In an ominous sign for 2020, a mere week into this year the assassination of Iranian military leader Qasem Soleimani by U.S. forces pointed in the direction of an escalation of armed conflict between Iran and the United States. This escalation followed months of rising violence and tensions between the two nations, which began after the Trump Administration precipitously withdrew from the Iran Nuclear Deal in May 2018. After pulling out of the agreement President Trump reinstated crippling sanctions against Iran whilst deploying an additional 20,000 troops into the Middle East. For his part, President Rouhani resumed his nuclear and missile programs and expanded investments in proxy forces, sophisticated drones, and cyber-capabilities, ultimately escalating regional tensions and making U.S. retrenchment from the Middle East less likely. Since the beginning of this new arms race two years ago, both countries have attacked each other’s forces in the region. Tensions ultimately degenerated this January following the assassination of one of Iran’s most revered military figures, beloved for his four-decade-long resistance against U.S. involvement.

The Covid-19 pandemic has (momentarily) stopped this escalation, but with the rocky transition from a Republican White House to a Democratic one – and with the Iranian elections scheduled to be held in mid-2021 – many are starting to question what the future holds for the historically hostile relationship between the two nations.

It emerges that the pandemic may actually play in favor of the U.S. and push Tehran to engage Washington in diplomatic talks in order to address its current humanitarian crisis. However, the White House will only have six months in 2021 to cement initial, preliminary agreements with Rouhani – whose pragmatic team signed Obama’s 2015 Nuclear Deal  – before Iranians elect a new President in June.

Both countries have strategic interests in reaching a diplomatic agreement and reducing regional tensions. Therefore, it is likely that they will engage in initial talks at the beginning of next year, which would leave the door open for a more sustained, long-term nuclear deal in exchange for sanctions relief in the future.

The Time is Ripe for Deal-Making 

Both countries have an interest in bringing each other to the negotiation table and finally reaching an agreement.

On the Iranian front, the time is ripe for diplomatic talks because of an ongoing crisis caused by the crippling U.S. sanctions and the Covid-19 pandemic. The already struggling Iranian economy has been brought to the brink of collapse, exacerbated by low oil prices. Humanitarian aid has also never been more vital for Tehran, to the point that the EU had to urge the U.S. to reduce sanctions in order to avert a full-blown humanitarian crisis in the country.

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Therefore, it is likely that Tehran will have fewer incentives to escalate an arms race and to invest in proxy forces for the foreseeable future; in fact, since the Covid-19 outbreak, Iran has pulled some of its troops from Syria and Iraq, supported the election of Iraq’s new US-favored Prime Minister and is engaging the UAE in rare diplomatic talks.

Engaging Washington in negotiations and halting its nuclear program in exchange for sanctions relief might be the only option Tehran has if it wishes to emerge from a devastating socio-financial crisis.

Related: Is Russia’s LNG Push Too Little Too Late? On the American front, structural forces are rapidly shifting U.S. priorities in the Middle East, from which it is trying to disengage. If 20 years ago the U.S. relied on Middle Eastern oil for 53% of its energy consumption, that figure is now down to less than 3% thanks to recent American oil production. Moreover, Washington’s endless, expensive, and ultimately ineffective wars in the Middle East have also become increasingly unpopular both at home and abroad. Current isolationist sentiments in the American polity on both sides of the aisle make U.S. retrenchment from the Middle East more likely than at any point in time since the end of World War Two. If Washington decides to seriously disengage from the Middle East before reaching an agreement, a nuclear-powered Iran would attempt to fill the power vacuum left behind in the region, which is precisely what Americans have been trying to prevent for the past four decades.

Moreover, incessant and harsh U.S. sanctions could lead Iran to find other trade partners (such as Syria, China, and Russia), which would, in turn, hurt America’s economy and its geopolitical agenda and exacerbate this potential situation. As such, it turns out that both Iran and the United States have more to lose from the current status quo than from a scenario wherein they finally reach a diplomatic agreement.

Biden’s Hope to Undo the Trump Years Will Prove Challenging

It would be wishful thinking to hope that incumbent President Trump will attenuate his bellicose rhetoric and uncompromising approach to diplomacy during the last two months of his administration. After all, since withdrawing from Obama’s agreement his team has worked to stall diplomatic progress, ultimately letting Iran pursue its nuclear program.

His rival, president-elect Joe Biden, often expressed his disapproval of the withdrawal from the landmark deal during his campaign. The Biden-Harris ticket promised to “change course” and to negotiate a follow-on to Obama’s 2015 agreement, which they hope will set the stage for future diplomatic efforts addressing larger regional issues with Iran.

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However, doing so could alienate those who oppose the deal, which includes congressional Republicans, Israel, and Saudi Arabia. The consequences of the pressure applied by these opponents could seriously obstruct future diplomatic initiatives with Tehran later down the line.

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To further complicate matters, Iran’s internal politics may hinder a swift restoration of the pre-Trump agreement. The Iranian elections are scheduled for June 2021 and the anti-U.S. hard-liners (whose ascent to power next year seems increasingly probable) will unlikely agree to a policy approved by President Rouhani’s party.

Prognosis: Short-Term De-Escalation

Though hard-liners are set to win next year’s Iranian election, President Rouhani’s party will still govern during the first six months of 2021. Over such a short period of time, it is unlikely that Biden will achieve a historic, long-term nuclear deal with Rouhani. Instead, it’s more likely he will establish preliminary diplomatic efforts and forge an interim agreement, which would de-escalate tensions in the region, avert a pre-election crisis and reduce hostilities between Tehran and Washington. It would also buy time for the future U.S. administration to design a diplomatic strategy and to consult with allies and Congress.

In order to signal commitment towards de-escalation, the future White House might implement some appeasement measures, including abolishing the Iranian travel ban and limiting sanctions, which would allow the Iranian government to address its pandemic-related humanitarian crisis. For his part, Rouhani will have to halt his proxy attacks on Iraq-based U.S. forces as well as his missile attacks on oil tankers, mines, and other important U.S. infrastructure in the Middle East.

To conclude, during the first six months of 2021 modest, narrow, and practical deal-making between Iran and the U.S. will likely take precedence over long discussions with a laundry list of political requirements coming from both parties. This would eventually set the stage for more complex negotiations that will address larger regional disputes, arm trade deals, and (finally) durable and sustainable nuclear peace in the Middle East.

By Carlotta Serioli via Global Risk Insights

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