A Game Changer in the Middle East?


The foreign policy chatterati is abuzz in the aftermath of the interim nuclear deal between world powers and Iran. The deal emerged from secret negotiations since 2011 between the United States and Iran, carried out on Sultan Qaboos’ neutral turf in Muscat, Oman. That is, the negotiations began before the election of Hassan Rouhani to the Iranian presidency. The Israelis, Saudis, and Europeans were kept in the dark until official negotiations began. This may seem surprising but is standard operating procedure in diplomacy. Sensitive deals are worked out between principal players before official negotiations that invariably involve other great powers to provide the stamp of “legitimacy” on what is effectively a bilateral negotiation.

The deal freezes Iranian uranium enrichment efforts above the 5 percent level, halts work on the heavy-water reactor near Arak, and grants daily inspections to Iran’s enrichment facilities at Natanz and Fordow. In return, Western powers agreed to provide temporary relief amounting to around $9 billion. The sanctions regime has reduced Iranian oil exports from 2.5 million barrels per day (mbd) in early 2012 to 1 mbd. According to the White House, the sanctions remaining in place will keep Iranian oil exports at current levels, “resulting in continuing lost sales worth an additional $4 billion per month, every month, going forward.”

This is a bit of an overestimate since many oil importers, especially Turkey, have taken the interim deal as a signal to renew oil imports from Iran. However, there is no doubt that the pain will continue for now. With $100 billion in frozen overseas assets, GDP growth of negative 5.4 per cent, inflation at 40 per cent, and youth unemployment at 28 per cent, there is ample economic incentive for Iran to seek a permanent deal. US’ strategy of economic strangulation and covert war has brought the ayatollahs to the point where they are willing to stay months away from breakout in exchange for relief.

The calculus of the Obama administration was almost as conducive. US strategists have come to recognize the following:

(1) Delivering Tomahawk cruise missiles to known nuclear facilities would only set back the Iranian nuclear program a few years at best since the distance to breakout depends much more on acquired know-how than the stockpile of enriched uranium. That is, the key question is how far the Iranians are from acquiring mastery over the nuclear fuel cycle. Stockpiles of enriched uranium can always be replenished by a state that has mastered the fuel cycle.

(2) Cyber attacks on nuclear facilities and assassinations of Iranian nuclear scientists have played havoc with Iran’s nuclear program precisely by throwing a wrench into the process of institutional learning as Iranian scientists seek mastery of the cycle. However, such disruptions, successful as they are in delaying the acquisition of breakout capacity, cannot possibly prevent a state with deep human capital resources such as Iran from going nuclear in the long run. This is simply because even the smartest nuclear scientists are ultimately replaceable.

(3) The most important factor in determining whether or not a state with the human and material resources to achieve breakout capacity will acquire a nuclear deterrent is the political will of the government. Many countries, such as Japan and Germany, are nuclear capable and choose not to weaponize for strategic reasons.  US intelligence believes that Iran is seeking a capacity to quickly acquire a nuclear deterrent if the need arises, while staying shy of actually making the bombs. The reason is that the acquisition of a nuclear arsenal, while it will deter a US-Israeli attack, will set off a regional security dynamic that will leave Iran more insecure than before.  For instance, by prompting a coalition of all the other regional powers to contain Iran. Moreover, the advantages in the regional game will be fleeting as the Saudis quickly move to obtain a deterrent from Pakistan.

If it becomes known that Iran is nuclear capable, so that it is understood that Iran can weaponize in a matter of weeks, it would enjoy the prestige and influence that comes from being a nuclear power without setting off a dynamic that isolates it further. (For instance, Chinese military strategists have no doubt that Japan can acquire a nuclear deterrent against China whenever it pleases. Whence, to Chinese strategists, Japan is effectively a nuclear power.) Moreover, a nuclear capable Iran will serve to deter a large scale US-Israeli attack. This is simply because Iran would have months of warning for an imminent American invasion due to the logistics of such an operation.

(4) The key question facing US policymakers was, therefore, how to incentivize Iranian policymakers to change their political will to master the fuel cycle. The strategy that was pursued was essentially laid out by Dennis Ross and David Makovsky in Myths, Illusions, and Peace (read my review from 2011). This is no surprise. Ross was the key architect of US’ Iran policy in 2009-2011. The logic was to impose real costs on Iran for pursuing the nuclear option but leaving a face saving door for Iran to walk through. This strategy has now borne fruit.

Some commentators have hailed this breakthrough as a game-changer. It has been claimed that this will lead to a thaw between the United States and Iran, perhaps even a strategic realignment. The response of US’ Middle Eastern allies has been equally hyperbolic. The Israelis and Saudis are furious. The response from Israeli policymakers was just shy of apocalyptic. Prime Minister Benjamin Netanyahu: “What was achieved last night in Geneva is not a historic agreement, but a historic mistake.” Israeli Intelligence Minister Yuval Steinitz: “[The deal] is more likely to bring Iran closer to having a bomb.”  Israeli Foreign Minister Avigdor Lieberman: “the agreement recognizes Iran’s right to enrich uranium.” The real zinger came from Economic Minister Naftali Bennett: “if a nuclear suitcase blows up in New York or Madrid five years from now, it will be because of the deal that was signed this morning.”

The Saudis are just as mad, if not as vocal. The Sunday Times, a British newspaper, reported that the Saudis have agreed to allow Israeli warplanes to use their airspace to carry out strikes against Iranian nuclear facilities, going so far as agreeing to assist a unilateral Israeli attack by cooperating on the use of drones, rescue helicopters and tanker planes. It seems likely that this story was planted. It is not really credible. Saudi Arabia prefers a strong Israel to contain Iran no doubt, but if the Israelis defy the US and carry out unilateral airstrikes against Iranian nuclear facilities, it is extremely unlikely that the Saudis would support an Israeli attack on a Muslim power so publicly, or that they would jeopardize their security ties with Washington just as the shit hits the ceiling. Furthermore, its not like Baghdad and Damascus can prevent Israeli warplanes from using the much shorter route through Syrian and Iraqi airspace.

While this may be a fairy tale, the Saudi royals have grown extremely nervous. A US-Iranian detente would increase Iranian influence to the detriment of Saudi interests. They have reasons to be worried. In a rising China, the United States faces perhaps its most formidable challenger in its history. Unlike Germany, Japan, and the Soviet Union, an industrialized China will have more war potential than the United States. In the long run, the US would prefer not to have to worry about the Middle East so that it can concentrate on containing China.

If the US manages to extricate itself from the regional game in the Middle East, it would have more resources to devote to the central challenge to US primacy. This does not mean that the United States will be able to withdraw from the Persian Gulf. Indeed, US military dominance of the Persian Gulf is key to containing China. However, managing a region in partnership with the natural regional hegemon is considerably less taxing than having to contain it. Iran is the natural hegemon of the Persian Gulf. A more cooperative relationship with Iran is, therefore, in the US interest.

The US would accommodate Iranian interests in Syria. A stronger Assad would be helpful in crushing al Qaeda affiliates, which is the core US interest in the Syrian conflict. Iran can also help stabilize Iraq where the Sunni Islamist insurgency continues to sap the strength of the Iraqi state, and the expansion of Iraqi oil capacity remains conditional on an improvement of the security situation. The United States could get Iran to rein back Hezbollah. In particular, there is no reason the US could not secure a deal with the Iranians whereby they refrain from supplying missiles capable of reaching Israel, in exchange for broader security cooperation and a further lifting of sanctions (many of which will remain in place even after a final nuclear deal). In the aftermath of September 11, 2001, Iran offered to help the Americans with its clients in Afghanistan. As the United States leaves an unstable regime in Kabul, Iranian help would be useful.

All of the above are deeply antithetical to Saudi interests. Yet the biggest fallout of a major nuclear deal with Iran will be in the oil market. The lifting of all the sanctions on the Iranian oil industry, which is on the table for the final deal, will bring millions of barrels a day of Iranian capacity online. Iran has already declared a price war, signalling that it will not restrict its output to support prices under any condition. With the Shale boom well underway in North America and further increases in Iraqi production, the oil price counter-revolution is unfolding as predicted. Opec negotiations are likely to be highly contentious, perhaps leading to a complete collapse of the cartel’s ability to restrict output and support high prices.

Since the 1980s, the Saudis have maintained an idle capacity of 2 mbd. Since there is no other country with any excess capacity, Saudi Arabia has functioned as the ‘swing producer,’ being the only actor capable of putting any downward pressure on the price of crude. This has made the House of Saud the most useful client of Uncle Sam. The US-Saudi arrangement since the Islamic revolution in Iran has been “based on the understanding that the kingdom works to stabilize global oil prices while the White House protects the ruling family’s dynasty.” [WSJ] For instance, when the US invaded Iraq in 1990 and 2003, the Gulf monarchies moderated the rise in the price of crude by replacing all the Iraqi production that went offline.

A major expansion of Iranian capacity following a detente with the US has the potential to undermine the Saudis’ unique position in the oil market, and hence jeopardize their traditional security arrangement with the United States. In this scenario, other US concerns, such as Saudi support for hardcore salafi Islam around the world, are likely to make the US-Saudi relationship more contentious. Washington is unlikely to throw the royals under the bus. However, it would no longer support the outsized regional influence exercised by the Saudis since the Islamic revolution. To wit, the relationship will look more and more like the ‘loveless marriage’ between Pakistan and the United States.

The Israelis always preferred the military option to thwart Iranian nuclear ambitions, so it is no surprise that they are so unhappy. Unlike the Saudis who have much to lose from a US-Iranian detente, Israel would emerge better off than before. The US would be able to get Iran to rein back Hezbollah and prevent the possibility of a revival of Iranian patronage of Hamas. Israel also does not have the sort of regional influence that will suffer as a consequence of a US accommodation of Iranian interests in the ‘arc of weakness.’ Indeed, a nuclear deal that keeps Iran months away from breakout leaves the Israeli nuclear monopoly in the region in place. The Israelis will come around after they are done screaming.

This is very far from being a done deal. A final deal may fail to materialize, although that is unlikely given how much domestic political capital has been invested by Obama and Rouhani. Even if a final deal materializes, a full detente may not obtain for a variety of reasons. For example, domestic political opposition in either the Islamic Republic or the United States may prevent a thaw. International relations is a treacherous domain. Let’s not get ahead of ourselves. 

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