The following is an edited transcript of the eighty-first in a series of Capitol Hill conferences convened by the Middle East Policy Council. The meeting was held on July 16, 2015, at the Rayburn House Office Building in Washington, D.C., with Richard Schmierer as moderator and Thomas R. Mattair as discussant. The video can be accessed at www.mepc.org.
JAMES MILLER, Former Undersecretary for Policy, U.S. Department of Defense; President, Adaptive Strategies, LLC; Board of Directors, the Atlantic Council
Since I'm kicking things off, I thought I'd set the context for the nuclear deal itself, the Joint Comprehensive Plan of Action, or JCPOA. I'll then offer my views about implications for the region as well.
If you haven't read it, the JCPOA is a lengthy and complex document, 159 pages, with annexes and a ton of technical details. I hope and expect that you and all staff and members here on the Hill are busy digging into it. The document addresses the three Iranian pathways to a nuclear bomb — uranium enrichment, plutonium reprocessing and covert production — which could follow one path or another.
The agreement requires Iran to remove two-thirds of its installed centrifuges, so it's allowed to operate about 5,000 centrifuges at Natanz. It allows Iran to use only the less capable so-called IR-1 centrifuges for the next 10 years and to enrich only to 3.7 percent, less than highly enriched and also less than the 20 percent or so that was a concern in recent years.
Under the agreement, Iran is required to convert Fordow, the underground facility of greatest concern, to a nuclear physics and technology center. It does not allow any enrichment or enrichment research and development, or any nuclear material there for 15 years. Basically, what all this means is that the time it would take Iran to break out, to have enough highly enriched uranium for a nuclear weapon, will increase from two to three months today to a year or more under the agreement.
On the plutonium pathway, the core of Iran's heavy-water reactor at Arak will be removed and filled with concrete. It's already started. Iran will ship out all of the spent fuel for present and future research reactors for 15 years. So the plutonium pathway is effectively blocked.
On the potential covert pathway, which could be either uranium or plutonium, in principle, the International Atomic Energy Agency (IAEA) will have access to any suspicious sites, including military sites, within 24 days, as long as a majority of the P5+1 agrees. I expect that in the Q&A we'll come back to that question of the 24 days and of what the agreement means.
What it means is that Iran, Russia and China, even working together, cannot block inspections. It's important to understand that nuclear facilities are different from chemical or biological facilities. There's a lot more infrastructure. It's much harder to get rid of nuclear material because of the traces of radioactivity. So Iran is not going to be able to move things around quickly to hide either large-scale infrastructure or radioactive material.
So, in my view, 24 days is not going to open up a window for successful cheating. When you consider also our so-called national technical means of collection, which perhaps Paul Pillar will talk about in general terms, we will be in a much better posture under this agreement to detect any Iranian effort to pursue either breakout or a covert path to a nuclear weapon.
Iran has agreed to provide the IAEA with the information needed to complete its investigation into possible military dimensions, the so-called PMD, of Iran's past nuclear research. The IAEA must agree that Iran has come clean before the agreement can be implemented, before the process of lifting sanctions can begin.
Finally, the agreement puts in place the most extensive verification in the history of nonproliferation. Inspectors will have 24/7 access to Iran's declared facilities. The IAEA will have access to the entire nuclear supply chain — including mines, mills, conversion, centrifuges and storage — plus its challenge inspections, which I mentioned before. So overall, in broad terms, the agreement will push Iran from today's posture of being two to three months away from a breakout to being a year or more away, and it will give the international community a much better ability to verify its compliance than we would otherwise have.
A number of concerns have been raised about this agreement and how it will play out. I'll go through each of them — in particular, those that relate to regional security — for my remaining time. Number one, some think that the P5+1 could have gotten a better deal, and that Iran should have been forced to give up any right to enrichment. In technical terms, that's malarkey. The Iranians were never going to accept a zero-enrichment proposal. In my view, the United States and the P5+1 negotiators did an excellent job. I'll be glad to go into more detail in the Q&A about why I think that's the case and why I think Iran would not ever give up its enrichment capability. In any event, the question is about the agreement at hand and not some hypothetical.
A second question that's been asked is this: What if Iran doesn't come clean to the IAEA about possible military dimensions of its past nuclear activities? As I mentioned, until the IAEA certifies that they've done so, sanctions would not come off. Iran needs to come clean in order to move forward, and that includes providing access to the Parchin facility.
Third, some have argued that Iran might cheat. I absolutely share that concern. Our ability to detect any suspect activity and respond, and so deter cheating, is much stronger under the agreement. As I noted, it puts in place much stronger verification than we've had before or would have otherwise — 24/7 at declared facilities and challenge inspections, including at military facilities across the country. We need to be prepared to respond to cheating, should it occur, with options ranging from diplomacy to the snapback of sanctions to the use of military force, if necessary. If we and the international community are well-prepared to respond to any Iranian cheating, we'll have a much better chance of deterring it in the first place.
Another question has been raised: Once there is a deal, what if Iran does not allow the IAEA access to suspect sites? If the IAEA says, we want to visit a location and Iran says no, we get stuck, even if a majority of the P5+1 say that should happen. This type of standoff could occur, and it would be a real test. It's something that bears thinking about and planning for.
The United States and our allies cannot let Iran block IAEA access to sites, including to military installations, if there's a good reason for the IAEA to be suspicious. Again, our options would range from diplomacy, to the snapback of sanctions, to the use of military force. And we need to ensure that viable military options remain on the table, and arrows in the quiver, for the duration of this agreement — indeed, well after the agreement would end.
Finally, some have argued that, after this agreement's terms end — some at 10 years, some at 15 years, some at 25 years — Iran will have a free hand. While some things will have changed in 10 to 15 years, Iran will still be obliged to keep its commitment not to pursue nuclear weapons. It will continue to be subject to these enhanced inspections, what some are calling the "Additional-Protocol-Plus" of the NPT. Of course, to repeat it for the third time, we must be prepared to take the full range of actions in response to any Iranian cheating or breakout. And, yes, that includes military options: first, to deter, and second, if necessary, to prevent any breakout.
So my bottom line is that this agreement is strongly in the interests of the United States and our allies and partners. Perhaps the most important concerns that have been raised about the agreement are not within the four corners of the agreement itself, but about two other issues. First, will Iran use the so-called windfall of perhaps $100 billion - $150 billion from sanctions relief to support proxies in the region and terrorists? [Note: Subsequent estimates of the value of sanctions relief to Iran range from $50 billion to $150 billion.] Second, is this agreement a sign that the United States is shifting away from support of its traditional allies and partners in the Gulf and toward Iran?
My answer to the first question is yes. My answer to the second question is no. After the IAEA certifies, if it does, that Iran has met its obligations under the agreement — this would be the so-called Implementation Day of the agreement — Iran will get relief from sanctions imposed because of its nuclear program. This sanctions relief is estimated as much as $150 billion equivalent.
Iran could use some of the money from sanctions relief to stir up even more trouble in the region, including supporting Hezbollah and Hamas, the Houthis in Yemen and President Bashar al-Assad in Syria. In fact, my view is that Iran will almost certainly do so. Because the Iranian people are counting on getting a big economic boost from this agreement, I would expect that the vast majority of the sum will go towards their domestic economy.
I think that the regime will be held accountable for that, but I also expect that some of these funds will go to the Iranian Republican Guard Corps (IRGC) and its Quds Force, including their operations in Syria. I expect that some will go to support Hamas and Hezbollah, the Houthis in Yemen and Assad in Syria. I think it would be unrealistic not to assume this and to plan for it.
To set all this in context, Iran's military budget is estimated to be about $30 billion a year. That's about 40 percent of the Saudi annual defense budget and about 5 percent of the U.S. defense budget. So we have the ability, just to take these two countries as examples, to increase our efforts to counter Iran. And we need to do so. In fact, Iran's nefarious behavior is a real problem, with or without a deal. By some reports, President Rouhani increased the IRGC budget by 50 percent for 2015 relative to 2014. This is not a new issue, but it's one that we will have to deal with in a very determined way.
We need to work closely with our partners in the region to improve our intelligence collection, our interdiction capabilities, and our ability to defeat cyber and other asymmetric threats. Specifically, we need to follow up on the Gulf Cooperation Council (GCC) summit that occurred last May at Camp David. The GCC summit ended with some very good words. It said that the United States would work with our partners in the region to cooperate more on counterterrorism, especially against Daesh and al-Qaeda, to protect critical infrastructure, to support border and aviation security, to combat money laundering and terrorist financing, and to interdict foreign fighters. This is a good agenda, to which we should add three areas that we have been working on for some time and that also should be amped up: cyber security, maritime security and interdiction, and air and missile defense.
There is a tremendous amount of work to be done, and we need to push hard in the coming weeks and months to get it done. Secretary of Defense Carter's planned trip to Saudi Arabia with a stop in Israel next week is a good next step. We should be defining specific further steps to strengthen our capabilities, our partners' capabilities and our combined capabilities to deal with these challenges. It's not just about spending more on the military. It also means taking action when necessary, as the United States did in stopping an Iranian vessel carrying arms to the Houthis in April. We will need to do that.
The administration should also be looking to increase its support to Iraq and to the moderate opposition in Syria. In Iraq, in my view, the United States should be leaning into embedding U.S. forces as advisers to trusted Iraqi units so that they can help by serving as forward air controllers to bring in a greater volume of coordinated air strikes. We should also be looking at how to continue to ramp up our intelligence assets and logistical support.
In Syria, the training of opposition forces started late and has been slow. We now have the first group of U.S.-trained Free Syrian Army fighters going into Syria, and we need to continue to vet more fighters and to accelerate that pipeline. We also need to look at ways to enable them as their numbers grow, to provide secure territory within Syria for them. We'll need to work with Jordan and Turkey and our other partners and be prepared to provide significant additional support for areas that are secured, protecting both against the Assad regime and from Daesh.
The final issue: some in the region are concerned that with this deal the United States will do a mini-pivot away from our long-standing GCC partners and toward Iran. I don't see anyone in the U.S. administration or elsewhere wanting to go down this path. On the contrary, I've seen the administration saying the right things about Iran, about consultation and about the strength of our commitment to our allies and partners. In addition to talking the talk, the administration, with support from Congress, should be walking the walk, as I've outlined, by ramping up support to our partners and actively countering Iran in the region.
In conclusion, this nuclear deal, the JCPOA, is strongly in the interests of the United States and our partners, in my view. It offers Iran the ability over time to join the community of nations; over the long term, that could happen. That's not how I would bet, as you can tell from my earlier remarks, but it could happen. If it does, we should encourage it.
Coming back to the real world and the most likely case, we should expect Iran to continue to act like Iran and to ramp up its nefarious activities in the region. So we need not only to sustain our strong military presence and to continue to strengthen our partnerships and our partners' military capabilities and our combined capabilities. We also need to take steps to counter Iran's influence and activities across the region, and we have to work extremely closely with our Gulf partners in doing so.
Finally, President Obama has said that all options, including military force, have been on the table to prevent Iran from getting a nuclear weapon. It will be important for Congress to reaffirm that and for the next president to make that crystal clear for the duration of this agreement and for the period afterwards as well.
NABEEL KHOURY, Senior Fellow, Atlantic Council's Rafik Hariri Center for the Middle East; Former Director of the Near East South Asia Office of INR at the State Department
First of all, accentuating the positive, we need to congratulate Rich, Tom, Anne and their team on the excellent timing of this event. When I was first invited for this, the agreement had not yet been concluded. Did you have inside information, or did you have inside information? We won't press you on that.
Also concentrating on the positive, I will agree with the main thrust of Jim's presentation, that this is a good agreement. I disagree maybe with the focus on what follows and the idea that we need to confront Iran. I take it for granted that we need to be militarily prepared. We need to have contingency planning, certainly. But to project at this point that "we know these guys are going to be up to no good and we should be ready to confront them," I think, defeats the purpose of this agreement.
My emphasis will be on diplomacy. As an old State Department hand, I guess that's normal. I think we need to try to take advantage of this agreement to hopefully build future agreements on it that will resolve the problems in the region diplomatically land not by force. This agreement displayed good diplomacy. Kudos are due to John Kerry and his team. It could not have been easy for a bunch of Europeans and Americans to go with the Iranians to the big bazaar — diplomats who are steeped in a long history of the art of negotiation — and to come out with some good nuggets from these negotiations.
Iranian diplomats, as well as the American and European diplomats, worked very hard and achieved goals that are in the interests of both sides, primarily related to limiting Iran's nuclear program and establishing a credible system of verification. As the president said, none of the options that were on the table before are off the table now. So if things don't go well, you could always go back to those options.
By the way, the critics of this agreement, who started with their criticism way before anything was known about the details, have not presented any credible alternatives. That's another reason this is the best agreement one could achieve under the circumstances.
Now, if this were part of a broad U.S. strategy towards the Middle East, there would be no ifs, buts or howevers about it. It would be a great agreement. As the president said yesterday, however, and I'm paraphrasing, don't judge this and don't judge me on resolving all the problems of the Middle East. Just judge me in terms of limiting the nuclear program of Iran.
If this is indeed the whole of the agreement, I'm disappointed, and we should all be disappointed. U.S. policy in the Middle East presents many challenges; the Middle East itself falling apart because of all sorts of revolutionary and extremist forces at play. Because of the overall dynamic of Saudi-Iranian rivalry, which fuels many of the conflicts, both the interests of the region and the interests of the United States are tied to resolving these conflicts.
For me, the nuclear issue is a side issue. I know that this offends some people, but we always over- emphasize weapons of mass destruction. We know where that led us in 2003. And there is the Syrian example from 2013, where all of a sudden there was lots of drama about chemical weapons. Why? Because they were a threat to the Syrian people and to the region. So diplomacy went to work and the mission was declared. The majority of those weapons, not necessarily all, were removed.
What happened after that? The Assad killing machine continued unabated. The dangers of the conflict and the chaos that it breeds have continued to impact the Syrian people, the region and the international community. So the removal of Assad's chemical weapons changed none of the basics of the conflict in Syria. I'm afraid that the same will happen with Iran if we rest on the laurels of limiting Iran's nuclear capabilities.
This agreement has the potential of improving relations with Iran. I agree with Jim; I don't think we're going to shift alliances, though many people in the region are worried that the United States is going to ally itself to Iran, abandoning its traditional allies. I don't think we're about to do that, and I don't think we should.
However, I think we should develop a better diplomatic working relationship with Iran and move from confrontation and saber rattling to a more positive posture. DOD [Department of Defense] is perfectly capable of preparing for negative scenarios on the quiet. We need to stress that this is a good start. Let's build on it and sit down and seriously discuss all the issues, starting with Syria, going to Iraq and to Yemen, and not forgetting Bahrain. All these conflicts are dangerous, potentially long lasting and with implications for the international community.
The Saudis and the Iranians have been talking for a long time, but they don't talk seriously, they don't talk frankly about these problems. They need the United States to mediate, to bring them together, to bridge the gap between them, and to end this rivalry and hopefully get them working together on these problems. There's no time here to go through all these problems, so I want to focus on the Syrian conflict as possibly an ideal place to put the agreement with Iran to the test to see if a better understanding between the West and Iran is indeed possible.
The Syrian tragedy has exceeded in civilian death, displacement and destruction anything that we have seen since World War II. We are commemorating this week the massacre in Srebrenica, the horrible death of 8,000 individuals in that Balkan War. The massacre moved the UN and the United States into quick, efficient military action, followed by good, efficient diplomatic action that led to the Dayton Accords, ended that conflict and brought war criminals before the International Court of Justice.
By contrast, the Syrian massacres continue on a daily basis; the body count has exceeded 250,000 civilian deaths. The extremism spawned in Syria is impacting the entire region and, if left alone, will impact the international community as well. A moral imperative as well as the U.S. national interest dictates a stronger intervention to end this conflict. I think Iran's interests can also motivate it to collaborate diplomatically; Iran's cost has been heavy and is rising. The Iranians and Lebanese Hezbollah have invested heavily in trying to shore up the Assad regime.
There are three different ways in which this could go. Left as is, the radical Islamist forces — IS and Jaysh al-Fateh and other factions allied with them — are on an offensive, pushing from at least two sides, with the Western-supported Syrian opposition pushing from the south. Eventually, they are going to encircle the Assad regime inside Damascus and the Alawite Mountains and the strip along the Lebanese-Syrian border. Indeed, it is possible that Damascus itself will fall to these forces.
Lebanese Hezbollah and Iran would throw in everything they have to defend that territory, which means a long war and a huge cost in human and material terms in a fight on behalf of a regime that can no longer serve their intests as it used to. Given the deteriorating situation, Iran has the motivation to participate in a transition that would preserve their interests with a future more representative government in Syria.
A diplomatic solution might be found that only the Iranians could actually help implement in Syria. Nobody else has that kind of influence on the Assad regime, so it behooves us to get to that matter with the Iranians right away. Saudi Arabia would have to be convinced; it could derail an agreement if it remains unhappy, and it is currently unhappy with the agreement with Iran. A diplomatic option would be the best option, one that would see the installation of a coalition government in Damascus that includes equitable representation for the Alawites in Syria.
In my opinion, it should be a democratic, federated Syria. A federal system guaranteeing some kind of regional autonomy, would give a sense of security to the various ethnic and religious groups in Syria, especially the Alawites. It would also give Iran the sense that they would not be excluded from interacting with this new country and that their interests would be preserved in a special relationship that they would surely have with the Alawite region.
Should the radical Islamist factions win, we would also be looking at a protracted struggle, not least of which would be among the radical Islamist groups themselves. They don't like each other and would not be able to share power should the country fall completely into their hands. A post-victory struggle for power would be a protracted and vicious struggle.
The third scenario is the Turkish military option. Turkey has already been threatening; hinting at, implying that it would take a unilateral approach to Syria should NATO and the United States not come along. A Turkish security belt along the Turkish-Syria border, if initiated by Turkey alone, would not be stable. It would bring the Turks to rule over an area that largely consists of Syrian Kurds, and the brief honeymoon we've seen between Turks and Kurds would surely end at that point. It's not a good idea, but it's an idea the Turks may well be forced into if they don't see any other options.
If, on the other hand, the United States and NATO do what Turkey has wanted all along — provide aerial support, on-the-ground support and political cover — the Turks could push IS out of Syria completely, certainly out of the northeast, where they are now dominant. For this to work, the United States would have to get the Kurds and the Turks to act together, not against one another.
Right now, the Kurds have done a good job in working to some extent with Turkey, but also with the Free Syrian Army. With Turkey on their side, and air cover by NATO, this coalitioin could go all the way to the outskirts of Damascus, presenting the Assad regime and Iran with an offer they could not refuse; a new government and a new future for Syria.
The agreement with Iran presents diplomatic options that would be far less costly than any of the military options on the horizon and should therefore be given every chance to work.
PAUL PILLAR, Non-resident Senior Fellow, Center for Security Studies, Georgetown University; Non-resident Senior Fellow, Brookings Institution; Contributing Editor, The National Interest; Former CIA Analyst
I've been asked to address U.S.-Iranian relations and where they might go in the wake of the agreement that's just been concluded. The agreement has to stand or fall as a nuclear agreement. It does not depend, nor should it depend, on particular assumptions or projections about the rest of the relationship or about other aspects of Iranian behavior. It is, instead, an effort to dispose of one particular issue which, rightly or wrongly, has acquired enormous salience: the nuclear issue. So the agreement has to be judged against the alternative of no agreement as to which of those two options does a better job of precluding an Iranian nuclear weapon. And, by the way, as you read the fine print of the agreement, I suggest you also read the fine print of the alternative of no agreement and consider that at the same time.
Nonetheless, precisely because the nuclear issue has been so salient, the deal is bound to have some knock-on effects with regard to the rest of the relationship. The most important effect, in very general terms, is that it does lessen somewhat the political and other impediments to dialogue between the United States and Iran on many issues in which both countries have a strong interest, regardless of whether their particular objectives and interests converge or diverge or, as most often the case, do both.
We've already had some progress in this regard simply by talking to each other. Bear in mind that we don't have to go back any more than about three or four years and U.S. and Iranian officials basically were not speaking with each other. Now our two foreign ministers have spent a lot of quality time with each other, mostly on the nuclear agreement, but the ice has been broken to talk about other things.
There certainly are several areas in the region that immediately come to mind where such dialogue would be fruitful. We've heard at length from Nabeel about Syria. I agree with basically everything he said on that. I would just mention two others: first, Iraq, where there are a great many convergent interests; both the United States and Iran have an interest in helping the Iraqi government push back ISIS/ISIL.
There has already been some necessary coordination, or at least deconfliction at the tactical level, to make sure we don't get physically in each other's ways. But there is a need to talk about more than tactical battlefield matters. It's ultimately a political problem that has to do with the nature and direction of the regime in Baghdad, and it certainly would be useful for the sake of getting some improvement in the Iraqi situation if Tehran and Washington were telling Baghdad things that are consistent.
Then there's Afghanistan, on the other side of Iran, where we have already shown during those few brief months in late 2001 and early 2002, at the time of the Bonn conference, that the United States and Iran and its diplomats could work constructively together on shared interests. That took place before we slammed the door in Iran's face and declared it to be part of the axis of evil. But it's a matter of getting back to the kind of cooperation we had at Bonn. And there are other regional issues too that we could talk about in the discussion period.
There are going to be effects on domestic Iranian politics that affect all this. We've heard two schools of thought. One is that the agreement is a victory for the pragmatists or moderates, people like Rouhani and Zarif. The opposing school of thought is that there's going to have to be some kind of compensation for all this, in that the hardliners are going to be thrown bones and be allowed to do hard-line things. That second school of thought does have some validity. I think you can look at how the politics play out on our end, and the political necessity for President Obama and his administration to be saying tough things about Iran right now, to make sure that they do not allow themselves to be portrayed as wimps toward Iran. It will work somewhat the same way on the Iranian side.
Nonetheless, politics, in general, work in Iran the way they work in other countries. Everybody loves a winner. Success begets power, and power begets more power. So I would say the net effect will be to help the moderates and pragmatists in the Iranian political equation. That means relatively more influence for those who have a relatively more moderate and pragmatic inclination when it comes to aspects of Iranian policy in the region.
One significant caveat to that conclusion is that much will depend on the pace and extent of economic improvement in Iran, and the extent to which the elevated hopes and expectations of the Iranian public in that regard get realized. They may not be realized nearly as much or as fast as many Iranians expect, partly because of what the private-sector response will be to sanctions relief. Much of the private sector, including financial institutions, have had the fear of Allah instilled in them by the U.S. Treasury Department with regard to the sorts of penalties they would suffer if they stepped even an inch over whatever the sanctions line happens to be on any given day. So I think we're going to see some slowness in that regard. Possibly — and I've heard this speculation from someone well-informed on the Iranian political scene — even the supreme leader has made some calculations along this line. Ali Khamenei has supported the negotiations but probably would not like to see a political sea-change in favor of the moderate side in Iran. Perhaps he has calculated that there won't be enough economic improvement between now and the Majlis elections scheduled for early next year in order for such a sea-change to take place. We will see.
There is not going to be any drastic change in the months ahead in the overall shape of U.S.-Iranian relations. There is going to be nothing approaching an alliance between Tehran and Washington, even though that actual term sometimes gets used by those who fear too much of a U.S.-Iranian relationship and for that reason have opposed this agreement. Even if the agreement is successful in terms of its implementation, and even if some of this other dialogue takes place on other issues, we are unlikely to see a restoration of full diplomatic relations between the United States and Iran for years. I would look, as an exemplar on this, to the experience with China. Several years transpired between the time President Nixon made his historic visit to Beijing and diplomatic relations between the United States and the People's Republic were finally established under President Carter in the late 1970s.
There will continue to be domestic political resistance, in both Iran and the United States, against going too far too fast with regard to this relationship. On the U.S. side, that would be all the more true if a Republican wins the White House in 2016; adamant opposition to the agreement that's just been signed is campaign baggage that would be awfully hard to discard.
In the meantime, there is not going to be any drastic change in Iranian behavior in the Middle East. There's been a lot of obfuscation on this particular point; opponents of the deal, of course, have tried to use this subject as an argument against it, including the notion of additional resources that Iran would use for regional troublemaking. Now, even if we take as unquestioned the most negative assumptions about nefarious behavior and about destabilizing the region — all the stuff you hear again and again about Iran in the region — there are still the logical inconsistencies with that line of argument that you have to deal with.
Number one, of course, is that if, indeed, Iran really is up to no good, that is all the more reason to make sure they don't have a nuclear weapon. That is what this agreement is all about. Second, and equally important, the sanctions we're talking about that will be relieved were all expressly imposed for the purpose of inducing change in Iranian nuclear policy and to get the Iranians to agree to something different, which they just did.
If we were to leave those sanctions in place because we don't want them to have the resources to do something else, that means everything we said before about the purpose of these sanctions was a lie. Anyone who's concerned about U.S. credibility and using a tool like sanctions to influence the Iranians or anyone else needs to think really carefully about that before saying we should keep the sanctions in place even though they were supposed to be about the nuclear policy.
Domestic economic needs have already been mentioned; I would also note that the Iranians are not bookkeepers who, in deciding what they're going to do in Syria or Yemen or someplace else in the region, check the balance in their bank account to see how many rials they have to determine what their regional policy is going to be. I might note that, if indeed that was what they were doing, this is a rather different image from the usual one of Iran: a less-than-rational set of actors whom we don't want to have a nuclear weapon because they don't think like us and don't make the cost-benefit calculations we do. So it's rather strange now to hear the argument that their behavior will be determined by a careful calculation about available financial resources.
Finally, related to that, if indeed it were true that they were bookkeepers and the resources they had determined their regional policy, we should have seen a pattern when all the really tough sanctions on banking and oil went into effect a few years ago: a reduction in Iranian regional activity in the Arabian Peninsula or the Levant. I don't think anyone has ever come up with any evidence to suggest that's the case. It isn't the case.
The Iranians in the past and the Iranians in the future are going to make decisions about what they're doing in the region based on other interests they have: political connections in the Levant, balance of power in the Persian Gulf, and so forth. They are going to continue to respond to things that happen — civil wars in Syria and Yemen, nasty terrorist groups arising in Iraq — and they will react. Their reaction is not going to depend on how many rials they have in their bank account.
It's not just the Iranians who are creating the facts on the ground here; others can as well. And when other players create facts on the ground, the Iranians are going to react if they believe it affects their interests. Israel, for example, has within its power to stir up something new with Hezbollah. Hezbollah, of course, also does, although right now they are rather bogged down in Syria and do not want a new war with Israel any time soon. I would not be surprised if we read in the newspaper tomorrow that more Iranian scientists have been bumped off, because then the Iranians would have to respond, of course. And those sorts of responses would be described as terrorism, just as they have been in past attempts to exercise the same sort of reprisal for that sort of event.
Opponents of this deal will also not give up trying to undermine it in other ways. I would expect in the weeks and months ahead that anything the Iranians do regionally that can be described as supporting the whole concept of increased nefarious troublemaking will be played up to the hilt. Also, anything that can be described as an Iranian violation or noncompliance with the agreement will get enormous attention. I don't mean just by the IAEA; I mean in the public discourse in this country and other countries as well. All of that is going to sustain a political environment in which it's going to be very difficult for either Tehran or Washington to go very far or very fast in this relationship.
In summary, as a matter of diplomacy and pursuit of U.S. interests, there are indeed very good reasons — and I agree with Nabeel on this — to build on the agreement with a broader dialogue. But the political reality is that we should expect this to be a very slow process.
SARA VAKHSHOURI, Founder and President, SVB Energy International
I'm going to speak about the energy consequences and implications of the deal. I remember almost three years ago that the EU announced their decision to put Iranian oil under embargo and stop importing oil from Iran. Everybody was thinking about how deducting 500,000 barrels of Iranian crude oil from the market was going to affect prices.
The EU oil embargo was followed by complementary sanctions on Iranian crude-oil transportation and insurance. Iranian crude export dropped to half of its previous level and reached to nearly 1 million barrels a day. But, unlike the expectations of many oil analysts and experts, the prices of crude oil didn't increase hugely. And today we are standing here with a different reality in the market. The prices are no longer above $100, but in the range of $50 to $60 per barrel, and people are worried about how prices are going to react if the sanctions are removed from Iran and Iranian oil is back in the market at its full capacity.
Last year, when the price of crude oil was starting to drop, many interpreted it as an initiative by Saudi Arabia to put further pressure on Iran. Ironically, this actually worked in favor of Iran; in the past few years, Iranian oil revenue had dropped because their oil exports had decreased by half. Since they didn't have access to cash, they started to be creative and open the door to new sources of income. So their economy showed more resilience in the face of low oil prices.
However, oil investors in the climate of above-$100 per barrel had lots of different options, from investing in unconventional resources in the United States to the recently energy-reformed country of Mexico. They all started once again to look into the conventional, low-cost resources of the Persian Gulf. Iraq, Saudi Arabia and Iran are three of them, holding most of the conventional low-cost oil reserves in the world.
Saudi Arabia at this point doesn't have any significant plan for increasing production capacity. There's not enough demand for that, so the Saudis at this moment are looking for more gas resources to extract. Iraq is tackling ISIS, or IS, and many investors have already left Iraq. This leaves Iran a good option for investment: the price of oil is about $50 to $60 per barrel, and the cost of production in Iran is about $2 to $7 per barrel. If you add maintenance fees, the cost will reach a maximum of $10 per barrel.
Iranians also have started to revise and reform their upstream investment contracts and regulations with the hope of making it more attractive for the investors to come to Iran. However, all of this, of course, depends on sanctions removal; there are massive sanctions on investment in Iran. But what about Iranian oil production and supply in the market?
We are expecting that Iran can increase its crude-oil production up to 800,000 barrels per day within the next six to 12 months. Our expectation of how long sanctions removal on Iran's oil exports will take is between three and eight months from the time that the deal starts to be implemented and Iran starts its compliance with the deal and follows the fact sheets and regulations. We should not forget that Iran already has about 40 million barrels of oil and liquids, mainly fuel oil and condensate-oil blend on the sea, which is ready to be released immediately.
But, again, the lower oil prices, ironically, create space for Iran rather than limiting it. Because of the low oil prices, the prospects for growth of unconventional oil production in the United States and North America and in other parts of the world have been reduced. Many experts are expecting that next year we are going to have less growth or less production of shale oil, although many agree that shale-oil production showed much more resilience to low oil prices than was expected. So Iranian crude oil by next year is not going to sharply affect prices, but it is going to help maintain low prices.
What does this mean for Iran-Arab relations? Of course, the Iran-Arab relationship is very complex and varies from country to country. Countries like Oman, Kuwait and the UAE — mostly Dubai — have a close relationship with Iran and could benefit from economic and energy cooperation after the sanctions removal. Countries like Saudi Arabia have a deep mistrust of Iranian intentions.
If the sanctions on Iran are removed, as expected, Iran can increase its crude-oil production by up to 4.2 million barrels a day by 2020 and can add an additional 1 million barrels of condensate. So they are going to have above 5 million barrels a day of crude oil and liquids by 2020, and their gas-export capacity is going to increase tenfold. They will be able to export it as gas or convert it to electricity to sell to their GCC neighbors.
Many GCC countries, the Arab neighbors of Iran, are major producers of oil and highly dependent on it for revenue. On the other hand, their consumption of oil is increasing. So having another source of supply, like Iranian gas, could theoretically free up some of their export capacity and allow them to export more oil. This could, of course, help their economies. There is a high potential for energy cooperation between Iran and Saudi Arabia — again, theoretically, because any long-term gas-export commitment needs trust. Nonetheless, at this point, Saudi Arabia is planning to increase its petrochemical capacity and they're using liquid fuel in their petrochemical refineries.
As the production of U.S shale-gas production increases, U.S. petrochemical factories benefit from low-priced gas feedstock. And they could compete with the price of Saudi petrochemical products in the market. So if Saudi Arabia can have access to the massive gas resources of Iran, they could use natural gas instead of a liquid fuel in their petrochemical facilities and be able to compete with U.S. products. They could also use Iranian gas in their power generation and, instead of burning liquid fuel, they could burn gas for producing electricity.
Of course, we cannot imagine at this point that Saudi Arabia could commit to 30 years of gas supply from Iran. It's kind of like a marriage. You need to have a basic trust to commit to 30 years of a relationship. It's highly unlikely that Saudi Arabia would be willing to rely on Iranian electricity if there's not enough trust. At this point, there is some thawing in the relationship. King Salman cautiously welcomed the framework of the negotiations and the agreement. This deal is going to, of course, strengthen the position of moderate parties and groups in Iran, and the moderates in Iran historically have been engaged in building a constructive relationship with Saudi Arabia. Former President Rafsanjani, a big supporter of President Rouhani, is the key person who bridged the gap between Iran and Saudi Arabia after the Islamic Revolution. Although the change in leadership in Saudi Arabia indicates that the Iranian government lost their foothold with the Saudi government, we think the current crown prince, Muhammad bin Nayef, would be the key player in bridging the gap, as he's a very realistic political player.
I agree with the previous speaker, Paul Pillar, that having a deal or not having a deal — how much Iran has in its pocket — is not going to change its strategy in the neighborhood. But having Iran coming out of isolation and integrate more into the global energy and economic systems will create higher risks for Iran to engage in reactionary activities in the region.
Imagine that Iran has gas pipelines to its neighbors: gas exports, long-term commitments for energy supply, economic integration. Having Iran out of isolation will incentivize more responsible and accountable behavior and reduce Iran's incentives for creating tension in the Middle East.
There are a lot of common interests between Iran and the Arab world, particularly its GCC neighbors. Energy is the place to start. The economies of many of the GCC countries could benefit from gas imports from Iran. Iran is going to greatly increase its gas production, and exporting it to its neighbors would be the best option.
I think having Iran out of isolation and engaging more in the global political economy will create a more responsible Iran. Of course, having investments and technology and foreigners investing in the country, and vice-versa, will produce a different outcome from what we have witnessed in the past few years.
THOMAS MATTAIR, Executive Director, Middle East Policy Council
Could we first talk a little about the terms of the deal itself? The president said that in year 13 of this deal, Iran's breakout capacity would be shortened. For example, I see that Iran will not enrich uranium beyond 3.67 percent for 15 years, and will ship out all spent fuel from the Arak reactor for 15 years. So if those two pathways are closed for that length of time, how could their breakout capacity be shortened by year 13?
DR. MILLER: It means shortened relative to what it would be during the terms of the agreement — in other words, shorter than a year. The reason is that, at that point, Iran would be able to put more advanced centrifuges into Natanz. And the combination of those as they grow in number would allow them a breakout capability that would shorten the time from the one year it would be during that first 10 years. While the centrifuges would be vulnerable at Natanz to potential attack, their numbers and sophistication would allow them a breakout capability that would, over time, shorten back down from one year toward the numbers that we face today. The big difference, of course, even if they achieve that shorter breakout, would be that the verification provisions — including the inspection of suspect sites — would still be in place.
DR. MATTAIR: So if they violated the terms of the agreement and started enriching beyond 3.67 percent with their advanced centrifuges, they could create enough fuel faster, and that would diminish their breakout time?
DR. MILLER: That's right. And they don't need to go to the intermediate level of 19 percent or so in order to do that. They could arrange the cascades in a way that allowed them to go to highly enriched uranium more rapidly. It would be visible even without the inspection regime that we're talking about as part of this agreement, which will continue. And it would take time for them to do that. It's not as if they could suddenly arrange a very rapid breakout capability. In addition, it would require them to do work on metallurgy and weaponization, which should by that time have been fully stopped for well more than a decade. As you know, we believe it's been stopped for a number of years as of today.
DR. MATTAIR: Another issue is the sequence of decisions that have to be taken from this day forward. For example, there will be a Security Council resolution drafted and voted on soon that would specify how sanctions are going to be lifted, and when and why. But it wouldn't be implemented for 90 days. First, you'd have to have an IAEA certification that Iran is complying. Also during that period of time, you'd have the congressional review.
Current estimates are that there's not enough support in the Congress to override a presidential veto, because it would take two-thirds of each house. Let's say that's wrong and a presidential veto was overridden. How would that affect implementation of the agreement, the Security Council vote, and how would that affect implementation of the agreement by others?
DR. VAKHSHOURI: Something that Iran has made clear is that they see the United States as one system, not separated into Congress, the president and the administration. Hence this deal is between the United States, five European countries and Iran. So, in my opinion, if even the Congress overrides a veto and the deal breaks down from our perspective here in Washington, D.C., the European countries, if they're convinced that Iran is complying with the deal, are going to start removing sanctions on their own. Then it's just the U.S. sanctions in U.S. jurisdictions. Then we have European companies putting on pressure, as happened during the ILSA sanctions, when Total and other European companies entered Iran.
DR. MILLER: First of all, and perhaps most obviously, it would be devastating to the credibility of the United States. And that would have broader and longer-term repercussions. The Iranians would have a choice, and the EU would have a choice. The Iranians have stated that, if other parties do not adhere to the provisions of the agreement, then they will not adhere to its provisions, either in whole or in part. So they would have a decision about what aspects not to adhere to, because presumably U.S. sanctions would remain in place and perhaps even be increased.
The EU and other parties would have a choice. I personally believe that there's no doubt that the sanctions regime that has been in place would fall apart, and our ability to persuade countries that have desired to be significant consumers of Iranian oil, including partners like India as well as those in the P5, would be likely to pursue arrangements for oil from Iran. We would find ourselves, in my view, very isolated.
DR. PILLAR: I agree with all that. Just to be very clear; that congressional scenario would kill the deal. It would deny the administration the ability to uphold the U.S. end of the deal, so it would not only kill the Comprehensive Joint Plan of Action, it would kill the Joint Plan of Action, the preliminary deal that was reached in November 2013, under which Iran has been subject to these various restrictions now for more than a year and a half. It would all be dead. Jim's absolutely right: for the Iranians it means they are released from all of their obligations. So we'd be going back to before the negotiations even began, with the major difference, as was pointed out, that the Europeans and others would not be signing up to the same sort of sanctions regime that we had before.
DR. MILLER: No international sanctions, no limitations on their program, no verification.
DR. MATTAIR: Right. So that's an alternative scenario to the passing of the deal.
DR. PILLAR: That's the alternative scenario, if Congress were to do that, yes.
DR. MATTAIR: Jim, what would you say to critics of the deal who claim that this undermines the U.S. ability to use force in the future on this issue. You said three times that we have that on the table. So would you just give us a scenario of a violation and the kind of U.S. military response that would be conceivable.
DR. MILLER: Obviously, the use of military force should be a last resort, not just in this case but in general. If we can achieve our aims without the use of force, it is less costly, less risky and more likely to be sustainable over time. Let me stipulate that. At the same time, the credible threat of the use of force can be an important part in making clear to the Iranians — not just during the course of this agreement but long term — that if they were to make a choice to pursue, not just nuclear enrichment but a nuclear weapons capability, that they would be subject to the use of force.
The question of when an infraction is serious enough to make that the case, obviously, would require a judgment by the president and should involve consultation with our partners and allies. At the point at which we believed it was inevitable that the only effective way to prevent Iran from achieving a nuclear weapon was the use of force, in my judgment, that's the time the use of force would be both appropriate and necessary.
DR. MATTAIR: A couple of panelists envisioned the possibility now of moderation of the Iranian regime and greater opportunities for negotiating, maybe, some resolutions to issues in Syria, for example, which is a key one. Do you think that is a plausible scenario we should be pursuing? Or are you really convinced that you expect much more aggressive, subversive behavior by Iran in the region? For example, Putin evidently called Obama yesterday or the day before to talk about cooperation on Syria. Is that a realistic prospect?
DR. MILLER: First of all, the opening of diplomatic channels is a positive. Let me stipulate that up front. The ability to have direct conversations and not talk only through intermediaries is useful and ought to help reduce the prospects for misunderstanding and miscalculation in the future. If that is extended and broadened over time, that would be a good thing. Second, in terms of the deal and how it relates to the broader agenda of a lessening of tensions and rapprochement even, I think Paul's initial point on this is fundamental: the nuclear deal should stand on its own, not be based on an expectation that it will be the start of a new age of U.S.- and GCC-Iranian relations.
Finally, nothing in this area would make me more pleased than if the Iranians made a calculation that because over time, as Sara referred to, they became more intertwined with the local and regional economies and the global economy, it was in their interest to behave less as they have in the recent past. That would be surprising to me, but the United States should be open to that possibility and be prepared to go down that path as well.
I think it far more likely, due to both its domestic political considerations and its current strategy — not a new strategy — that it will put somewhat more resources into the areas that I talked about. While the bulk of new resources will go to the domestic economy, that is something we should expect. We shouldn't interpret that to mean they have not acted in good faith or that we shouldn't have a deal. No. We should say that's what we thought was very likely, in my view — others could say plausible — and we should be prepared for that.
My view is that the best way to encourage Iran's positive behavior in the region is to ensure that our partners are capable of blocking any nefarious behavior they may pursue, whether directly or through proxies. But, we should be open to the possibility of a more positive relationship over time. It's just that that's not what I would bet on in the near term.
DR. KHOURY: I think we should consider two things. In the overall Saudi-Iranian rivalry that I talked about earlier, Iran is winning. Iran is ahead in the struggle for power in the region. It does not need to do any more than it is already doing.
If we look at Syria, despite four years of the bloody civil war there, Iran has certainly supported it, but it has not committed a large number of forces. And it will not, unless it comes to the encircling of the Alawites and the Assad regime, particularly protecting the border between Syria and Lebanon, which is very important to them. But that's a defensive posture rather than an aggressive one.
If you consider Iraq, they've committed some advisers, probably fewer than the American advisers who are there. They haven't overdone it. In Yemen, they have not committed any forces on the ground. They are supportive of the Houthis, but mainly politically. So I wouldn't focus on overly aggressive Iranian behavior. I would try to make sure that they're not pushed to a corner anywhere so that they need to become more aggressive.
For that matter, the elephant in the room that hasn't yet been discussed is the Israeli unhappiness with the agreement. I spoke of Saudi unhappiness, but Israel is unhappy. The threat of Israeli unilateral action against Iran has somewhat receded, but it's still there. It has to be considered because, theoretically — and this is something we've been thinking about for the past several years — if Israel decides on a military strike against the Iranian installations and Iran retaliates in a big way, the United States is in there. The United States will be then committed to a war with Iran, whether it wants it or not. So that threat has to be addressed. I don't think the Israelis are likely at all to do it at this point. Two years ago, maybe, but at this point — and certainly after this agreement — they're unhappy, but I don't think they'll do anything about it. But still, it is something that could cause considerable aggressive Iranian behavior, should it happen.
DR. MATTAIR: This deal enhances President Rouhani. Does it give Rouhani more to say about portfolios other than the nuclear portfolio? Does it increase his influence on matters such as Syria and Iraq, which are really not his portfolios now? Would that lead to potential cooperation on resolving them?
DR. VAKHSHOURI: Of course. I think this deal already strengthened the position of the moderates in the Iranian government. And I agree with Nabeel that after the deal, Iran's position has been strengthened even more vis-à-vis Saudi Arabia because the unity against Iran in the GCC will be weakened after the deal. And there are more Arab neighbors around Iran that want to have cooperation or get closer to Tehran. They will be less eager to engage in the anti-Iran unity that we were seeing a few months ago.
With regard to energy, I know that they have already started to expand their energy activities in Iraq and in Yemen, particularly. They are trying to build refineries and to supply oil, refined petroleum products and perhaps electricity to these countries in the near future. And the prosperity of particularly Iraq is very important for Iran.
There have been some arguments that maybe there is going to be unity between Saudi and Iran against Iraqi oil production. A major game-changer in the oil market in the future will be potentially massive Iraqi production. But I don't think this is going to happen because the prosperity of Iraq is really important for Iran. So, on the side of the energy politics and diplomacy of Iran, I think they have already started and are trying to strengthen their influence in these countries.
DR. PILLAR: It is well known that the running of foreign policy, including regional policy, in Iran does not work along clean bureaucratic lines. The Foreign Ministry does not control everything. The Revolutionary Guard has specific portfolios and influence in areas of importance to Iran and to us. Nonetheless, and in another respect in which Iranian politics tend to work a lot like politics elsewhere, Rouhani and Zarif have had to observe the principle that you need to choose which bureaucratic fights to pick and which ones to fight. They have placed enormous stakes on this nuclear deal in terms of time and effort and attention. If it is a success for them, that gives them a basis for extending their influence at least somewhat more in areas that have not really been their province so far.
This is not going to be a matter of wholesale seizing of accounts from the IRGC. There's always going to be a give and take inside Tehran, as in other governments. But it will involve an expansion of their involvement and their influence into other regional matters more than we've seen hitherto.
DR. MATTAIR: Nabeel, can you talk more about how each of the GCC countries sees this deal and how they will react? Do you think it will encourage or discourage Saudi Arabia from developing its own nuclear-weapons program?
DR. KHOURY: I hope it discourages Saudi Arabia. I think they're unhappy, but they really did not have any credible alternatives to suggest to the United States. It would be very hard to imagine if, right at the conclusion of this agreement with Iran, Saudi Arabia were to launch a nuclear program unrestricted and potentially aimed towards weaponization. It would be very hard to expect the United States and Europe, the P5+1, to ignore a move like that by Saudi Arabia. I think the Saudis would make some noises; they would try to get some compensation for their unhappiness over the deal. But I don't think they would go for a nuclear weapon themselves. Both they and the Israelis would have to give it some time — at least a year or two — to see if the implementation of the agreement begins to take effect seriously. That would delay any aggressive moves on either of their parts.
The reaction from Saudi Arabia has been somewhat muffled disgruntlement and polite acceptance of it — saying yes, well, it's better than war. We'll see how it goes. You can tell they're unhappy, but they're not coming out full-thrust against it. Only Israel has; Netanyahu and John Boehner, identical twins on this issue, have come out vociferously against it. Boehner will try on the Hill, but I think he will fail to derail the agreement. Netanyahu will try to support him. I don't think he would do anything on the ground — military action — but he would try to support the movement against the deal here in the United States. Again, I expect that to fail.
As you might expect, Oman is happy with the deal, happy with the fact that they have tried, although they're GCC members, to be somewhat neutral, specifically on Yemen, for example. They did not join the war effort against the Houthis. And they have mediated, and this is a vindication of their mediation. They're happy with the result. The UAE and Kuwait tend to follow the lead of Saudi Arabia; they are not that happy. But I think the UAE and Kuwait can both look forward to good relations with Iran to come out of this. So they will look on the positive side.
The Iraqis are generally happy, certainly the Shia majority and the government. Hezbollah in Lebanon and others who identify with the Iranian people have been reacting very positively. Arabs who identify with Iran are also looking at this as a victory for Iran, in the sense that they are going to be removed from the sanctions list and looked at more positively in the international community. Not to mention that the financial windfall is going to be significant. The Arab world is split along lines that you would expect, but there is a more positive than negative outlook on this agreement, I think.
DR. MATTAIR: Of course, there are differences across the GCC, but there are differences of opinion even within a single GCC country. Rich and Jim and I in Riyadh last May heard differences of opinion from Saudis about the nuclear deal. None of those countries is monolithic. But we also know that they're as concerned about the geopolitical implications of the deal as they are the technical details. They're concerned that the United States wanted the deal so much that it will acquiesce in Iranian aggression in the region.
That takes us to the U.S. relationship with GCC countries and the kinds of promises that were made at Camp David and how to bolster their conventional defenses. What have we agreed to, and how will that reinforce and protect the relationship with partners that are doubting us?
DR. MILLER: I'll be glad to go over the list again: to cooperate more on counterterrorism, especially against Daesh and al-Qaeda, protect critical infrastructure, strengthen border and aviation security, combat money laundering and terrorist financing and interdict foreign fighters. As I suggested, efforts are already underway on cybersecurity, air and missile defense, and maritime security as well, that in my view should be bolstered. Some of those go back not just years but decades, particularly on missile defense, and it has been very challenging to take cooperation to the next level, not just arms sales, which have occurred, of course, but cooperation. I'd like to see greater GCC cooperation and the sharing of information that will provide a more effective ability to do maritime interdiction when necessary, to do air and missile defense and, for a very challenging area, to improve the posture on cybersecurity and counterterrorism as well.
DR. MATTAIR: Nabeel, you doubted that Israel would take overt military action against Iran, but, Paul, you're suspicious about the potential for other Israeli action. Would you be surprised if something broke out between Israel and Hezbollah before the summer's over?
DR. PILLAR: I would not be surprised. I'm not predicting it; I'm not even saying it's likely. Certainly, Israeli policy makers have many other considerations to bear in mind. And there would be a lot of domestic political costs for the Israeli government if they got involved in a new war with Hezbollah. That would all weigh very heavily on them. It's not just up to Iran or Iran and the United States in terms of how these Iranian-related issues we're discussing today play out. Other actors — and Israel certainly is one of the more important ones — have a piece of the action, whether it's a matter of intentional decisions to go to war or simply weighing the risks in a way that makes an accidental outbreak of, say, new hostilities with one of the other actors, such as Hezbollah, more likely.
To the extent that it may have, shall we say, the bonus effect of undermining the viability of the nuclear agreement and its continued implementation, that would not be a disadvantage in the view of the Netanyahu government. Again, I do not predict that would happen. I'm not even saying that would be the primary motivation if it does happen. It might just be a matter of doing things that are a little more rather than less risky than they might otherwise have done. And I agree with Nabeel: a bolt-from-the-blue Israeli attack on Iran is unlikely for the time being.
DR. MATTAIR: Is it really the possession of a nuclear weapon by Iran that bothers Israel, or is it the way that would increase Iran's freedom of movement and the way it could challenge Israel on the ground throughout the region that bothers Israel the most? Is there a way for the United States to address those concerns through increased defense relationships with Israel?
DR. PILLAR: There certainly is in Israel — and I'm talking about the population, not just the government — an understandable concern about a possible Iranian nuclear weapon. Just as a matter of geography, as a matter of hateful Iranian rhetoric and everything else, we can all sympathize with that concern. That is not the main motivation for the position that the Netanyahu government has taken. If that were the main motivation, they'd be supporting this agreement rather than opposing it, when you simply compare it with the alternative of no agreement and everything that implies, as Jim and I discussed in response to your earlier question about Congress shooting it down.
The Israeli government does not want to see Iran as an unfettered competitor for influence in the Middle East. It's a large country, the other big country besides Turkey that's non-Arab. And it's not only a competitor for influence in the Arab world and elsewhere in the region; it's one that will continue to be highly critical of Israeli policy in a way that does not get restrained by any relationship with the United States. I would suggest that the Gulf Arabs rein in their rhetoric about Israel partly because of the nature of their relations with us.
The Netanyahu government also looks to Iran — to the specter of the Iranian threat — as one of the main rationales for sustaining major U.S.-Israel security cooperation and support. It also does not like the idea of U.S.-Iranian cooperation on anything; that undermines the whole concept that Israel is the only worthwhile partner for the United States on anything in the Middle East.
Last, but not least, all we have to do is look at the rhetoric virtually any day coming from Mr. Netanyahu and his government. The Iranian threat is the all-purpose go-to diverting topic whenever something else comes up — like the occupation of Palestinian territories — that they don't want to talk about. The response always is that the real problem in the Middle East is Iran, especially its nuclear program.
That gets lost to the extent that an agreement like the one that was just signed becomes successful. By every indication, those are the motivations. But, again, just consider the alternative between this agreement and no agreement. If the motive really had to do chiefly with an Iranian nuclear weapon, the Israeli policy would be the opposite of what it is.
DR. MILLER: Forty years ago, arguably even 30 years ago, Israel could realistically fear a combination of Arab states that could come together and pose a conventional military threat to it. That is far less foreseeable today, including vis-à-vis Iran, including vis-à-vis the GCC. The existential threat to Israel in the region, in my view, is an Iran with a nuclear weapon. Their leadership has not accepted Israel's right to exist. And, whatever you think about prudence prevailing in the event of a crisis or in the event that Iran were to get to the capability of having a nuclear weapon, if you're an Israeli you've got to take that very seriously. I do think it's true that an Iran with a nuclear-weapons capability would be likely to act out in ways that were dangerous to Israel — and to Iran itself.
DR. MATTAIR: Who are the countries and companies that are going to benefit the most from the successful implementation of the deal and the lifting of sanctions? Let's say the U.S. trade embargo is going to stay; no matter what, that's not being lifted. So who's going to be there, what kinds of capital and technology do they have, and how effectively are they going to rehabilitate the energy infrastructure?
DR. VAKHSHOURI: All types of companies could benefit from sanctions removal, European and Asian companies, in particular. Iran has a young population and they're consuming all types of goods: tourism, energy and industrial products. Something that is significant in this deal is that the subsidiaries of U.S. companies outside of the United States can invest in Iran. This is a slight difference. We have talked to some oil companies. They think that if Iran's compliance goes successfully and the sanctions are removed, they might be able within the next two or three years to go to Iran and start investing in the Iranian energy industry. Everybody could benefit from this type of business, Europeans mostly.
But something has always interested me. What if there were a business opportunity between Iran and Israel? Could that lay the groundwork for raising profits and creating higher stakes and interest for both countries to engage in a business relationship? Can anyone imagine that there could be Israeli businessmen in Tehran?
DR. KHOURY: They already know the lay of the land. There is a very positive potential relationship between Israel and Iran long term. Right now, it looks like pie in the sky, considering the enmity, the hostility, the mutual suspicion. But, when you think in terms of business, economics, even regional interests, ultimately their interests coincide. They just have to get beyond this phase they're in right now. I don't think we'll see it anytime soon, but ultimately yes.
DR. VAKHSHOURI: Iran is really in need of water desalination, and this is a technology that Israel is a master of. There are many economic benefits that theoretically the two sides could work on as a starting point.
DR. MATTAIR: About the nature of the regime, what are the prospects for successful implementation of the deal having an impact on the Iranian population such that it brings about a change in the nature of the regime? Is that a possibility?
DR. VAKHSHOURI: I don't think that a change in the government is something that will be brought about through economic prosperity. But imagine if Iran breaks out of the isolation and we have lots of foreigners in Iran, investors with long-term mutual interests — Western and other foreign companies. Of course, certain behaviors are going to change. But I don't see this necessarily as the cause of a regime change or a massive behavior change.
DR. MILLER: Interaction with the West and with the rest of the world does have internal political effects. They are slow; they are very gradual. It's nothing that's going to overthrow this regime. I would agree with that.
This is one of the dynamics that is often cited, I think appropriately, as the basis for opposition by hardliners within Iran to the agreement and to the possible increased relations with the West that may stem from it, given that the hardliners do not want to see that kind of political evolution. There is that sort of resistance. But to the extent that increased relations — whether economic or diplomatic or both — can take place despite that kind of hard-line opposition on both ends, there will be a gradual political set of effects.
DR. VAKHSHOURI: Some people wonder whether the Iranian people want regime change or not. Most Iranians voted for the current president. Are the Iranian people looking for political change? People were dancing in the streets in favor of the P5+1 negotiations and the result of the final nuclear deal. The deal happened and the majority of Iranians never said, OK, now that we have a deal, we want the regime to change. People were just happy, celebrating, thanking their foreign minister. I don't know if there are any among most of the people in Iran who have that intention. Particularly since President Rouhani, we don't see any particular signs of a desire for regime change.
DR. PILLAR: I agree. There isn't an appetite for a new revolution. There are desires for change of the sort that will bring about economic improvement, and lifestyles in Iran during the history of the Islamic Republic have already loosened up a great deal over the last three decades. But most Iranians are not hankering for a new revolution and all the disorder that would bring.
Q: I agree with a lot of what has been said about the potential for some kind of Israeli-Iranian rapprochement. There's a big obstacle in the way, but it's an obstacle that can be resolved. There will never be full rapprochement with either Iran or the Arabs until the Palestinian issue is resolved. The Palestinians have kind of been slow-walking their way to statehood, through international law, the International Criminal Court, and so forth. Look at what happened in the dispute between Israel and the Palestinians in FIFA over the treatment of the Palestinian athletes. That was resolved through negotiation between the Palestinians and the Israelis. We're going to be seeing more of this. And Israel at some point has to accept that it cannot be integrated fully into the region until the Palestinian-Israeli conflict is resolved in a way that's acceptable not only to the two sides, but to the region and to the international community.
Q: I've seen reports from different countries and businesses lining up to do business with Iran. Is the United States missing an opportunity here with companies that aren't able to do that? Or should the United States be doing more in terms of trying to open up trade with Iran?
DR. VAKHSHOURI: I agree with you. There's a lot of great potential for American businesses. They haven't been in Iran for almost 30 years, directly and significantly. Iran is a big consumer market, from goods to energy investment. Already we know that there are many oil companies interested in Iran because of low production costs and because there are not many accessible oil resources for development in the world. Most of the available resources are natural gas.
The complexity of the rocks in Iran is low, and the rate of return on its oil and gas resources is high, so there is a lot of interest among the international oil companies to invest in Iran. There is huge interest from American companies. Even if Iran complies with the deal, only the U.S. secondary sanctions will be removed; U.S. companies will still be subject to primary sanctions. Previously, because of the Iran Sanctions Act, Chinese, Russian, Japanese, Indian or European companies easily took the place of American companies. If American companies were in Iran, it would be stiff competition for the other companies.
I would like to add something about the Revolutionary Guard and the hardliners. I think they actually benefit from the deal. The removal of the sanctions will partially involve the removal of some of the Revolutionary Guard commanders from the lists of sanctioned individuals. They will be able to resume their businesses again. So I think that it is not necessarily the case that the Revolutionary Guard is truly against the deal.
Q: I'm interested to hear what the panel thinks about the lifting of the arms embargo in five years and the purchasing of ICBMs. Those both seem to be major sticking points that a lot of politicians have brought up.
DR. MILLER: The provisions call for the lifting of a conventional-arms embargo in five years and the lifting of a ballistic-missile-technology embargo in eight years. Nothing in the provisions calls for the transfer of ICBMs to Iran. But I would note that Iran in its own indigenous work has made significant progress on a space launch with two different vehicles, the Safir and the Simorgh. So it is moving towards a capability that will effectively give it that long-range-missile capability, even with this agreement in place.
My view is that while it was a great addition to the prior framework to get a five-year extension for conventional weapons and an eight-year for ballistic missiles, the ballistic-missile extension is going to have a relatively minor impact because of how far Iran has proceeded indigenously. On the conventional side, I think it will have a modest impact. These are good things to achieve. I'm glad that we got them, but I wouldn't overestimate their impact in the near term or when they expire — compared to the other provisions of the agreement — in being able to have the restrictions on the Iranian nuclear program and the verification-in-place, not just for 10 or 15 years, but indefinitely. To me, those are, while useful, not as important as the core provisions of the agreement.
DR. PILLAR: I agree with that and just want to add a couple of things. The main legitimate reason this became an issue toward the end of the negotiations is that it was a subject mentioned in one of the UN Security Council resolutions that is now outdated and has to be revised or addressed somehow. In the existing UN Security Council resolution, the conventional-arms embargo as well as the restrictions on missile technology were all part of the sanctions related to the nuclear program, along with pistachios and caviar and banking and everything else.
So it is very understandable, or at least unsurprising, that the Iranians themselves and, of course, the Russians and Chinese, said that this whole deal is supposed to be about lifting nuclear-related sanctions in return for the restrictions that the Iranians accepted. Therefore, the Iranians made, in my judgment, a significant concession in going along with the five-year, eight-year, thing as a compromise. Fortunately, because you can just count years, there's a basis for splitting the difference and having a compromise.
To accentuate what Jim said, the indigenous capabilities — on both missiles and conventional arms — are such that the embargo, even when it expires, isn't going to make a whole lot of difference. Tony Cordesman, who studies these things quite closely, had a good formulation the other day: this is not an arms race that's about to take place, despite the indigenous capabilities; it's an arms race that the Iranians have already lost. He was referring to the overall military balance with regard to the Saudis and the UAE, not to mention the Israelis on the other side in the region. So this was a necessary compromise. It came up because it's in the UN Security Council resolutions. But I don't think we should be too worried about how it came out.
Q: At the end of the negotiation, Russia and China differed from the other members of the 5+1 about lifting the arms embargo. What can be the benefit for Russia and China —they seemed to want to lift the arms embargo?
DR. MILLER: By the principle of Occam's razor, I'd say that, while there are geostrategic calculations, Iran is going to have $150 billion worth of sanctions relief in its pocket. My guess is that Russia and China would be interested in arms sales sooner rather than later, and in being able to increase what they already have under consideration. So there's a self interest. In addition, as part of the negotiation, it's unsurprising to see them, in general, going in a way that is intended to protect Iran's interest more broadly.
DR. KHOURY: I agree with Jim. Although I'm positive about the agreement and what one could build with it, you have to consider that the $150 billion and the increasing yearly income that's going to be generated in Iran as a result of the lifting of the sanctions could go either way. If relations do not improve between Iran and the United States and between Iran and Saudi Arabia, and the conflicts in the region keep getting worse, the conventional weaponry of Iran will improve, certainly.
In the United States, the president and others are saying, if the agreement doesn't go well, all options that existed before still exist. The Iranian internal dialogue must be going along the same lines: if this doesn't go well for them, the same options they had before will be on the table again in a few years. I'm one of those who never considered the nuclear weapon to be the real threat from Iran; it was the conventional one. I disagree a bit with Paul on that; I don't think they're losing the race.
If you count tank for tank and F-16s for MiGs, yes, you can say Saudi Arabia and allies are ahead. But in terms of real fighting power on the ground and in terms of influence in the region, Iran is winning, not Saudi Arabia. But Saudi Arabia has to throw all its weapons and all its bombs against the barefoot Houthi soldiers in Yemen. It's not necessarily winning, except perhaps in carving out an enclave in Aden for President Hadi to be able to return. They've been humiliated by the Houthis before, in 2009 and 2010. In Iraq, in Syria and in Lebanon, Saudi influence is far less than that of Iran.
You have to look at both sides of this. If things go well in the relationship and in terms of conflict resolution, we are headed towards a positive outcome five or 10 years from now. If not, then Iran's conventional weaponry and their capabilities will have improved. Rocketry is the main thing, whether for Hezbollah or Iranian forces. Rocketry is what they depend on. They don't depend on an air force. This could go well or it could go badly. So conventional weaponry — the missiles, whether they have them or not, whether they go to longer-range missiles — that's very important.
DR. MATTAIR: Could I ask you, Ambassador Schmierer, to say a few words about how this started and the role that Oman played, since you were the ambassador during that time and were receiving the American diplomats who were engaged in negotiations?
AMB. SCHMIERER: This all got started when we were trying to get the American hikers out of Iran, which we successfully did during my tenure, with the facilitation and mediation of the Omanis. We Americans were not engaged directly with the Iranians at that time, but we were talking to the Omanis, who were engaged with them.
As it played out, there were two kinds of dynamics. All the panelists have referred to them, and I would encourage people to keep them in mind as we look at where things might go with Iran. One was a complete lack of confidence in the United States. From the Iranian point of view, Washington didn't have credibility or was not seen to be trustworthy.
One of the things we had to do, in a subtle way, was to convince the Iranians that the United States was willing to be a reasonable and reliable interlocutor. They would talk about the Iranians that we were holding, and of course, we were trying to get the hikers out of Iran. In a number of ways, we were able to show them that the relationship didn't have to be entirely based on animosity, but that we were willing to be fair and reasonable with them and that we expected them to do the same with Americans at the personal level. I think, ultimately, that convinced them to at least pursue what we were trying to achieve.
Second, you always hear references to the Iranian bazaar, as if there was always an effort by Iran to try to look for quid pro quos or linkage and to try to get things that weren't associated with the issue at hand. We were very determined and very clear that there would not be linkage or a quid pro quo, that we had principles — we treat people fairly; we expect our people to be treated fairly; and we would not bargain as if in a kind of bazaar. That took a while to sink in.
I think we made some progress in those two regards that ultimately helped the effort to launch an actual dialogue that has resulted in the deal. I would just say that it's important that we continue to build on the sense that, one, we are trustworthy and reliable and will operate on an individual and human level in a fair way, and, two, that we will stick to our principles and not compromise for expediency. I think if the Iranians continue to be convinced of those two things, there is the potential for positive developments going forward.
I've learned a lot just hearing what the panel has had to say. But, to put that into the perspective of my experience, I'm hopeful that what we accomplished in terms of dialogue and a clearing of the air in recent years might be something we can build on.