Asian Affairs

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THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

Sir Richard Dalton

To cite this article: Sir Richard Dalton (2016) THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR
ON, Asian Affairs, 47:3, 351-365, DOI: 10.1080/03068374.2016.1225896

To link to this article: http://dx.doi.org/10.1080/03068374.2016.1225896

Published online: 24 Oct 2016.

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 Asian Affairs, 2016
Vol. XLVII, no. III, 351365, http://dx.doi.org/10.1080/03068374.2016.1225896

THE IRAN NUCLEAR NEGOTIATIONS:

ONE YEAR ON
SIR RICHARD DALTON
Sir Richard Dalton KCMG served in the FCO for over 35 years, concluding his
career with postings as HM Ambassador to Libya (19992002) and Iran (2003
2006). He is currently an Associate Fellow at Chatham Houses Middle East and
North Africa Programme and President of the Iran Society. This is an amended
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text of the Lord Denman Memorial Lecture, which he delivered following the
RSAA Annual General Meeting on 15 June 2016.

Introduction
It is an honour to be asked to deliver the fourth Charles Denman memorial
lecture to the Royal Society for Asian Affairs. You have chosen a lecturer
who knows a little about West Asia, but nothing about East Asia. Though
I can claim a great grandfather who was a Governor of Hong Kong.

Its 29 September 2016: the Islamic Republic of Iran News Agency reports
that President Rouhani has returned from New York where he addressed
the General Assembly of the United Nations and met numerous Heads
of State and Government. Unfortunately, he has had to tell the Iranian
people that the US and its partners have not done, and will not do,
enough to enable Irans reintegration into the world economy. They are
in breach of their obligations. Despite some limited progress, foreign
businesses are still unable to secure nance for trade and investment
owing to the boycott of Iran by major banks. This is contrary to the
commitment of the Five plus One to facilitate nancial cooperation with
Iran. Accordingly Iran is giving notice to the international community
and to the International Atomic Energy Agency (IAEA) that it is obliged
to postpone the next routine inspection visits by the IAEA and that
should the situation have not improved by the end of 2016, it will consider
suspending other aspects of its hitherto exemplary cooperation with the
IAEA.

Its 29 September 2016. Reuters reports that, on his return, Rouhani was
able to tell his people that he was assured in New York that an itemized
set of measures will be adopted by the governments of the US, Britain,
2016 The Royal Society for Asian Affairs
 352 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

France and Germany that should ensure that Iranian businesses are able to
pay suppliers through major Western banks including through Iranian
banks in London, that nance will be made available for big deals with
Iran such as sales of aircraft and that Western banks will consider sup-
porting investment under the new Iranian Petroleum Contract in the
Iranian Oil Industry.

One of these may turn out to be true both are possible. I shall assess the
future of the Joint Comprehensive Plan of Action (JCPOA), which was
agreed on 14 July 2015. It will endure. To start with I shall take you
on a quick tour of 15 years of nuclear diplomacy, and its promising
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aftermath.

The destination
Iran had never decided to develop nuclear weapons. It said, and still says,
that they are against nuclear weapons because they are un-Islamic. It did
not have a programme to develop nuclear weapons. But up until 2003, it
did undertake some military-related research and development, and had
slowly approached the point at which, despite its declared policy,
it would be able to exploit its technical capabilities to go down that
dangerous path.

As you know, the JCPOA blocked three potential pathways to obtaining

ssile material for a bomb secret enrichment, diversion of overtly
produced material, and acquisition of plutonium via the heavy water-
moderated reactor at Arak. The JCPOA extended potential breakout
time to a year at least, through, in brief:
. export of stockpiles of enriched uranium
. limitation of production in terms of centrifuge numbers and output
volume and output grade
. effective monitoring of all facilities, including by implementing
and eventually ratifying the Additional Protocol to its Safeguards
Agreement with the IAEA
. oversight of procurement for its nuclear industry
. supervision of its nuclear research and development.

These controls, taken together, were in excess of Irans obligations under

the Nuclear Non-Proliferation Treaty (NPT).
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 353

By the end of 2015, the IAEA had certied that Iran had carried out the
preliminary measures needed to enable the agreement to come into force,
and hence for sanctions to be suspended. Implementation Day was 16
January 2016. Nuclear-related sanctions were lifted. Iran is committed
to never having nuclear weapons and has had restored to it recognition
of its right under the NPT and the JCPOA to research, develop and use
nuclear technology for peaceful purposes. The risk of aggressive war
on Iran, though never acute, has been very much reduced.

Getting there
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Getting there was a long and difcult journey. I should mention some of
the milestones. Suspicion of Irans activities and intentions went back at
least to the nineties. Diplomacy began with concern expressed in the
IAEA after disclosures in 2002 that indicated non-compliance by Iran
with some aspects of Safeguards. A threat of a preemptive war by the
US or Israel or both emerged.

The E3 Britain, France and Germany took an initiative in 2003,

believing that reference of Iran to the UN Security Council (UNSC)
would be unproductive. Several rounds of talks led to a ministerial
meeting in Saadabad, Tehran, in October 2003 that agreed that Iran
would suspend its enrichment of uranium. That was nally realized in
full a year later through an agreement negotiated in Paris, opening up
six months of talks on elements of a possible comprehensive deal.

The E3, under US inuence, demanded open-ended suspension of enrich-

ment in return for treaty-guaranteed external supply of reactor fuels and
other benets. This was rejected by the Supreme Leader of Iran Ayatollah
Khamenei, and by the outgoing government of President Khatami, as
humiliating because it discriminated against Iran. The matter was referred
to the UNSC later in 2005.

Efforts were made to get the US on board a new presentation of the E3s
terms in 2006, and, thanks in large part to Secretary of State Condoleeza
Rice, President Bush agreed. Then followed six more years of ineffective
often circular talks, during which both sides tried to obtain leverage
over the other. President Ahmadinejad (who led the Iranian government
from 2005 to 2013) declared that their programme was a train without
brakes. Iran scared the West and Israel by starting to accumulate
uranium enriched to 20 per cent (a signicant move if nuclear weapons
 354 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

were ever to be developed). The West promoted increased sanctions from

2010 onwards.

There was common ground by now that a deal should be based on the
NPT, should provide mutual benets, and should be negotiated and
implemented step by step. Realizing the futility of punishing Iran with
sanctions without, as he put it in his 2008 election campaign, providing
Iran with a ladder to climb down, President Obama authorized secret
US diplomacy with Iran in 2012 and 2013 to see whether that common
ground could be built upon.
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Another breakthrough towards eventual agreement was, of course, the

election of President Rouhani in Summer 2013. He wanted Irans
economy to turn, as well as its centrifuges. His election brought back
the team, led by the charismatic Javad Zarif, Irans foreign minister,
that had negotiated with the E3, together with their ideas for how to
reconcile Western and Iranian requirements. A public breakthrough
was made in talks between foreign ministers in New York in September
2013: the outline of a deal that had been sketched out in the secret talks
broke surface. There was a conrmatory phone conversation between
Presidents Rouhani and Obama. Intense negotiations proceeded.
Russias close coordination with the US and the E3, despite being
opposed bitterly by them over Ukraine and Syria, was a key enabler of
success.

Proof that an outcome in accordance with the NPT and mutual benet
was indeed possible emerged in the 23 November 2014 Programme of
Action in effect heads of agreement. The full JCPOA was ready with
all the crucial and hard-fought details settled after signicant compro-
mises on both sides, especially by Iran, by 14 July 2015.

It is a political agreement not a treaty. All the parties have to work at

maintaining political support for it. The chief onus is on Iran and the
US. China, Russia, the E3 and the EU have vital supporting roles.

Singing the praises of the JCPOA

First, it was the product of diplomacy. It serves the often-elusive ideal of
peaceful resolution of disputes, and is rooted in international law. It is a
perfect example of how there are times when you must not let your most
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 355

hoped-for outcome the ideal or best result be the enemy of achieving a

good and sufcient one.

It came about for three main reasons:

. secrecy in setting up the framework for negotiations and during the

negotiations themselves; leaks from the meeting rooms, or rather the
subsequent reaction to them from the political right in Tehran and in
Washington, could have been fatal;
. the shift in the US position on enrichment of uranium, from an attempt
to prevent Iran doing it on Iranian soil, to dening, limiting and moni-
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toring it;
. the toll taken on Iran by sanctions; long-present structural issues were
exacerbated low growth, low investment in infrastructure and
business of all kinds, too few jobs created for the young, the govern-
ment budget decit, government indebtedness. Rouhani won because
he offered hope of an end to chronic under-achievement.

Second, the deal itself. It was deliberately not complicated by being over-
ambitious. It is not about US relations with Iran. It is not conditioned on
anyone changing their policies on the region. It is a necessarily complex
means of bringing about a simple aim: to ensure that Irans nuclear pro-
gramme will be exclusively peaceful.

Here are some selections from the Preface .

Iran reafrms that under no circumstances will Iran ever seek, develop or acquire
any nuclear weapons.

Iran may move forward with an exclusively peaceful, indigenous nuclear pro-
gramme, in line with scientic and economic considerations, in accordance with
the JCPOA, and with a view to building condence and encouraging international
cooperation. In this context, the initial mutually determined limitations described in
this JCPOA will be followed by a gradual evolution, at a reasonable pace, of Irans
peaceful nuclear programme, including its enrichment activities, to a commercial
programme for exclusively peaceful purposes, consistent with international non-
proliferation norms.

The E3/EU+3 envision that the implementation of this JCPOA will progressively
allow them to gain condence in the exclusively peaceful nature of Irans pro-
gramme. The JCPOA reects mutually determined parameters, consistent with
practical needs, with agreed limits on the scope of Irans nuclear programme,
 356 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

including enrichment activities and R&D. The JCPOA addresses the E3/EU+3s
concerns, including through comprehensive measures providing for transparency
and verication.

The JCPOA will produce the comprehensive lifting of all UN Security Council
sanctions as well as multilateral and national sanctions related to Irans
nuclear programme, including steps on access in areas of trade, technology,
nance, and energy.

At the simplest level of interpretation, it provides advantagesfor Iran

as indicated by the passages emphasized above in Italics. And for the US
and its Partners in the EU in the passages underlined.
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The key feature is balance. The negotiators found the points at which it
became worthwhile to compromise and xed them in place rmly with
incentives and disincentives. They preserved the dignity of both sides.

The third thing to praise, after the diplomacy and the heart of the deal on
nuclear issues, are the features that strengthen non-proliferation generally
and here I would like to thank my Chatham House Colleague, Patricia
Lewis, for the summary below.
(1) The Agreement contains a denition of nuclear activities that together
amount in practice to a commitment not to develop nuclear weapons in
perpetuity. It demonstrates what it takes to show that Irans activities
are commensurate with civilian requirements;
(2) Strong afrmation of the right in conformity with NPT to the fuel
cycle;
(3) Foregoing by Iran of reprocessing which is another right and hence
committing not to do it is a big condence-building measure;
(4) Tougher monitoring and controls than that of any other country, such
as over uranium mining for 25 years and over centrifuge manufactur-
ing for 20. Trust is placed not in Iran, but in the IAEA and the
Additional Protocol;
(5) The Dispute Resolution Mechanism;
(6) The return of sanctions in the event of breaches by Iran;
(7) Reduction of the chance that there will be a nuclear arms race in the
Middle East.
Fourth, and crucially, will it last?

Yes, probably. Iran will not be the rst to renege, so the chance of sanc-
tions being re-imposed for that reason is small. The overwhelming inter-
est of Iran is to comply. The nuclear deal will stick, subject to US policy.
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 357

And even if a Republican wins in the US, it is not a foregone conclusion

that a candidates hostility to perceived past concessions to Iran would
translate into active sabotage of the deal it is too obviously a good
agreement for US, regional and world security against the spread of
nuclear weapons.

Revision or toughening of the JCPOA is not going to happen. Some in the

US would like to eliminate the sunset clauses, under which Iran may
increase the extent and efciency of its nuclear enrichment by stages so
that by 2031 it is free, under the NPT, to enrich at low levels in large
quantities for its civil power reactor programme. The right to use indigen-
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ous technology at an industrial scale for fuelling future nuclear reactors is

an absolute requirement of Irans attachment to its national dignity and
core beliefs.

A Trump presidency would face the same choice as did Obamas to

ditch negotiation and carry on with a policy of sanctions, which would
be too weak an instrument to effect change in Iran, or to make war.
The risks involved in waging a war on Iran which would be illegal
aggression would on any rational calculation exceed the benets. The
advice of US military leaders on the limits of what could be achieved
and on the potential costs played a crucial role in deterring rash action
in 20102012: it is likely to be the same in 2017.

So yes the JCPOA will last, provided that mutual benet is delivered in
practice; provided that the US uses its power wisely.

Todays issues
First and foremost, there is delivery of the economic quid pro quo for
Irans concessions. Some say that Rouhani over-sold the agreement.
Neither the P5+1 nor Iran foresaw, apparently, how difcult it would
be to turn massive interest by both Iranian and foreign businesses into
working projects and accelerated national growth that would trickle
down in increased family incomes. High expectations in Iran of economic
progress have not been realized. Disappointment has set in and criticism
of the limited benets that have accrued to Iran by the Supreme Leader
and by President Rouhanis opponents is rising in intensity; 2017 will
see a Presidential election in Iran and the right scent Rouhanis blood.
For him to be the only one-term President since the Revolution in 1979
would be a setback.
 358 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

The JCPOA has led to some foreign investment and to a major return of Iran
to world oil markets. But it is threatened by the generally slow pick-up in
economic activity and the non-appearance of Western trade and investment,
other than in a modest rise in EU exports (22 percent or so this year)

As an aside, the Iranian government knows that it must work on the trans-
parency issues that currently deter many from believing that Due Dili-
gence can ever fully assure foreign companies and their bankers rst,
that they know whom they are dealing with, and second, that they will
not fall foul of the bans on dealing with still-sanctioned Iranian entities.
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Iran has programmes with the IMF and others to bring their nancial
regulation and banking practices up to modern standards and to address
the issues raised against them by the Financial Action Task Force
(FATF) on terrorist nancing and anti-money laundering.

The biggest problem is, nevertheless, the stuttering return of banking

facilities no real banking market for Iran exists yet. Letters of Intent
and MOUs agreed with companies too often remain ink on paper.
Modest facilities are being put in place for known customers by mid-
sized or small banks with little exposure to the US. But capacity is far
too low and likely to remain so for some time.

Many British companies are interested in Iran, but wont get stuck in while
there is no banking. The UK has fallen behind Germany in restoring facili-
ties, since we are so tightly tied to the US. Sentiment in banking board-
rooms is still against doing business with Iran because of actual and
perceived risk to business of hugely greater importance done with the US.

My thesis is that the US and its partners have done a couple of useful
things recently to facilitate resolution of the banking embargo, but that
it has been done too slowly, has been small in scale and ambition, and
that so far it has been ineffective. They laboured to produce a reassuring
statement when ministers met in London on 17 May, but they produced a
mouse. The latest addition to The Ofce for Foreign Asset Control
(OFAC)1 guidance helps, but at the edges.

There have been useful oral assurances by OFAC spokesmen that, in con-
sidering potential prosecution of a non-US rm for a suspected breach of
US sanctions, the completion of correctly targeted, good-faith due dili-
gence will be taken into account; meaning that if (despite all lights
having been green at the time) it transpired after a deal had gone
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 359

through that there was a link to a banned entity, such as through a deeply
concealed shareholding, a non-US entity would not be in serious
jeopardy.
But the US and its partners have also made some potentially signicant
mistakes. Please bear with me if I lay them out in some detail.
. not re-authorizing U-turn transactions in dollars (for reasons related to
current US politics), thereby maintaining a sanction that was originally
enacted to get Iran to negotiate seriously;
. not working on means to reassure non-US banks that they can continue
to deal safely with dollar-correspondent banks in the US, given that the
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latter are still excessively nervous about US risk to them arising from
association with concerns in other countries that do business with Iran;
. not developing a positive list system where they can e.g. providing
clarity on the ownership and control of Iranian state entities, including
entities where there is no IRGC (Islamic Revolutionary Guard Corps)
presence;
. unwillingness, apparently, to use governmental inuence with state-
owned banks to get them to help carry out government policy e.g.
by providing clearing facilities in London or lending to companies
under ofcial UK export nance arrangements;
. there is no general licence by OFAC to enable non-US entities to use
US software in support of business operations involving Iran;
. not stafng OFAC properly so that the if in doubt ask invitation can
actually mean something real to businesses engaged in commercial
competition with nimble operators; and
. failure to get a grip on the individual US States. Ambassador Steven Mull
is responsible for implementation in the State Department. He wrote to
State Governors on 8 April. It would appear to be a perfect example of
too little too slowly. Basically, the State Department appears to have
wasted the period between Implementation Day and that date.

Common sense suggests that, if the situation is not appreciably better later
in the year, it will be impossible for the US and its partners to argue cred-
ibly that they are not in breach of the JCPOA. As you know, there are
clauses in the JCPOA enjoining facilitation of Irans access to nance.
Given that various measures open to them have not been taken, they will
be hard pressed to say as pregured in the 17 May statement that it
is all the fault of rms and companies making autonomous decisions.

To return to the American States, clearly States Rights are a major

concern now, as in US history. And Iran has worsened the political
 360 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

atmosphere around dealing with its concerns (for example by writing

Death to Israel on missiles being tested).

But this does not exonerate the US and its partners - they knew all along
that the politics would be bad during implementation, as bad as it was
during the long negotiation.

There is a wider issue: grudging US support during implementation of a

hard-fought international agreement. I saw it from Jerusalem after 1993
when I was British Consul-General. The US pleaded that they (the Pales-
tinians) must understand the political difculties in Washington and
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Israeli Jerusalem, in turn leading to encouragement of the forces on

both sides that were never reconciled to the Oslo agreement.

Zarif and his team are being statesmanlike in explaining what was in the
deal, and what was not, with the latter including US non-nuclear sanc-
tions that of course preceded the nuclear crises.

The UK government is saying many of the right things for example that
private-sector nance and trade are an integral part of the benets given to
Iran in return for its concessions. They have been active behind the scenes
as well. But fully regulated British-based Iranian banks in the City still
cant trade as there is no one to clear their transactions. British exporters
still have to use costly round-about ways of getting money from Iran
because major British banks wont handle it.

Chatham House may give Secretary Kerry and Foreign Minister Zarif the
Chatham House Prize for the biggest contribution made to international
affairs. Yet, I am sure you have come across the words that 300 years later
became what is known popularly as Drakes Prayer.

As his ship, the Elizabeth Bonaventure, lay at anchor at Cape Sakar on 17

May 1587 after the sacking of Sagress, Sir Francis Drake wrote to Eliza-
beth Is secretary of state, Sir Francis Walsingham, saying:
There must be a begynnyng of any great matter, but the contenewing unto the end
untyll it be thoroughly ffynyshed yeldes the trew glory.

Iran today
Having nished my tour of nuclear diplomacy and its aftermath, it is time
to look at Iran today and its political prospects.
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 361

Despite the near-term problems, the Iranian governments aim is growth

through trade and investment.

The Minister of Industry, Mines and Commerce said in July:

In the six months after the JCPOA, 6 presidents, 791 governmental ofcials, along
with 2,045 private companies from various continents came to Iran; and 68 govern-
mental MoUs and 119 contracts have been signed. 12 industrial projects with
foreign investment worth US$501 million have been approved . The SWIFT
interbank system has been reactivated.

This, and more of the same, will be two-edged for the Iranian system: pro-
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gress reduces risks by enabling resources for patronage, for security and
for satisfying important groups.

We know that economic freedoms boost demands for political ones too.
We should consider the durability not just of Iran in this context, but of a
certain way of governing. Irans Middle East geographical context is mis-
leading we should compare it not with post-Ottoman, post-imperial
Egypt or Saudi Arabia, but with Russia and other Asian powers.

Iran has been struggling with the value to be allowed respectively to mod-
ernization and to traditional values for approaching two centuries. In this
century, it is in good company in focusing on sovereignty, stability and
security of the regime. So they push back against Western inuence
and heavily manage Iranian civil society. They coopt business, monitor
social media and the internet like mad, and enhance their security
services.

But if Iran does grow at its potential ve to eight per cent for a few years,
then the historical fact that revolutions can coincide with a period of
improvements will come into play; especially if wealth does not trickle
down or growth is followed by recession, as in the few years before
the Iranian revolution in 1979.

Will we look back one day, note the coincidence of the Nuclear Agree-
ment and a period in which Iran rises and becomes stronger, and ask
was there a connection between them and political instability? To
approach an answer, I need to talk to you about Iran. This will be a
shorter tour.

Irans constitutional settlement is still contested. The revolution is seen by

its keenest advocates, by its opponents and by the many in between who
 362 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

want it to work better for all not just the few, as work in progress. Each
group seeks an appropriate balance of republican and religious elements
of democracy with centralism.

There are seven centres of power:

. the Supreme Leader and his network of representatives everywhere
i.e. the institution that includes his extensive Ofce, not just the person;
. then there are the agencies of domestic power that report to the
Supreme Leader, the Islamic Revolutionary Guards Corps, the Intelli-
gence ministry and the judiciary;
. the bureaucracy President, government structures, technocrats,
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police;
. next, the clerics, including the ayatollahs based in Qum, the (elected)
Experts Council that in theory selects the Supreme Leader, the
(appointed) Guardian Council that forms the Upper House of Parlia-
ment, and the Bonyads charitable and business trusts combined
with investments and revenues largely outside the tax system;
. the House of Representatives, the Majlis, that makes draft laws and
has oversight over government Ministers elected after stringent
vetting of candidates for their morality and loyalty;
. The Bazaar nance, commerce and industry both publicly and pri-
vately owned;
. nally The Street students would be here, as well as organized labour.

These are very broad categories, but are still helpful, particularly when
imagining where challenges to the system might come from and what
it would take for a reform movement or a coup to succeed.

They are interlinked. Members of one are often members of others. And,
to varying degrees, traditionalists, conservatives and reformers are found
in each. So none of them have just one outlook. The rst three are con-
trolled through a central leadership. But in a crisis, bits of the others
would clump together to face it down.

Should the system falter, the Revolutionary Guards might make a pre-
emptive move. They would suspend parts of the constitution under
overt military control, in the name of the stability of the Islamic revolu-
tion, thus protecting their own interests.

Least likely at present, even far-fetched as seen from todays vantage

point, would be a collapse of the current order and its replacement by a
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 363

democratic regime. Events might bring the Green movement or a succes-

sor to the fore once again. To take power, they would need the security
forces to stand aside. And that would not happen unless new potential
leaders were supported by groups in Iran that are currently neutral, or
in favour of the current system: sections of the clergy, civil society includ-
ing universities, business both public and private, political parties once
they had re-emerged, and the bureaucracy.

The revolutionary elites are strongly motivated. A revolt from below in

which the forces enforcing order for the politicians lose the will to
persist is not in prospect. There is a new generation of conservative
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leaders.

They could be tested as the current generation of senior conservatives dies

off 20 of those in top positions are over 88; or during a transition to a
new SL. Khamenei is 77. There is no obvious successor in waiting.

But under the motto if we dont hang together we could hang separately, I
am expecting bitter jockeying among the factions but a collective sense of
self-preservation that stops it shaking the nitham the system to pieces.

Economy
Could this calculation change as a result of economic change? That I
believe is unlikely. President Rouhani has stated on various occasions
that: The countrys priorities are economic prosperity and employment
for young people; An economy that does not have the power to
compete on the international stage cannot resolve domestic issues in the
long run. To help make this happen, he wants his country to build
foreign partnerships based on respect, mutual benet and meticulous obser-
vance of the international agreement that solved the nuclear question.

They have a 1.4 trillion dollar diversied economy, growing at some four
to ve per cent, with a backlog of investment in all sectors, a reforming
government (for the next year at least) and a well-educated population
(total 80 million) striving to take advantage of the countrys improved
prospects. They are rebuilding purchasing power after years of sanctions,
and are recovering oil market-share. Crude production will soon go above
4 million barrels per day. The oil minister projects a production capacity
of 4.8 million barrels per day within ve years. They are an emerging
BRIC.
 364 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON

The Iranian government is committed to expanding the private sector,

strengthening and reforming the nancial sector and attracting foreign
investment, especially to boost non-oil exports. Ination is down and
the demand is now for jobs.

On the negative side, they have big problems of economic and scal
management among them, still no unied exchange rate, 800,000
new entrants each year to the employment market, cronyism and cor-
ruption, $90 billion of government internal debt to banks and
businesses, an inadequate tax base given the privileges to religious
foundation-owned and military-owned rms, and a lack of transparency
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on ultimate ownership of businesses with too few good due-diligence

operators.

The most likely scenario on balance, however, is continuity a kind of

stability under which the system gets by as at present: unable to eliminate
discontent or reformism, while able to deny them space to mount an
effective challenge. In other words another success for that pretty
general, autocratic system of government that I mentioned, in which
the Western way is not a given.

The future
I hope my nuclear and my Iranian tours have shown you some interesting
features. I should now sum up.

Iran will probably remain stable under the current mixed religious and
vote-based ruling system, though factional struggles will continue.
Irans young and well-educated population will keep pushing against
social barriers and demanding personal freedoms. There could be a
slight easing in social controls. But overall, evolution in the political
system is more likely than revolution.

It is not a given that the Supreme Leader will be replaced by another all-
powerful individual or that Irans elected institutions will stay stuck in
second-class status. But no big changes should be expected during the
lifetime of the current Supreme Leader, Ayatollah Khamenei. He can
be a critic of President Rouhanis government but is not contesting his
economic policies provided there is no slackening in resistance to non-
Iranian, non-religious attitudes to life and politics.
 THE IRAN NUCLEAR NEGOTIATIONS: ONE YEAR ON 365

It will take time for the system to consolidate itself under a new Supreme
Leader, but it will get through the trial.

In external affairs, tension will continue between policies of resistance to

foreign enemies and their allies (which comprehends non-recognition of
Israel), their desire for regional cooperation and their intention to preserve
Irans inuence in Arab states that they see as vital for their security such
as Iraq and Syria.

Despite unprecedented public enmity, there will not be an interstate war

across the Gulf, either over nuclear issues or as a consequence of disputes
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between GCC countries and Iran.

Some reduction in tension with Saudi Arabia is possible, even talks, but
no rapprochement will take place until serious progress has been achieved
in building a stable polity in Iraq, Syria and Yemen. And it may never
take place, given Saudi determination to weaken Iran.

There will be further signicant advances in European relations with Iran

but little or none with the US. Hilary Clinton may well take over next
January. If not, the US military, with support from US allies, Russia
and China will water down Trumps rash electoral promises.

Good Iranian sources told me in July 2016 that Zarif and Rouhani thought
they could contain pressures at home while giving the US and its EU partners
time to full their side of the bargain in spirit as well as to the letter; that most
people think their country is on the right track, delays and disappointments
notwithstanding; and that just enough is happening for the government to
demonstrate progress on trade and investment, such as moves made with
Turkey, India and Far Eastern countries. My hope and my belief centre on
eventual accommodation over current disputes on implementing the econ-
omic side of the JCPOA, notably access to nance, during 2017.

The nuclear agreement will endure, if everyone works at it.

NOTE

1. The Ofce of Foreign Assets Control is a nancial intelligence and enforcement

agency of the US Treasury Department charged with planning and execution of econ-
omic and trade sanctions in support of US national security and foreign policy
objectives.