One 'small' detail in the Iran nuclear talks is creating a huge problem for Biden

Iran's Islamic Revolutionary Guard Corps is designated as a terrorist organisation by the US. Reuters

Under the shadow of the Ukraine war, negotiations to salvage the Iran nuclear deal have reached a deadlock. Two months after negotiators left Vienna, the initial wave of optimism and claims that a deal was “imminent” have turned into statements of concerns and last-ditch efforts to save the talks, as negotiations appeared to flat-line.

The last standing obstacle is Iran’s demand for the removal of a US terrorist designation against the powerful Islamic Revolutionary Guard Corps (IRGC). Iran insists that a deal to curtail its nuclear activities should also include the lifting of US sanctions against the Revolutionary Guards.

Given how close the negotiations were when they concluded, with reports that an agreement had effectively been drafted and was waiting to be signed, the fact that the talks have stumbled on such a “limited” issue may seem surprising to outsiders. After all, Washington has shown that it was willing to be flexible, and placed the issue of re-entering the 2015 nuclear agreement at the top of its foreign policy priorities. The removal of the IRGC from the list of Foreign Terrorist Organisations (FTO) would also have a relatively limited economic impact on Iran, given that the group’s sub-branches and officials have also been targeted by sanctions.

But the issue is far more important than it seems, and Iran’s behaviour has even adamant supporters of a return to the nuclear deal concerned. The possibility that the IRGC would be removed from the FTO list has rattled US allies in the region, including (but not limited to) Israel. The IRGC is the main arm of Iran’s aggressive foreign policy, one that funds proxies active in Iraq, Yemen and Lebanon, and one that has, at times, acted on its own against US allies. Opposition to the lifting of the FTO designation also comes from within the US, as the US Senate recently passed a non-binding resolution prohibiting the Biden administration from lifting the designation in exchange for a return to the deal. At a time when the Ukraine crisis has shown that the gap between the US and its regional allies was real, the possibility of further alienating those same allies should be taken seriously.

This only partly explains why the Biden Administration has, so far, refused to delist the IRGC. President Joe Biden stated that the issue was one of principle: by asking to delist the IRGC, Iran is making demands that go beyond the scope of the nuclear deal. This might be acceptable if Iran was prepared, in exchange, to make concessions, including with regards to its regional influence and funding of militant groups across the region. The Europeans offered a very minimal compromise, in which Iran would only have to publicly commit to a de-escalation. And yet Iran refused.

This is no anecdotal refusal. The US administration seeks to re-impose restrictions on Iran’s nuclear programme, but its effort to negotiate a new arrangement also stems from a view that the US should pivot away from the Middle East, and that the Iran nuclear deal would assist Washington in doing so. The implicit assumption behind Washington’s flexibility and diplomatic campaign to ensure a return to the deal almost at all cost was that this would change Iran’s behaviour, help de-escalate regional tensions and free up the resources and bandwidth to tackle issues the Biden Administration views as more pressing. In other words, for Washington this was not the “cherry on top of the cake”. It was the whole cake.

From there, the US has only two options. The first is to proceed with a creative solution, lifting some sanctions against the IRGC as a compromise. A diplomatic effort is currently underway after the visit of the EU envoy Enrique Mora to Iran, and a Qatari initiative that may well help find a middle ground for both sides to save face. The second option is to try to kick the ball down the road. Practically, this would mean agreeing to discuss the IRGC designation and the issue of Iran’s regional influence in a separate format, something that would likely satisfy the US.

How realistic would that be given the fact that it took months of protracted negotiations to reach a very minimal agreement and given the limited US bandwidth due to the war in Ukraine? Not very realistic. But beyond that, Iran simply doesn’t want to hear about it, which is one of the reasons why it seeks to have the designation lifted as part of the nuclear talks. Tehran does not want to discuss its regional influence with the US.

The Iranians also believe they are in a position to extract additional compromises from Washington: Tehran can up the ante and scale up its attacks as a way to pressure Washington, particularly as a regional escalation is exactly what the Biden administration seeks to avoid. Unless Washington is ready to respond to the Iranian provocations – which it hasn’t done for months, despite the fact that some of those were directed at its own soldiers and interests – Iran can feel confident that the dynamic is in its favour.

The bottom line is that this “last issue” is of critical importance. Iran’s refusal to commit to a de-escalation negates one of the key benefits the Biden administration was expecting from a deal, whether it acknowledges it or not. What’s more, the US is at risk of making the exact same mistake the Obama administration did when it signed the so called “Joint Comprehensive Plan of Action” (the formal name of the nuclear deal) by ignoring the fact that this agreement is actually far from comprehensive, and by denying itself the leverage need to negotiate on other critical issues related to Iran’s regional influence.