The Danger of New Iran Sanctions

The Geneva “interim” agreement reached in November between Iran and the so-called P5+1 (the United States, Britain, China, France, Germany, and Russia) freezes Tehran’s nuclear program in exchange for modest sanctions relief, with the goal of enabling further talks to comprehensively resolve one of the world's thorniest challenges. Yet despite the landmark accord, more than two dozen Senators introduced legislation on December 19 to impose new oil and financial sanctions on Iran. The Senate could vote on the measure soon after it returns from recess in January. Powerful lobby organizations are mobilized in support of the bill, and it could certainly pass.

The legislation defies a request by the Obama administration and ten Senate committee chairs to stand down on sanctions while negotiations continue. It also flies in the face of an unclassified intelligence assessment that new sanctions “would undermine the prospects for a successful comprehensive nuclear agreement with Iran.” Proponents of the bill note that the proposed sanctions would only come into force if Iran violates the Geneva agreement or fails to move toward a final deal, and would not kick in for months. But the White House warns that enshrining new economic threats in law now runs counter to the spirit of the Geneva pledge of no new sanctions during negotiations, and risks empowering Iranian forces hoping to scuttle nuclear talks. The legislation also defines congressionally acceptable parameters for a final deal that Iran experts almost universally believe are unachievable, namely the requirement that Iran completely dismantle its uranium enrichment program. For these reasons, the administration believes the bill represents a poison pill that could kill diplomacy, making a nuclear-armed Iran or war more likely.

Sanctions hawks disagree, arguing that the legislation will enable, not thwart, diplomatic progress. “Current sanctions brought Iran to the negotiating table,” Senator Robert Menendez, the bill’s leading champion, contends, “and a credible threat of future sanctions will require Iran to cooperate and act in good faith at the negotiating table.”

But this logic badly misreads the historical effect of sanctions on Iranian behavior and under-appreciates the role played by Iran’s fractious domestic politics. A careful look at Iranian actions over the past decade suggests that economic pressure has sometimes been effective, but only when it aligns with particular Iranian political dynamics and policy preferences. And once domestic Iranian politics are factored in, the lesson for today’s sanctions debate is clear: the threat of additional sanctions, at this critical juncture, could derail negotiations toward a peaceful solution.

In the fall of 2003, under Iran’s reformist president Mohammad Khatami and his lead nuclear negotiator, national-security adviser Hassan Rouhani, the so-called E-3 (Britain, France, and Germany) persuaded Tehran to voluntarily suspend its uranium enrichment activities. Iran also agreed to implement the Nuclear Non-Proliferation Treaty Additional Protocol, allowing International Atomic Energy Agency (IAEA) inspectors more expansive access to Iranian nuclear facilities. According to the 2007 U.S. National Intelligence Estimate and a November 2011 IAEA report, the Iranian regime previously halted its organized effort to design a nuclear warhead. François Nicoullaud, the French ambassador to Iran during this period, suggestedthat Rouhani may have played a key role in convincing Supreme Leader Ayatollah Ali Khamenei to order the halt to Iran’s weaponization work.

These decisions came in the aftermath of the August 2002 revelations that Iran had constructed a secret uranium enrichment facility at Natanz and was building a heavy water reactor at Arak. Iranian leaders feared that the IAEA Board of Governors would refer Iran to the United Nations Security Council for violations of Iran’s nuclear safeguards agreement, raising the prospect of multilateral sanctions. (In the aftermath of the initial lopsided U.S. military victory over Saddam Hussein’s forces in Iraq, the Iranian regime may also have feared they would be targeted next for pursuing weapons of mass destruction.) A year later, the parties signed the Paris Agreement, which extended the temporary suspension of Iran’s nuclear activities, pending negotiation of a comprehensive framework.

In March 2005, Iran presented a proposal to the E-3 offering to cap Iran’s level of enrichment at 5 percent, a level appropriate for civilian nuclear power plants but far from weapons-grade. Tehran also offered to limit the number of operating centrifuges to 3,000 and ratify the Additional Protocol. But negotiations broke down when the E-3, backed by the Bush administration, balked at allowing Iran to continue low-level enrichment. With the resurgence of hardline forces, many affiliated with the Islamic Revolutionary Guard Corps, in the 2004 Iranian parliamentary elections and the June 2005 presidential election of Mahmoud Ahmadinejad, it became impossible for Iranian moderates to sustain elite consensus for nuclear compromise. Moderates were accused of appeasement and retreat, and hardliners demanded a tougher stance. Rouhani was singled out for particular derision. Hardliners showed little concern about possible UN sanctions or U.S. military action, advocating for the abandonment of diplomacy in favor of “resistance” and the creation of irreversible technological facts on the ground.

And that is exactly what happened during the Ahmadinejad period. Iran ended its temporary suspension of nuclear activities in the summer of 2005 and resumed enrichment at Natanz in early-2006. Tehran also stopped voluntarily implementing the Additional Protocol. Iran increasingly viewed its nuclear activities as inalienable rights, and uranium enrichment in particular became a central symbol of national pride.

In late-2006, the UN Security Council passed the first of six resolutions imposing economic sanctions and calling on Iran to suspend its enrichment and reprocessing activities until such time that it restored the confidence of the international community in the peaceful nature of its program. The most recent and significant of these resolutions, negotiated by the Obama administration and passed in June 2010, set the stage for a series of crippling unilateral U.S. sanctions, including potent provisions aimed at preventing third parties from buying Iranian oil or engaging in transactions with Iranian banks. The European Union and other like-minded nations followed suit with similar punishing measures. Sanctions severed Iran’s links to the international financial system and cut the country’s oil exports by more than fifty percent, costing the Islamic Republic more than $80 billion in revenue since the beginning of 2012, according to White House estimates. The value of Iran’s currency plummeted, and inflation, government debt, and unemployment soared. In 2012 alone, Iran’s economy contracted by five percent, and the 2013 numbers are expected to be similar.

Yet despite the escalation of sanctions during the Ahmadinejad period, Iran did not halt its nuclear activity. On the contrary, when Ahmadinejad entered office, Iran possessed several hundred centrifuges enriching to the 3.5 percent level, but by 2013, Iran had nearly nineteen thousand centrifuges, including almost one thousand at the deeply buried Fordow facility (another once-secret site constructed during the Ahmadinejad period) enriching to the much-closer-to-bomb-grade 20 percent level. In total, Iran accumulated enough low-enriched uranium during this time to produce, if further enriched, as many as half a dozen nuclear weapons. Iran also began installing much more advanced centrifuges at Natanz, and made substantial progress toward making the Arak reactor operational, opening up a potential plutonium pathway to nuclear weapons.

None of this changed until the June 2013 presidential election. In a six-way race, Rouhani vanquished several more conservative candidates, including Ahmadinejad's chief nuclear negotiator Saeed Jalili, who campaigned on continued economic and nuclear resistance in the face of international pressure. Rouhani, in contrast, emphasized the dangers of Iran’s isolation and the economic damage from sanctions. He pledged to repair relations with the world and have a softer touch at home. Rouhani’s sweeping victory—which surprised internal and external observers alike—gave him a strong public mandate and, for the time being, implicit support from Ayatollah Khamenei to change course.

Aware that he needed to act fast, Rouhani put together a largely technocratic unity government, including the Western-educated foreign minister Mohammad Javad Zarif, another member of the 2003 negotiating team, who was given the nuclear file. Rouhani and Zarif immediately set off on a “charm offensive” designed to signal a more moderate Iranian path, including a historic phone call between Rouhani and president Obama in September. The new approach culminated in Tehran’s willingness to accept the interim nuclear deal signed in Geneva—a deal very similar to one that Jalili had rejected in previous nuclear talks.

Iran’s behavior over the last decades clearly shows that there is no inevitable or linear causal relationship between applying “more pressure” and obtaining “more concessions,” as many sanctions advocates claim. Sometimes, as was the case in the 2003-2005 period, the threat of sanctions motivated nuclear compromise; but at other times (2006 to mid-2013), the actual imposition of sanctions appeared to have the opposite effect. There is little doubt that the economic deprivations produced by crippling sanctions—worsened by profound mismanagement under Ahmadinejad—compounded popular dissatisfaction with the regime and played a role in Rouhani’s recent election. And sanctions certainly influenced the Iranian regime’s apparent willingness to move toward nuclear accommodation in Geneva. But there is also little doubt that had Jalili become president, as some Western analysts predicted, Tehran’s nuclear intransigence would have continued despite the same level of economic hardship.

History thus suggests that external economic pressure matters, but the balance of domestic political forces in Iran matters at least as much—and it is the interaction between the two that matters most of all. The Islamic Republic's authoritarian political system is not nearly as static or monolithic as many casual observers assume. Rather, it is an arena for contestation between competing political actors and interests—and the winners of these battles can have considerable influence over the ultimate course Iran takes. To be sure, Supreme Leader Khamenei is the most powerful actor in the Iranian government, and he is the ultimate decider on the nuclear issue. But he is not omnipotent or unmovable. More often than not, Khamenei stays above the political fray, waiting to weigh in on controversial decisions until he has assessed the domestic power balance and the direction the political winds are blowing.

Iran’s domestic politics matter because competing factions place different values on the nuclear program relative to other national priorities, and they have fundamentally divergent diplomatic and economic worldviews. Iranian moderates—including both pragmatic conservatives and reformers—believe Iran’s national interests are best served by international recognition and integration. They value the country’s nuclear program, but they also worry that pursuing nuclear weapons could ultimately leave Iran less secure by worsening regional tensions and, by making Iran the target of sanctions, ruining the nation’s economy. Consequently, they may be willing to settle for a nuclear outcome in which Iran maintains some distant, latent capability to develop nuclear weapons under significant international constraints. Such a capability, in their view, would be sufficient to deter foreign adversaries if security conditions deteriorate, but would not put Iran so close to an actual bomb that it results in international isolation. For pragmatists like Rouhani, that latent status was achieved once Iran mastered uranium-enrichment technology, and they seem willing to trade away more advanced nuclear capabilities to achieve their higher-order objectives of sanctions relief and reintegration into the international community.

In contrast, Iranian hardliners—including so-called Principlists and traditional clerical conservatives—do not seek integration with the wider world. They embrace a narrative that portrays the United States, Israel and the West as unrelenting enemies hellbent on toppling the Islamic Republic and depriving Iran of the economic and scientific wherewithal to take its rightful place among the world’s great nations. They see resistance to the West as the core of Iran’s national identity. And they view economic self-reliance and the acquisition of a one-turn-of-the-screwdriver-away “threshold” nuclear capability or actual nuclear weapons as the only means of deterring Western aggression and realizing Iran’s regional ambitions. For this group, international threats and sanctions simply vindicate their worldview, encouraging them to escalate their own provocative counter-reactions.

In this clash of perspectives, Khamenei appears closer to the hardliners’ camp. But Khamenei is also concerned about the legitimacy and survival of the system as a whole, which was badly damaged by the frigged 2009 elections and the mishandling of foreign and economic policy during Ahmadinejad’s tenure. Rouhani's sweeping election victory thus mattered not only because of the new president’s own preferences, but because the election itself signaled to Khamemei that some policy shift was required in order to maintain domestic legitimacy. Anxious to shore up the system, Khamenei appears willing to give Rouhani a chance to resolve the nuclear impasse, but only so long as the president and his negotiating team do not cross the leader’s red lines, especially as it relates to defending Iran’s asserted right to enrichment.

If Rouhani can maintain sufficient elite consensus, Khamenei may ultimately agree to meaningfully roll back Iran’s program as an act of “heroic flexibility” to relieve the economic pressure created by sanctions. But he will not support total capitulation. Given the significant financial investment—estimated to be at least $100 billion—and political capital the regime has expended to master uranium enrichment, the supreme leader will not agree to completely dismantle Iran’s program as many in Congress demand. Indeed, Khamenei probably fears such a humiliation more than he fears economic collapse or targeted military strikes against his nuclear facilities. If Khamenei senses Rouhani and Zarif are headed in that direction, he will likely pull the rug out from under continued negotiations, regardless of U.S. threats to escalate the pressure further. And cognizant of this fact, Iranian hardliners will seize on any sign that Rouhani is being suckered by the West to try to sway the leader's decision.

What does all this mean for the current debate in the Senate over new Iran sanctions? It means that any member of Congress truly committed to a diplomatic outcome should recognize America’s acute interest to ensuring that Iranian moderates maintain their fragile momentum within Iran’s political system. The Revolutionary Guard and other hardliners are already fighting a rearguard action against the Geneva agreement, with a war of words breaking out in recent weeks between Zarif and the Guards’ top commander, Major General Mohammad Jafari, over the course of Iran’s nuclear and foreign policy. These same forces would undoubtedly seize on Congressional legislation threatening new sanctions and demanding de facto nuclear surrender as the latest example of American perfidy, using it to rebut Rouhani’s claim that an accommodation with the West that protects core Iranian interests is possible. Hardliners have consistently argued that Iranian compromise is just a prelude to greater U.S. pressure. Khamenei suspects this too. Threatening new sanctions in the immediate aftermath of the first meaningful Iranian concessions in a decade, as the proposed Senate legislation does, risks validating that view.

The Senate bill could also lead to provocative Iranian counter-reactions at an extraordinarily delicate moment for diplomacy. Indeed, nearly one hundred hardline Iranian parliamentarians have already drafted legislation that would mandate escalating enrichment to the nearly-bomb-grade 60 percent level if more U.S. sanctions are imposed. Given thirty-five years of distrust between Tehran and Washington, it would not take much perceived bad faith by either party to reverse the modicum of confidence built at Geneva. It is difficult to imagine negotiations surviving such a tit-for-tat retaliatory cycle.

Finally, Rouhani’s ability to forge elite consensus for the additional concessions required for a final nuclear deal hinges on his ability to deliver meaningful sanctions relief, not just avoid an increase in sanctions. Yet by imposing demands that Iran completely dismantle its enrichment program—which Khamenei, hardliners and the majority of the Iranian public view as unacceptable capitulation—prior to lifting U.S. sanctions, the proposed Senate legislation will make it extremely difficult for Rouhani to build a coalition in favor of further compromise. The net effect will be to make a comprehensive, peaceful resolution to the Iranian nuclear crisis more difficult to achieve.

In 2005, the last time Iran and the West had an opportunity for a nuclear breakthrough, Iran walked away from negotiations on a comprehensive accord because moderates were discredited. Hardliners came to dominate the Iranian political scene and the nuclear threat grew. History is not doomed to repeat itself, but it easily could if Congress inadvertently helps the forces of confrontation regain lost ground.

Colin H. Kahl is an associate professor in Georgetown University’s Edmund A. Walsh School of Foreign Service and a senior fellow and director of the Middle East Security Program at the Center for a New American Security. From 2009 to 2011, he was the Deputy Assistant Secretary of Defense for the Middle East.