The price of a new Iran deal may be more trouble in the Middle East

At his first news conference since his election as Iran’s president, Ebrahim Raisi, its outgoing chief justice, made it clear that under no circumstances would he agree to any arrangement that might curtail either Iran’s ballistic missile program or its international activities. That means that whatever the outcome of current indirect negotiations between Washington and Tehran for a renewed, or slightly modified, version of the 2015 Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal, it in no way can affect Iranian support for rogue regimes such as Syria and Venezuela, or terrorist groups such as Hamas and Hezbollah. 

In fact, it is arguable that should Iran conclude a nuclear agreement with the United States and the other signatories of the previous agreement — Russia, China, Britain, France and Germany — it actually may be in a stronger position to pursue both its missile program and its international objectives.

It is widely anticipated that the United States will lift many of the sanctions that the Trump administration imposed on Iran. Not all will be lifted, however, despite Raisi’s firm demand that Washington do so. Congress approved numerous sanctions that, apart from certain waivers, cannot be lifted without additional legislative action. Other sanctions, though imposed by executive order, might not be lifted either, in the likely event that Raisi holds firm to his refusal to negotiate a follow-on agreement.

Nevertheless, once a new JCPOA is reached, money will begin to flow into Tehran’s coffers, not only because of increased trade revenues, especially from petroleum products, but also as a result of the unfreezing of at least some Iranian assets. These assets currently total more than $35 billion in accounts in six countries in addition to the United States, apart from additional frozen Iranian real estate holdings.

China is the largest holder of monetary assets, amounting to around $20 billion. Since Beijing recently completed a 25-year, $400 billion deal with Tehran that includes investment in Iranian transportation and manufacturing infrastructure and its energy sector, it is likely that China will unfreeze at least some portion of that $20 billion in the event of a new agreement. Luxembourg, which is not a party to the nuclear deal, might release its $1.5 billion in assets under pressure from France and Germany if there’s a new agreement. And former South Korean Prime Minister Chung Sye-kyun announced in April that his country would unfreeze the $7 billion in Iranian assets that it holds.

In theory, the influx of these funds would redound to the betterment of Iran’s economy and thereby improve the lives of its citizens. In practice, however, a primary beneficiary of any incoming monies is likely to be Islamic Revolutionary Guards Corps (IRGC) and, in particular, its subsidiary unit, the Quds Force. The IRGC reports to Iran’s Supreme Leader, Ayatollah Ali Khamenei, via the Supreme National Security Council. It controls at least a third of Iran’s economy and has major holdings in the country’s construction, automobile, electronics and energy sectors. A significant portion of any revenue increases in these sectors, therefore, will flow to the IRGC’s coffers. 

In addition, the IRGC receives an annual budgetary allocation that totals at least $6 billion. Because of its near autonomy, there is virtually no visibility into the IRGC’s allocation of its funds, much less accountability for them. 

An increase in the IRGC’s revenues no doubt will enable it to continue to fund Quds Force activities in Syria, Yemen, Iraq and elsewhere. The cost of its operations probably amounts to less than $3.5 billion annually. Iran’s support for Syrian President Bashar al-Assad’s regime probably does not exceed $2 billion, and appears to have been cut back since former President Trump launched his “maximum pressure” campaign against Tehran. Support for Hezbollah has been estimated to range from $750 million to $1 billion; for various Palestinian groups, $100 million; for Yemen’s  Houthis, $25 million; and up to $200 million for Iraq’s Shia militias. The completion of a new JCPOA will enable the IRGC to restore, if not increase, any prior reduction in its funding for Quds Force operations. 

The Biden administration is determined to lower the United States’s profile in the Middle East. But as former Secretary of Defense Jim Mattis once noted, “The enemy gets a vote.” With the IRGC and its Quds Force likely to be bolstered by both new funding and the support of a hard-line president, Iran certainly will cast that vote in a manner that could well force the administration to reconsider just how low America’s profile really can go.  

Dov S. Zakheim is a senior adviser at the Center for Strategic and International Studies and vice chairman of the board for the Foreign Policy Research Institute. He was under secretary of Defense (comptroller) and chief financial officer for the Department of Defense from 2001 to 2004 and a deputy under secretary of Defense from 1985 to 1987.