A New Era of Nuclear Uncertainty
After weeks of positive diplomatic developments on the Korean Peninsula, Donald Trump has followed through on his longstanding vow to withdraw the United States from the 2015 Iran nuclear deal. The decision threatens to deepen the chaos in the Middle East and undermine nuclear-nonproliferation efforts worldwide.
AACHEN – With the decision to withdraw from the Iran nuclear agreement – formally known as the Joint Comprehensive Plan of Action (JCPOA) – US President Donald Trump’s administration has demonstrated, yet again, that it is determined to destroy major global structures and agreements. The decision will be a massive blow to the 2015 deal, putting the entire world at risk.
The JCPOA – the result of years of difficult negotiations – was agreed by seven countries and the European Union, and unanimously endorsed by the United Nations Security Council. Yet Trump has decided unilaterally to impose “the highest level of economic sanction” on Iran and on “any nation that helps Iran in its quest for nuclear weapons.”
Now, companies and banks from countries that have lived up to their commitments under the JCPOA stand to suffer considerably, as a result of their legitimate business ties with Iran. In other words, the country that is breaking its promises has decided to punish those that have kept theirs.
The JCPOA can still be salvaged. All of the other parties to the agreement have already reaffirmed their commitment to it. But the EU, in particular, must step up to take responsibility for ensuring that the JCPOA survives. While transatlantic relations are a high priority, so is defending multilateralism – and all of its milestones – from reckless and unjustifiable attacks. This is all the more true when those attacks aim not to put “America First,” but to put Trump first.
Trump’s withdrawal from the JCPOA has come at a particularly sensitive moment for international relations. For one thing, nuclear proliferation remains at the top of the agenda on the Korean Peninsula. While some positive steps have lately been taken, the Trump administration, with its incoherent policy approach, may yet squander this opportunity.
South Korean President Moon Jae-in recently met with North Korean leader Kim Jong-un to discuss a formal peace agreement to end the Korean War. The Moon-Kim meeting was a prelude to another extraordinary summit, between Kim and Trump, which will take place on June 12.
The first-ever meeting between a North Korean leader and a sitting US president reflects the significant progress that has been made in the space of just a few months. Lest we forget, 2018 began with Kim and Trump exchanging threats for the umpteenth time, and with Trump going so far as to boast about the size of his “nuclear button.”
Since then, however, the US has relied on diplomacy rather than bombast in handling the North Korean nuclear threat – an approach that has enabled recent progress. And yet, just as newly confirmed US Secretary of State Mike Pompeo was flying to North Korea to meet Kim for a second time, Trump reverted to his antagonistic modus operandi with regard to Iran.
Negotiating with Kim was always going to be extremely challenging, especially given that North Korea, unlike Iran, already possesses nuclear weapons. With America’s diplomatic credibility now undermined by Trump’s violation of the JCPOA, that job will be all the more difficult.
Trump tends to express himself in terms of national interests, sovereignty, military capacities, and economic supremacy. Yet his fixation with Iran has little to do with realpolitik. Rather, it is in keeping with his systematic rejection of all policies associated with his predecessor, President Barack Obama. Beyond that, his JCPOA withdrawal is meant to please Trump’s two favorite allies in the Middle East: Saudi Arabia and Israel – the first two countries he visited as president.
Indeed, when Mohammed bin Salman, Saudi Arabia’s crown prince, visited the White House in March, Trump quickly dispensed with the thorny question of the Saudi-led war in Yemen by denouncing Iranian support for the Houthi rebels. Rather than take the diplomatic initiative to end the fighting and restore stability in Yemen, the Trump administration has continued to fan the flames of an ongoing Saudi-Iranian proxy war that is causing untold suffering and roiling the region.
Similarly, next week the US will move its embassy in Israel from Tel Aviv to Jerusalem. Trump’s announcement of the move in December already generated great unease in the Muslim world (though Iran’s protests were more aggressive than Saudi Arabia’s). The fact that the embassy will be opened precisely on the 70th anniversary of Israel’s declaration of independence will only intensify the controversy. On the following day, Palestinians will mark the Nakba (“catastrophe”), commemorating the mass displacement of the Palestinian population that resulted from the establishment of the State of Israel.
To be sure, the US’s alliances with Saudi Arabia and Israel are not new. But Trump has abandoned the previous administration’s more moderate approach, and thus risks opening a Pandora’s box in the Middle East. Hawks in both countries are now emboldened, as evidenced by Israeli Prime Minister Benjamin Netanyahu’s eccentric attempt to discredit the JCPOA. The same holds true for Iran, where Trump’s withdrawal from the JCPOA plays directly into the hands of hardliners.
The current state of affairs does not bode well for the situation in Syria, where all of the region’s powers have a stake. Israeli and Iranian forces have already clashed in southern Syria, and Netanyahu’s government is now threatening further action in response to reports that Russia may furnish Syrian President Bashar al-Assad with S-300 anti-aircraft missiles.
Trump’s abrogation of the JCPOA will almost certainly fuel the downward spiral of confrontation in the Middle East, while further complicating matters on the Korean Peninsula. More broadly, Trump’s decision could have serious implications for global nuclear nonproliferation efforts, which now face the prospect of backsliding. The stakes in the weeks and months to come could not be higher.
Counting the Costs of Trump’s Iran Policy
Donald Trump’s decision to withdraw from the Iran nuclear deal is likely to make addressing that country’s nuclear development more difficult. More broadly, it threatens to rob the world of a new and innovative approach to global governance and multilateral diplomacy at a time when such approaches are badly needed.
MADRID – With President Donald Trump’s announcement that the United States will begin reimposing sanctions against Iran, the short, strange life of the 2015 Iran nuclear deal – formally known as the Joint Comprehensive Plan of Action – has entered a new and dangerous phase.
Trump believes that, by withdrawing from the JCPOA, he can pressure Iran to agree to a new, more comprehensive deal that would cover not just the country’s nuclear program, but also its ballistic missile tests, provocative regional behavior, and human-rights violations. But, as America’s partners and allies have noted, this is a highly risky gambit – one that contradicts the underlying logic of the deal.
The decision to withdraw from the JCPOA, despite Iranian compliance with all of its provisions, is likely to make addressing Iran’s nuclear program more difficult, not least because it will strengthen the position of the country’s hardliners. More broadly, it threatens to rob the world of a new and innovative approach to global governance and multilateral diplomacy at a time when such approaches are badly needed.
Trump claims that the JCPOA was a failure from the start, owing to the myriad non-nuclear issues that it neglected. Indeed, he called it “one of the worst and most one-sided transactions” into which the US has ever entered.
The JCPOA’s supporters have inadvertently reinforced this reading. French President Emmanuel Macron, for example, recently advocated bolstering the agreement with complementary deals covering other areas. In conceding the premise that the deal was somehow incomplete, supporters and detractors alike set it up to fail.
The truth is that the JCPOA was never supposed to be a one-off “transaction.” Instead, it was conceived as the first step in a long negotiation process. The “comprehensive” in its official title refers to the lifting of nuclear-related sanctions and the verification measures to ensure compliance. It did not indicate that the deal amounted to a comprehensive solution to all of the international community’s disagreements with Iran.
The point was to take a particularly knotty and urgent issue – Iran’s growing nuclear-enrichment capacity – off the table for a period of time, to allow for progress in other areas. Had all of the issues been negotiated at once, it is far from clear that a deal could have been reached at all, much less in a timely manner. After all, previous attempts to negotiate with Iran – notably under President Bill Clinton’s administration – failed precisely because they sought to secure too much. There were just too many potential spoilers.
The JCPOA was not simply a precedent for further agreements; it actually demanded them. The so-called sunset clauses that stipulate expiration dates for various restrictions imposed on Iran’s nuclear program – clauses that attracted so much derision from Trump and other opponents of the deal – were vital, because they necessitated further negotiation.
Thanks to the lifting of sanctions under the JCPOA, that negotiation would take place against a background of steadily improving economic conditions, which would persuade the Iranian public of the tangible benefits of a moderate and cooperative approach. This would strengthen the government’s resolve to strike deals on other controversial issues – precisely the opposite of the likely effect of Trump’s unilateral withdrawal from the JCPOA.
Simply put, the JCPOA was the foundation stone for a more comprehensive solution. Perhaps we should not be surprised that Trump has now taken a sledgehammer to it: systemic awareness has proved to be a major blind spot for the “Artist of the Deal,” whose worldview can be summed up in three words: quid pro quo. But awareness of Trump’s transactional worldview does not make it any less damaging.
The risks implied by Trump’s worldview are particularly acute in today’s fast-changing world. On one hand, power has shifted and become more diffuse, while the mismanagement – and misrepresentation – of globalization has created further uncertainty. On the other hand, the biggest challenges the world faces – from transnational terrorism to climate change – cannot be addressed by any country alone, and thus demand cooperative solutions.
It is now starkly apparent that we can no longer rely exclusively on the top-down Western-dominated structures that have underpinned the rules-based world order for the last 70 years. Though we should not dispense with those structures, much less the rules-based order, we must develop new, complementary instruments to foster cohesion and create the conditions for effective cooperation.
Such arrangements will often be ad hoc and flexible, rather than traditional binding deals, and will almost never be comprehensive. They will be relatively narrowly focused and designed to lay the groundwork for further progress. In this sense, they will be discrete components of a broader process. Call it Marshall McLuhan-inspired governance: the medium (or instrument) is the message.
The 2015 Paris climate agreement – from which Trump withdrew the US last year – is a case in point. Nobody believes that the soft and voluntary commitments that signatories have made will be enough to limit global warming to “well below” 2° Celsius (3.6º Fahrenheit) above pre-industrial levels. Nonetheless, the deal is valuable: it spurs action now, while acting as a platform for further commitments later.
The JCPOA was intended to have a similar effect, facilitating – indeed, demanding – efforts to address the myriad other disagreements between Iran and the rest of the international community. The US was an essential part of that process. Trump’s utter failure to understand this innovative approach is bad news for Iran, for the world, and for the future of global governance.
How Europe Can Save the Iran Nuclear Deal
Europe cannot afford to let the 2015 Iran nuclear deal fail. That's why Donald Trump should be confronted with a choice: either uphold the agreement, in exchange for European support on regional issues and Iran’s missile program; or scrap the deal and risk the loss of European cooperation and the emergence of a nuclear-armed Iran.
LONDON – This week, a senior German official pointed out to me that, “The Iran nuclear deal is the last firewall preventing military tensions in the world’s most combustible region from spilling over into thermonuclear war.” That language is unusually apocalyptic, but it reflects a genuine fear that US President Donald Trump could soon dismantle a crucial line of defense that Germans and other Europeans are proud to have built.
European leaders have been on the back foot since January, when Trump gave them a deadline of May 12th to “fix the terrible flaws of the Iran nuclear deal,” or he would re-impose sanctions on Iran. Trump’s main objections to the deal are that it does not address Iran’s misbehavior in the region or its ballistic missile program, nor does it prevent Iran from restarting its nuclear program after 2025. And now that Trump has installed a hawkish new foreign-policy team – with John Bolton as national security adviser and Mike Pompeo as secretary of state – European diplomats fear the worst.
Over the past few months, the German, French, and British governments have been frantically assembling a package of measures – including potential sanctions on Iranian elites – to address Trump’s concerns. And both French President Emmanuel Macron and German Chancellor Angela Merkel have now visited the White House to persuade Trump that it is better to build on the deal than blow it up.
In the short term, the Europeans are hoping that their proposed measures will allow Trump to declare victory while remaining in the deal. They have reminded Trump that a diplomatic solution to the North Korea nuclear crisis could very well depend on whether he unilaterally abandons America’s commitments to Iran under the Joint Comprehensive Plan of Action (JCPOA).
In the long term, though, European leaders’ ability to save the deal will depend on the extent to which they can act in their own interests, rather than being a hostage to the caprices of the Trump administration.
It is fitting that the Iran issue has come to the fore around the 15th anniversary of the start of the Iraq War. For European diplomats, that disaster and the success of the JCPOA have come to represent two foreign-policy extremes. Iraq was post-Cold War Europe’s darkest hour, with European countries lined up against one another to support or oppose the war, even though none had any real influence over US decisions.
The JCPOA, by contrast, is seen as modern Europe’s shining success. Desperate to avoid another war in the Middle East, Europeans, starting in 2005, began to define their own interests in the region. With the two-pronged goal of preventing Iran from acquiring nuclear weapons and avoiding another war, they devised various carrots and sticks to shape Iranian and US actions.
To Iran, European diplomats offered a choice between two futures: one in which Iran would freeze its nuclear program and end its international isolation; and one in which it would maintain its program and face ever-harsher sanctions, and possibly war. At the same time, the Europeans, having convinced Russia and China to back their strategy, approached the US with another stark choice: either join an international coalition to apply diplomatic pressure on Iran, or pursue dubiously effective military measures on your own.
Today, European leaders’ overarching goals in the Middle East are to de-escalate the hegemonic struggle between Iran and Saudi Arabia, prevent nuclear proliferation, combat terrorism, and stanch the flow of refugees into Europe. But many of these goals are now being actively undermined by the Trump administration, which has made a show of siding with Israel and Saudi Arabia against Iran in regional conflicts from Yemen and Iraq to Lebanon and Syria.
Diplomats in some EU member states have started to worry that attempts to placate Trump could force them into self-defeating positions, thus reprising the relationship between British Prime Minister Tony Blair and US President George W. Bush in 2003. As one official confided to me, the introduction of new sanctions will make it even harder to keep Iran committed to the JCPOA, let alone engage with it on other regional issues.
Nevertheless, the European approach so far has been carefully calibrated both to win over Trump and preserve Iran’s commitment to the deal. Needless to say, this requires a delicate balance. If the Europeans give Trump too much, they will be playing into the hands of US hardliners.
At the same time, they will be empowering the hardliners in Iran. In a recent interview, political scientist Nasser Hadian of Tehran University told me that moderate Iranian leaders such as President Hassan Rouhani and Foreign Minister Javad Zarif have already been left in a weak position, with hardliners now saying, “We told you so.” In Hadian’s view, the greatest danger is that Europe will try to appease Trump “at any cost,” when it should be working “on a plan B to save the deal without the US.”
Among other things, a plan B would offer Iran economic relief if the US were to re-impose sanctions, conditional on Iran’s continued compliance with the JCPOA; and it would provide the basis for a larger strategy of engaging with Iran and other stakeholders to de-escalate regional conflicts. Of course, it would be better for everyone if Trump agrees not to abrogate the nuclear deal. But to persuade him of that, Europe must show that it is willing to go it alone.
To that end, Trump should be confronted with a clear choice: either preserve the JCPOA, in exchange for European support in addressing regional issues and Iran’s missile program; or scrap the deal and risk the loss of European cooperation and the emergence of a nuclear-armed Iran. As my German interlocutor put it, “Trump must be told that he cannot have his cake and eat it.”
How Iran Will Respond to New Sanctions
Even before US President Donald Trump began threatening to re-impose sanctions on Iran, foreign investors looking to do business there were wary. Iranian President Hassan Rouhani failed to get his pro-market agenda off the ground, and now international political developments are playing into Iranian hardliners' hands.
PRINCETON – Since December 2017, Iran’s currency, the rial, has lost one-third of its value. And on April 10, the exchange rate’s rapid depreciation prompted the government to halt domestic foreign-exchange transactions and outlaw foreign-currency holdings of more than €10,000 ($12,000).
This government’s move represents a radical change of course, following three decades of relatively liberal economic policymaking, during which the authorities have permitted private-sector foreign-exchange transactions and even capital flight. Iran is not just anxious about the reinstatement of US sanctions after May 12, when US President Donald Trump is expected to make good on his campaign promise to withdraw from the 2015 Iran nuclear deal. Rather, the country is already adapting to a new world in which the prospect of rapprochement with the West is fading.
With the threat of renewed US sanctions having already created a rial crisis, the Trump administration is using the nuclear deal, formally known as the Joint Comprehensive Plan of Action, to try to force Iran to accept more restrictions on its nuclear program, as well as on its ballistic missile program. Given that Iran came to the table to negotiate the JCPOA less than a year after an earlier exchange-rate collapse – by 200% as of October 2012 – it is not entirely unreasonable to believe that the government will bow to Trump’s demands.
But 2018 is not 2012. Iranians today are far less optimistic about repairing relations with the West, and particularly with the US. So, if the US does renege on its commitments under the JCPOA, it would be difficult, if not impossible, for Iran’s leaders to justify further concessions.
Iranians are also less optimistic about President Hassan Rouhani’s ability to deliver greater prosperity, as large protests in December and January showed. With Rouhani’s hopes for market reforms and closer integration with the West dashed, he may be forced to change course, by adopting Iranian Supreme Leader Ayatollah Ali Khamenei’s “preference for the East over the West.”
That would certainly suit Iran’s hardliners, who have long railed against Rouhani’s pro-market, pro-globalization reforms. Their preferred strategy, which is now gaining traction, is to move toward a “resistance economy.” First proposed by Khamenei in 2012, this approach relies on import substitution and favors domestic over foreign investment, in an effort to reduce Iran’s reliance on Western economies and strengthen its resilience against international sanctions.
The need for a resistance economy had seemed to disappear with the JCPOA. After two years of negative growth, the Iranian economy rebounded strongly in 2016, as international sanctions were lifted. Owing largely to a doubling of oil exports, the economy grew at a rate of 12.5%. But the recovery has since slowed considerably. In 2017, the growth rate returned to about 4%, and is expected to remain low for the next several years.
Likewise, while the Iranian economy has created 600,000 new jobs each year since the JCPOA took effect, this has not been enough to absorb Iran’s massive youth bulge. In fact, unemployment is now at an all-time high, especially for young, college-educated Iranians. According to the 2016 census, among college-educated 20-29-year-olds, 36% of men and 50% of women are unemployed.
One reason for the inadequate supply of jobs is that Iran’s leaders have failed to improve the country’s environment for private investment. In 2018, Iran ranked 124th in the World Bank’s “Doing Business” rankings, which was unchanged from the year before. With powerful entrenched interests standing in the way of liberalizing reforms, Iran’s economy remains as anti-competitive as ever.
Still, much of the blame for Iran’s lackluster performance belongs to Rouhani’s economic team, which has proved no match for the economy’s mounting problems. If Rouhani ever held the key to the door of prosperity, as he was fond of saying in his 2013 presidential campaign, he failed to locate the keyhole in time.
Nearly five years after Rouhani’s election, Iran’s banking system is still insolvent. Burdened by non-performing loans accumulated during the 2000s real-estate boom, Iranian banks have been unable to lend for investment since 2012, owing to sanctions. To attract deposits, banks have been offering interest rates of ten percentage points or more above of the inflation rate, while using new deposits to pay previous depositors. The government has identified and closed a few of these Ponzi schemes. But for the rest of the country’s insolvent banks, the only option has been to wait for another real-estate boom.
Making matters worse, persistently high interest rates have pushed fixed investment down to around 20% of GDP, which is at least ten percentage points lower than what is required to bring down unemployment. Meanwhile, public investment, at less than 3% of GDP, is hardly enough to pay to maintain and repair existing infrastructure. And with prospects for substantial inflows of foreign capital dimming, there is little likelihood of an investment rebound.
Even before Trump’s election, foreign investors approached Iran cautiously, signing projects but holding back on actually committing funds. According to the International Monetary Fund, in 2016, $12 billion in foreign funding had been promised for various projects, but only $2.1 billion had been invested. And now that the government has imposed new restrictions on capital flows, the country’s attractiveness to foreign investors will fall further.
Capital controls are of course in keeping with the “resistance economy” favored by conservatives, one of whom recently stoked fears of capital flight by declaring that $30 billion had left the country in only a few months. In fact, a more likely figure is $10 billion.
In any case, depending on whether and how fast the JCPOA falls apart in the coming months, capital controls will be just the start of a great reversal. As economic decision-making shifts from markets to the government, Rouhani’s attempt to create a competitive, globalized Iranian economy will come to a grinding halt.
Trump, Iran, and Stability in the Middle East
The Iran nuclear deal and the Paris climate agreement offer hope that formalized, multilateral responses to global challenges are still possible. But Donald Trump has criticized both agreements, and the actions he takes as president could undermine them, and contribute to global instability.
MADRID – It is unfortunate that so few international agreements have been reached in recent years. During a period when great-power competition has generally trumped cooperation, two significant exceptions – the Iran nuclear deal and the Paris climate agreement – offer hope that formalized, multilateral responses to global challenges are still possible.
But now Donald Trump is threatening to renege on both agreements, and his election as President of the United States has revealed their fragility. If the US withdraws from, or fails to comply with, either deal, it will strike a heavy blow to a global-governance system that relies on multilateral agreements to resolve international problems.
To see what is at stake, consider the Joint Comprehensive Plan of Action between Iran and the E3/EU3+3 (the five permanent members of the United Nations Security Council, plus Germany and the European Union). The JCPOA’s first anniversary coincided with Trump’s inauguration, so it is worth recalling how it came about – and what could happen if it falls apart.
Europeans first made contact with Iran about the issue back in 2003, when they negotiated with then-Secretary of the Iranian National Security Council, Hassan Rouhani. Both sides even reached an agreement in 2004; but it did not last long. In 2005, Mahmoud Ahmadinejad’s election as President of Iran marked a turning point. While the negotiations officially continued, scant progress was made. Meanwhile, Iran’s nuclear program advanced rapidly, even as its people suffered under heavy economic sanctions.
Rouhani won Iran’s presidential election in 2013. When he had negotiated with European diplomats in 2003, Iran had a modest nuclear program, and could enrich uranium only with great difficulty. Ten years later, it had installed thousands of centrifuges. Fortunately, tireless diplomatic efforts during the two years following Rouhani’s election culminated in the JCPOA.
Of course, there were vocal critics in the US who did not welcome the agreement, or the prospect of negotiating with Iran at all. And other countries in the Middle East feared that the agreement would alter the regional balance of power and damage their own interests. Opponents of the deal offered three main reasons for rejecting it: Iran could never be trusted to fulfill its commitments; the agreement would unacceptably elevate Iran’s regional status; and Iran did not deserve the time of day.
In the year since the JCPOA was implemented, has Iran fulfilled its commitments? The International Atomic Energy Agency says that it has. Iran has allowed the IAEA to inspect every site that the agency has requested to see – including those from which it was barred before the agreement – and has granted inspectors access to its electronic systems and chain of enrichment.
The IAEA insists that no country has ever been more closely monitored. As the International Crisis Group points out, “Trump is the first US president in more than two decades who enters office not needing to worry about Iran crossing the threshold to nuclear weaponization undetected.”
To be sure, many of us had hoped that the agreement would noticeably improve Iran’s relations with its neighbors and the US, and that has not happened. The agreement created a diplomatic window to stabilize the region, but that opportunity was squandered. The wars in Syria and Yemen have continued, rapprochement between Saudi Arabia and Iran seems unlikely any time soon, and Russia is visibly asserting itself in the region.
But the blame does not rest with the JCPOA, which was negotiated as a delimited non-proliferation agreement. Taking regional diplomacy any further at that time would have been impossible. But, given the new period of uncertainty under Trump, the European negotiating parties should now assume responsibility for maintaining the JCPOA, and they should urgently propose an initiative to increase stability in the region.
Russia and Turkey convened a meeting in Kazakhstan this month for Syrian rebel groups and the Syrian government to begin peace talks. This effort should be expanded to include other parties, and be used as a first step toward building regional trust. All stakeholders will benefit from putting their energy into peacemaking instead of attacking the Iran agreement.
It is chilling to imagine the current situation without the JCPOA. Troubled Saudi Arabia would like to end its military intervention in Yemen, but that is no easy feat. Iran is commencing a presidential election campaign, while reeling from the death of Akbar Hashemi Rafsanjani, a former president and one of the architects of the Islamic Republic. Turkey is seeking an outcome to the Syrian conflict that aligns with its own policy toward the Kurds. Russia needs to withdraw its troops from Syria – an intervention that has been bleeding its economy. And the EU still needs to resolve the refugee crisis, in a context of regional stability.
Trump should think seriously about America’s interests, and those of the region. If he does, he will realize that the alternative to contributing to regional stability is to risk an even greater nightmare.