Why Is This Man Smiling?

Last week in Almaty, Kazakhstan, Iran discussed its nuclear program with representatives from the five permanent members of the U.N. Security Council plus Germany — the so-called P5+1. Supreme Leader Ayatollah Ali Khamenei has no doubt been smiling ever since, and not just because the unproductive talks bought Iran yet more time to advance its nuclear program. Khamenei is likely smiling because in the longstanding game of diplomacy, economic warfare, and clandestine operations between the Iran and the West, Iran won the week.

Iran’s primary victory out of Kazakhstan was in obtaining an offer from the P5+1 to ease the economic sanctions that have been battering the Iranian economy as an interim step, rather than as a part of a comprehensive deal. Widely referred to as "sanctions relief," the Almaty proposal was leaked before talks even began, and described by the P5+1 as a "confidence-building step."

"Sanctions relief" can indeed be seen as a confidence-builder, but not in the way its proponents intended. In reality, the Kazakhstan offer simply allowed Iranian officials to effectively convey competence and the hope of improved economic conditions to their own people, just as the June 2013 presidential election approaches. At a time when Iran has suffered from worsening economic conditions including hyperinflation and an 80 percent currency devaluation, this is exactly what the regime was hoping to achieve.

To be sure, the upcoming election will be illegitimate and result in Khamenei’s hand-picked candidate assuming power. But even with that ultimate result determined, the regime is taking every step possible to ensure that the election proceeds smoothly and is not a repeat of 2009 — when hundreds of thousands of Iranians took to the streets in protest — particularly given the lessons of the nearby Arab uprisings.

In January, Khamenei made rare public comments demanding that Iranians honor the results of this year’s election, stating that "[a]ll people should be careful that their remarks do not serve this desire of the enemy." That followed numerous statements by President Mahmoud Ahmadinejad and others blaming Western sanctions for the deterioration of the Iranian economy. The ayatollah and his cronies are taking great pains to fight the narrative that their own incompetence, both in domestic policy and foreign policy, is responsible for the nation’s current economic troubles.

Unintentionally, the P5+1 played right in this propaganda effort with its offer of "sanctions relief." While nothing was accomplished in Kazakhstan diplomatically, Tehran held up the P5+1’s offer as evidence that sanctions would soon be eased. Subsequently, the Iranian rial, which was recently trading at an all-time (semi-official) low of 40,000 to one dollar, rose in value to 33,000 to 1. Regime officials spoke effusively of the meeting, with spokesman Ramin Mehmanparast stating that "[a] positive atmosphere was created in the talks," and that "if this atmosphere prevails, an acceptable outcome for both parties may be reached."

The value of an unstable currency like the rial is about confidence, and the regime rather gamely used the talks to manipulate the rial and reassure its populace at a key political time. The P5+1 must learn from this manipulation and avoid complicity in further domestic victories by the regime.

"Sanctions relief" as a bargaining chip — rather than as a key component of a comprehensive deal — is also tremendously unhelpful to the effort to pressure corporations and other countries to pull out of Iran. Over the last five years, my NGO, United Against Nuclear Iran, has sought to compel companies around the world to end their Iran business. And while hundreds have cooperated and pulled out, some have only done so after considerable public pressure. A number continue to operate in Iran with impunity today.

In the most difficult cases, we have had success appealing to a company’s bottom line, and explaining that because of escalating sanctions, doing business in Iran is financially risky and will result in considerable losses. Unfortunately, developments such as what just happened in Kazakhstan give these companies less incentive to leave Iran, as they calculate that they can just wait the sanctions out.

Rather than making half-baked offers of "sanctions relief," the P5+1 must make clear that absent substantive negotiations resulting in a comprehensive solution, sanctions will increase, and culminate in a full economic blockade of Iran that will cripple its economy.

Unless meaningful progress occurs, the negotiators ought to say, there will be no "relief" — only escalation. In other words, if the regime continues to pursue a nuclear weapon, then it will be doing so at the expense of its economy — and perhaps its grip on power over its people. And in the case that Iran continues using P5+1 talks to just stall for more time, like-minded countries should join Barack Obama in fulfilling Vice President Joe Biden’s recent promise that "big nations cannot bluff" when it comes to the military option.

At this point, the only side that is benefitting from the current negotiating process is Iran. That doesn’t mean diplomacy shouldn’t continue, but it does mean that future negotiations need to be based on substantive progress with real outcomes. It’s time to recognize this, and never again repeat the great mistake of Almaty.