Iran: What's Driving the JCPOA Talks From Inside Tehran?

Iran and the US might appear to be closer than ever to reviving the 2015 nuclear deal after nearly 18 months of on-again, off-again talks. But optimism is still premature. Tehran submitted its formal response to the EU's proposed “final text” of a new nuclear pact on Monday following an extraordinary meeting of Iran's Supreme National Security Council chaired by President Ebrahim Raisi. Reading the tea leaves is challenging.

After the submission of Iran's response, Foreign Minister Hossein Amir Abdollahian suggested that an agreement could be reached within days — if the US were to make further compromises. But he added: “What the people want from us is an outcome from these negotiations ... The people want to see results from us.“ He also spoke of the reality of give-and-take negotiations. Days later, however, Abdollahian noted that “other stages may be discussed” once Iran’s red lines are respected and economic benefits guaranteed.

In Washington, State Department spokesman Ned Price said the US had received Iran’s comments through the EU and was still studying them on Wednesday.

On the Iranian side, any return to the so-called Joint Comprehensive Plan of Action (JCPOA) will ultimately be guided by what matters most to Supreme Leader Ayatollah Ali Khamenei, the country’s ultimate decision-maker, which is preserving the Islamic revolution — and the current structure of leadership. To be sure, reviving oil exports and establishing better ties with Mideast Gulf neighbors do provide benefits — but they need to serve the domestic priority. And a deal could cut both ways, offering wins but also presenting risks.

Attractions of a Deal

A revived nuclear deal could be seen as strengthening the leadership, by enabling Tehran to gain access to frozen foreign reserves worth around $100 billion and return to the oil market at a time of high prices and buoyant demand — capturing market share in Europe as it turns its back on Russian supplies. Energy Intelligence's Research and Advisory unit estimates under its “breakthrough” scenario that Iran's exports could rise within nine months to around 2 million barrels per day from around 600,000-900,000 b/d now.

Those windfall revenues could allow the leadership to signal to the Iranian people that the revolution can still deliver results, shoring up a sense of its legitimacy while offering a release valve for already-struggling Iranians hit by unrelenting global inflationary pressures.

With this in mind, the benefits of a new nuclear deal could prove sufficiently attractive for Iran's leadership even under the assumption that a future Republican president in the US could abandon it — and even absent meaningful foreign investment from Western companies amid concerns over the deal's longevity. “Even if you expect that the deal might fall apart in two years’ time, take the deal now, give the economy some breathing room and use the opportunity to stabilize the system and prepare for the eventuality in 2025,” Esfandiyar Batmanghelidj, founder of economic think tank Bourse & Bazaar, recently told Energy Intelligence.

For ordinary Iranians, of course, the question is to what extent recovered and new funds would actually end up benefitting the people versus ending up in proxy battlegrounds to bolster Iran's influence there. “Many people say that even if sanctions are removed the oil revenues will be spent on Syria, Yemen and Lebanon, and I believe that too,” one Iranian source said.

Risks — and the Status Quo’s Appeal

That concern speaks to stakeholders in the Islamic republic likely content with the status quo, notably those associated with the powerful Revolutionary Guard. The Guard's sprawling business interests across the country, along with its smuggling activities that also include oil, have made the organization a powerful economic and political force. The Guard has also been handling Iran's under-the-radar crude export sales rather than state National Iranian Oil Co., said one Iranian official, with the bulk ending up in China.

To some extent, however, the reality of a more limited deal — one that allows for more exports but does not open the floodgates for Western investment in Iran’s economy — could ease possible concerns by the leadership and Revolutionary Guard about what lies ahead: This time around, unlike in 2015, there is no talk of the JCPOA being transformational for Iran’s orientation and regional behavior, economy or nature of government.

With key stakeholders in the regime and in the economy long used to operating under sanctions and in opposition to the West, a deal seen as not rocking the boat too much could be easier to stomach.

Managing the Optics

Iran’s leadership will also need to portray any deal as a win, especially after heavily criticizing the original agreement struck by the previous Hassan Rohani administration. In short, an agreement will need to be seen as extracting key concessions while producing tangible benefits.

Should talks stumble, the Raisi government can point to the US as being the one to blame, having withdrawn from the pact in May 2018 in the first place. Tehran could also make a case that shortcomings in the US political system are preventing Washington from guaranteeing a deal, in line with its long-held view of US untrustworthiness.

Both parties seem to wish to avoid a complete collapse in the negotiating process. But if it came to that, Iran could expect Washington to ratchet up sanctions, intensifying Iran's economic woes. That would put Iran’s relationships with Russia and China to the ultimate test. Neither country has provided the far-reaching economic support Tehran may have welcomed after US sanctions snapped back in 2018-19. Looking ahead, China is likely to remain cautious, although fellow sanctions-hit producer Russia may prove more eager.