Time Running Out For Permanent Iran Nuclear Deal

The chances of a final deal between the P5+1 countries (the US, Russia, China, France, Britain and Germany) and Iran over the latter's nuclear programme by a deadline set for November 24, 2014 are minimal. We believe that talks will continue through 2015 and 2016 without reaching a permanent agreement. Incentives for the P5+1 and Iran to remain at the negotiating table are high, but political challenges will hinder chances of a deal. There are three main implications from all this:

  • With only marginal cuts to sanctions on the cards, a return of Iran's oil to the market on a large scale is unlikely.
  • Foreign direct investment in Iran will remain low, particularly from Western companies, despite Iran's enormous potential.
  • The more time that passes without a permanent agreement, the less likely that there will be one.

 

Beyond the 2014-2016 timeframe, much will depend on decisions of future political leaders, and indeed, who those leaders will be.

The next US president, who will take office in January 2017, is unlikely to be as friendly towards Iran as Barack Obama, and it is unclear if the relatively moderate Hassan Rouhani will be re-elected in June 2017. Further complicating matters are reports that Iranian Supreme Leader Ayatollah Ali Khamenei's health is deteriorating. A power struggle to succeed Khamenei could paralyse Tehran's decision-making on a crucial geopolitical issue.

Even if 'moderates' retain executive offices in Washington, DC, and Tehran, they could still face opposition from hardliners in their respective legislatures.

The longer the lack of progress on a nuclear deal, the higher the risk that both the US and Iran will consider each other insincere.

It is arguably easier for the negotiations process to collapse (for example, through neglect) than it is to achieve a breakthrough.

The stakes are high. If the P5+1 negotiations collapse, Israel would be significantly more likely to strike Iran on the grounds that all diplomatic measures have been exhausted, and that an attack would be the last chance to stop Tehran from developing nuclear arms. The US itself could adopt this position, and bomb Iran on behalf of Israel and its own Arab allies, which also have grave concerns about a nuclear Iran. There would still be major logistical and diplomatic obstacles to a war on Iran, but it is unclear if these would override the perceived nuclear threat.