TSG IntelBrief: The Iran Deal and Regional Moves
September 8, 2015

The Iran Deal and Regional Moves

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Bottom Line Up Front: 

• As Congress returns on September 8, the Obama Administration has built enough congressional support to ensure that the U.S. will implement the Iran nuclear deal

• Major international firms, particularly European energy companies, are seeking to re-enter the Iranian market, virtually ensuring that Iran will receive a significant economic boost from the deal

• The United States and its regional allies—Israel and the Persian Gulf states—have begun planning for the post-deal region in which Iran could expand its destabilizing activities

• The September 4 White House meeting between President Obama and Saudi Arabia’s King Salman focused not on the nuclear deal, but on how to counter Iran’s activities in Yemen and in Syria.

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Since the nuclear agreement between Iran and the P5+1 negotiating powers (United States, Britain, France, Russia, China, and Germany) was signed on July 14, 2015 (Joint Comprehensive Plan of Action, JCPOA), the international community has been concerned that opponents of the deal would defeat it in the U.S. Congress. In early September, the Administration locked up sufficient support to sustain a presidential veto of any attempt by congressional opponents to reject the accord. In Iran, efforts by the relatively moderate President Hassan Rouhani to block review of the deal by Iran’s parliament (Majles) failed when the Supreme Leader directed the body to formally vote on the accord. Even though hardliners in the Majles are likely to oppose the agreement as a capitulation by Iran, Supreme Leader Khamenei’s tacit support for the deal will likely ensure its passage there as well.

With implementation of the agreement now virtually assured, Iran’s economy is set to rebound sharply, with the help of international investors largely shut out by international sanctions. Since the agreement was signed on July 14, British Foreign Secretary Phillip Hammond, accompanied by executives of several British energy services firms, visited Tehran to reopen Britain’s embassy. Germany’s Minister of Economics also visited, joined by a large delegation of German business executives seeking to re-establish their companies’ positions in Iran. The significant European corporate interest in returning to a post-agreement Iran means that Iran’s economy could expand by close to double-digits in the first year after the lifting of international sanctions. The expansion will be fueled not only by the investment, but by Iran’s ability to sell oil freely again, and to repatriate nearly $60 billion in hard currency assets that have been inaccessible in foreign banks since 2010.

As the agreement approaches implementation, the United States is accelerating its planning for the post-deal Middle East, in conjunction with key allies. The Gulf Cooperation Council states (Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, and Oman) have expressed skepticism of the deal, and Israel strongly opposes it. These allies have now grudgingly accepted that the deal will move forward and are working with the United States to counter Iran regionally.

The clearest indication that the region is moving past consideration of the deal itself was Friday’s White House meeting between Saudi Arabia’s King Salman and President Obama. Barely mentioned in official statements on the meeting was the Iran deal itself. King Salman’s absence from the May 2015 U.S.-GCC summit—a cancellation widely attributed to the King’s criticism of the emerging deal—was also not mentioned at all. Instead, the two leaders focused on how best to shape political solutions in Yemen and Syria that suit both U.S. and GCC interests. In conjunction with the meeting, it was reported that the United States is preparing a sale of precision munitions to the Kingdom, for use against Islamic State targets in Syria as well as against the Zaydi Shi’a Houthi rebels in Yemen. The United States has recently increased the logistical help it is providing the Saudi-led campaign against the Houthis, which now includes Saudi, UAE, and Qatari special and regular ground forces. President Obama also urged the King not to obstruct humanitarian access to Yemen. The meeting included discussion of implementing the agreements reached at the U.S.-GCC summit, particularly the establishment of a GCC-wide missile defense system and enhancements to GCC maritime and cyber defenses. As part of that effort, the United States is preparing to transfer two frigates to Saudi Arabia to improve its naval defenses against Iran.

It is also clear that Israeli Prime Minister Benjamin Netanyahu has accepted that the JCPOA will be implemented, and he is moving to extract as much U.S. security assistance as possible to counter Iran’s strength. In the course of securing congressional support for the deal, President Obama and Secretary of State John Kerry sent several letters to Congress expanding support for Israel. The letters reiterated the extensive U.S. support for Israel’s missile and rocket defense programs Iron Dome and David’s Sling, which are directed against two Iranian proxies, Lebanese Hizballah and Hamas. They also pledged that the United States would supply Israel with technology to better detect the tunnels that Hamas has used to infiltrate terrorist units into Israel. Directly addressing congressional concerns for Israel’s security against Iran, the Administration has said it will sell Israel the F-35 Joint Strike Fighter long before it sells the fifth-generation U.S. fighter to any Arab nation, and it will supply Israel with penetrating munitions that could conceivably be used to destroy Iranian nuclear sites, should the JCPOA break down. However, the United States has not committed to sell Israel the Massive Ordnance Penetrator (MOP) that could potentially destroy hardened Iranian nuclear sites. The U.S. commitments to Israel made to secure support for the deal could enable Netanyahu to argue that his unprecedented direct opposition to a major U.S. foreign policy initiative did not harm Israel’s security in any way, even if the Prime Minister’s tactics perhaps damaged his relationship with President Obama.

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