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Is an Iran Nuclear Deal Dead amid Domestic Protests?

Iran is currently engulfed in protests, which are spreading by the day, fatalities are mounting, and the regime’s authority is being challenged like rarely before. The turmoil is playing out against the backdrop of delicate diplomacy to prevent a nuclear stand-off from spiraling out of control, destabalising the entire region.

How things have changed since March, after eight grueling rounds of negotiations, when it seemed as though a final text had been crafted to renew the contentious Joint Comprehensive Plan of Action (JCPOA), colloquially known as the Iran deal. But now a deal seems as far away as ever.

There is deadlock over three main points. First, is the designation of the Islamic Revolutionary Guard Corps (IRGC) as a Foreign Terrorist Organisation (FTO). Second, is the ongoing International Atomic Energy Agency (IAEA) investigation into Iran’s past conduct. And third, the lack of assurances over the longevity of the deal, triggering Tehran’s fears of another U.S. unilateral pullout.

Can these issues be resolved? I believe each of the three has potential solutions, but it requires the political will to achieve them.

Designation of the Islamic Revolutionary Guard

As part of former President Donald Trump’s ‘maximum pressure’ campaign, in 2019 the IRGC was designated as a Foreign Terrorist Organization. Even at the time, the U.S. acknowledged this was an ‘unprecedented’ action because it is a branch of the Iranian military. Iran is insistent on this designation being removed. But for the U.S., backing down on this is politically very challenging.

Before the designation, the IRGC was already one of the most sanctioned entities in the world. The reality is the designation made little practical impact. However, for Iran, it added another layer of sanctions and stigma to an already sanctioned and stigmatized group. For the U.S., it became a political symbol of toughness on Iran, giving it an outsized role in domestic political debate. To renege it would be seen as being soft – a politically unpopular stance.

This issue must be seen in greater granularity, the IRGC is not a monolith. As a compromise, certain arms of the IRGC, namely those engaged in military operations across the region, could remain designated as an FTO to allow the Biden administration to be seen domestically as being tough. However, those that are engaged in non-military activities, such as social welfare and building hospitals, could be taken off this list. I believe this could be an acceptable compromise for both parties.

IAEA inspections

The second big sticking point stalling the Iran deal is the IAEA investigation into past Iranian nuclear activities, specifically the secretive way they continued enriching uranium without disclosing it. These are legitimate concerns, but Iran is seeking to have the investigation unconditionally closed as part of any deal.

The Iranians argue, not unreasonably, that if we are to look at the past, then we also must look at Trump’s unilateral pull-out of the original Iran deal negotiated by the Obama administration. They claim that this brought about great economic loss, for which Iran should be compensated. Either examine the past, and look at both sides of the argument, or draw a line and move on, they say.

Western powers say they are reluctant to dictate how an independent UN agency should conduct its mandate of nuclear accountability. However, if full inspection rights are restored the IAEA would be able to piece together an accurate picture of past activities. Moreover, the reality is that the IAEA is a creature of its member states. If the membership says a line is drawn, they will be inclined to agree. Whilst Russia’s Ukraine war complicates the issue considerably, making it harder to reach a consensus, there must still be hope that this issue could be dealt with in isolation.

Long-term assurances

The third and perhaps most pertinent issue for Iran relates to the longevity and reliability of U.S. sanctions relief. As an Iranian negotiator summarized: “Without economic guarantees that outlast Biden’s presidency, no one will invest in Iran. So, we won’t get the majority of the deal’s dividends, compounded by the political risk of another U.S. [withdrawal].”

Some in Iran even argue that they are better off living under the stability of permanent U.S. sanctions, given that each snapback of the sanctions leads to a deeper shock in the economy. In fact, Iran’s central bank pegged GDP growth at 5.7% in its most recent assessment. Therefore, it will require some form of reassurance to the Iranians for them to be tempted by the lift in sanctions.

Of course, no U.S. administration has the power to bind the hands of a future administration under U.S. law. So, removing the threat of unilateral pullout is a non-starter. However, the Biden administration could offer a backstop on insurance policies against Iranian political risk. This would mean a business looking to invest in Iran would take out an insurance policy, and if the U.S. reimposed sanctions, then the business could claim insurance for their loss, backstopped by the U.S. administration.

This would mitigate the risk of investing in Iran, incentivizing businesses. And it would be acceptable to the U.S. as it would mean they could never be accused of compensating Iran and would not be accused of giving economic handouts to Tehran.

Political environment

Clearly then, significant differences remain between Washington and Tehran. However, there are solutions that could potentially break the deadlocks. Is there political will for it, though?

President Joe Biden has the November midterm elections to worry about. There is a reluctance amongst Democrats to engage in a polarizing debate in Congress which could cause harm to their efforts to hold onto both houses of Congress. There are also elections looming in Israel and given their intense lobbying on this deal, it is important nothing happens before then. Some in Israel believe a bad deal is better than no deal; ironically, many in Iran think the opposite.

On Iran’s side, the regime feels emboldened by Russia’s war in Ukraine. But more recently, with the hijab protests growing in Iran following the death of 22-year-old Mahsa Amini while in police custody, will a regime under pressure at home be more likely to want to conclude a showpiece diplomatic agreement or double down and be less minded to reach an agreement?

If the Iran deal is to be revived, there must be genuine political will from both sides, which may not come until at least after the U.S. midterm elections. Neither side will want to break away from talks completely though, as nobody wants to go down the military route.

Creative solutions and compromise are the only way of breaking the deadlock. The alternative scenario of no deal and the prospect of U.S.-backed Israeli strikes on Iranian nuclear facilities could see the region quickly spiral out of control with all the ensuing consequences.