Key Findings

• Iranian nuclear physics continue to beat Western economic pressure. Iran is less than a year from reaching critical nuclear capability, despite international sanctions designed to prevent this outcome. While its accessible FX reserves have fallen sharply, Iran has sufficient reserves, and "off-books" assets, to painfully muddle through for at least 12 months, if not longer. However, Iran's domestic political timeline may be considerably shorter given the considerable pressure on Iranian president Hassan Rouhani to deliver on his commitment to lift sanctions and stabilize the economy as quickly as possible. The Iranian government may fear that, without a short-term nuclear deal, further sanctions pressure could tip the economy into an unmanageable economic and political crisis before reaching undetectable nuclear breakout in mid-2014.
• Iran is moving steadily toward critical nuclear capability, defined as the point of "undetectable breakout," where Iran could produce enough weapons-grade uranium or separated plutonium for one bomb so quickly that the IAEA or Western intelligence services would be unable to detect the breakout. Iran is on track to reach this point in mid-2014, if not sooner. At this point, Iran will have considerable leverage even if it decides not to breakout to a bomb.
• Iran's foreign currency reserves, which are critical to the Iranian government's ability to withstand sanctions pressure, are being depleted and, in large part, impeded. We estimate that its FX reserves have fallen from $100 billion in 2011 to $80 billion by mid-2013, and more importantly that the Iranian government has unencumbered access to only $20 billion of those funds. Declines in the oil price, exports or output, restrictions on non-oil exports or further restrictions on access to funds would lead to a more rapid decline in total and accessible reserves.

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See full text at the Foundation for Defense of Democracies: When Will Iran Run Out of Money?