Reuters notes that Supreme Leader Ali Khamenei, who is the final authority in all Iranian affairs, has signaled wariness about the deal, but neither he nor any other high-level authority is likely to stand directly in its way, since to do so would be to forfeit the promise of broad-based relief from US-led economic sanctions.
Tehran has boasted of various plans for how it will utilize the up to 150 billion dollars in assets that it will receive once that relief goes into effect, but independent analysis has tended to portray these claims as over-ambitious. In fact, Iran’s public statements presumably serve more of a propaganda purpose than they contribute to actual planning, even though a portion of the specified investments will indeed be put into practice.
The International Monetary Fund recently issued a press release detailing many of the findings of its 2015 report on the economic outlook for the Islamic Republic. Naturally, that outlook is very much dependent upon the completion of sanctions relief, but the report indicates that Iran’s own claims are overblown for the best case scenario, and thus drastically underestimate the economic consequences of a possible collapse of the nuclear agreement.
Even if all goes well for Iran under current conditions, its GDP growth is expected to shrink to near or even below zero in the coming year. Thus the IMF report concludes by saying that major policy reforms are necessary if Iran is to benefit from sanctions relief. “Ultimately,” the report says, “if mild reforms are implemented the sanctions relief will have only a moderate positive impact on the economy. If, on the other hand, more assertive and deeper reforms along the lines outlined above are carried out, the boost to confidence and investment inflows would put Iran’s economy on a significantly higher growth trajectory.”
But it remains to be seen whether serious reforms will be possible in an economy that is dominated to a great extent by ultraconservative elements of Iranian society, especially including the Iranian Revolutionary Guard Corps. Even so, internal reforms constitute only one portion of the factors that will influence the effectiveness of sanctions relief. Foreign investment makes up another, and there has been a strong push for such investment even from countries like Britain and the US that are traditionally enemies of the Islamic Republic.
Trade Arabia reported on Tuesday that such foreign interest in the Iranian market has already lead to a 78 percent increase in oil product exports from one Iranian port, as well as a 33 percent increase in non-oil exports when compared to the same six-month period last year.
With such economic impacts manifesting themselves before the nuclear agreement is even adopted, much less implemented, Western critics of the nuclear deal are wondering whether Iran has sufficient incentive to follow through on its commitments under that deal. Iran must complete a series of adjustments to its nuclear infrastructure in order for sanctions relief to go into effect in the first place, but whether Tehran will remain committed to those changes is another matter.
In fact, an article in the National Interest pointed out on Tuesday that Iran’s leadership has been aggressively pushing a narrative that emphasizes the reversibility of provisions of the agreement which Western powers assumed would be irreversible. For instance, the regime is expected to remove the core of its Arak heavy water reactor, thus cutting off a plutonium pathway to a nuclear weapon, but officials have lately insisted that they will be able to replace that core at a later date.
Supreme Leader Khamenei has said that since the US and its partners are merely suspending economic sanctions at first, rather than removing them from the books, Iran should take the same approach to its nuclear activities, suspending those identified in the agreement but not eliminating them outright. This leaves the agreement eminently reversible on both sides, so that Tehran is in effect free to resume former nuclear activities, presumably precipitating a return of former economic sanctions, but only after the regime had accrued the benefits of unfrozen assets and expanded foreign investment.
