Testimony of Mark Dubowitz of the Foundation for Defense of Democracies Before the Senate Committee on Foreign Relations on the Negotiations on Iran's Nuclear Program

February 4, 2014

Weapon Program: 

  • Nuclear

Following the announcement of the Joint Plan of Action (JPOA) and the signing of the implementation agreement, Obama administration officials have repeatedly stated that, despite the "limited, temporary, and reversible" sanctions relief, Iran is "not open for business," that the United States is not significantly easing sanctions on Iran, and that existing sanctions will be enforced in a "very aggressive manner."

At the same time, Iranian President Hassan Rouhani has been aggressively courting foreign companies, including at a recent appearance before the global business and political elite in Davos, Switzerland. Iran's nuclear chief Ali Akbar Salehi has boasted, "The iceberg of sanctions is melting while our centrifuges are also still working."

Despite this, the Obama administration and its European allies are confident that, with the Geneva agreement that addresses Iran's illicit nuclear program having been implemented on January 20, 2014, their carefully constructed Iran sanctions' architecture will not be eroded—that is, until they decide to lift the toughest sanctions in exchange for a final nuclear agreement.

Their argument is this: Should Iran renege on the deal, the limited concessions the United States and other world powers are offering Iran in exchange for the dismantling of its illicit nuclear program are easily reversible. They are also adamant that the total value of sanctions relief is only $7 billion. "It's not going to be hard for us to turn the dials back or strengthen sanctions even further," President Obama claims, adding that he would "work with members of Congress to put even more pressure on Iran, but there's no reason to do it right now."

Regrettably, the administration and its allies may be miscalculating on these fronts as my testimony outlines. Bijan Khajehpour, a Vienna-based Iranian investment manager close to the Iranian government, noted "the beginnings of a 'gold rush' mood in Tehran." Whether or not that view is yet fully justified, he has correctly identified the early stages of a shift in market sentiment that the interim agreement unintentionally but predictably triggered.

Although the Obama administration is correct that most sanctions measures remain in place, recent macroeconomic trends, changes in market sentiment, economic gains in specific sectors subject to sanctions relief, and worrying signals of large-scale sanctions-busting by U.S. partners indicate that economic pressure on the Iranian government is diminishing. If Iran's economy recovers, the pressure on Iran's leaders to follow through on a nuclear deal lessens. At that point, President Obama may discover that he has lost negotiating leverage and can't turn sanctions off-and-on like a "dial."