If this proposal is representative of the West’s efforts, Iran may be right. The proposal’s incentives will not overwhelm the Iranians. Iran has largely made progress in its nuclear enrichment and reprocessing activities in the absence of international cooperation. Moreover, Iran has seen its economy buoyed by the rising price of crude oil, and its lack of participation in the WTO has not hindered its economic progress. With crude oil all but certain to remain among the world’s most sought commodities for the foreseeable future, WTO membership is not necessary for Iran to expand its production and sale of crude oil.
The proposal’s penalties are even more underwhelming than its incentives. They truly lack teeth. Not one provision would curb Iran’s ability to sell oil in the world market. Yet, that is about the only penalty that would inflict meaningful pain on Iran’s economy and government. The latest data from the U.S. Energy Information Agency shows that oil sales account for 80%-90% of Iran’s export revenue. Oil revenue also finances 40%-50% of Iran’s federal budget.
As a result, curbs on international investment in Iran’s nuclear energy program are all but meaningless. Rising oil revenue would provide an ocean of petrodollars that would thwart the effectiveness of any such measures. At the same time, precisely because Iran has achieved significant nuclear progress on its own accord, restrictions on the sale of nuclear goods and technologies won’t prove a strong deterrent either. Finally, the provision that would ban the sale of “unique goods” would probably prove far more attractive as fodder for David Letterman than inducements for Iran to cease its illicit nuclear activities.
Finally, the proposal contains no provisions for verification. Without a robust verification mechanism Iran could easily cheat while simultaneously obtaining the proposal’s benefits. Iran could employ North Korea’s playbook by pocketing the benefits of the proposal while maintaining a secret nuclear weapons program. It could also seek to initiate discussions, not on its nuclear activities, but on the proposal itself, in order to buy additional time for its nuclear research and development activities. In either case, it will insist that its nuclear fuel activities are non-negotiable and it will maintain an overly expansive definition of what comprises such activities.