The fact that the IAEA has found that Iran is in full compliance with the terms of Implementation Day is both a serious step forward in preventing a nuclear arms race in the Gulf and the Middle East, and a potential step forward in ending the tensions between Iran and the United States as well as Iran’s tensions with its Arab neighbors.
The Positive Impact of Implementation Day
The fact that Implementation Day has occurred is real progress, regardless of the inevitable partisan political debate that has already begun. The International Atomic Energy Agency (IAEA) has certified that Iran met the following terms:
Reduce its supply of low-enriched Uranium from 12,000 kilograms to 300 kilograms of UF6— a 98 percent reduction.
Fabricated all Uranium enriched to 5% through 20% into fuel plates for its Tehran Research Reactor, transferred it out of Iran, or sold and delivered it out of Iran.
Reduced its active centrifuges by about two-thirds, from some 19,000 to less than 6,000 – although the IAEA has not determined the actual number of centrifuges Iran has in inventory. As a report by CSIS notes, “The report makes clear that the IAEA has not determined the number of centrifuges Iran has made. Iran merely had to state the number of rotor tubes and bellows it now has and allow the inspectors to count and number them. The IAEA did not determine, or have the means to determine, if Iran provided a complete declaration of all the rotors and bellows it possesses. How this issue of completeness will be addressed remains unclear.”
Limited the operation of its centrifuges at Natanz – its primary facility capable of making weapons grade material to 5,060 operational first generation IR-centrifuges in no more than 30 cascades. Storing the rest of some 16,000 first generation and 164 more advanced IR-2m and 164 IR-4 centrifuges.
Halted all Uranium enrichment at the Fordow Fuel Enrichment Plant (FFEP), its underground facility in a mountain. Cut the number of its centrifuges at Fordow – from 9,000 to 2,800-3,000 centrifuges, none of which will remain operational. Remove all fissile material from the site, and convert it a nuclear research facility.
Agreed to limit all Uranium enrichment to the 3.67% needed for nuclear power reactors for 15 years vs. the 90% enrichment generally described as weapons grade material.
Ceased putting Uranium through, and conducting R&D on its more advanced IR-2m, IR-3, IR-4, IR-5, IR-6, IR-7, and IR-8 centrifuges, and not build or test additional types – except for one IR-4, 10 IR-4 centrifuge cascade, and one IR-5, one IR-6 and potentially one IR-8. Give the IAEA full details to ensure the proper definition of each such centrifuge systems. Agree with JCPOA participants to a procedure for measuring the output of the IR-1m, IR-2m centrifuges.
Provide a full long-term enrichment and R&D plan to set the terms for further control and inspection.
Agreed to only conduct mechanical and Uranium testing of its centrifuges at its PFEP facility and the Tehran Research Center.
Declared all Uranium Ore concentrate and allow IAEA inspection.
Redesigned its heavy water reactors at Arak so it cannot produce weapons grade Plutonium, and limit its supply of nuclear grade Heavy Water to 130 metric tons for all enrichment activity.
Agreed not to build any other reactor capable of producing weapons grade Plutonium for 15 years.
Began new and more demanding monitoring and verification by the International Atomic Energy Agency (IAEA) under the Additional Protocol to the Safeguards Agreement, and Iran’s Subsidiary Agreement. IAEA inspectors will be granted regular access to all major nuclear sites and state a process of monitoring Iran’s entire nuclear infrastructure from its uranium mills to centrifuge storage facilities, for up to 25 years.
Gave UN inspectors the right to enter any suspect facility in Iran within a maximum period of 24 days. Iran can present reservations to the IAEA’s requests to visit suspicious facilities, but a special arbitration committee has been established to make a decision over inspections that includes members from six world powers, Iran and the European Union.
Allowed the IAEA to install new on-line inspection machines with electronic seals.
Accepted – and continue to accept – major new international controls over every aspect of its nuclear-related procurement activities.
Accepted – and continue to accept – terms that allow all of the nuclear sanctions to be resumed within 65 days if it violates the terms of the agreement
Agreed to grant IAEA inspectors full daily access to Natanz, as well as give them permanent working spaces and facilities near all key Iranian facilities.
Important as these steps are, however, they are only a beginning in both dealing with the challenge of Iran’s nuclear weapons efforts and the broader strategic challenges involved.
The Continuing Risk of Proliferation
For all Iran has given up, there are still serious uncertainties regarding Iran’s future capabilities to develop nuclear weapons. A previous IAEA report – Final Assessment on Past and Present Outstanding Issues regarding Iran’s Nuclear Programme , 2 December 2015 strongly indicated that Iran had continued to lie about continuing a nuclear weapons program through at least 2009, and had reached the nuclear weapons threshold in every major area of research and weapons grade production capability.
Key portions of the report stated that,
Information available to the Agency prior to November 2011 indicated that Iran had arranged, via a number of different and evolving management structures, for activities to be undertaken in support of a possible military dimension to its nuclear programme. According to this information, the organizational structures covered most of the areas of activity relevant to the development of a nuclear explosive device. The information indicated that activities commenced in the late 1980s within Departments of the Physics Research Centre (PHRC) and later, under the leadership of Mohsen Fakhrizadeh, became focused in the early 2000s within projects in the AMAD Plan, allegedly managed through the ‘Orchid Office’. Information indicated that activities under the AMAD Plan were brought to a halt in late 2003 and that the work was fully recorded, equipment and work places were either cleaned or disposed of so that there would be little to identify the sensitive nature of the work that had been undertaken. Eventually, according to the information, a new organization known as the Organization of Defensive Innovation and Research29 was established by Mohsen Fakhrizadeh and based at the Mojdeh Site near Malek Ashtar University in Tehran.
…The Agency assesses that, before the end of 2003, an organizational structure was in place in Iran suitable for the coordination of a range of activities relevant to the development of a nuclear explosive device. Although some activities took place after 2003, they were not part of a coordinated effort.
…The Agency also had indications of instances of procurements and attempted procurements of items with relevance, inter alia, to the development of a nuclear explosive device. The Agency does not have information regarding any such procurement attempts after 2007.
…By November 2011, the Agency had received information from Member States indicating that, prior to 2004 and between 2005 and 2009, Iran had undertaken computer modeling studies of various component arrangements, which were only specific to nuclear explosive configurations based on implosion technology. Open source information also indicated that Iran had conducted additional studies relating to high explosives modeling, which the Agency also considered significant in the context of both hydrodynamic simulation and code development studies. The modeling described above has a number of possible applications, some of which are exclusively for a nuclear explosive device.
Additional information received by the Agency from Member States since November 2011 is consistent with the information previously available to the Agency. Additional information was also received by the Agency from a Member State regarding a project in 2009 to determine equations of state for materials of concern.
…The Agency assesses that explosive bridgewire (EBW) detonators developed by Iran have characteristics relevant to a nuclear explosive device. The Agency acknowledges that there is a growing use of EBW detonators for civilian and conventional military purposes. The Agency also assesses that the multipoint initiator (MPI) technology developed by Iran has characteristics relevant to a nuclear explosive device, as well as to a small number of alternative applications.
Information available to the Agency in relation to hydrodynamic testing indicated that Iran made and installed a large cylinder at the Parchin military complex in 2000. Other information indicated that this cylinder matched the parameters of an explosives firing chamber featured in publications of the foreign expert. The information available to the Agency, including the results of the analysis of the samples and the satellite images, does not support Iran’s statements on the purpose of the building. Activities implemented under the Road-map have established that the cylinder is not in the main building of interest. The Agency assesses that the extensive activities undertaken by Iran since February 2012 at the particular location of interest to the Agency seriously undermined the Agency’s ability to conduct effective verification
…Based on all the information available to the Agency, including from the implementation of the Road-map, the Agency assesses that Iran conducted computer modeling of a nuclear explosive device prior to 2004 and between 2005 and 2009. The Agency notes, however, the incomplete and fragmented nature of those calculations. The Agency also notes the applicability of some hydrodynamic modeling to conventional military explosive devices
This past is a clear warning that the success of the agreement will be heavily dependent on Iran’s future perceptions of outside threats, its deep internal political debates over the JCPOA and Iran’s civil versus military priorities, and its perception of how seriously all of the members of the P5+1 and outside states take its full compliance with all the terms of the agreement.
This depends on the future level of diplomatic effort, the support of the IAEA, the level of outside intelligence effort and analysis, outside willingness to reimpose sanctions if the agreement is violated, and the full institutionalization of a complex agreement that will take a major international effort to enforce.
It fully depends on the IAEA and other efforts that are part of the agreement have in detecting any violations or efforts to “game” the terms of the agreement. Much depends on a new and untried inspection agreement and set of controls set up under the agreement, intelligence support from the P5+1 and other outside states, and the willingness to actually enforce the agreement over time.
Implementation day does not mean Iran has lost any of the technology that made it a threshold state ready to demonstrate that it could produce a fissile explosion once it got sufficient amounts of weapons grade material, does not resolve any of the uncertainties regarding how far it had gotten in actual nuclear weapons design, does not stop it from conducting covert research into weapons design, and leaves the possibility that it might create a new set of covert facilities.
It will not stop Iran from learning more about nuclear technology from its nuclear power plants and research reactors, If Iran is willing to take further risks of detection, it will be able to conduct more centrifuge experiments and design activities. Much will also depend on the as yet undefined procurement controls in the agreement, and Iran may be able to import new nuclear technology.
The Civil Side of the Broader Strategic Challenges
Iran’s Nuclear Programs, however, are only part of the strategic challenges that creating any broader détente between the US and Iran, and Iran and its neighbors, create. It is critical to understand just how far the distance is to any broader settlement, and how many directly related issues could block such progress or push Iran back towards a nuclear weapons program.
Iran’s Domestic Politics and Coming Elections
Iran’s political leadership is clearly divided over the nuclear issue, the priority for civil versus military efforts, and how to treat the United States, the West and Iran’s neighbors. Its Supreme Leaders has been negative to cautious over every aspect of the nuclear agreement, and while he seems to be playing various sides off against each other, he had shown little over sympathy for easing relations and more support for a hardline and pro-military position.
The Iranian Revolutionary Guards Corps (IRGC), senior clergy, and hardline figures support confrontation, continued attacks on the Great (U.S.) and lesser (Israel) Satans, efforts to expand Iran’s military forces and regional influence, and confrontation with Saudi Arabia and most of Iran’s Arab neighbors. Missile tests and firing missiles near U.S. ships are only some of the most recent signs of their attitudes.
They also are deeply committed to maintaining and expanding Iran’s military role and influence in neighboring states like Lebanon, Syria, and Iraq and to supporting Shi’ite elements in nations like Bahrain, Yemen, and Saudi Arabia. Iran does deny that it provides major economic support for the Assad regime in Syria, but some analysts have estimated this cost at over $10 billion a year and a few have estimated that it is well over $20 billion.
President Rouhani, Foreign Minister Zariv-Khonsari, and many other Iranian political leaders focus more on Iran’s need for economic recovery and civil stability, have been key voices in recent actions like releasing captured U.S. sailors and prisoner exchanges, and may well want detente and give Iran’s access to the global economy priority over nuclear weapons and any form of military confrontation.
However, the nature of such power struggles, and the intentions of key Iranian figures, are anything but clear. It is impossible to know or predict how these struggles will play out over time, or even under the political, economic, and security pressures of the coming year.
It is also important to understand that Iran faces two critical elections on February 26th – a little more than a month after Implementation Day – that could tilt the current balance of political power substantially. One is for the 290-seat Islamic Consultative Assembly – the Iranian Parliament. The hardliners and Supreme Leader have used their control of nominations to eliminate many challengers in past elections and it is far from clear what will happen in this one.
The second election will occur the same day, and is for the Assembly of Experts. This is an 88-member body of Iranian theologians or Mujtahids where “hardliners” and “moderates” have already lined up in a more or less open power struggle. They are critical because their key function is to supervise, dismiss and elect the Supreme Leader and within the shortest possible time if he dies. The current Supreme Leader, Sayyed Ali Hosseini Khamenei is 77 years old and seems to be ill – possibly with prostate cancer. In practice, any election for the next Supreme Leader – who controls the military, IRGC, justice system, police, intelligence and security service, and media and can veto action by any other part of government – is far more important than the election for the Islamic Consultative Assembly.
The practical problem is that “experts” can take sides as to how this will play out over time, but they have no empirical or real world basis to predict either a negative or positive future.
Economic Issues and Lifting Sanctions: Arms, Civil Needs, or Simply Compensating for Low Petroleum Export Revenues
The impact of lifting nuclear sanctions is equally unclear. Press reports talk about it freeing $100 billion in Iran’s international assets, and some strong opponents of the JCPOA talk about as much as $150 billion. The NSC and U.S. Treasury put the money under $55 billion, once existing obligations are subtracted, and note that it may take months or longer for the money to be freed, non-banks to freely deal with Iran, and the structure of Iran’s finances to stabilize.
The past impact of sanctions is summarized as follows by the U.S. Energy Information Agency,
The sanctions have prompted a number of cancellations and delays of upstream projects. The United States and the European Union (EU) enacted measures at the end of 2011 and during the summer of 2012 that affected the Iranian energy sector more profoundly than any previously enacted sanctions. The sanctions impeded Iran’s ability to sell oil, resulting in a near 1.0-million b/d drop in crude oil and condensate exports in 2012 compared with the previous year.
Iran’s oil and natural gas export revenue was $118 billion in the 2011/2012 fiscal year (ending March 20, 2012), according to the International Monetary Fund (IMF) In the 2012/2013 fiscal year, oil and natural gas export revenue dropped by 47% to $63 billion. The IMF estimates that Iran’s oil and natural gas export revenue fell again in the 2013/2014 fiscal year by 10% to $56 billion. The revenue loss is attributed to the sharp decline in the volume of oil exports from 2011 to 2013. Iran’s natural gas exports increased slightly over the past few years. However, Iran exports only a small volume of natural gas, because most of its production is domestically consumed.
Nonetheless, international sanctions have also affected Iran’s natural gas sector. Iran’s natural gas sector has been expanding, but production growth has been lower than expected as a result of the lack of foreign investment and technology. However, in 2014, Iran experienced higher production growth than usual because new phases at the South Pars natural gas field came on line.
There are sharply different estimates of how soon Iran can increase exports, it’s sustainable production capacity, and what time, investment, incentives and technology are required to increase that production capacity. The same is true of how quickly it can see the oil it has stored since sanctions and the price it will receive.
What is far more critical, however, is the massive cut in oil prices and Iran’s probable oil exports levels. Even if oil should average as much as $50 a barrel through 2016 – which may well be a high estimate – and Iran should suddenly increase its production back to its FY2012 levels, its oil and gas export revenues would probably not exceed a maximum of $53 billion.
The good news is that Iran will be even more desperate for sustained relief of sanctions. The bad news is that the internal power struggle for money and over military vs. civil needs may become even more serious.
The “hardliners” have a case. Iran has not come close to competing with its Arab Gulf neighbors in arms imports since the fall of the Shah in 1979. A recent CRS report indicates that the Arab GCC states imported arms worth some 24 times more than Iran could afford in 2007-2014. As a result, much of its military inventory is better suited to a museum than creating a hegemon. Its air force and ground based air defenses largely date back to the time or the Shah or Vietnam War era military technology.
The “moderates” – and Iran’s people – have an even better case. Iran now has some 82 million people if one uses the CIA Factbook estimate as a base. It has a very young population and some 42% is 24 years of age or younger. A third of its population is young people depending on others for their livelihood and another 7% of its people are elderly dependents. Youth unemployment or underemployment are at levels of at least 20-25% and career opportunities are poor, and over 715,000 males and 680,000 females reach job age each year.
CIA Factbook data indicate that Iran’s per capita income is far lower than in any Gulf state other than a war torn Iraq, and that, “Iran continues to suffer from high unemployment and underemployment. Lack of job opportunities has prompted many educated Iranian youth to seek employment overseas, resulting in a significant ‘brain drain.’”
The World Bank reports that some progress has occurred under President Rouhani and that Iran has real economic potential, but that it faces major problems from state mismanagement, barriers to investment and growth, and particularly in terms of its population and youth:
Following two years of recession, the Iranian economy recovered during the 2014 Iranian calendar year (i.e., March 2014-March 2015) as the new administration led by President Rouhani took office in July 2013 and a partial lifting of sanctions was enacted under the Joint Plan of Action (JPA). This sanctions relief included the partial removal of constraints on Iran’s oil exports, and the supply chain in key sectors of the economy—such as in the automobiles industry—and on international and domestic banks’ international transactions.
The economy expanded by 3 % in 2014, on the heels of annual economic contractions of 6.6 % and 1.9 % in 2012 and 2013, respectively. As of August 2015, the official and parallel market rates were trading at 29,797 Iranian rials per U.S. dollar and 33,400 Iranian rials per U.S. dollar, respectively, thereby representing a difference of about 13%, down from roughly 190% in the second quarter of 2012 when sanctions were tightened. The inflation rate declined from a year-on-year peak of 45.1% in 2012 to 15.6% in June 2015 in line with the lifting of sanctions and the tightening of monetary policy by the Central Bank of Iran.
The unemployment rate has remained stubbornly high and rose slightly in 2014. The unemployment rate reached 11.4% in 2014, up from 10.4% in 2013. The unemployment rate was much more elevated among women (20.3% for women against 8.7% for men), among the population between the ages of 15 and 29 (17.9% for men and 39% for women in this age cohort) and in urban areas (11.7% in urban areas and 7.4% in rural areas). This weak labor market performance took place within a context of a subdued and declining labor force participation rate with only 37.2% of the country’s population being economically active in 2014, down from 37.6% in2013 (62.9% for men and 11.8% for women). The incidence of underemployment has also become more prevalent, with an estimated 9.5% of workers being considered underemployed (10.3% for men and 4.8% for women). Underemployment is largely concentrated among the youth population.
Stimulating private sector growth and job creation is a mounting challenge for the new government considering the number of workers who should enter the labor market in the coming years, including women and youth. Weak labor market conditions are exacerbated by the large number of youth entering the labor market and low female labor force participation rate. This trend is expected to be maintained in line with the evolving socio-economic profile with the demographics of the country characterized by a disproportionately high youth population with over 60% of Iran’s population of 77 million individuals estimated to be under the age of 30 in 2013. The government estimates that 8.5 million jobs should be created in the following two years to reduce the unemployment rate to 7% by 2016. Tackling youth unemployment in particular is a pressing policy issue.
… In 2005, poverty was 1.45% in Iran using a poverty line of US$1.25 per day (PPP). World Bank projections estimate that only 0.7% of the population (half a million people) lived under this poverty line in 2010, although a large proportion of people are living close to it. Indeed, raising the poverty line by US$0.5 (from US$2 to US$2.50 and from US$3 to US$3.50) could put 4%-6% of the population – over 4.5 million people – in poverty. This suggests that many individuals are vulnerable to changes in their personal disposable income and to the persistent rise in the cost of living.
The Bank’s earlier positive estimate of the impact of lifting sanctions – which assumed that the new money would go to civil rather than military needs and there would be major internal economic reforms, has also been overtaken by events and the massive drop in probable oil and gas export revenues:
The medium-term outlook is positive if the JCPOA is enacted and implemented and the government tackles much needed reforms to unleash growth and private-sector led job creation. Growth will decelerate from 3% in 2014 to 1.9% in 2015 (March 2015-March 2016) against the backdrop of low oil prices despite a projected increase in oil production by 200,000 barrels per day from 3.1 million barrels per day in 2014. If all sanctions are be lifted by the beginning of the 2016 Iranian calendar year (March-June 2016), real GDP should rise to 5.8 % and 6.7 % in 2016 and 2017, respectively, as oil production reaches 3.6 and 4.2 million barrels per day. Reforms to the business environment to promote competition, rationalize licensing and authorization requirements, reduce the imprint of State-Owned Enterprises in the economy, and improve the health of the financial and banking sector are needed to accelerate growth and private-sector led job creation.
The fact is that neither outsiders nor Iran can predict its near-term economic future, or the course of action its government will take given the competing needs of the military and civil sectors.
The Military Side of the Broader Strategic Challenges
These internal and civil challenges will interact with a wide range of military and national security challenges that go far beyond the nuclear dimension. It is also critical to note that most of our regional allies – except Israeli political leaders – are far more concerned with these other aspects of Iran’s national security actions than with its each for nuclear weapons.
In brief, regardless of the nuclear agreement, the following key strategic challenges and differences remain:
Iran’s Missile Programs and Search for Missile Accuracy and the Missile Arms Race in the Region
The political hype over Iran’s missile tests ignores the fact that no one passing the UN’s sanction on Iran’s missile efforts assumed they would have much effect of Iran vs. possible exporters, that Iran has long seen missiles as a way of compensating for its lack of modern conventional airpower, and that Iran already poses a massive threat to its neighbors in terms of missiles that can be used for “terror” or “intimidation” strikes against area targets.
Iran is also putting major assets into trying to create conventionally armed missiles accurate and reliable enough against military, civilian, and infrastructure point targets that include critical desalination and electric power plants.
These same missiles will all have substantial range-payloads and the potential for rapid conversion to nuclear warheads, and they now include long-range cruise missiles with such capabilities – and cruise missiles are not included in the UN sanctions.
This has triggered an arms race as the Arab states buy long-range, stand-off precision air-to-ground missiles, and missile defenses. The U.S. is also advocating regional missile defenses, deploying missile defense ships, and offer advanced THAAD anti-missile missiles to countries like the UAE, Qatar, and Saudi Arabia.
It also raises the specter that Russia could again play a major destabilizing role in the region by selling Iran advanced combat aircraft, more ships and submarines, and/or a truly advanced surface-to-air missile defense system based on its S300 and S400 missile forces – some of which would have anti-missile missile defense capabilities.
Iran’s Regional Military Influence
Iran’s ties to the Hezbollah in Lebanon and transfer of rockets and precision guided missiles to them, its major role in Syria and ties to the Assad regime, its critical role in supporting hardline Shi’ite elements and militias in Iraq are seen a critical threats by virtually all of the Arab states – not just Saudi Arabia – and have been for years. They also involve a controversial level of Iranian support of armed elements in Bahrain, Kuwait, Yemen, and Saudi Arabia, and support of Shi’ite movements in the UAE.
Iran can argue that its actions are defensive, support vulnerable Shi’ite groups in Arab states, and counter Sunni Islamist extremism. The fact remains, however, that other regional states – with the partial exception of Israel – also see these threats as more imminent and serious that Iran’s nuclear potential. They are also the real reason that the U.S. has labeled Iran as the principal state supporter of terrorism in recent years – a mischaracterization that conceals what could be a far more serious set of security problems if Iran came to dominate even the Shi’ite portion of Iraq.
The growing tension between Iran and Saudi Arabia, the UAE, Qatar, Kuwait, and Jordan – and impact of Russia in sustaining the Assad regime in Syria – may well more than offset the benefits of the JCPOA in moving the region towards some form of detente.
Iran’s Asymmetric Warfare Capabilities to “Close the Gulf”
People sometimes forget Iran’s past threats to use its steadily increasing mix of surface vessel, submarine and submersible, sea/air/land based-anti-ship missiles, strike aircraft and maritime patrol aircraft, and civil vessels capable of laying smart and conventional mines to threaten maritime traffic.
These Iranian forces are based along the entire coastal area of Iran in the Gulf, at the Strait of Hormuz, and increasingly outside it. Iran is steadily improving the range, lethality, and numbers of such forces and they are again perceived as a major threat. The U.S. Navy has reported that it has deployed more forces to the Gulf than to Asia as a result of its “rebalancing” of forces since 2012.
Iran can again argue that these efforts are a defensive reaction to the Arab Gulf military build-up and arms imports, and the improvements in U.S., British, and French-based forces in the Gulf or that can deploy there. As yet, however, the forces on both sides are planned to increase steadily through at least 2020. This may or may not increase deterrence, but it scarcely is a road to détente.
Looking Beyond the Iran Nuclear Agreement and Declaration Day
There is no reason that this complex mix of forces will either derail the JCPOA or make the overall security situation in the region notably worse than in past years. There also, however, is no clear reason that anyone can predict that Implementation Day will make things better. Too many variables and uncertainties are at work and there is no valid basis for turning analysis in to prophecy.
What does seem clear is that the U.S. partisan political debate over the Iranian nuclear agreement far too often ignores both its short-term benefits and longer term challenges, and is focused on a comparatively narrow part of the region’s strategic challenges with limited regard to the broader strategic interests of both its Arab strategic partners and Israel. Worse, it ignores the broader political, economic, and social forces in Iran and the opportunity to at least encourage détente. This has long been a grim and uncertain area, but that does not mean that things cannot get better – rather than continue to get worse.
By By Anthony H. Cordesman
CSIS
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