Iran is already winning

The popular Persian proverb, ‘the spatula has hit the bottom of the pot’ artfully explains the erosion of luck, capability, or financial wherewithal. With the inauguration of President Joe Biden however, Iranian officials may soon cease using the phrase. Although mistrust of and enmity with America on a bipartisan basis remain, regime elites understand that the new administration is eager to score a diplomatic win, spiting its predecessor, while assiduously avoiding a military confrontation. Taken together, these sentiments offer the Islamic Republic a path to victory even before negotiations commence.

So how did we get here?

Since leaving the Iran nuclear deal —the JCPOA — in May 2018, the Trump administration employed unilateral sanctions to dry-up Iranian revenues and push it towards the negotiating table. On limited occasions, Washington resorted to using military force, as demonstrated in January 2020 with the killing of Iran’s chief terrorist, Qassem Soleimani, or elsewhere in Iraq in response to the killing of American soldiers by pro-Iran militias. The administration also continued supporting Iranian protestors, who were taking to the streets more often and more aggressively than in years past. This policy, known as ‘maximum pressure’, produced substantial macroeconomic contraction and domestic political pressure for Tehran. When married up with Israel’s military pushback in Syria, and what many assume to be Israel’s targeted killing of Iran’s top military nuclear scientist, Mohsen Fakhrizadeh, the policy landed some powerful blows.

However, Tehran’s desire to maintain its revolutionary agenda was so intense that despite dwindling revenues, it engaged in an escalatory contest of wills with Washington, a contest that it now believes it has won. No clearer indication of this sense of victory exists than the recent statement by Iranian President Hassan Rouhani proclaiming, ‘Tyrant Trump’s political career and his ominous reign are over today and his “maximum pressure” policy on Iran has completely failed… Trump is dead but the nuclear deal is still alive’.

Despite the departure of Trump and his maximum pressure policy, the Islamic Republic continues to shun direct engagement with the new administration. Instead, it is upping the ante. As Tehran learned during the previous iteration of nuclear talks (2013-2015), taking risks, drawing red lines, overvaluing concessions, and changing the goal posts, work. This January, Iranian Supreme Leader Ayatollah Ali Khamenei produced a list of conditions and demands, some of which include financial compensation and sanctions relief independent of any American return to the JCPOA.

In addition to still proliferating weapons, Tehran is also modernizing its ballistic missile arsenal – the largest in the Middle East. Worse, the country’s nuclear coercion continues, in the hope of coaxing the Biden administration into early sanctions relief. According to open-source estimates, Iran now has enough domestic low-enriched uranium to make one to two nuclear bombs, should it decide to do so. This January, Tehran took a step towards that decision as it resumed enrichment of uranium to 20 per cent purity – technically considered highly enriched uranium – at its underground Fordow facility.

While members of the new Biden administration have rhetorically begun to pump the brakes on the idea of a speedy JCPOA re-entry, Iranian escalation is designed to expedite it, driving the matter of premature sanctions relief to the top of Biden’s agenda by growing the risks of military conflict and diplomatic failure. In short, Iran is engaging in a policy of extortion and it is working.

On the political front, many pro-engagement voices are clamoring about the need to act fast to resurrect a non-proliferation agreement that was ‘working’. Some even contend that JCPOA re-entry can lay the foundation for a better deal. But no building can be erected on a sordid foundation. A return to the JCPOA, even if only in the quest for a ‘longer and stronger’ agreement, as some Biden appointees suggest, means that if Washington unwinds the bulk of its sanctions for limits on Tehran’s nuclear program, it will have little to no non-kinetic leverage left to address Iran’s missiles or support for terrorism. For an administration that shuns deeper engagement or military conflict in the Middle East, dispensing with this national security tool too early would raise, rather than lower, the prospects of conflict.

Worst of all, rejoining the JCPOA absent any improvements upfront would restore an outdated and inaccurate framing of the Iran threat: nuclear über alles. During the presidencies of George W. Bush and Barack Obama, the Iran threat was primarily addressed through the prism of counter-proliferation policy. It was the Trump administration that corrected this narrow view and merged the nuclear, missile and regional tracks in a bid for a comprehensive agreement. Abandoning this approach would be akin to a reduction of US goals toward Iran, which is exactly what the regime wants. How do we know? Iran’s Foreign Minister, Mohammad-Javad Zarif, said as much in his recent op-ed in Foreign Affairs.

While there are other areas, such as pauses in regional arms sales, where developments may be viewed as a win for Iran, it is on the economic front where the Islamic Republic’s gains are the most concrete. In November 2020, Iran’s rial began to appreciate on the free market relative to the US dollar. The strengthening of the rial continued in mid-January, hinting at the prospect of potentially better economic times ahead. According to Bloomberg News, the rial ‘lost 80 per cent of its value against the dollar over the course of Trump’s presidency’. Bloomberg also reported that Iranian oil production was growing in January, which builds on reports from late 2020 about a slight rise in oil sales by Iran to China. With the election of Biden, black-hat buyers, traders and shippers may again feel confident taking risks that ultimately redound to the benefit of Iran’s bottom line.

Ultimately, the more money Iran has upfront, the more watered-down US sanctions become, the less resolute America will appear and the less effective Biden’s diplomatic approach will be. Time will tell if engagement with American partners and allies, which is currently underway, can help the new administration reverse this dynamic and capitalize on existing sanctions leverage to render Iran’s wins, however real, short-lived.