June 16, 2015 / 11:02 AM / in 2 years

COLUMN-Calibrating the risk of Iran sanctions relief

(The opinions expressed here are those of the author, a guest columnist for Reuters.)

By Richard Nephew

NEW YORK, June 16 (Reuters) - - It is now taken as a given by many that, upon completion of a comprehensive nuclear deal, Iran will plow its hard-won sanctions relief into regional adventurism. Having dealt with the nuclear issue, Tehran will secure its real ambition of regional domination.

This narrative is powerful, compelling, and frightening. It is also not true.

Certainly, Iran will invest some portion of immediate sanctions relief and the long-term health of its economy in its support for groups opposing U.S. and partner interests. But this problem has become wildly exaggerated because of the confluence of a large number - the $100 billion in restricted oil funds Iran would be able to tap - and semi-hysterical concerns that a nuclear deal will leave Tehran as the top Middle East power.

The reality is that Iran has supported radical elements since the fall of the Shah, even during difficult economic periods. As Suzanne Maloney of Brookings has noted, much of this support started during the middle of the Iran-Iraq war, hardly an ideal economic time. Iran continued to support these groups during the lean years of sanctions, investing heavily in Syria even as revenues were hit by sanctions-induced oil export declines and the oil price crash. The issue of Iranian support for terrorism is not whether they have the financial resources to do it but rather whether they have the political will, opportunity, and foreign policy incentive (or need, as in the case of Syria) to do so. A nuclear deal will not change this.

The argument against substantial sanctions relief usually shifts to a simple point: if Tehran can do this much damage with no money, imagine what $100 billion would do. But, this assumes Iran has no better use for $100 billion (a little less than a third of its present GDP) than proxy wars. This defies common sense. Iran’s economic troubles are well established, as are the government’s concerns that they could lead to unrest if unresolved. It also defies history: Iran had this $100 billion in its own hands a little more than two years ago and was not plowing it all into Assad, the Houthis or troublemaking along the Gulf. And prior to January 2012, when Iran’s oil exports were unrestricted it was earning nearly $88 billion per year in oil sales off of $100 per barrel oil. No one alleges that all of that money was going to terrorists. Iran was spending it on all manner of domestic priorities in addition to its foreign policy, as any government would.

Instead, it is far more likely that only a portion of this amount (and subsequent revenues) would go to such purposes. No one can accurately predict how much will go and estimates of current spending in Syria vary between $6-15 billion per year. Assuming such estimates are accurate, if Iran doubles its support to between $12-30 billion it would still be a small fraction of US or GCC defense spending. This amount of Iranian spending can be countered when put in realistic terms.

This point does highlight a real challenge the United States will have in dealing with Iran after a nuclear deal: creating a viable regional security architecture that can manage the disorder present now in large parts of the Middle East and deepening the relationships that exist between the United States and its partners there. Such an architecture can help the US and its partners combat Iran’s activities and, most important, help build sustainable structures for preventing Iranian adventurism in the future. The GCC-US Summit of May 14 was a start but more will be needed in the weeks and months to come.

Sanctions will also play a part, as it is US policy that the current U.S. terrorism-related sanctions (and those preventing arms-related trade) will remain in place against Iran even if a nuclear deal is reached. They include tools that will continue to make foreign banks leery of doing business for suspect entities and prohibit dealings with designated ones. Moreover, the improved due diligence standards and guidelines that govern international banking, created in large part because of Iran, will remain tough. Compliance officers will remain vigilant given the penalties their institutions have risked, and sometimes suffered for, due to lapses in sanctions enforcement. None of this will change after an Iran nuclear deal.

There are regional implications from the sanctions relief embodied in a nuclear deal with Iran. But, they are manageable so long as we focus on regional solutions and cooperation rather than implausible boogeymen scenarios, and, of course, on the strategic implications to the region and beyond of having prevented Iran from acquiring a nuclear weapon.

Richard Nephew is a research scholar and program director for Economic Statecraft, Sanctions and Energy Markets at Columbia University's Center on Global Energy Policy. He is a former director for Iran at the U.S. National Security Council and was a member of the U.S. nuclear negotiating team with Iran from August 2013 to December 2014. Editing by Andrew Hay

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