Gulf Arab states must be breathing a collective sigh of relief over the acrimony that continues to characterize U.S.-Iran relations a year after the signing of the Joint Comprehensive Plan of Action, aka, the Iran nuclear deal. After all, Gulf Arab states were convinced the JCPOA would be Iran’s Get Out of Jail Free card, ending its international isolation and enabling Washington and Tehran to turn the page on more than three decades of hostility – at their expense.
All evidence to date suggests they can relax. The rhetoric emerging from Tehran regarding the United States and its intentions is as barbed as ever. The most recent outburst came August 1, when Iranian Supreme Leader Ayatollah Ali Khamenei laced into the nuclear deal, insisting that it “proved the pointlessness of negotiating with the Americans, their bad promises and the need not to trust America’s promises.”
According to Iranian state media, Khamenei has decided that the reason international investors have not responded enthusiastically enough to the opportunity to sink money into Iran now that some key economic sanctions have been lifted is because “the US is breaching its promises, and while speaking softly and sweetly, is busy obstructing and damaging Iran’s economic relations with other countries.”
Khamenei’s comments follow remarks in mid-July by Ali Larijani, the speaker of Iran’s Parliament, who took his own swipe at the U.S. commitment to the nuclear deal, warning “the US administration, House of Representatives and Senate that their efforts to undermine the nuclear agreement have reached a point that leaves no option for Iran but confrontation.”
The proximate cause of Larijani’s pique was action taken by the House of Representatives in July to quash the sale and/or lease of up to a hundred Boeing jetliners to Iran – which, with a potential value of $20 billion, would be the largest commercial deal between the United States and Iran in nearly 40 years. Opponents of the sale expressed concern that the aircraft could be used for military purposes and that, more generally, Iran remains a state sponsor of terrorism with which U.S. companies should not be doing business. The Senate has yet to act on the measure.
Frustration has been building in Tehran since the JCPOA took effect in January, and most economic sanctions imposed on Iran by the United States and European Union were lifted, in exchange for Iran’s suspension of activity that might contribute to development of a nuclear weapon. Most, but not all. A variety of unilateral U.S. sanctions linked to issues distinct from the nuclear deal remain in place, prompting many international banks to think twice about engaging in commercial transactions with Iran that might inadvertently run afoul of Washington.
Therefore, the Obama administration has taken great pains to assure potential investors that, as Secretary of State John Kerry announced in May, “Iran is open for business.” And, in fact, a lot of investors seem to have heeded the message. According to the Financial Times, since sanctions were lifted this year, foreign direct investment in Iran has grown so rapidly that, among the states in the Middle East that are FDI destinations, it has moved from twelfth to third place, trailing only the well-established economies of the United Arab Emirates and Saudi Arabia.
Similarly, all indications are that the nuclear deal, as President Barack Obama said July 14 on the first anniversary of its signing, “has succeeded in rolling back Iran’s nuclear program, avoiding further conflict and making us safer.”
So why is there so much unhappiness with the agreement? Largely because it is burdened by unmet – and undeserved – expectations on both sides. American critics claim the deal has failed to curb Iran’s support for terrorist groups when, in fact, it was never designed to do so and leaves issues such as terrorism unaddressed. That doesn’t mean the administration has turned a blind eye to Iran’s destabilizing behavior in the region, only that its goal in the agreement was to deprive the regime in Tehran of access to the world’s most powerful weapons. Or, as a White House spokesman said in May, Iran’s “support for terrorism is a whole lot less dangerous if they don’t have a nuclear weapon sitting in the closet.”
Meanwhile, on the Iranian side, the economic benefits of the deal were oversold, leading to expectations that, as international sanctions were lifted, FDI would flood into the country. Iranian President Hassan Rouhani encouraged this misperception, insisting at one point that Tehran had achieved “more than what was imagined” from the negotiations. Ongoing U.S. sanctions are not the only obstacles to investment in Iran by any means. Many Western firms remain reluctant to invest in Iran for a host of other reasons, such as endemic corruption, an opaque banking system, and an inflexible labor market.
Does all this griping suggest that the nuclear deal is about to collapse? Probably not. At the end of the day, it’s very hard to argue against the value of an agreement that seems to be succeeding in preventing Iran from developing a nuclear weapon for 10 to 15 years – although critics in the U.S. Congress likely will continue to try. Similarly, Iran’s hard-line political leaders will huff and puff about the deal’s shortcomings, but as foreign investment reinvigorates the country’s ailing economy, they will be hard pressed to take steps that would return Iran to the status quo ante without provoking a strongly negative public reaction.
And, at the end of the day, both outcomes – an Iran that is free of nuclear weapons and more integrated into the global economy – should provide a solid foundation upon which a more stable and secure future for the region can be built. Similarly, Washington’s continued use of economic and other levers to end Tehran’s unacceptable interference in the internal affairs of Arab states should reassure the United States’ Gulf partners that any normalization of relations will require an end to Iran’s destabilizing behavior and support for terrorism.