The Lausanne agreements on Iran’s nuclear program will naturally have a significant effect on the geopolitics of the Middle East, but not necessarily in the way some of the US sponsors of this process have calculated. Tehran seems the only clear beneficiary here, and that country is taking advantage of President Obama’s vanity (as he tries to achieve some sort of high-profile foreign-policy success in the twilight of his professional life) by wrangling an escape from the strategic pincers it is trapped in.
On one hand, Iran’s economy has been exhausted by many years of Washington’s sanctions, and the drop in oil prices has made this even more evident. On the other hand, Iran’s position in the region has been seriously challenged by Saudi Arabia and her allies, who are trying to suppress the activity of Shiites in Yemen and other Middle Eastern countries. Given this climate, Tehran has made the right choice. It’s already clear that although it will be no simple task to implement the Lausanne agreements, Iran is now ready to put up a much bigger fight against her regional adversaries than they might have expected, as she rolls out a military campaign in Yemen.
Iran’s leaders also do not appear to be at all the kind of people who would sacrifice their national interests for the sake of some phantom benefits. On April 9 of this year, Iran’s Supreme Leader Ayatollah Ali Khamenei stated that «just because the parties have reached a preliminary agreement, there is no guarantee of a final deal or its contents or even that the negotiations will continue». He categorically rejected the idea of lifting the sanctions incrementally, as the Western negotiators demand. He feels that the sanctions against Iran must be rescinded on the same day the legal agreement on Iran’s nuclear program is signed. Khamenei added that based on his previous experience, he has «never been optimistic about negotiating with the US».
Now the White House is in a difficult position. Tehran is not rejecting any meaningful aspect of the deals that have been struck to limit its nuclear program. It all seems to come down to a question of legal formalities, but of a type that Barack Obama will find difficult to overcome. Israel and the members of the powerful Jewish lobby in the US are not mincing their words, accusing Obama of betraying a strategic ally. And the Republican-dominated Congress has no intension whatsoever of making life any easier for the Democratic president on the eve of the upcoming elections. Obama can cross his fingers that legislators might still approve a future agreement that includes an incremental repeal of the sanctions on Iran, but he certainly doesn’t have the political muscle to pressure them to lift all the sanctions at once, although the Iranians will accept nothing less. And then the US will be left holding the bag for the breakdown of an agreement that already seemed to be in hand. And that will be an epic failure of American diplomacy that will entail a significant loss of prestige far beyond the Middle East. Moreover, it would be difficult to continue an economic blockade of Iran once she has agreed to comply with all the requirements of the international community.
The calculations of those who had hoped that the prospect of rescinding the sanctions on Iran would lead to a further drop in oil prices (and deal a painful blow to Russia) have not been borne out. Many experts believe that this was one of the primary motives behind Washington’s desire to fast-track the agreement on Iran’s nuclear program. However, Iran’s leaders are not the type who would further undercut the price of oil by dumping their product onto the market willy-nilly. Hydrocarbon production is significantly more expensive in Iran than in the Arab countries of the Persian Gulf, and there is no point in the Iranians trying to compete with those nations for the lowest price quote. Foreign Policy believes that once sanctions are lifted, additional Iranian oil supplies won’t be available until 2016, even assuming a favorable scenario. Moscow and Tehran have a solid understanding of the need to work together to ensure that oil is «priced fairly», which includes a deal to swap Russian-made goods for extra shipments of Iranian oil. The wise Persians do not see topping off the tanks of Western cars with cheap gas as their highest priority, but rather focus on the unfreezing of about 100 billion dollars in Iranian assets held in Western banks. Iran is bargaining to get these funds released in the second half of this year. Once this money makes its way onto the global markets that will mean a dip in currency quotes, not commodity prices. Many manufacturers, including in Russia, are awaiting this capital.
This is why oil prices did not fall after Lausanne, but even trended upward, and the ruble gained ground. Sergei Lavrov was being quite honest when he welcomed the upcoming reversal of sanctions against Iran, claiming it was good news for Russia. It is somewhat naive to think, as many do in Israel for example, that closing Iran’s nuclear dossier will fundamentally change the balance of power in the Middle East and possibly make Iran the primary US ally in the region. Tehran did not wriggle out of that strategic pincer grip just to voluntarily re-saddle itself. Underlying regional tensions remain. Washington will lose some of its credibility with Middle Eastern monarchies and Israel, but will still be forced to construct a regional policy that relies heavily on them. And due to its geopolitical position, economic interests, and official ideology, Iran will continue to see America as an enduring threat to its national security.
Russia is Iran’s most useful partner for solving the immediate problems she faces. In particular, given the growing tension on its borders, the Islamic Republic of Iran urgently needs to upgrade its arsenal of conventional weapons, particularly its air-defense and antiballistic systems. But the Western systems cannot compete with the Russian versions, and in any event will not be available to Tehran for a long time. Iran’s second major problem is how to develop her energy and transportation infrastructure, including the expansion of her railways. Russian companies are also quite competitive in these specific areas. Expanded ties with Iran would energize Russian manufacturing. The Iranian manufacturers of many different goods, including those associated with the fabrication of finished products, could be included in Russia’s import-substitution program. Russian companies are not only interested in selling their high-tech goods to Iran, but also in joint production. Bilateral Russian-Iranian trade currently amounts to only about $1 billion per year. But that could reach $10 billion fairly quickly once sanctions are lifted. Economic cooperation between Russia and Iran has the potential to match the current commercial partnership between Russia and Turkey (which is about $40 billion, but expected to grow to up to $100 billion).
The key to preserving a close relationship between the two countries and even turning that into a long-term alliance is the fact that both Russia and Iran hold very similar or even identical positions on regional issues that are crucial to Tehran, such as the situation in Syria, Iraq, Yemen, and Afghanistan, and the opposition to the «Islamic state». Iran does not currently share such a unified stance with Western countries, nor does Tehran predict such an affinity in the future. In addition, during the years of sanctions Iran began its own foreign-trade push eastward toward India, China, and Southeast Asia, where demand and prices for traditional Iranian exports are higher. It is reasonable to assume that Iran will not abandon these markets after sanctions are lifted, but will instead strengthen its foothold. Their bitter experience with the Western embargo has made Iranians more leery. It is no secret that many major Iranian projects with India and China are still being stymied by the existence of those sanctions. Those projects are also opening up additional opportunities for Russian participation.
It seems likely that being released from the embargo would facilitate Iran’s full integration into the SCO, membership in which is a strategic goal for Tehran, because Iran’s primary interests are aligned with that organization’s activities. Promoting the expansion of the SCO is hardly part of Barack Obama’s agenda. However, that’s precisely where these events seem to be headed.