American Enterprise Institute resident fellow J. Matthew McInnis spoke on current affairs in Iran at a Wednesday lecture. After the event, McInnis sat down with The Daily Princetonian to discuss the Iranian nuclear deal and Iran’s relationships with other world powers.
Daily Princetonian: With the signing of the Iran Deal, what do you expect to see in terms of economic development in Iran and its neighbors?
Matthew McInnis: I think that Iran is going to get an initial influx of cash that’s been sitting overseas under sanctions. So, the biggest thing that they are going to get first is cash, specifically in terms of investments between 20 and 30 billion dollars. But the real advantage for them is all the potential for warcraft investment, and frankly, it’s not going to be as lucrative as they initially expected. Partly this is because the Supreme Leader in general is still concerned about too much Western influence. They are still concerned about foreigners sitting on corporate boards and more multinational company structures. They are unsure how to balance the economic and political repercussions of investors from the West and East Asia. Everyone’s very eager to find out how much money they’re going to make, but I think they’re going to find it much more difficult than they expected. The rules are not going to be very pleasant, and a couple of problems foreign companies are going to have is that Iran is very adept at taking other people’s technology, reverse-engineering it and using it in better ways than the original intent. They’re very good at this, but they want to become as self-sufficient as possible … If sanctions come back, they’re extremely vulnerable ... They want to be able to take as much as they can during this window when [Barack] Obama is still president. They are confident that sanctions will not be coming back for now, and they are trying to strike deals and get intellectual property and other proprietary information from major international companies to get their technology and know-how. Iran is very smart, and they know how to take that and use it for themselves so they can produce the stuff on their own. The other thing is that there are going to be capital controls being placed on investment because of this fear of what would happen if sanctions came back. So, I think that, for those companies in particular that Iran is looking for, like energy companies, they will be offered to form long, 20-30 year deals. Theoretically, the deals would be grandfathered if sanctions came back, so there’s going to be a lot of pressure to get those kind of deals. Any kind of deal that makes them a quick dollar is going to be very attractive, so that’s kind of the approach Iran is going to be taking, because they very much want to stand on their own two feet economically. At the same time, they’re going to end up in a situation where the growth is not as fast as they would have wanted because they have so much to modernize, and I think they are underestimating how hard this is going to be.
DP: Iran recently launched a surface-to-surface missile on Sunday. Do you think the United Nations will find Iran in violation of the nuclear deal? What are the implications?
MM: They’re not in direct violation of the U.N. sanctions, but are in terms of the spirit of the sanctions, at least in terms of the requirements adopted by the nuclear deal. However, that deal only goes into effect on Oct. 19, so there might be a reason why they launched it before then. Once the new terms come in, the resolution that was passed in July to adopt the deal changed the language of ballistic missile launches. Now, it says that they have to refrain from launching missiles that are designed to carry a nuclear weapon, so of course Iran has an easy loophole there. Not only are they not forbidden anymore, they are just being told to not do it as opposed to 'you cannot do it.' They can always argue that they don’t intend to put a nuclear weapon on the missile, so they are not in violation of anything. They intend to push the envelope as far as they can, but what is interesting is that they are deciding to do it based off the old resolutions. I think they are sending a very strong message that they don’t see the UN resolutions as legitimate. That’s why they can reject the resolution with moral standing. The deal that was signed in Vienna, they look at that deal as something they are beholden to. They look at the U.N. resolution that adopted it as less binding, because it was passed by the U.N. Security Council, of which Iran is not a part. Their signatures aren’t on it, and even though they were part of the negotiations, they only see what they sign as binding. They’re going to look at what we think is a binding resolution and are going to care less. You’re going to see a continuing approach that will annoy us, but they don’t think we’re going to do anything about that, like pass new sanctions. If we push back, they’ll pull back, but if we don’t push back, they won’t let up. They’re testing us in a way.
DP: China and Russia are Iran’s largest buyers of oil. Do you think they’ll have an increasing influence in determining Iran’s military and economic future?
MM: Well, certainly, I’ve talked about tonight that they’re in a kind of new relationship with Russia that is going to become very problematic in the long-term, in my opinion, where they’re going to be increasingly beholden to what Putin wants to do in the region. That’s going to have certain advantages for them. They’re going to be able to have greater ability to resist the United States, resist Saudi Arabia, resist Israel. But they’re also going to be, I think, more compromised in what they want to do, because they’re going to have to accede to Russian interests at times when they may not want to. With China they don’t have as much of a strategic alignment per se, but they do obviously have a lot of interest in Chinese military capabilities, military weapons, as they do with Russians, and in particular, over the years the Chinese have been more and more hesitant to sell stuff to Iran. Because Iran has its history, as I was talking about on the economic front, of taking their technology and ripping it off and using it in their own stuff, and so the Chinese got really annoyed with that … the Russians, they’re going to sell some stuff to the Iranians, but they don’t want to arm Iran to the teeth. It’s just like the reason Russia, in the end, didn’t want Iran to get a bomb. I think actually they were sincere about that. The reason why the P5+1 held together so long is because the Chinese and the Russians don’t actually want a nuclear bomb, because that’s a real problem, because they can’t manage it, they can’t control it, it’s disruptive … China and Russia, they’re going to increase their cooperation with Iran, but … I don’t expect this to become some grand new version of NATO inside Eurasia.