The Iran deal is done. It’s a historic moment. But as important as it is to defang Iran’s nuclear threat, the bigger story is what the deal means for Iran’s new standing in a crumbling geopolitical order. Three changes will matter most.
First, the competition between Shia Iran and Sunni Saudi Arabia will heat up, and the balance of power will tip toward Tehran. Saudi Arabia is now pumping the most oil since 1980, but an unsanctioned Iran will cut into Saudi market share. Iran is the holder of the world's fourth-largest proven crude oil reserves and second-largest natural gas reserves, and will soon bring 1 million barrels a day back to the market. Meanwhile, proxy fights in Iraq, Yemen, Syria, and elsewhere will intensify. As the U.S. and Europe look to reduce their presence in the region, the escalation of proxy wars between Saudi Arabia and Iran will heighten the risk of direct conflict.
Next, Iran will open for business. The world will trade again with Iran’s $420 billion economy. Trade with the EU could expand as much as 400 percent, from $8.3 billion last year. Economic benefits will spill across the Gulf. Dubai will become a launch pad for foreign investment in Iran. And the investors are coming. Iran is not just another Middle Eastern petro-state; it offers investors a diversified economy with an established capital market. Its population of 80 million, the second largest in the Middle East, promises consumer demand across sectors as varied as travel and logistics to pharmaceuticals and consumer products. By some estimates, the nuclear deal could accelerate growth in Iran to 8 percent over the next three years and motivate the potential return of hundreds of thousands of highly talented Iranians.
Finally, Iran will lead the fight against ISIS. Obama is in no position to put U.S. boots on the ground, but the more battles ISIS wins in the Middle East, the more of a problem it will become internationally. Washington needs someone with the will and resources to deal ISIS a strong blow. And that’s Iran. Though economic sanctions and a global arms embargo have limited the sophistication of Iran’s military powers (Iran spends a fifth as much as Saudi Arabia on boosting its military assets), the expansion of Iranian influence and economic capabilities will pave the way for greater defense leadership in the Middle East. Iraqi Shia militias, backed by Iran, will offer a desperately-needed counter to ISIS.
Will Iran cheat on the deal? Yes. The U.S. and Iran aren’t about to start trusting one other, much less become fast friends. But in the world created by the deal, Iran starts to matter much more than Saudi Arabia and other old-guard U.S. allies.
Today’s deal isn’t the end of the story. It’s only the end of the first chapter.
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