June 18, 2015 | Policy Brief

The Fundamental Flaws of the Emerging Nuclear Deal

The Asymmetry Between an Expanding Iranian Nuclear Program and Diminishing Western Leverage
Mark Dubowitz

Chief Executive
Annie Fixler

CCTI Director and Research Fellow
June 18, 2015 | Policy Brief

The Fundamental Flaws of the Emerging Nuclear Deal

The Asymmetry Between an Expanding Iranian Nuclear Program and Diminishing Western Leverage

Mark Dubowitz

Chief Executive
Annie Fixler

CCTI Director and Research Fellow

Under the emerging Iran nuclear agreement, there is an inherent asymmetry between an expanding Iranian nuclear program and diminishing economic leverage. Tehran over time will develop an industrial-sized nuclear program with zero-breakout and a strong economy increasingly immunized against future economic pressure—and the United States will increasingly lose peaceful economic leverage to prevent Iran from developing nuclear weapons.

The emerging deal does not link the sunset of restrictions on Iran’s nuclear activities to a broader conclusion by the International Atomic Energy Agency (IAEA) that Iran is not engaged in any undeclared nuclear activities and its program is entirely peaceful in nature. The IAEA issues these so-called broader conclusions for states whose nuclear programs pose no proliferation concern because there is “no indication of diversion of declared nuclear materials from peaceful nuclear activities” and “no indication of undeclared nuclear material for activities.” On June 10, the IAEA issued the key findings from its latest safeguards implementation report and noted that the agency had reached a broader conclusion for 65 countries.

Rather than link the expansion of Iran’s program to a broader conclusion, the deal will allow Iran to ramp up its nuclear program after an arbitrary ten-year period with many of the key nuclear restrictions sunsetting after fifteen years.

Information in the following two charts is drawn from analysis of the U.S. fact sheet on the Joint Comprehensive Plan of Action (JCPOA) from April 2, 2015.

Iran’s Nuclear Program Will Grow as Restrictions Sunset:

Years 0-10, Iran can:
  • Perform R&D on advanced centrifuges.
  • Continue to produce centrifuges and components.
  • Enrich uranium at Natanz up to 3.67%.
  • Maintain a stockpile of no more than 300kg of 3.67% enriched uranium.

After 10 years, Iran can:
  • Increase the number of operating centrifuges enriching at Natanz beyond 5,060 IR-1s.
  • Operationalize advanced centrifuges at Natanz.
  • Reduce its breakout time to less than one year and then to near zero at years 13-15.

After 15 years, Iran can:

 
  • Build and operate an unlimited number of enrichment facilities.
  • Install and operate an unlimited number of existing centrifuges and advanced centrifuges.
  • Enrich uranium at Fordow.
  • Enrich uranium above 3.67%.
  • Increase its stockpile of LEU above 300 kg.
  • Build additional heavy water reactors and accumulate heavy water.

Permanent restrictions:

 
  • All spent fuel from modified Arak heavy water reactor shipped out of Iran.
  • No reprocessing or reprocessing R&D.
  • Iran implements the Additional Protocol and Modified Code 3.1.

IAEA’s Access Will Diminish:

After 20 years, the IAEA can no longer:
  • Conduct continuous surveillance of centrifuge component manufacturers.

After 25 years, the IAEA can no longer:
  • Have access to uranium mines and continuous surveillance at uranium mills.

Permanent access:

As a result of this agreement, after fifteen years, Iran will likely have an industrial-sized and widely dispersed nuclear program, with unlimited advanced centrifuge capacity, zero breakout, and multiple heavy-water reactors—all of which will be increasingly seen as legitimate by the international community.

Simultaneously, over time, the agreement will leave only residual economic leverage to peacefully deter Iranian nuclear weapons development because sanctions relief will enable Iran to expand its economy and build economic resiliency to economic pressure.

Economic Recovery as a Result of JPOA Sanctions Relief:

  • A deceleration of the sanctions pressure led to a change in market sentiment with improved confidence levels leading to improved economic performance.
  • Iran has received $11.9 billion in direct payments from escrow accounts in which oil revenues have been accumulating, a significant amount for a country with no more than $20 billion in fully accessible foreign exchange reserves prior to the JPOA.
  • The Iranian economy has shown signs of stabilization and modest growth. Economic growth rebounded from the negative growth rate of 6% in FY 2012/13 to positive average growth of 3-3.3% in FY 2014/15.

The economic impact of sanctions relief is likely to be substantial and build over time, facilitating economic growth and increased resilience against future sanctions-induced economic pressure. The “snapback” sanction as an enforcement mechanism depends on the ability of the United States and its allies to use economic pressure to enforce the agreement. Unfortunately, the effectiveness of the snapback will diminish as Iran builds a more powerful and resilient economy.

Economic Expansion as a Result of Sanctions Relief in a Final Deal:

  • Iran’s oil revenues may increase by $22 billion annually within a few years if Iran increases its exports by 1 million bpd back to the pre-sanctions level of 2.2 million bpd. Oil exports are projected to grow from 1.3 mbd to 2 mbd over the next 12 months, providing Iran, before July 2016, with an additional $15.4 billion (at the price of $60 per barrel) which it will find easier to repatriate
  • As a result of these trends, Iran’s economic growth may stabilize around 2.6% in FY2015/16, and then accelerate to about 4% in FY 2016/17.
  • Economic growth may help immunize Iran from economic pressure.

Snapback sanctions may be somewhat successful in the early years of the agreement when international companies are still reluctant to return to Iran and countries are still relatively united in their response to Iranian violations. However, they are likely to become much less effective in the later years. The international sanctions regime took decades to put in place and to have an impact on Iran’s economy and decision making. In the later years of the agreement, international companies may have invested tens of billions of dollars back into Iran and will likely be less willing to forgo their business interests because of Iranian nuclear violations. It is also at this point, particularly after year ten of the agreement when key constraints on Iran’s nuclear program disappear, that economic leverage will be needed most to deter Iranian violations and to prevent Tehran from using its expanding nuclear infrastructure to move to a nuclear weapon.

Sunsets and snapbacks are fundamental design flaws of the emerging nuclear agreement. They give Iran an asymmetrical advantage as it expands its nuclear program under diminishing, and difficult-to-reestablish, economic pressure.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies where he focuses on Iran and directs FDD’s Center on Sanctions and Illicit Finance. Follow Mark on Twitter, Facebook, and LinkedIn. 

Annie Fixler is a policy analyst at the Center on Sanctions and Illicit Finance.

 

 

Issues:

Issues:

Iran Iran Sanctions

Topics:

Topics:

United States Iran Twitter Tehran Mark Dubowitz International Atomic Energy Agency Joint Comprehensive Plan of Action Facebook Natanz Fordow Fuel Enrichment Plant Joint Plan of Action LinkedIn Arak