Iran Can Do This All Day
Thoughts about strategic and nuclear challenges over the next few months
The consensus is that the Trump MOU (that my friends want to refer to as the Versailles MOU) is that the deal is a very clear financial and strategic victory for Iran. It is also a stunning capitulation from both long-standing US, and President Trump’s own stated goals in Iran. Even based on his own confused and shifting justifications put forward from Trump for the war - preventing a nuclear Iran, getting a better deal than 2015 Iran nuclear agreement, destroying Iran’s nuclear, missile and drone capabilities, regime change, and ending Iran’s support for proxies - the war did not achieve any of its goals and likely made some of them harder to achieve.
Before February the Straits were open, Iran did not allow nuclear inspections and Iran oil sales were sanctioned and illegal. Now, the Straits are open, Iran is not allowing nuclear inspections, and Iran is making a lot of money from approved oil sales and the threat of US and Israeli military action is no longer credible or at the very least seen by Iran as a major threat to their survival.
So, the question is not whether the MOU is a good nuclear agreement but where the MOU leaves the US, Iran and the world. Here is how I see the current situation:
US has waived sanctions on Iranian oil exports. This means Iran is now making $150-200 million per day, or $4-6 billion per month. There are no restrictions on this money that I know of. The funds go straight into Iranian bank accounts, presumably controlled by the IRGC/military and can be spent on anything they want. I assume some significant portion will be used to ensure loyalty of leaders and troops, ensure populations are controlled, and rebuild missile and drone production capabilities.
Iran’s nuclear program is unconstrained. Press reports and statements from Vice President JD Vance that Iran has agreed to result “inspections” have been rejected as false by Iran. It is likely true Iran indicated privately they might accept some role for the International Atomic Energy Agency (IAEA) in the future, but history shows that unless a deal is specific that getting Iran to adjust/accept/abide is very hard. So for now, Iran is getting to bank money but still has not yet had to hand over, dilute, provide access over or compromise on its nuclear capabilities.
Iran still possess 400 kilograms of 60% enriched uranium, enough for a number of nuclear weapons. Some experts believe that material is likely intact and accessible by Iran, the Administration - with a long and checked history of making inaccurate statements - contends otherwise. Iran also still has - somewhere - over 1 tone of low enriched uranium that can be further enriched to make even more nuclear weapons.
Iran has been offered a $300 billion reconstruction fund and access to previously frozen Iranian funds if they negotiate a final agreement. I have seen reports that some funds have already been unfrozen, but I have not seen the confirmed. If so, this would be a step that is not reversible and a major boon for Iran’s new leaders. Regardless, if funds are unfrozen, a big question is what has Iran done to get that benefit.
President Trump desperately wants/needs the Straits of Hormuz to remain open. Iran has opened them and by all repoorts oil flows are getting close to pre-war levels. Oil prices have returned roughly to pre-war levels as well. That is good news for the global and US economy, even if the price hike from oil shortages will take months to flow to consumers. Shipping costs have been high - those prices will flow thought the financial system for a while. And there is still the damage that was done to Gulf oil and natural gas infrastructure. That is reportedly going to take years to fix. But for now, markets seem to like the Straits being open.
Iran owns the Straits. The US can say what it wants (and will) but the big strategic shift aside from the US baking away from nuclear and other goals is that Iran has laid claim to and demonstrated that it controls the Straits of Hormuz. The US under President Trump have also made clear they are not going to take actions that might lead Iran to close them nor is the US prepared to risk what it would take to militarily keep the Straits open. This presents Iran with a fascinatingly dangerous new reality - it can hold the world hostage without having to build a nuclear weapon. It has a much more credible and globally significant weapon in its ability to close the Straits. As such, it suggests that if the US was able and willing to focus and organize itself, it might be able to get satisfaction on the nuclear issue.
Iran is better at this than Trump. I’ve been to Iran and negotiated with Iranians. Even when the US held a lot of leverage, Iranians are very skilled negotiators and drive hard bargains to achieve their aims. Good for them. the US used to be able to do the same, but it remains far from clear the Trump Administration knows what it wants aside from putting the war in the rear view mirror and keeping the Straits open. If that is what the US wants, it can have them but at the cost of all of the other goals the US has sought for over three decades. A wise person once said elections have consequences. This is a prime example of how having Trump instead of a lot of other options means the US and the world are more likely to face a nuclear Iran in the future.
Iran has every incentive to drag out the talks, and the ability to do so. The MOU says the final peace settlement should be done in 60 days, but the time can be extended by mutual agreement. It is going to be extended. A lot. Trump does not want to restart the war. Iran is making money while talks continue. It is not clear who is going to offer $300 billion to Iran for reconstruction. The US Congress is not going to provide that, and the gulf states Iran just attacked have also said they are not going to pay. So the status quo - Iran making money, Straits open but under Iran’s control and thumb and an unresolved nuclear program without strong verification - is likely to continue for many months.
The US Congress may have a say on any move to provide Iran with comprehensive relief from US sanction. The terms of the 2015 Iran Nuclear Agreement Review Act, adopted to constrain President Obama by a Republican Congress now weigh on President Trump - assuming he intends to comply with the law. That is of course not a given. My colleague Tess Bridgeman has written a very useful piece arguing the INARA should be repealed but unless and until that happens, the law stands. It is likely the President could prevail in a veto fight, but it would not be pretty and he would need to find a way to argue Iran has done enough to warrant such a step. It is also not clear France or the UK - which would have to approve sanctions relief thought the UN, or the EU states who continue to see Iran’s support for Russia in Ukraine as a major threat - are prepared to relieve sanctions or go along with the US.
So, lets lay this out. Before February the Straits were open, Iran did not allow nuclear inspections and Iran oil sales were sanctioned and illegal. Now, the Straits are open, Iran is not allowing nuclear inspections, and Iran is making a lot of money from approved oil sales and the threat of US and Israeli military action is no longer credible or at the very least seen by Iran as a major threat to their survival.
That is why the war is a clear loss for the US, a clear win for Iran and why things are likely to get worse for the US before they get better.