London: Motivation within Iran to reach a deal is high as banking and financial sanctions continue to hurt Iran’s economy, despite partial sanctions relief that has allowed Iran to repatriate revenues from oil sales. A deal for Iran would serve to reduce the risk of sanctions reversal in the event of policy disagreement with the US and the EU in other areas.
This is the crux of an analysis from IHS Country Risk follows on what of the extension of the Iranian nuclear talk’s means.
Iran’s Supreme Leader, whose acquiescence is imperative for Iran’s negotiators to reach a deal, is continuing to support negotiations. This can be interpreted from his relative silence (a sign of support) and decisions which have boosted Rowhani’s power domestically.
Examples include intervening to reinstate Rowhani’s choice of Minister for Higher Education, despite opposition from Conservatives, and replacing the conservative chief of IRIB, Iran’s official broadcasting, with a relative moderate, removing another source of criticism to Rowhani. The release of two dual national Iranians also sends signals of support from the Supreme Leader for Rowhani and therefore of the negotiations, the success or failure of which is tied to Rowhani’s presidency.
In the event an agreement is not reached in the next seven months, Iran will increasingly look to Russia and China for financing, though not by choice. The Iranian press was largely critical of the role played Russia and China in the negotiations and Iran most likely does not see either as a particularly reliable partner when completing projects in a timely manner. Moreover, technology transfer limitations imposed by international sanctions on Iran is likely to increase Iranian motivation for a deal that leads to renewed Western direct investment in Iran. Russian and Chinese energy companies cannot offer the same technological advantages as US or European energy companies.
Iran’s Supreme Leader, whose acquiescence is imperative for Iran’s negotiators to reach a deal, is continuing to support negotiations. This can be interpreted from his relative silence (a sign of support) and decisions which have boosted Rowhani’s power domestically. The length of the extension reflects political will on all sides to reach a deal.
The length of the extension reflects political will on all sides to reach a deal. The fact that the revised schedule separates a deadline for reaching a political deal from a technical one (1st of March and 1st of July, respectively) probably makes it more likely that both sides can claim a success in March even if the main sticking points related to Iran’s uranium enrichment capability have not been fully ironed out by July. A political agreement, in turn, makes it possible to maintain the limited sanctions exemptions included in the terms of the interim deal, and raises the possibility for other, most probably EU sanctions, to be relaxed. This potentially includes sanctions prohibiting Iran from using international banking mechanisms such as SWIFT.
US Congressional sanctions are very unlikely to be removed in the one year outlook. In the event that no agreement is reached in 2015, the risk of further US sanctions grows from 2016.