International Implications of the Iran Deal: Is It Really About the Nukes?

Anti-aircraft guns at Natanz, an Iranian nuclear facility. Hamed Saber || Wikimedia Commons

Earlier this week, the world witnessed two deals sealed by international powers: on Greece’s future in the European Union and on Iran’s future in the world. Both deals will have their political and social costs and profits, winners and losers. One can, however, make a fair assumption that both these deals have one winner in common and this is Germany.

The goal of the Vienna deal (Joint Comprehensive Plan of Action, JCPOA) signed between P5+1 (5 UN Permanent Members + Germany) and Iran is not regulating the world nuclear order, it doesn’t cancel Iran’s nuclear military program, but postpones its realization. In fact, the agreement allows Iran to restart the program, with modernized equipment, after a 10-year “suspension period” under the umbrella of the international powers.

JCPOA gives much room for interpretation and the technical-nuclear part looks pretty much like an excuse for the financial deal – the sanctions part. According to the JCPOA, Iran is seemingly agreeing to far-going concessions, but in fact each of this concession has its own stipulations, like e.g. time limits or West’ technological and financial engagement. The very sophisticated text shows the Iranian diplomacy’s refinement. It also shows a strong urge of the P5+1 to finish the negotiations, sign the agreement, to begin business cooperation and send the success story into the world.

The Iran Deal does send a political and moral message to the world and, despite its elusive content, the PR around and the very fact that is was signed, let the world know about a breakthrough in international affairs and encourage potential investors to go ahead with their plans.

Saudis and Israelis Alienated

The Deal sends also a strong message to other players in the region, in particular to Israel and Saudi Arabia that they need to adapt to the new reality and they’d better accept it, if they don’t want to fall from grace. The agreement significantly diminishes the strategic position of both, and the collaboration in solving regional problems will most probably prove more difficult rather than easier. This is Iran and its closest allies Hezbollah and Assad’s Syria as well as the Iraqi Shia population that have an interest in fighting the Islamic State (Daesh), while the Saudi and Israelis have more interest in fighting Iran and its allies, whether it is in Yemen or in Lebanon or elsewhere. Hence, the gap between their different ambitions and interests will widen.

The Wahhabi Saudis go to all lengths and maintain their primacy over their Persian Shia rival: They will ally with anyone from al-Qaeda and fundamentalist organizations alike (on Syria, Yemen) to Israel (on Iran) to achieve their goals. Therefore, there is no reason to believe that they will come to terms with the growing importance of the Islamic Republic. The rivalry between Saudi Arabia and Iran is historic and at its core there is the will to keep the religious supremacy in the Middle East: To be the Islamic country that leads the Muslim community, to keep the military deterrence (at least) power and to expand the cultural dominance.

As far as Israel is concerned, since president Obama ostensibly shows his lack of interest in Israel’s affairs and the Israeli-Palestinian conflict, the rest of the world has started ignoring Israel, as well. Nothing good can come out of this: Ignored right-wing Israel is floating more towards the right and on its way to become the militarized, tiny fortress hostile to its neighbours and to its own citizens. Moreover, the Deal does empower Iran’s closest ally, the Shia group Hezbollah morally and, in at a later stage, probably also financially. In such circumstances Hezbollah will be tempted to reorient its militant focus from Syria back on Israel. Therefore, Israeli fears and criticism towards the agreement are not unfounded.

A Chance for a Coalition Against Daesh?

The chances are, however, that a positive outcome of empowered Iran is to be noticed in Iraq, where the anti-Daesh Shia forces will most probably get more tangible support coming from Iran. The USA-Iran strategic cooperation in Iraq will take an official, and hence more efficient, character. Iran has been militarily and morally supporting the Iraqi Shia throughout the Iran-Iraq war, American intervention and now, in the war with Daesh. Once acknowledged by the international community, the Islamic Republic will be able to contribute more resources to further fight Daesh. However, there are two sides of the same coin and the probability that the Ayatollahs will try to add fuel to the Sunni-Shia animosities and incite the Shias (in Iraq, but also in Shia-dominated Bahrain) to raise against their Sunni compatriots, is relatively high.

It remains to be seen what will happen in Syria, but it’s sure that there are few people who are happier about the Deal than President Assad. Those who say that the Iran Deal will help solve the Syrian crisis are either lying or are naïve, unless they are of course supporters of the Assad regime. Iran’s efforts in Syria to keep Assad in power and help him regain lost territories will be boosted and will lead to more casualties and the Iran-Saudi, Iran-Israel, Iran-Qatari rivalries will take a more aggressive shape on the Syrian territory.

Needless to say what consequences this will have on the civilian population, the unbearable humanitarian situation, and eventually southern Europe, which is already incapable of handling the immigration waves. Surprisingly, however, the stronger Iranian position may help stabilize the situation in Lebanon, simply because Hezbollah’s enemies will need to gather their strengths in fights in Syria instead of further spilling the Syrian conflict into Lebanon.

What’s the Deal About?

It seems the goal of the Deal was not to stop Iran from getting the nukes, and it will not prevent Iran from achieving this goal if it really wants to. According to JCPOA, Iran will postpone by a decade its R&D activities, enriching uranium to higher levels and destroy highly enriched stockpiled uranium that serves to build a nuclear bomb. The Deal gives Iran room for never-ending negotiations regarding independent observers’ access to suspicious sites. The dispute resolution mechanism implies that every time the international inspectors may wish to check the suspicious sites, new weeks-long negotiations will begin. The Deal calls for modernization of nuclear sites, with a stipulation they will not serve constructing nuclear weapon. This gives Iran a perfect opportunity to construct the weapons in modernized facilities, as soon as the arrangement expires.

Nonetheless, I would argue that such an agreement is still better than none, because it releases the tensions that have built up over the decades between Iran and the West, introduces a spirit of collaboration (even if only out of highly sophisticated Iranian courtesy) and averts the threat of further alienation, even if only as a side effect. It brings new opportunities, but also risks, to the Iranian people, (but the internal repercussions of the Deal are not the topic of this text). As the leftist Israeli newspaper Haaretz noted, the deal is “breaking the taboo” of dealing with the ayatollahs and includes the Islamic Republic in the broad international community.

And the Winners Are: China, Germany, Financial Industry, Energy Industry…

International Business Times reports that some European countries like France, Germany, and Great Britain created the European-Iranian Business Alliance to ease business flow with Iran. More than 130 German companies have now branches in Iran, according to the German-Iranian Chamber of Industry and Commerce, and this number is about to grow. During the last two years of negotiations France seemed to be most fierce opponent of making the deal with Iran, because it didn’t see any serious profit in it for itself. Having had strong economic ties with Saudi Arabia, the French will be constrained to develop a cooperation in all aspects, in particular military and heavy industry, with Iran. Another reason why France took such a tough stand on the deal is the attempt to prevent further expansion of German economic domination. The American companies are not going to profit from the deal as commonly expected, due to too much historic burden as well as cultural and geographic distance. While Russia-Iran relations will not change much, the playground is wide open to China and Germany.

Germany is Iran’s largest trade partner within the European Union, and German companies have been preparing to enter Iranian markets for a couple of years now. During the times of the harshest sanctions in 2012 Germany exported to Iran goods at the value of around $3.5 bn. As expected, it is the Germany’s engineering thought and specialized engineering equipment that are critical to Iran’s infrastructure and industrial projects. Daniel Bernbeck, director of the German-Iranian Chamber of Industry and Commerce, even stated as early as in 2009, during the period of the Mahmoud Ahmadinejad’s controversial presidency, that he saw “no moral question at all” in conducting business. Even Berlin’s former mayor, Walter Momper, moderated an event at the Iranian Embassy with the focus on developing informal business cooperation and suggested the lifting of sanctions on Iran.

The crucial companies that are in the game are the ones that will boost development in such industries as energy, automotive, chemical and pharmaceutical as well as shipping and transport infrastructure. Additionally, all of the business deals will be overseen by investment banks, which will “facilitate” and finance the deals. The EU will offer export credits to enable trade, project financing and investment in Iran. Iran, being a large country, is a very potent market in retail and private banking, as well as insurance, for which the sanctions are to be lifted, too.

Nonetheless, Iran’s care about national interests will certainly introduce protective measures in order to control foreign capital inflows and the fashion in which foreign companies will operate in Iran. The Islamic Republic is wary of foreign economic and cultural influences, hence the investors should not be counting chickens before they’re hatched.

In turn, the Iranian high quality specialized products will certainly be demanded in Europe, and along with product export, the culture export will occur. On top of this, we should expect a boost in tourism sector.

Last but not least, are the energy industry implications, which – unless OPEC opts for setting limits on production – will hit the region that will suffer from decreasing oil prices. European energy companies, in turn, will profit from modernizing and developing the outdated Iranian infrastructure.

The hopes that following the economic boost Iran will open to the west and give up its nuclear ambitions, while the new range of opportunities will push the society to change the power, are, in my opinion, unfounded. It may prove quite the contrary: The current regime will gain recognition for the economic boost and for returning Iran its well-deserved position in the international community.

Agata Niedermann