The Pandemic Depression
The Global Economy Will Never Be the Same
The deal with Iran falls far short of what the United States and its European allies would like. They wanted Tehran to dismantle its nuclear program, agree to unimpeded inspections, and forgo ballistic missiles and support of Hezbollah and Hamas. But these are terms that can only be imposed on a country that has been militarily defeated. So the two pertinent questions are whether the P5+1 got the best deal possible and, more importantly, whether it is better than the likely results of walking away from the table.
It is extremely unlikely that the P5+1 got the best deal possible (as disconcerting as that may be for proponents of the deal, including me). Part of the reason is that, as the critics have alleged, U.S. President Barack Obama wanted the agreement very badly, which—although necessary to undertake the arduous negotiations—did reduce his leverage. A more important point is that it is extremely rare for one side, let alone both, to get everything that it could. In almost all cases, the two sides’ preferences do not meet at a single point, but instead have some overlap, which means that it would take extraordinary intelligence and luck for either side to be able to squeeze out the last drop from the other.
Although the question of whether the West could have gotten a bit more in the bargain is interesting, much more important is the question of whether the deal was better than a breakdown of negotiations. It was, and by quite a wide margin.
Iran could still pursue a bomb. It could renounce or simply break the agreement, expel the inspectors, and use the declared facilities to produce highly enriched uranium. This has received the majority of attention in the media, but most experts believe it is the least likely route to a bomb because it invites an immediate attack. Alternatively, Tehran could also take a series of small steps, some cloaked in either secrecy or spurious justifications, toward building a bomb. But this would be difficult and risky given the surveillance that Iran has agreed to. Experts worry most about the third option: a secret program that would produce nuclear weapons before the West knew about it. This is a real worry, but the danger is more than counterbalanced by the greatly enhanced surveillance provided by the agreement. Granted, the inspections regime falls short of the “anywhere, anytime” option that the West wanted, but it is still much more intrusive than has been imposed on any country other than Iraq after the Gulf War. To be sure, there is no 100 percent guarantee that the inspectors will catch cheaters, but sneaking toward a bomb would not be a simple. It would involve a large number of steps, procedures, and facilities. The West would not have to detect all of them; one or two would be sufficient. Here, it is the Iranians who have to worry about certainty.
Unpredictability also surrounds one of the larger questions lurking in the background. This is whether the economic boom that will accompany the lifting of sanctions will solidify support for the regime because it has succeeded in securing international recognition of Iran’s rights and reinvigorating the economy or whether the boom will corrode the regime’s strength by building an independent middle class that rejects theocracy.As in the Cold War, a crucial question is whether the West would respond adequately to violations, and whether the Iranians would anticipate that it would. Here, too, the proper comparison is to a situation without an agreement. It is indisputable that the United States is more likely to bomb Iran in response to worrisome Iranian activities if those activities are not only troubling in themselves but also violate an agreement.
Much attention has been given to the re-institution of economic sanctions as a deterrent to Iranian violations—the so-called “snap-back provisions.” The legalities are complicated, but both the defenders and critics of the agreement have downplayed, if not entirely missed, basic political truths. In reality, what would happen if Iran violates the agreement would be determined less by legal niceties than by the state of domestic and international politics at the time. If Iran had recently been hit by attacks from the Islamic State (also called ISIS) or Israel, for example, it would be much harder to build a coalition to re-impose sanctions. Likewise, sanctions that require unanimity would be hard to reinstate if there were high tensions between the West on the one hand and China and Russia on the other. The West’s will also could be sapped by domestic disruptions of various kinds. But the alternative of rejecting an agreement and maintaining the sanctions regime of the last few years faces these dangers as well.
Indeed, unless all parties in the P5+1 had agreed that it was Iran’s unreasonableness that put an agreement beyond reach, sanctions would have been extraordinarily difficult to maintain, let alone increase. In that case, the alternative to an agreement would seem to be either bombing, which Obama would not do (and even a critical successor would have to undertake over the objections of the military) or greater unilateral sanctions, and few observers believe that these would be sufficient to coerce Iran into the sort of agreement that the critics seek. The hope, then, would be that increased economic distress would lead to the regime’s collapse, although this discounts the mitigating effects of other countries relaxing their pressures. To be sure, in an unpredictable world, it is always possible that the regime will crumble, but it is hard to come up with a good theory or past case that would lead us to expect this outcome.
Unpredictability also surrounds one of the larger questions lurking in the background. This is whether the economic boom that will accompany the lifting of sanctions will solidify support for the regime because it has succeeded in securing international recognition of Iran’s rights and reinvigorating the economy or whether the boom will corrode the regime’s strength by building an independent middle class that rejects theocracy. The hope, if not the expectation, for the latter processes is part of the reason why the bargain’s defenders worry less than the critics do about what will happen when the limits on enrichment expire. Critics are correct that if the latter outcome were certain, Iran’s leaders would not have signed the agreement. They can also point to the example of China, in which economic growth and a semi-free market has not produced support for political liberty. Defenders can respond that the two cases are quite different and that the foundations of the theocratic regime are already less than firm.
In any case, much will depend on the politics that will evolve as the agreement is implemented. There is a danger that the leaders of the West, and Obama in particular, will be so committed to the deal that they will overlook Iranian violations, although the fact that there will soon be a new president reduces this concern. Meanwhile, if relations between Iran and the West do begin to improve, it will mean more reassurances for Iran’s Sunni neighbors as well as for Israel. Although diplomats cannot say anything this rude, however, these countries do not have any better options than working with the United States. Managing them should not be as hard as keeping Iran from gaining nuclear weapons.
In the end, I can easily imagine a better deal, but in the world as it is, this one is quite good.