country’s future has heightened since the deal. Many, there and abroad, believe it could rebalance domestic politics. It not only has boosted the profile of those who promoted it, but, more fundamentally, it has opened space for new debates in a domestic sphere that was dominated by the nuclear issue for more than a decade. Yet, the political system, with its multiple power centres and tutelary bodies, inherently favours continuity. As its guardians try to quell the deal’s reverberations and preserve the balance of power, any attempt by Western countries to play politics within the Iranian system – for instance by trying to push it in a “moderate” direction – could well backfire. If world powers hope to progress on areas of concern and common interest, they must engage Iran as it is, not the Iran they wish to see. To start, all sides should fulfil their commitments under the nuclear deal.

The accord comes at a sensitive moment. Over eighteen months, three pivotal elections are scheduled. February 2016 will see polls for parliament and the Assembly of Experts, whose key mandate is to choose the next supreme leader; in June 2017, there will be a presidential poll. With the supreme leader aging, many wonder if the next Assembly (during its eight-year term) will choose his successor, who could reshape the Islamic Republic’s course. President Hassan Rouhani’s competitors are concerned that he and his allies will parlay their foreign policy achievements into electoral victories.

Tensions within the Islamic Republic stem in no small part from its blend of popular sovereignty and religious authority. Theocratic forces seek to maintain the dominance of the supreme leader and other tutelary bodies, while republican forces advocate more clout for popularly-elected institutions. Each camp is further split between pragmatists who seek incremental political evolution and radicals who either resist any change or promote revolutionary transformation. The supreme leader – powerful but not omnipotent – maintains stability by accommodating both theocratic and republican trends. But his affiliation with the former makes for a balancing act that is as complex as it is imperfect.

The precariousness of this equilibrium means that policy shifts when pressure from below is accompanied by substantial consensus at the top. The nuclear talks illustrate this. Rouhani’s election and the sanctions-battered public’s demand for normalcy catalysed the process, but the agreement was not a single man’s achievement. Supreme Leader Ali Khamenei had endorsed bilateral negotiations with the U.S. before Rouhani ran for office. He then supported the new president’s diplomatic push and kept his opponents at bay. But given the leader’s aversion to risk, his support was qualified and did not obviate Rouhani’s need for a coalition with other power centres.

The president, who is from the republican camp, brought on board the most important allies: the pragmatic theocrats, who control the unelected institutions. Almost every powerful group had a say in the accord, which reflected a national, strategic decision to turn the page on the nuclear crisis even as concern remains over the world powers’ commitment. The establishment appears as determined to implement the deal as it was to seeing the negotiations through – and largely for the same reason: to resuscitate the economy by removing sanctions, either as envisioned in the accord or by showing that Iran is not to blame for failure.

Rouhani has encountered difficulties in other spheres. He was forced to freeze priorities behind which he could not generate sufficient consensus, including social and political liberalisation. But his economic agenda, aimed at stimulating growth after several years of recession, is likely to move forward, even though it damages entrenched interests that have profited under the sanctions regime.

Everything suggests Rouhani will continue with a prudent approach, and change is likely to be arduous, slow and modest. Though the U.S. and its European allies might nudge him to move faster, there is no way to speed the reform process and many ways to undermine it. Seeking to empower republicans – touted in certain quarters as a potential by-product of the nuclear deal – will not work, as many theocrats view that tactic as a stalking horse for regime change.

This does not mean giving Tehran carte blanche, domestically or regionally, but issues of concern will need to be addressed judiciously, taking account of Tehran’s legitimate concerns no less than its adversaries’. It also means Iranians – notwithstanding the imperfection of their governance system, which many are the first to acknowledge – should determine their country’s positions without undue external interference. Trying to shape Tehran’s regional calculus through a variety of carrots and sticks is standard foreign policy practice, but trying to shape or short-circuit the decision-making process itself is another matter. As seen in the nuclear deal and now in the economic realm, internal consensus, reached through a credible domestic process, is the only stable basis for progress.

The best option for Western states and Iran is to continue reversing the negative narratives from decades of suspicion and hostility by fully implementing the nuclear accord; creating discrete and non-politicised channels to address other issues of concern or common interest; and, eventually, pushing for regional security architecture that takes account of both Iranian and Arab interests. In the end, Iran and the West may not be able to agree on a range of issues, but trying to game the Iranian system will ensure that they will not.

Tehran/Istanbul/Brussels, 15 December 2015

A Way Out of the U.S.-Iranian Impasse

U.S.-Iranian clashes have pushed the JCPOA to the brink of collapse. In this excerpt from our Watch List 2020 for European policymakers, Crisis Group urges the EU and its member states to use their economic and diplomatic power to keep Iran in compliance with the JCPOA and prevent Iraq from being sucked further into the conflict.

This commentary is part of our Watch List 2020.

As 2019 faded into 2020, the U.S. and Iran careened up to the brink of war. In late December, a series of U.S. airstrikes on Iranian-backed Iraqi militias, in response to militia attacks on U.S. assets in Iraq, brought crowds of Iraqis with a battering ram to the doors of the U.S. embassy in Baghdad. On 2 January, reportedly stinging from the embassy assault and determined to restore what he considered to be eroded U.S. deterrence, President Donald Trump ordered a drone strike on Qassem Soleimani, head of the Quds Force, the expeditionary unit of Iran’s Islamic Revolutionary Guards Corps. Vowing revenge for the general’s death, Iran fired ballistic missiles at U.S. bases in Iraq, killing no one there, but in the aftermath inadvertently downing a Ukrainian passenger jet outbound from Tehran with 176 people on board. Both the exchange of attacks and the airline disaster seemed to close this particular chapter of the conflict between Tehran and Washington. But the danger of broader confrontation has not passed.

At the origin of these events lies the Trump administration’s exit from the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). Under the JCPOA, Iran accepted limits on its nuclear program in return for integration into global trade. Since May 2018, when it withdrew from the pact, the U.S. has been exerting “maximum pressure”, mostly through unilateral sanctions, to compel Iran to negotiate a more stringent, comprehensive deal and curb its regional behaviour. Sanctions have inflicted great harm upon Iran’s economy. In light of the failure of the JCPOA’s remaining signatories to provide Tehran economic respite, Iran took retaliatory measures of its own. It ramped up its regional activities, notably in the Gulf, and started loosening its compliance with the nuclear deal as of May 2019, shedding all restrictions on its uranium enrichment program by January 2020. That last move in turn led France, Germany and the UK, the so-called E3, to trigger the deal’s dispute resolution mechanism, which could ultimately resuscitate UN sanctions on the Islamic Republic. The JCPOA is closer than ever to collapse, and any small incident could fuel escalation, by either the U.S. or Iran.

To help ease tensions, the EU and its member states should:

  • Seek to salvage the nuclear deal by delivering some economic benefits to Iran in exchange for its compliance with the JCPOA. Triggering the dispute resolution mechanism could backfire if failure to reach a settlement leads the E3 to restore UN sanctions – a step that Tehran has warned would prompt it to withdraw from the deal and perhaps the non-proliferation treaty as well. The E3 should seek to stretch the timeline provided by the mechanism as much as possible;
  • Ensure the Iranian people’s access to humanitarian goods, via the Instrument in Support of Trade Exchanges (INSTEX);
  • Encourage a partial drawdown of U.S. forces from Iraq and a reaffirmation of the fight against ISIS as Western militaries’ sole objective in Iraq, which would remove an immediate source of U.S.-Iranian friction. As part of the drawdown, European states and other members of the International Coalition to Counter ISIS should take over some of the more visible military tasks from U.S. forces in Iraq.
  • Explore possible ways of lowering regional tensions, such as a deconfliction channel.

Salvaging the JCPOA

As the smoke cleared after the Soleimani killing and the Ukrainian airliner catastrophe, both Washington and Tehran were sticking to the strategies that produced the present impasse. The Trump administration boasted of having “restored deterrence” against Iran, claiming that by responding to Soleimani’s death with restraint, Tehran was tacitly admitting that “maximum pressure” works. Economic sanctions, notably those limiting oil exports, have indeed drained the Iranian state’s coffers, forcing it to enact deeply unpopular spending cuts, and hurt the living standards of Iranian citizens. To date, however, “maximum pressure” has failed to deliver on the goals laid out by the U.S. administration itself. Far from curtailing nuclear ambitions, it has led Iran to wriggle out of the JCPOA’s handcuffs; rather than stop Iranian meddling in the Middle East, it has prompted Tehran to redouble it. Meanwhile, and despite recurrent eruptions of mass discontent, the Islamic Republic appears firmly ensconced in power.

[Maximum pressure] has led Iran to wriggle out of the JCPOA’s handcuffs.

For its part, Iran is continuing to pursue parallel paths: escalating on the nuclear front while leaving a door open to diplomacy. On 5 January, Iran breached its nuclear commitments for the fifth time, announcing that it would cease observing JCPOA limits on centrifuge quantities – the last restriction it still faced. It stopped short of quitting the accord, however, and it did not say what practical steps it might take. The diplomatic part of its strategy suffered a blow on 15 January, when the E3 triggered the deal’s dispute resolution mechanism, which could result within 65 days in reimposition of the UN sanctions in place before the 2o15 deal – an outcome that the Trump administration appears to be keen on, if only because it would stop removal of the UN arms embargo on Iran that the JCPOA says should be lifted on 18 October 2020. U.S. Treasury Secretary Steven Mnuchin, in his statement welcoming the E3’s move, said he “expect[s] that the UN sanctions will snap back into place”, though E3 officials were at pains to say they have no such intention. Should there be no resolution within the coming months, U.S. pressure on the E3 to take the next step – snapback of sanctions – inevitably will grow.

As renewed UN sanctions would signal the nuclear accord’s demise, the E3 should do all they can to ward off this outcome. In the short term, their best option is to extend the timeline for dispute resolution – something the JCPOA allows – so that they can assemble an economic relief package that might persuade Iran to reverse its breaches and stay in the deal. They also should accelerate efforts to meet humanitarian needs in Iran, ensuring that the INSTEX mechanism gets fully up and running.

The E3 could also help broker other means of rescuing the nuclear deal. One option that had previously been mooted would be for the U.S. to reissue limited oil waivers for key Iranian importers and restore civil nuclear waivers, in return for Iran’s full compliance with the JCPOA, de-escalation in the region and, possibly, its agreement to initiate negotiations with the U.S. and others over a new nuclear arrangement, but also regional security and ballistic missiles. In a narrower version, the U.S. would suspend key non-oil sanctions (eg, on Iran’s metals and petrochemical sectors) and restore civil nuclear waivers, in return for Iran agreeing not to ramp up its nuclear program beyond its current status and, possibly, reversing one or more of its breaches, as well as halting aggressive behaviour in Iraq and the Gulf. A third party would almost certainly be required to facilitate either of these bargains.

Sparing the Region from Further Harm

From the outset of the U.S.-Iranian standoff, Crisis Group has warned that it could take its deadliest form in third countries where both powers have strong interests. Particularly in the wake of the Soleimani killing, the country at highest risk of becoming a battleground is Iraq.

The circumstances surrounding the killing – the preceding bombing of Iraqi militia bases without notice to Baghdad, the targeting of the Quds Force leader on Iraqi soil, the death of militia commander Abu Mahdi al-Muhandis alongside Soleimani – have greatly angered many Iraqis and not just those close to Iran. Many Iraqi politicians are calling upon the government to expel U.S. troops from the country. The result is a triple challenge: first, the demand, while popular with many, is nevertheless liable to be so divisive that it paralyses Iraqi political institutions. Secondly, some of the factions opposed to the U.S.-led troop presence will resort to violence, particularly if attempts to end that presence through parliamentary and diplomatic means fail. Thirdly, a full U.S. withdrawal would likely put paid to the mission of the International Coalition to Counter ISIS, perhaps giving the jihadist organisation a new lease on life.

To mitigate the attendant risks, the EU should encourage the U.S. to partially draw down its military forces in Iraq and to transfer some military tasks to other members of the International Coalition to Counter ISIS, while continuing to provide logistical and other forms of support. The EU should also encourage the Coalition to reaffirm the fight against ISIS as its sole objective in Iraq.

The EU ought to send unambiguous signals that it respects Iraqi sovereignty above all else.

In addition, the EU and its member states should expand existing cooperation with Iraq, in particular in, but not restricted to, the security sector. While calling for foreign troops to leave the country, Iraqi authorities have affirmed that the EU’s civilian Advisory Mission to Iraq is welcome to stay for the purpose of security sector reform support. In order for this mission to be effective, the EU should make sure that all its personnel return to Iraq, with adequate resources and security guarantees to maintain a full presence. Iraq desperately needs more security forces that are committed to the state, rather than various factions, and that can handle challenges such as public protests in a professional manner. At the same time, the EU ought to send unambiguous signals that it respects Iraqi sovereignty above all else, as the contrary impression created by the U.S. attacks and dismissal of calls for its departure threatens the very basis of any cooperation. The High Representative has received the acting Iraqi prime minister in Brussels to demonstrate the EU’s support for the country’s stability and reconstruction, which is a good start.

The EU also needs to urgently impress on the U.S. and Iran the need to refrain from turning Iraq into an arena for their rivalry. The contestation between Tehran and Washington is already polarising the Iraqi political system, rendering reform impossible and creating a real risk of backsliding to the partial state collapse that pertained in 2014. The EU should clearly convey this message to Washington, while it should tell Tehran that it, too, would be harmed were the Iraqi government to weaken further and the resulting vacuum to allow ISIS to re-emerge.

Outside Iraq, the EU and its member states should seek to expand possibilities for engagement between U.S. regional allies, in particular Saudi Arabia and the United Arab Emirates, with Iran, either bilaterally or through other Gulf countries, such as Kuwait and Oman. European states could establish a core group to encourage Gulf states to set in motion an inclusive regional security dialogue on issues of dispute in order to open up new channels of communication, gradually build trust among these governments and thus reduce risks of inadvertent conflict. A deconfliction channel through a mutually acceptable third party – perhaps Oman – could also diminish such risks by relaying messages between the U.S. Central Command and Iran’s general staff.