Iran Nuclear Deal Likely To Be Reached In June, But Could Flounder After 2017

We now expect that an agreement between Iran and the P5+1 countries (the US, Russia, China, Britain, France and Germany) on Iran's nuclear programme will be reached in June.

Although much of the content of the negotiations has remained secret, significant progress seems to have been made over the past few months. In addition, the format of the remainder of the talks (with an outline of the deal to be agreed at the end of March, and final discussions to take place before June) appears to indicate that the likelihood of another rollover of is small.

We believe that there is significant political will on the part of the main leaders in Washington and Tehran for an agreement to be made, and this will override opposition from hardliners on both sides.

We expect any agreement to include a gradual relaxation of banking and oil sector sanctions on Iran, as their lifting is a key requirement for Tehran to agree to any deal. In return, Iran will suspend the nuclear programme, with Tehran agreeing to regular inspections of nuclear sites at Fordow and Arak.

Beyond 2015-2016, there is a significant chance of any agreement being nullified, given the accession of a new US president in January 2017. President Barack Obama's successor (whether Democrat or Republican) is unlikely to be as open to a deal being made with Iran, and in Tehran most alternatives to President Hassan Rouhani (who faces re-election in June 2017) are unlikely to be as moderate as the latter.

Furthermore, Supreme Leader Ayatollah Ali Khamenei, 75, is said to be chronically ill, raising the possibility of his own death over the next few years. Given that he has ruled Iran since 1989, his passing would leave behind a huge vacuum. The frontrunners to replace Khamenei at this stage appear far less pragmatic than he is on the nuclear deal.

Against this backdrop, we remind readers of a special report, Iran-US Rapprochement: Historic Opportunities Beckon, which we published in January 2014, and which outlines the implications of a nuclear deal.