The Last Best Chance for a Nuclear Deal

Photo courtesy of Deviant Art

Photo courtesy of Deviant Art

On January 26th, Michael Singh of the Washington Institute for Near East Policy came to Duke University to debate Duke Professor Bruce Jentleson, former Senior Advisor to the U.S. State Department Policy Planning Director, in an event hosted by the Alexander Hamilton Society.  In the event, the two D.C. veterans discussed U.S.-Iranian nuclear negotiations and their implications for the future relationship between these two countries.  Earlier this month, DPR’s Andrew Kragie discussed Iranian nuclear negotiations with Jake Sullivan, former National Security Advisor to Vice President Biden.  This week, DPR’s Maxime Fischer-Zernin sat down with Michael Singh to get a closer look at how the domestic politics of both countries influence current U.S.-Iranian interactions.  Below is a lightly edited transcript.

Michael Singh is the Lane-Swig Senior Fellow and Managing Director at The Washington Institute. Formerly, he served as Senior Director for Middle East Affairs at the National Security Council in 2nd George W. Bush’s second administration. After ten years in the foreign service, Singh began working for think tanks where he has advised Republican Presidential candidates, including Mitt Romney.

Photo courtesy of The Washington Institute

Photo courtesy of The Washington Institute 

DPR: How have Iranians’ perceptions of President Rouhani evolved since his election in August 2013?

Singh: When Iranians chose President Rouhani they were choosing the candidate of change who represented a new course. So clearly Iranians were trying to choose a different course for their country, one that differed from the previous administration of President Ahmadinejad, and that [difference],in a sense, [is] what President Rouhani campaigned on: economic reform, a diplomatic opening to the world, and even some social reform. You can see that he has been able to deliver somewhat in some of those areas and very little in others.

For example, in the economic realm, he has been able to improve Iran’s economy through a combination of monetary and fiscal changes and through the increase in confidence that came with the interim accord on the nuclear deal—the sense that maybe the climate will get better and sanctions would be lifted.

He hasn’t been able to really pursue the larger economic plan of bigger openings, bigger reforms, and so forth [such as limiting liquidity to reverse the high-inflation low-growth economy he inherited]. Some of that is contingent on getting the nuclear deal. Opening Iran to foreign investment is contingent on lifting the sanctions, but it’s also contingent on politics in Iran, because it’s not clear that the Supreme Leader or hardliners are on board with that economic plan.

When it comes to a diplomatic opening, he really hasn’t been able to deliver. That’s also contingent on a nuclear deal, I would say. The isolation that Iran experiences is in part due to the impasse on this issue, but again it’s also due to conscious choices that are made by the Supreme Leader and some more hardline elements. 

DPR: Given the risk of future sanctions, is foreign investment a realistic prospect even if current sanctions are lifted?

Singh: [Lifting sanctions] is a necessary but not sufficient condition [for foreign investment]. You can’t have foreign investment in Iran right now, because banks won’t participate and companies worry about being sanctioned. So there are clear obstacles at present. But you are quite right—there are a lot of non-sanctions obstacles to foreign investment as well.

Iran didn’t do a good job of attracting investment before the sanctions because Iran proved to be a very difficult [business] partner. For example, when it comes to oil or energy investments, Iran would insist on buy-back provisions as opposed to the types of contracts that other countries were engaging in; and therefore, didn’t get a lot of foreign participation in their energy products. 

There’s also the question of how sanctions are lifted. Given the private sector, risk-based sanctions that we’ve engaged in, it does not guarantee that banks or companies will go back into Iran just because Congress or the EU votes to lift them. They’ll make their own decisions based on how the risk stands, how the opportunity ranks—[which is] not something to be dictated by governments.

DPR: What effect will the new Congress and the final quarter of the Obama presidency have on the prospects for a nuclear deal?

Singh: It’s always hard to know what exactly what the Iranian perspective is, but speaking analytically, the new Congress increases the leverage Obama has in negotiations because there is a much more realistic prospect that there could be new sanctions if there is no deal. You could have new sanctions by July 1st—but if not by July 1st then if the talks collapse. This may have been a prospect before, but is much more [realistic] now.

At the same time, given the state of relations between the President and Congress, one big problem is whether he can really deliver sanction relief in a credible way, which is something I think the Iranians are really focused on—maybe even more focused on than…the nuclear side of things.

DPR: What effect will the shared objective of defeating ISIL have for relations between the U.S. and Iran?

Singh: The Iranians think they are riding high in the region. They feel as though the United States and the West need them in this fight. So the Iranians would like to link these issues. This is not the way the United States is inclined to approach it because if you look at what is happening in Iraq and Syria, Iran is really part of the problem. You could take the expedient route of saying, “Let’s work with the Iranians in these places”, but that would be a terrible mistake. So far, even the Obama administration has shied away from going down that road.

DPR: Speaking of the U.S.-Iran relationship, what will be the implication of record-low oil prices?

Singh: It increases the pressure on Iran. You can think of this decrease in oil prices as the equivalent of new sanctions, because if the point of the sanctions is to diminish Iran’s oil revenues, a decrease in price does that just as well. This is new pressure—and can we effectively use that to our advantage? On the other hand, this [new pressure] isn’t something we can relieve either, but maybe it increases the need for Iran to make this kind of deal. That said, all this depends on whether the Supreme Leader will put the economic prosperity of the Iranian people first, or whether he is willing to put this nuclear program ahead of the prosperity of his own country.

Iranians are strong nationalists, with a strong sense of pride in the country, so of course there is no desire to cave to external pressure. But according to polls, it is not the top issue on the minds of Iranians. The top issues on the minds of Iranians are employment, the economic state of the country, and their own political rights. All of these things could be benefited by a nuclear deal, so it’s really a matter of leadership.

DPR: How do you see things changing between now and 2016?

Singh: Getting to a nuclear deal is going to be very hard because the underlying issues—just the nuclear issues themselves, and [the dividing] issues beyond that —there are still massive gaps[between them]. And then there’s the fundamental issue of whether the Supreme Leader will sign any agreement he construes as a compromise with the United States given how central anti-Americanism is to the ideology of the regime. There will be a great temptation on both sides to just keep extending the interim agreement, as a second best option for both sides. So come November 2016, there is a very good chance the situation won’t look very different than it does today, except that the situation in the region may be much worse and Iran may figure that works in their favor. 

DPR: Finally, what do you think is the most important thing people don’t know or fail to consider when looking at U.S.-Iranian relations? 

Singh: One thing I would hope people bear in mind is that Iran is not the only issue in the region, so when we are talking about solving this problem it needs to be done in the context of a larger strategy. One problem we have right now is that the way we pursue this issue has an impact on our overall strategy, alliances in the region, and U.S. policy going forward.

[…]The nuclear issue is not the only issue out there, it’s not a stand alone issue. In fact our concerns with Iran are much broader, and how we deal with those issues, even in the wake of a nuclear agreement, is a very important challenge that isn’t being addressed right now.

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