Iran's New and Dangerous Moment
Tehran's next push for regional hegemony begins as sanctions end.
Dov S. Zakheim
January 21, 2016
Politicians, pundits and analysts will no doubt continue to debate whether the terms of the P5+1 nuclear deal with Iran, the so-called Joint Comprehensive Plan of Action (JCPOA), could have been more favorable to the West, whether the United States pressed too hard and too fast for a deal and whether a deal should have been reached at all. Likewise, there will be considerable speculation regarding just how closely the U.S.-Iran prisoner exchange was tied to the deal. Many will also ponder why the Iranian-Americans released to Iran chose to remain in the United States. Finally, many will wonder whether the Iranian capture and release of American sailors was deliberately timed to virtually coincide with "implementation day," the day when Iran was deemed compliant with the requirement to dismantle its nuclear weapons program, and the process of releasing frozen Iranian funds began.
It is unlikely that clear answers will emerge regarding any of these developments anytime soon. What is certain, however, is that Iran stands to receive anywhere from $50 to 100 billion resulting from the removal of sanctions imposed in response to its nuclear program. The lower figure amounts to just under one-eighth of Iran's total gross domestic product in 2014; the larger amount represents about a quarter of Iran's GDP that year. Since many, if not most, of these funds will flow to the central government, Tehran will enjoy a degree of budget flexibility unheard of since the days of the Shah.
The boost to the Iranian economy will not be limited to the influx of funds unfrozen by the lifting of sanctions under the JCPOA. International businesses, including foreign subsidiaries of American corporations, are already lining up to invest in what all agree is a large, and sophisticated, Iranian market. Iran is also determined to increase its oil production despite a drop that has resulted in petroleum prices below thirty dollars a barrel, the lowest in a dozen years. Both taxes on foreign investments and petroleum revenues will add even more billions to Tehran's coffers.
What will the mullahs do with their newfound cornucopia? Apologists for what they invariably call "the Islamic Republic" (there are actually other states whose official names include that term—Afghanistan, for instance) are certain to claim that these monies will be applied solely to boost a sagging economy. No doubt some, perhaps most, of those funds will do so—but not all. They also are needed to accelerate Iran's ongoing thrust for regional hegemony.
Iran has long since expanded its influence beyond what King Abdullah of Jordan termed in 2004 "the Shia crescent." At the time, Tehran was supporting Hezbollah in Lebanon and Syria's Bashar al-Assad, while attempting to secure influence in U.S.-occupied Iraq. Abdullah's statement provoked considerable controversy, with many pundits reacting to the king's statement with either ridicule, disbelief or both.
Twelve years later, Iran is no less invested in Hezbollah and Assad. But it also has achieved far more sway in Iraq than anyone apart from King Abdullah (certainly not the United States) ever anticipated. Iran's influence now also extends to the Houthis of Yemen, while it foments dissension, and possible insurrection, in Bahrain and Saudi Arabia's eastern province. Not surprisingly, the Saudis, facing Iranian subversion both on their border and inside their country, have one-upped the Jordanian king's characterization. They now speak in terms of a Shia "full moon."
It would not require Tehran to divert much if its newfound revenue significantly to increase its subversive activities and support for terrorism both inside and outside the Middle East.
Iran's support for Hezbollah costs something over a billion dollars annually, according to a top Israeli official who watches these developments as closely as anyone. Estimates of its support for Assad range anywhere from what the Obama administration has characterized as "a pittance," to some $6 to 8 billion as identified by UN officials and academic observers. Add to that perhaps another two billion provided to Iran's Shia allies in Iraq, Yemen, Bahrain and Saudi Arabia, and its total annual expenditures amount to some $10 billion. This is an amount it can easily double by drawing upon its newly unfrozen accounts, while still allowing it to pump at least $40 billion into its domestic economy.
Critics of the Iran deal have focused on the likelihood that Tehran will cheat its way to obtaining a nuclear weapons capability. They note that Iran is already guilty of minor violations of the agreement, without promoting a reaction either by the United States or its other negotiating partners. They also point to Iran's testing of medium-range missiles in contravention of a 2010 Security Council resolution, and observe that the sanctions imposed through the Obama administration’s response to Tehran's violation of that resolution were both slow in coming and limited in nature.
While these critiques should not be lightly dismissed, the financial implications of the agreement are likely to be far more threatening in the short and medium term. An increase in Tehran's aid to Bashar al-Assad, in the form of both military and economic assistance, will render it even more difficult to achieve an end to Syria’s civil war. More funding for Hezbollah will increase the threat from across Israel's northern border, adding to the likelihood of another conflict between the terrorist militia and the Jewish state. More financial support both for the Shia militias in Iraq, and for its backers in Baghdad, will further fractionate that bitterly divided country.
Politicians, pundits and analysts will no doubt continue to debate whether the terms of the P5+1 nuclear deal with Iran, the so-called Joint Comprehensive Plan of Action (JCPOA), could have been more favorable to the West, whether the United States pressed too hard and too fast for a deal and whether a deal should have been reached at all. Likewise, there will be considerable speculation regarding just how closely the U.S.-Iran prisoner exchange was tied to the deal. Many will also ponder why the Iranian-Americans released to Iran chose to remain in the United States. Finally, many will wonder whether the Iranian capture and release of American sailors was deliberately timed to virtually coincide with "implementation day," the day when Iran was deemed compliant with the requirement to dismantle its nuclear weapons program, and the process of releasing frozen Iranian funds began.
It is unlikely that clear answers will emerge regarding any of these developments anytime soon. What is certain, however, is that Iran stands to receive anywhere from $50 to 100 billion resulting from the removal of sanctions imposed in response to its nuclear program. The lower figure amounts to just under one-eighth of Iran's total gross domestic product in 2014; the larger amount represents about a quarter of Iran's GDP that year. Since many, if not most, of these funds will flow to the central government, Tehran will enjoy a degree of budget flexibility unheard of since the days of the Shah.
The boost to the Iranian economy will not be limited to the influx of funds unfrozen by the lifting of sanctions under the JCPOA. International businesses, including foreign subsidiaries of American corporations, are already lining up to invest in what all agree is a large, and sophisticated, Iranian market. Iran is also determined to increase its oil production despite a drop that has resulted in petroleum prices below thirty dollars a barrel, the lowest in a dozen years. Both taxes on foreign investments and petroleum revenues will add even more billions to Tehran's coffers.
What will the mullahs do with their newfound cornucopia? Apologists for what they invariably call "the Islamic Republic" (there are actually other states whose official names include that term—Afghanistan, for instance) are certain to claim that these monies will be applied solely to boost a sagging economy. No doubt some, perhaps most, of those funds will do so—but not all. They also are needed to accelerate Iran's ongoing thrust for regional hegemony.
Iran has long since expanded its influence beyond what King Abdullah of Jordan termed in 2004 "the Shia crescent." At the time, Tehran was supporting Hezbollah in Lebanon and Syria's Bashar al-Assad, while attempting to secure influence in U.S.-occupied Iraq. Abdullah's statement provoked considerable controversy, with many pundits reacting to the king's statement with either ridicule, disbelief or both.
Twelve years later, Iran is no less invested in Hezbollah and Assad. But it also has achieved far more sway in Iraq than anyone apart from King Abdullah (certainly not the United States) ever anticipated. Iran's influence now also extends to the Houthis of Yemen, while it foments dissension, and possible insurrection, in Bahrain and Saudi Arabia's eastern province. Not surprisingly, the Saudis, facing Iranian subversion both on their border and inside their country, have one-upped the Jordanian king's characterization. They now speak in terms of a Shia "full moon."
It would not require Tehran to divert much if its newfound revenue significantly to increase its subversive activities and support for terrorism both inside and outside the Middle East.
Iran's support for Hezbollah costs something over a billion dollars annually, according to a top Israeli official who watches these developments as closely as anyone. Estimates of its support for Assad range anywhere from what the Obama administration has characterized as "a pittance," to some $6 to 8 billion as identified by UN officials and academic observers. Add to that perhaps another two billion provided to Iran's Shia allies in Iraq, Yemen, Bahrain and Saudi Arabia, and its total annual expenditures amount to some $10 billion. This is an amount it can easily double by drawing upon its newly unfrozen accounts, while still allowing it to pump at least $40 billion into its domestic economy.
Critics of the Iran deal have focused on the likelihood that Tehran will cheat its way to obtaining a nuclear weapons capability. They note that Iran is already guilty of minor violations of the agreement, without promoting a reaction either by the United States or its other negotiating partners. They also point to Iran's testing of medium-range missiles in contravention of a 2010 Security Council resolution, and observe that the sanctions imposed through the Obama administration’s response to Tehran's violation of that resolution were both slow in coming and limited in nature.
While these critiques should not be lightly dismissed, the financial implications of the agreement are likely to be far more threatening in the short and medium term. An increase in Tehran's aid to Bashar al-Assad, in the form of both military and economic assistance, will render it even more difficult to achieve an end to Syria’s civil war. More funding for Hezbollah will increase the threat from across Israel's northern border, adding to the likelihood of another conflict between the terrorist militia and the Jewish state. More financial support both for the Shia militias in Iraq, and for its backers in Baghdad, will further fractionate that bitterly divided country.
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