A Dangerous Deal
From the January 27, 2014, issue of NR


John R. Bolton

For nearly three decades, Iran’s ayatollahs have outfoxed and outmaneuvered Western counter-proliferation efforts. Tehran has repeatedly bested our diplomats, our spies, and, most especially, our gullible political leaders. In the Joint Plan of Action, reached in Geneva this November, the mullahs did it again, worsening the already-grim prospects for stopping or even slowing Iran’s nuclear program.

This “interim agreement” with the U.N. Security Council’s five permanent members and Germany, and its recent implementation protocol (effective January 20, although its precise terms are still not public), should win Iran a prize for fantasy fiction. Worse, Secretary of State John Kerry, under a thick rhetorical fog, is blithely pursuing a “comprehensive solution,” despite the certainty that Iran will never agree to anything precluding it from possessing nuclear weapons.

The Joint Plan has two key facets: relaxing international economic sanctions against Iran and treating with its ongoing nuclear activities. On its face, the interim agreement is woefully inadequate to stop Tehran’s march to becoming a nuclear-weapons state. But rather than analyze the text further, let’s consider how the deal is already playing out and predict what comes next. If the implementation of even the interim agreement fails, that will be compelling evidence against any purported “comprehensive solution.”

On sanctions, Geneva afforded Iran an enormous psychological breakthrough, reversing the prevailing momentum and making it extremely difficult politically to restore sanctions in the unlikely event President Obama wakes up to his mistakes. In fact, so rapidly are sanctions disintegrating that there is already much to report and less to prophesy. What can confidently be predicted is that the initial problems with the agreement will simply metastasize until sanctions (and sanctions enforcement) all but disappear.

Obama-administration estimates that the interim deal’s economic boost to Iran will be only approximately $6–7 billion understate the immediate benefits and completely ignore the future cascade of consequences. For example, if Iran can now purchase for $500 a previously forbidden automotive spare part, the administration calculates that as a $500 benefit to Iran. But if the spare part allows a non-functioning truck to resume operating, the economic upside is manifestly greater than just the part’s purchase price. Multiply this example appropriately and the real impact becomes obvious. And don’t think Tehran hasn’t done the math on this.

Even more important than defining what has become “permissible” under reduced sanctions is the new psychology that foreign businesses will bring to potential trade with Iran. What was once plainly illegal or prohibitively risky economically now becomes at least thinkable. What was once questionable or dicey now looks entirely legitimate and even attractive. According to Western advocates of sanctions, sanctions were extremely effective before Geneva. If so, the impact of the Geneva deal will be enormous, moving large numbers of deals out of a forbidden or dark-gray zone into one where the gray is much lighter. Moreover, while U.S. enforcers may try to hold the line, don’t expect Europe to be so punctilious.

French automakers and energy executives are already racing to Tehran to secure lucrative contracts once sanctions are formally suspended. Dubai’s Sheikh Mohammed bin Rashid al-Maktoum signaled in a recent BBC interview that he will not be left behind in the rush for commercial opportunity in Iran. Although a supposed adversary of the mullahs, al-Maktoum of course merely sounds like an Arab version of John Kerry. Weakness and opportunism often go hand in hand.

(There are also disturbing reports that Oman has granted Iran a key observation spot near the critical Strait of Hormuz, and that the United Arab Emirates has agreed with Iran on the status of long-disputed islands in that strategic waterway. While not directly caused by the collapse of sanctions, these politico-military accompaniments to Geneva are extremely dangerous.)

Not surprisingly, Russia, which for years resolutely resisted efforts to increase sanctions against Iran, is now plunging into the gap left by their collapse. Press reports highlight a possible oil-for-goods swap with Russia amounting to $18 billion annually, which alone would lift “officially reported” Iranian oil exports by 50 percent. Russian energy minister Alexander Novak said candidly that “we don’t have any restrictions here and, of course, we are looking at ways to widening trade volumes.”

“Lawfare” will also be an important element in Iran’s campaign to dismantle sanctions. Reuters reports that Bank Mellat, an important Iranian financial institution, is bringing suit in Britain, seeking over $800 million in damages because the U.K. supreme court ruled last year that the bank was improperly sanctioned. According to Bank Mellat’s lawyer, this is only the first of eight to ten cases of private Iranian firms’ taking legal action. Government entities may bring lawsuits as well, pressuring Western politicians to ease back on sanctions and enforcement by putting taxpayer dollars at risk.