Biden administration’s COVID response expected to impact midterms

Even good news is not so good. No, Iranian officials haven’t left the room in anger yet, but they have good reason to keep talking, according to Eurasia Group’s Henry Rome – even if they have no intention of working a deal. The negotiations, warns Rome, “provide political cover to advance the nuclear program.”

They make it harder for the United States and Europe to exert further pressure on Iran or for Israel to target its nuclear facilities and scientists. They give Russia and China a reason to defend Iran’s position.

They also protect (what remains) Iran’s economic stability by ensuring that sanctions do not immediately become stricter. And perhaps, Tehran will reason, the Americans could improve their offer.

Calculation (erroneous?) of Iran

But the Iranian government, now led by Ebrahim Raisi, a president more openly hostile to the West than his predecessor, may feel it has little to lose by continuing to say no.

After all, Iran’s ‘economy of resistance’ has already survived harsh sanctions, and the government believes further protests inside Iran over economic hardship can be contained – or, if necessary, crushed. .

What if Donald Trump becomes President of the United States again in three years? Won’t he just tear up everything Iran has signed, just like he pulled the US out of the last nuclear deal?

May be. But reviving the nuclear pact, according to Rome, “is the best option for Iran’s economic stability.”

A new deal could free up $100 billion in frozen foreign exchange reserves. This would allow Iran to sell much more oil at market prices. This would attract new trade and investment to the country.

This is a plus for Iran’s cash-poor government and its long-suffering people. Without a deal, Iran faces the indefinite extension of US sanctions, which could one day spark public unrest that Iran’s security forces cannot contain.

Escalating tensions

The Biden administration — focused for now on COVID, domestic political headaches, inflation, China and Vladimir Putin — is well aware that Iran’s willingness to talk may not offer much. be no hope of breakthrough. US and European officials have publicly stated that a deal should be in “weeks, not months”. That deadline could be extended, but only if real progress offers credible hope of a deal.

In short, if there is no deal by late spring, it will be time for all parties to prepare for trouble. A breakdown of the talks will persuade the Biden administration to tighten Iran’s economy even further. Iran could stockpile enough highly enriched uranium for several bombs, spin up more advanced centrifuges and get closer than ever to a nuclear weapon.

If so, Rome warns, Israel could be ready to go back on the sidelines “with cyberattacks and sabotage inside Iran against military, economic and nuclear sites, aimed at degrading Iranian capabilities and to destabilize the government”. Israel could also conduct military exercises that would put the Middle East — and global oil markets — on edge.

The risk of military conflict, deliberate or accidental, cannot be ignored. In fact, Eurasia Group pegs the probability of direct Israeli and/or US airstrikes on Iranian nuclear facilities in 2022 at 20%. Considering the stakes, that’s a frighteningly high number.

In short, there’s a reason this story features in Eurasia Group’s 2022 Global Top Risks Report.

About Troy McMiller

Check Also

Week Ahead: Stocks Waiting Until the FOMC

Investors understand – the Fed is synonymous with business All eyes are on the FOMC …