On Jan 16, the United States and Europe lifted sanctions on Tehran after the six-month-old Iran nuclear deal reached its most important milestone: the United Nations verified that Iran has dismantled much of its nuclear infrastructure. The agreement between Iran and six world powers was a victory for international diplomacy over the threat of war. With the agreement in force, Iran now has the potential to transform itself from a pariah state to a regional power broker. The United States and European nations lifted oil and financial sanctions, and released about $100 billion of Iran’s frozen assets. These steps will pave the way for international companies to invest in Iran, and for Tehran to increase its oil production and access world markets. “The shackles of sanctions have been removed and it’s time to thrive,” Iranian President Hassan Rouhani said in a speech to Parliament a day after sanctions were lifted, adding it is now up to Iran to “seize the opportunity for an economic leap.” Still, there are major obstacles to a full-scale détente between the United States and Iran. On Jan. 17, the Obama administration imposed new sanctions on Iran for two recent ballistic missile tests, which violated UN resolutions. And on Tuesday, Iran’s supreme leader, Ayatollah Ali Khamenei, projected a hard line, warning Rouhani and his government to guard against American “deceptions” — and to ensure that Iran’s opponents live up to their part of the nuclear deal. His comments reinforced fears that the supreme leader would clamp down on future US efforts to engage with Tehran. Saudi Arabia and its allies in the Arab world are another potential hurdle to rapprochement between Iran and the West. After the nuclear deal was signed in July, the Sunni leaders of Saudi Arabia were enraged that it would help Shi’ite-led Iran gain an edge in their ongoing regional rivalry.
This series of proxy battles — in which the two rivals are backing competing factions in Iraq, Syria, Yemen, Lebanon and Bahrain — have shaped the Middle East since the United States invaded Iraq in 2003. While the conflict is partly rooted in the historical Sunni-Shi’ite schism within Islam, it is mainly a struggle for political dominance of the Middle East between Iran and Saudi Arabia. Within Iran, the lifting of sanctions and an end to Tehran’s international isolation were expected to strengthen Rouhani and his moderate allies. He was elected in 2013 on a pledge to improve Iran’s economy, which has been crippled by sanctions. But Rouhani and his allies face a daunting battle against hardliners in parliamentary elections scheduled for next month. About two-thirds of the 12,000 candidates who initially registered for the elections have withdrawn or been disqualified by the Guardian Council, which approves all parliamentary candidates and legislation. Of the 3,000 reformist contenders nationwide, only 33 were approved by the council, which is dominated by Khamenei. While Khamenei and Iran’s hardliners are suspicious of détente, there is a small opening for improved relations. Alongside the lifting of sanctions, Iran and the United States also agreed on a prisoner swap that led to the release of Jason Rezaian, a Washington Post correspondent, and four other Americans who had been detained by Iran for years. In exchange, Washington released seven Iranians — six of whom hold dual US citizenship — who had been arrested on charges of violating sanctions. The past weekend’s flurry of activity underscored the importance of increased US-Iranian engagement, which could lead to a thawing of relations between the two countries after more than 35 years of hostility. Since the nuclear deal, US Secretary of State John Kerry and the Iranian foreign minister, Mohammad Javad Zarif, have developed a close relationship, which helped pave the way for the prisoner swap and other de-escalation measures. On Jan. 12, two US patrol boats drifted into Iranian waters in the Persian Gulf, and Iran’s Revolutionary Guards detained the 10 American sailors onboard. Hardliners in both the United States and Iran tried to escalate the incident into a diplomatic crisis, but thanks to the quick action of Kerry and Zarif, the sailors were released within 24 hours. To avoid jeopardizing the nuclear deal, Khamenei, the supreme leader, reined in hardliners in the Iranian military. The nuclear agreement was signed after two years of difficult negotiations that involved the United States alongside France, Britain, Germany, Russia and China. Since then, Iran has shown a willingness to engage world powers in other negotiations, especially by joining US and Russian-led talks that seek an end to the five-year civil war in Syria. But those negotiations, which are set to start on Jan. 25, have stalled partly because of the conflict between Iran and Saudi Arabia. On Jan. 2, the kingdom executed an outspoken Shi’ite cleric who called for the overthrow of the Saudi royal family. Within hours, demonstrators stormed the Saudi embassy in Tehran and set the building on fire. The next day, Saudi Arabia cut off diplomatic relations with Iran, a move followed by several Saudi allies in the region. Tensions eased recently, but Saudi-Iranian relations are at their worst in years and leaders are still trading hostile rhetoric. For example, a Saudi foreign ministry official recently accused Iran of “spreading sedition, unrest and chaos in the region” since the 1979 Islamic Revolution. Saudi Arabia’s leaders are fixated on containing Iranian power throughout the Middle East, whether real or perceived. The Saudis worry that after economic sanctions have been lifted, Iran will use its tens of billions of dollars in frozen funds and new oil revenue to expand its influence in Iraq, Syria, Lebanon and elsewhere. Saudi Foreign Minister Adel al-Jubeir warned on Jan. 19 that if these funds “go to support the nefarious activities of the Iranian regime, this will be a negative and it will generate a pushback.