A slow Chicken Game: Iran and the P5+1 nuclear talks

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The third round of nuclear talks between the international community and the Islamic Republic of Iran began in April in Istanbul, continued in Baghdad in May and few weeks later in Moscow on June 18th-19th.

All parties, especially the P5+1 (the five permanent member of the UN Security Council plus Germany), acknowledged the extent of the impasse, with a number of expectations raised in Istanbul that, however, led to disappointment in the two subsequent meetings. Given the distance between the Iranian stance and that of the P5+1, it was decided that negotiations would continue only on a technical, rather than political level. The P5+1 has a clear agenda: “Stop, Shut and Ship”. Stop uranium enrichment, Shut the Fordo nuclear facility near Qom and Ship the uranium enriched beyond 20% abroad.

The statement delivered in Moscow by Catherine Ashton, the EU High Representative for the common foreign and security policy, demonstrated that the P5+1 is currently putting more emphasis on the necessity of Iranian compliance with its "international", not just its NPT, obligations (i.e. suspending all its enrichment activities), differently from what came out in Istanbul. Of course, the burden of proof is on Iran’s shoulder, and as for the international community, 20% uranium enrichment lies at the heart of the matter. Agreeing to stop the enrichment and ship the stockpiles of 20% enriched uranium abroad are the main parameters of any agreement proposed by the P5+1. Before the last talks, pressures on Tehran were strongly exerted not just by the EU, but also by Russia and China. So far, to no avail.

This time around, expectations were high not only because previous political-level meetings led many to believe that new steps could be undertaken to overcome the nuclear stalemate, but also because the meeting took place in Russia. The common assumption was that Moscow had managed to secure some bilateral agreement on progress to be made with regards to negotiations with the Islamic Republic. This would have increased Russia’s political capital and leverage vis-à-vis the US.

Despite assertions that point in the opposite direction, it looks as if Moscow has substantially moved its stance closer to that of the US and Europe - who demand a halt to uranium enrichment. On the surface, Russia keeps defending its “old partner”, especially at a time of regional turmoil and shifting of alliances. With previous regimes gone or disempowered in Libya and Syria,, Moscow has to stand by its few remaining allies. However, while continuing to criticize the use of sanctions as an effective policy tool, Russia acknowledges the destabilizing potential of an Iranian nuclear bomb and wants to avoid this scenario as much as it wants to avoid a pre-emptive attack against Iranian nuclear facilities. A military action against Tehran would further destabilize a geopolitical area bordering the southern frontiers of the Russian federation, currently anticipated by Iranian-Azeri tensions, with waves of migrants trying to enter Russia from the south.

All actors engaged in the negotiations want the process to continue, and this is especially true for the Obama administration, which fears any sudden escalation in the election season..

Domestic Iranian dynamics complicate matters further: the Chicken Game metaphor applies namely both at the international level, where nobody wants to be seen as the weaker actor, seeking compromise in order to avoid conflict, and at the domestic level. There, two rival groups, one centered around President Mahmoud Ahmadinejad and the other around the speaker of Majlis Ali Larijani (supported by Ayatollah Khamenei), strive to not be seen as the more compromising faction, despite agreeing on the need to find a way out of the current impasse.

On July 3rd, the parties will meet again, albeit at a technical level, in a move aimed at avoiding a collapse of talks or their sine die suspension. By then, US unilateral sanctions against Iran will have been renewed and European oil sanctions will have entered into force, with the goal of further isolating Iran.

The Western fear that the implementation of these sanctions might have a detrimental impact on their economies and on the global oil market is demonstrated by the recent US waiver of seven countries (India, South Korea, Malaysia, South Africa, Sri Lanka, Taiwan and Turkey) from the new package of measures. These countries join Japan and 10 European Union nations which received similar exemptions in March for a renewable 180-day period.

The P5+1 is hoping that the risk taken in further destabilizing the global oil market through the implementation of additional sanctions, will be compensated by a breakthrough in Iran’s attitude, also under the simultaneous pressure of military strikes often invoked by Israel, Within such a scenario, the Iranian leadership would capitulate. There are indeed signs that the burden on the country is seriously growing: as a result of sanctions introduced in the last year, Iran's oil exports have already fallen by 40% since the start of the year: the 27-nation EU oil ban reduced Iran's oil exports by 18%, according to OPEC. However the International Energy Agency (IEA) suggested in May that crude exports would be down as much as one million barrels/day (b/d) in the second quarter of the year. The IEA puts Iran's oil production at around 3.3 million b/d, down from 3.5 million b/d at the end of 2011.

The possibility that the Iranian regime will feel weakened, that the diminution of available resources will reinforce existing tensions within the leadership and force Iran to compromise is therefore not illogical. But the contrary might also happen: given the lack of incentives from the P5+1, particularly with regard to the possibility of lifting or suspending the implementation of the incoming sanctions, Khamenei might become persuaded that the West only aims at regime change, and at that point stop any pretense of being interested in negotiations. In such a scenario, Iranians might conclude that they are better off enforcing domestic hardships, reducing consumption and further cutting subsidies, and accelerate their nuclear program as a deterrent to future international threats. This reading seems to be shared by some key personalities within the regime, as suggested by US Secretary of State Hillary Clinton: she has officially stated that a military attack against the country might end up emboldening it, through a “rally around the flag” dynamic and a legitimization of the existing regime with the blame attributed only to external powers. In that case, Tehran would complete the underground facility in Fordo and threaten again to close the Strait of Hormuz. It may also break off from the talks hoping that this would trigger an increase in oil prices, partly compensating for the drop in revenues. 

All in all, the effects of an alternative policy to the continuation of nuclear talks is still unclear, which is why negotiations are being kept alive despite the lack of progress. The chicken in this game is therefore both the player that swerves first – he who makes bigger concessions in order to avoid war - and/or he who stops the race while in it – exiting negotiations and brinkmanship and adopting a more coercive posture. It is in all actors’ interest to keep playing, until something changes the dynamics of the whole game. Either an external shock – an Israeli attack - or powerful domestic changes – in Iran, or the cost-opportunity structure linked to sanctions and the threat of war.

The diplomatic game might already be a futile exercise and the deadlock might prove irreversible, but it will only be through keeping up the game that all players will have a chance to adjust their external behavior also according to internal dynamics. The consequences of the worsening economic crisis in the eurozone and the upcoming elections both in the US and Iran might prove to be the most decisive elements in modifying the incentives and thus the behavior of the key players..