The nuclear pact inked by the P5+1 and Iran, though not yet ratified, offers the opportunity for Iran to shed its parish-state label and reenter the world of nations. It has been largely excluded since the 1979 Revolution but especially so after opposition grew to its nuclear program in recent years. There are political-economic consequences from the pact that will affect regional stability, the world economy, and the prospects for change inside the Islamic Republic. Most of these will unfold regardless of Washington’s approval of the deal or its lifting of sanctions on Iran.
Economic change, political change?
There is high probability that most major industrial states will establish trade deals with Iran in coming months. There are some 80 million Iranians, many of them urbanized and westernized, with disposable incomes that will rise sharply in coming years. French foreign minister Fabius booked his flight to Tehran scarcely before the P5+1 arrangement had been announced. His rival ministers from other countries are following suit, save for those from one major power.
Increased trade, especially with western nations, will strengthen the orientation of urban middle classes with principles of individuality, autonomy, and openness. This in turn will strengthen the reform movement at the expense of elites – clerical and military – who prefer national solidarity, deference to authority, and cultural austerity. Return to rigged elections and crackdowns cannot be ruled out, but it could only be undertaken with considerable risk. Increased trade with the West can hardly be seen as ensuring democracy and secularism, but continued sanctions plays into the hands of authoritarian elites by presenting the outside world as bent on interference and oppression.
Greater international involvement
The nuclear deal will better integrate Iran with the world, with the notable exception of the Sunni monarchies just to the west. Trade partners use diplomatic levers to see that mutually-beneficial commerce continues despite regional disputes and sectarian hatreds, most of which seem anachronistic and foolhardy to outsiders. Tensions in the Gulf will ease, threats of attack on Iran will be somewhat reduced, and the Iranian military’s rationale for nuclear weapons will be weakened.
It could be countered that Iran, especially its military, will use the cover of greater international support to continue the nation’s nuclear program, including uranium enrichment at, say, a site presently unknown to the international community. This scenario cannot be ruled out; after all, the Fordo site went undetected for years (though it was eventually discovered). It can be noted, however, that international inspection teams and numerous intelligence services will be watchful for such violations, with some of the latter eager to find them. While a full return to the sanctions of today would be unlikely, burdensome economic retaliation would follow swiftly and American airstrikes would almost assuredly follow.
Nations that conduct trade with Iran may face retaliation from the Sunni monarchies. Saudi Arabia and the Emirates buy immense amounts of military equipment, less to field powerful armies than to wield influence with arms-exporting states. The Sunnis may punish EU countries by shunning their arms industries. The obvious alternatives are Russia and China, but those countries already trade with Iran (and with Saudi Arabia for that matter). Russia sells jet fighters and air-defense systems, and China buys huge amounts of Iranian oil and gas. Shifting to second- and third-tier arms sellers will bring inferior weapons from countries which offer little if any diplomatic help and which are unable to project power into the Middle East.
The reliability of oil from the Gulf
The Arab Spring has been quashed in the Sunni states of the Gulf – in Saudi Arabia through threats, in Bahrain through troops. Fissures, resentments, and expectations remain in liberal reformers and Islamist militants alike, and they will resurface one day. The resulting turmoil could bring down more than one doddering monarchy. Bahrain, the Emirates, and Kuwait are all governed by monarchs frightened by reform and driven into lockstep with Saudi Arabia. Oil exports could be gravely endangered one day. World markets would panic, sending prices up sharply – as they did when Iran went through its upheaval in 1979. Paradoxically, the global economy may come to rely greatly on increased Iranian production.
The US
Even if congress were to ultimately accept the P5+1 agreement, it is unlikely to end the sanctions it has imposed on Iran. This stance will hurt Iran, however it will also hurt American businesses. Iran’s oil and gas industry is badly in need of new technology. RD Shell, Eni, Total, and other foreign companies are eager to step in – at the expense of Exxon Mobil and its American sisters. China is expanding its leases in Iran.
American defense contractors once had a near monopoly on sales to Iran under its monarchy. This was at a time when Washington’s “twin pillars” policy supported good relations with both Tehran and Riyadh – an adroit policy which kept their rivalry from erupting into war in the vital region. Boeing and General Dynamics will look on in annoyance as their EU, Chinese, and Russian rivals are eagerly greeted at the Tehran airport. Employment in the US will be the worse for it, especially in Texas, Washington, and California.
Sanctions, of course, can be skirted. Halliburton, for example, successfully elided American law for several years by working with Iran through subsidiaries. Nonetheless, American businesses will lose out in the large and growing Iranian market. They will in time use their considerable lobbying assets to gain access to Iranian markets.
©2015 Brian M Downing