Iran Nuclear Accord: Historic Agreement Or Bad Deal?

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
November 26, 2013

IN THIS ISSUE:

1. Overview – Iran & P5+1 Nations Make a Deal

2. A “Landmark” Agreement? Maybe For Iran

3. Negative Reactions to the Iranian Nuclear Deal

4. Which Assessment of the Deal Should We Believe?

5.  Wishing you all a HAPPY THANKSGIVING!

Overview – Iran & P5+1 Nations Make a Deal

The United States and five other world powers announced an agreement Sunday morning that would temporarily freeze Iran’s nuclear program and supposedly lay the foundation for a more sweeping agreement later on. Not surprisingly, an intense debate followed the announcement with one side arguing it was a victory for the US and its allies, and the other claiming it was a major sell-out and a big win for Iran. So which is it?

As you would expect, the mainstream media portrayed the agreement as a huge win for the US and its allies. Yet some in a better position to judge the deal concluded that it was a big win for Iran. We’ll hear from both sides today, and you can decide for yourself.

As I pointed out in last week’s E-Letter, a major agreement between Iran and the P5+1 nations (US, Great Britain, France, Russia, China + Germany) to halt (or delay, as it turns out) Iran’s nuclear weapons program was very close, so it was no surprise that a deal was agreed upon in Geneva last weekend. However, the more I read the details of the agreement, the more I am disappointed in the outcome.

It now appears that the P5+1 were more interested in a headline-making deal than they were in permanently halting Iran’s nuclear weapons program. As we’ll see below, Iran does not have to dismantle any of its 10,000+ working centrifuges, and the new agreement only slows down Iran’s ability to produce a nuclear bomb by a few months, at best.

Iran’s new president and even the Supreme Leader hailed the agreement as a huge win for Iran. President Obama and Secretary of State John Kerry came out somewhat on the defensive, claiming that the deal was a big victory for the US and its allies. Today, we’ll look at the agreement and try to analyze the pluses and minuses for both sides.

A “Landmark” Agreement? Maybe For Iran

I was home Saturday night watching the #10-ranked Oklahoma State Cowboys trounce the #4-ranked Baylor Bears 49-17 when I noticed President Obama speaking in the White House. He was heralding the new agreement to halt Iran’s nuclear weapons program for six months. When was the last time you saw an American president on national TV after 10:00 on a Saturday night during a key college football game? But there he was.

Here’s the way the mainstream media announced the agreement, as reported by the New York Times:

The United States and five other world powers announced a landmark accord Sunday morning that would temporarily freeze Iran’s nuclear program and lay the foundation for a more sweeping agreement. It was the first time in nearly a decade, American officials said, that an international agreement had been reached to halt much of Iran’s nuclear program and roll some elements of it back.

The aim of the accord, which is to last six months, is to give international negotiators time to pursue a more comprehensive pact that would ratchet back much of Iran’s nuclear program and ensure that it could be used only for peaceful purposes.

Shortly after the agreement was signed at 3 a.m. in the Palace of Nations in Geneva, President Obama, speaking from the State Dining Room in the White House, hailed it as the most “significant and tangible” progress of a diplomatic campaign that began when he took office.

“Today, that diplomacy opened up a new path toward a world that is more secure,” he said, “a future in which we can verify that Iran’s nuclear program is peaceful and that it cannot build a nuclear weapon.”

In Geneva, the Iranian foreign minister, Mohammad Javad Zarif, said he hoped the agreement would lead to a “restoration” of trust between Iran and the United States. Smiling and avuncular, he reiterated Iran’s longstanding assertion that its nuclear program was peaceful, adding that the Iranian people deserved respect from the West.

Secretary of State John Kerry, who flew to Geneva early Saturday for the second time in two weeks in an effort to complete the deal, said it would “require Iran to prove the peaceful nature of its nuclear program.”

Iran, which has long resisted international monitoring efforts and built clandestine nuclear facilities, agreed to stop enriching uranium beyond 5 percent, a level that would be sufficient for energy production but that would require further enrichment for bomb-making. To make good on that pledge, Iran will dismantle links between networks of centrifuges.

Its stockpile of uranium enriched to 20 percent, a short hop from weapons-grade fuel, would be diluted or converted into oxide so that it could not be readily used for military purposes. Iran agreed that it would not install any new centrifuges, start up any that are not already operating or build new enrichment facilities.

The agreement, however, does not require Iran to stop enriching uranium to a low level of 3.5 percent, or to dismantle any of its existing centrifuges.

The United States did not accept Iran’s claim that it [Iran] had a “right to enrich” under the nuclear non-proliferation treaty. But American officials signaled last week that they were open to a compromise in which the two sides would essentially agree to disagree on how the proliferation treaty should be interpreted, while Tehran continued to enrich.

In return for the initial agreement, the United States agreed to provide $6 billion to $7 billion in sanctions relief. Of this, roughly $4.2 billion would be oil revenue that has been frozen in foreign banks.

This limited sanctions relief can be accomplished by executive order, allowing the Obama administration to make the deal without having to appeal to Congress, where there is strong criticism of any agreement that does not fully dismantle Iran’s nuclear program…

Negative Reactions to the Iranian Nuclear Deal

While the mainstream media applauded the agreement and praised President Obama and Secretary Kerry, sharp criticism mounted as more details of the deal came to light. The best analysis I’ve seen so far came yesterday from The Wall Street Journal’s opinion page:

President Obama is hailing a weekend accord that he says has "halted the progress of the Iranian nuclear program," and we devoutly wish this were true. The reality is that the agreement in Geneva with five Western nations takes Iran a giant step closer to becoming a de facto nuclear power.

Start with the fact that this "interim" accord fails to meet the terms of several United Nations resolutions, which specify no sanctions relief until Iran suspends all uranium enrichment. Under this deal Iran gets sanctions relief, but it does not have to give up its centrifuges that enrich uranium, does not have to stop enriching, does not have to transfer control of its enrichment stockpiles, and does not have to shut down its plutonium reactor at Arak.

Iran nuclear talks
Iran nuclear talks at the United Nations in Geneva

Mr. Obama's weekend statement glossed over these canyon-sized holes. He said Iran "cannot install or start up new centrifuges," but it already has about 10,000 operational centrifuges that it can continue to spin for at least another six months. Why does Tehran need so many centrifuges if not to make a bomb at the time it pleases?

The President also said that "Iran has committed to halting certain levels of enrichment and neutralizing part of its stockpiles." He is referring to an Iranian pledge to oxidize its 20% enriched uranium stockpile. But this too is less than reassuring because the process can be reversed and Iran retains a capability to enrich to 5%, which used to be a threshold we didn't accept because it can easily be reconverted to 20%.

Mr. Obama said "Iran will halt work at its plutonium reactor," but Iran has only promised not to fuel the reactor even as it can continue other work at the site. That is far from dismantling what is nothing more than a bomb factory. North Korea made similar promises in a similar deal with Condoleezza Rice during the final Bush years, but it quickly returned to bomb-making.

As for inspections, Mr. Obama hailed "extensive access" that will "allow the international community to verify whether Iran is keeping its commitments." One problem is that Iran hasn't ratified the additional protocol to its International Atomic Energy Agency agreement that would allow inspections on demand at such sites as Parchin, which remain off limits. Iran can also oust U.N. inspectors at any time, much as North Korea did.

Then there is the sanctions relief, which Mr. Obama says is only "modest" but which reverses years of U.S. diplomacy to tighten and enforce them. The message is that the sanctions era is over. The loosening of the oil regime is especially pernicious, inviting China, India and Germany to get back to business with Iran.

We are told that all of these issues will be negotiated as part of a "final" accord in the next six months, but that is not how arms control works. It is far more likely that this accord will set a precedent for a series of temporary deals in which the West will gradually ease more sanctions in return for fewer Iranian concessions.

Iran will threaten to walk away from the talks without new concessions, and Mr. Obama will not want to acknowledge that his diplomatic achievement wasn't real. The history of arms control is that once it is underway the process dominates over substance, and a Western leader who calls a halt is denounced for risking war. The negotiating advantage lies with the dictatorship that can ignore domestic opinion.

Mr. Obama all but admitted this himself by noting that "only diplomacy can bring about a durable solution to the challenge posed by Iran's nuclear program." He added that "I have a profound responsibility to try to resolve our differences peacefully, rather than rush towards conflict." Rush to conflict? Iran's covert nuclear program was uncovered a decade ago, and the West has been desperately trying to avoid military action.

The best that can be said is that the weekend deal slows for a few weeks Iran's rapid progress to a nuclear breakout. But the price is that at best it sets a standard that will allow Iran to become a nuclear-capable regime that stops just short of exploding a bomb. At worst, it will allow Iran to continue to cheat and explode a bomb whenever it is strategically convenient to serve its goal of dominating the Middle East.

This seems to be the conclusion in Tehran, where Foreign Minister Javad Zarif boasted that the deal recognizes Iran's right to enrich uranium while taking the threat of Western military action off the table. Grand Ayatollah Ali Khameini also vouchsafed his approval, only days after he denounced the U.S. and called Jews "rabid dogs."

Israel has a different view of the deal, with Prime Minister Benjamin Netanyahu calling it a "historic mistake." He and his cabinet will now have to make their own calculations about the risks of unilateral military action. Far from having Israel's back, as Mr. Obama likes to say, the U.S. and Europe are moving to a strategy of trying to contain Israel rather than containing Iran. The French also fell into line as we feared they would under U.S. and media pressure.

Mr. Obama seems determined to press ahead with an Iran deal regardless of the details or damage. He views it as a legacy project. A President has enormous leeway on foreign policy, but Congress can signal its bipartisan unhappiness by moving ahead as soon as possible to strengthen sanctions. Mr. Obama warned Congress not to do so in his weekend remarks, but it is the only way now to stop the President from accommodating a nuclear Iran.

Which Assessment of the Deal Should We Believe?

As mentioned above, most (not all) on the left love this “landmark” agreement with Iran. President Obama pledged in his speech on Saturday night that if for some reason Iran cheats, the deal can easily be reversed and the sanctions reinstated. But as the Journal points out above, that is easier said than done. Again, who are we to believe?

To my surprise, even the left-leaning POLITICO is not happy with this deal. Columnist Aaron David Miller had an excellent piece over the weekend which points out many ways that Iran can cheat under this new agreement. Likewise, he is convinced while Iran may play nice for some temporary period, its Supreme Leader will never agree to dismantle its very expensive nuclear infrastructure. I tend to agree.

The POLITICO article is #1 in Special Articles below. You should read it.

Finally, if you are wondering who got the better deal in the Geneva agreement, read what the Iranians said afterward:

Iran’s leadership Sunday hailed the interim nuclear deal brokered in Geneva between Iranian envoys and representatives of the United States and five other world powers.

Iran’s supreme leader, Ayatollah Ali Khamenei, thanked President Hassan Rouhani and his negotiating team in a message that called the Geneva talks a "success," a crucial sign of support from the nation's ultimate arbiter of national security issues.

The Iranian president, meantime, gave a nationally televised address labeling the agreement a breakthrough that could eventually help eliminate the vise of international sanctions, which have put a stranglehold on Iran’s economy in recent years.

The accord, Rouhani said, “marks a starting point for a new experience for the Iranian nation,” and a global recognition of Iran’s right to nuclear power.

They seem downright happy to me. That’s not a good sign.

In last week’s E-Letter, I warned the president “not to give away the store.”  He did it anyway.

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Finally, let me take this opportunity to wish all of you a very HAPPY THANKSGIVING! We have so much to be thankful for in this country, so it is appropriate that we pause on Thursday, gather with loved ones and give thanks to our loving God. Enjoy!

** Due to the holiday, I probably will not post on my blog on Thursday.

Best regards,                                                 

Gary D. Halbert

SPECIAL ARTICLES

Even POLITICO is not happy with new Iran deal

A Bad and Morally Indefensible Deal

Krauthammer: Iran agreement is “suckers’ deal”

Iran’s Leaders Call Nuclear Deal a Success

 


Read Gary’s blog and join the conversation at garydhalbert.com.


Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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