Australia / Israel Review

The nuclear deal and Teheran’s hardliners

Jay Solomon 

Since the completion last year of a landmark deal limiting Iran’s nuclear program, the country’s Supreme Leader, Ayatollah Ali Khamenei, has lashed out again and again at the US for its supposed failure to live up to its end of the bargain. But a speech he gave on Aug. 1 in Teheran took his anti-American rhetoric to a new level. He accused the Obama Administration of a “bullying policy” and of failing to lift sanctions in a way that benefited “the life of the people.” Mr. Khamenei ruled out cooperation with the US in the fight against Islamic State in Iraq and Syria, telling his audience that Iran’s experience with the nuclear deal “showed us that we cannot speak to [the Americans] on any matter like a trustworthy party.” Many in the crowd chanted anti-US slogans.

Is Iran preparing to walk away from the accord? It’s unlikely. Khamenei’s speech was classical political posturing intended to rally his hardline followers. But more than that, his bluster conceals a deeper strategic calculus. For all his complaints about American treachery, Khamenei and his allies recognise that the nuclear deal has produced significant benefits for their hobbled theocracy and may serve to further entrench the regime brought to power in the 1979 revolution.

President Barack Obama defined the nuclear deal primarily as an arms-control exercise, designed to constrain Teheran’s nuclear program for at least a decade and to keep the US from becoming embroiled in yet another Middle East war. But the White House and its top diplomats, including Secretary of State John Kerry, also quietly suggested that the agreement might open the door to a broader rapprochement between Teheran and Washington and empower Iran’s moderate political forces, particularly its elected President, Hassan Rouhani.

US officials have always cautioned that it would take time for the salutary effects of engagement with Iran to take effect. They have even conceded that, in the short term, the agreement might energise hard-liners opposed to engagement with the West – and that, indeed, seems to be what is happening.

Since the accord was announced last summer, Khamenei and his elite military unit, the Islamic Revolutionary Guard Corps, have moved to solidify their hold. As international sanctions against Iran have slackened, the Ayatollah and his core allies have expanded the Iranian military and pursued new business opportunities for the companies and foundations that finance the regime’s key ideological cadres. Iran has continued to fund and arm its major regional allies, including the Assad regime in Syria, the Lebanese militia Hezbollah and Houthi rebels in Yemen – all of which are at war with America’s regional partners – and the regime has continued to test and develop ballistic missiles. The Government has also stepped up arrests of opposition leaders and political activists.

Khamenei has been deeply involved from the start with his country’s talks with the US. After the UN Security Council imposed tough sanctions on Iran in 2010, he became alarmed by the drain on Teheran’s finances. In 2012, he backed secret talks in hopes of relieving the crippling financial pressure. A collapse in global oil prices made Iran even more vulnerable. As the talks evolved into public negotiations with the US and its partners, Khamenei instructed his representatives to ensure that Iran could keep the major infrastructure of its nuclear and military programs.

Today, the 77-year-old Ayatollah – who reportedly suffers from cancer – is seeking to cement his legacy and to shape the political transition that will occur once he is gone. The nuclear agreement provides him with the building blocks to do that, and for now, at least, Khamenei and his allies look to be the deal’s big winners. The next US administration is likely to face an unhappy choice: to continue to work with Iran or to challenge an increasingly entrenched Supreme Leader and his Revolutionary Guard.

For its part, the Obama Administration says that the nuclear deal blocks Iran from all paths to develop an atomic bomb and that the agreement’s success doesn’t depend on political change taking root in Teheran. They note that the deal is still in its early stages and suggest that an opening of Iran’s economy could help reformists over time. They also insist that it has served the cause of peace in the region. “The president and I both had a sense that we were on an automatic pilot toward a potential conflict, because no one wanted to talk to anybody or find out what was possible,” Mr. Kerry said in an interview. “I have no doubt that we avoided a war. None.”

To understand Khamenei’s perspective on the negotiations and the resulting deal, the best place to start is Iran’s nuclear program. The agreement requires Iran to accept key limitations: Previously, the country had nearly 20,000 centrifuge machines producing nuclear fuel and was on the cusp of possessing weapons-grade uranium. A plutonium-producing reactor was also nearly online.

Today, only 5,000 centrifuges are spinning, the plutonium-making reactor has been made inoperable, and most of Iran’s enriched uranium has been shipped out of the country. Iran also agreed to grant greater access to its nuclear sites to inspectors from the UN’s nuclear watchdog, the International Atomic Energy Agency. “There are serious constraints on their nuclear program for 15 years,” Energy Secretary Ernest Moniz, an important player in the negotiations, said earlier this year. “Fifteen years, with serious verification measures, should give considerably more comfort to our allies in the region.”

Khamenei, however, doesn’t appear to share this view of the deal’s constraints. Just as Iran’s negotiators were agreeing to these terms in July 2014, the Supreme Leader delivered a speech about the nuclear program – without consulting his chief negotiator, Foreign Minister Javad Zarif, according to US and European officials. In the address, Khamenei said that his oil-rich country needed at least 100,000 centrifuges to power its civilian nuclear program in the coming decades. This was more than 20 times what the Obama Administration envisaged. Western diplomats wondered whether Iran’s diplomats really spoke for the Supreme Leader.

Over the next year, the US and its partners brought the Iranians back down to a capacity of just 5,000 machines. Washington hailed this as a major negotiating victory, but there was a twist: After a decade, the international community would go along with Khamenei’s vision of an Iran that could develop an industrial-scale, civilian nuclear program without checks on the number or capacity of the centrifuges spinning. The US had won only a short-term pause in the expansion of the Iranian program, and the Supreme Leader had gained international approval for his longer-term plan.

Indeed, in recent weeks, Iranian officials have talked of their preparations to build 10 new nuclear reactors with Russian help. This will require a steady supply of nuclear fuel from centrifuges that will be allowed to go online in a decade. “The agreement gives us time, provided Iran implements it. But it’s limited,” said Mark Hibbs, a Berlin-based expert on nuclear programs at the Carnegie Endowment for International Peace. “The Revolutionary Guard controls the program, and there’s a risk that in 10 or 15 years, they might decide to restart their [weaponisation] activities.”

Khamenei also came away from the talks with much of what he wanted for reviving Iran’s economy – a longstanding anxiety for the regime. Before the nuclear deal, Iran had been on the financial ropes, especially after the Obama Administration ratcheted up international sanctions. The deal relieved that pressure.

The US-led international sanctions campaign against Iran raised alarm bells in the Supreme Leader’s office in 2013, according to Iranian officials. In just over a year, Iran’s oil exports had been cut by more than half, and its banks were almost completely shut off from the international financial system. Iran’s currency, the rial, fell by two-thirds against the dollar, spurring massive inflation and unemployment. This gave the US an opportunity to extract new concessions from Teheran.

The more moderate Rouhani was elected president that year with a mandate to improve Iran’s economy and ease the sanctions. His aides say that Rouhani convinced Khamenei that sanctions posed an existential threat to the government.

Rouhani got many of the US-imposed penalties lifted under last year’s nuclear agreement. The impact on Iran’s economy has been mixed so far, stoking charges from Iranian leaders that the US hasn’t lived up to its commitments. Iran’s oil exports have largely returned to their pre-2012 levels, and the World Bank projects that Iran will see nearly 5% growth in its gross domestic product next year. But European and Asian banks remain skittish of financing projects in Iran, and the US Treasury Department maintains its ban on dollar transactions with Iran.

This path of modest growth has worked to Khamenei’s advantage, Iran analysts say. Far from hoping for a flood of foreign investment, the Supreme Leader has repeatedly warned his people that Western culture and business could undermine the revolution and its values.

Khamenei says that Iran must remain economically self-sufficient and independent of the West, running a “resistance economy” fuelled by domestic production and capacity. “With its calm appearance, and with the soft and glib tongue of its officials, America is damaging us from behind the scenes,” he said in his speech earlier this month.

Khamenei is managing the economy the way that he wants it – with enough money to avoid a financial crisis but not so much that it might threaten his system. The Supreme Leader’s “system wants technology, and he wants access to imports,” said a political adviser to Rouhani. “But his ‘resistance economy’ is a way to keep the West out of Iran.”

In an apparent effort to ward off foreign influence, the Revolutionary Guard has stepped up arrests of dual nationals from the US, Europe and Canada over the past year. One of the detained Americans, Siamak Namazi, is an oil-industry executive who has written and spoken about the need for Iran to embrace economic and political reforms. Friends and family of Mr. Namazi say that his arrest was a warning to Iranian expatriates not to return home to pursue business dealings. Many Iranian-Americans have heeded the message. The economy is now dominated by the Revolutionary Guard, which controls many of Iran’s largest companies.

As for conventional military capabilities, the deal didn’t do much to curtail Iran’s ambitions. The Supreme Leader demanded a provision weakening a UN Security Council resolution that prohibits Teheran’s ballistic-missile development – and got it. He wanted the UN embargo lifted on Iran’s ability to buy or export conventional arms – and got it, in five years. He wanted to retain Iran’s ability to export arms – and the deal does nothing to interfere with that.

“Ayatollah Khamenei has emerged as the single most powerful man in the Middle East,” said Karim Sadjadpour, an Iran expert and senior associate at the Carnegie Endowment for International Peace in Washington. “It will take years to assess the full impact of the nuclear deal on the Middle East and in Iran internally, but the hope that the deal would weaken Khamenei and the Revolutionary Guards so far hasn’t been borne out.”

Finally, the nuclear deal also seems to have boosted Khamenei’s ability to influence the region. In the ornate former palaces and six-star hotels where the nuclear talks took place in Austria and Switzerland last year, US and European officials talked optimistically about using the deal to stabilise a roiling Middle East. They hoped that Iran, the region’s great Shi’ite power, might play a constructive role in ending conflicts in Yemen, Iraq and, above all, Syria.

It hasn’t worked out that way. Even as the talks continued, Khamenei and his generals were plotting a much broader military campaign in Syria in partnership with Russian President Vladimir Putin, according to European, Arab and Iranian officials. Starting in January 2015, the Supreme Leader’s top aides began a series of visits to the Kremlin to chart out a plan to bolster the embattled regime of Syrian President Bashar al-Assad.

The result was a highly coordinated operation in Syria that began just weeks after the nuclear deal was completed. Mr. Putin’s air force has pounded Syrian rebels, bombing not just Sunni jihadists associated with Islamic State or al-Qaeda but also US-backed fighters. At the same time, Khamenei’s Revolutionary Guard mobilised thousands of soldiers and Shi’ite militiamen to launch a ground offensive, with Iranian troops fighting alongside militants from Hezbollah and other Shi’ite militias. The joint Iranian-Russian operation drove back Syrian rebels who had been advancing on the Assad regime’s stronghold on the Mediterranean coast, according to Arab and US officials, and allowed the minority regime to retake large swaths of territory. The Kremlin announced this week that it has started launching airstrikes in Syria from Iranian territory.

Khamenei has sworn off any collaboration with the US in the Middle East, even against shared regional enemies like Islamic State. Instead, he has continued Iran’s campaign to control the oil-rich Persian Gulf and weaken the influence of the US, Israel and its Sunni Arab allies across the region. US military commanders say that they have seen no tapering off of Revolutionary Guard support for its allies in Yemen, Iraq or the Palestinian territories.

Khamenei cannot know how the US will respond to his uncompromising stance, especially with a new administration soon to take office. But he may figure that he wins either way. If the deal falls apart, he could call it proof that the Americans never could be trusted and figure that another round of biting UN sanctions will prove too difficult to assemble. If the deal survives, he will have his military continue to develop missiles and conventional arms to position Iran to become a latent nuclear weapons power in 10 years.

Either way, it is Khamenei, not his more moderate rivals, who is acting as if he has been strengthened by the nuclear deal. “Our problems with American and the likes of America… on regional matters and on various other matters are not solved through negotiations,” Khamenei said in his Aug. 1 speech. “We ourselves should choose a path and then take it. You should make the enemy… run after you.”

Jay Solomon is chief foreign affairs correspondent for the Wall Street Journal. His new book, The Iran Wars: Spy Games, Bank Battles, and the Secret Deals That Reshaped the Middle East, will be published shortly by Random House. © Wall Street Journal, reprinted by permission, all rights reserved.