Iranian negotiators will meet for a second time with representatives of the United Nations Security Council plus Germany on Wednesday in Baghdad. Guarded optimism surrounds the talks. That optimism and caution is appropriate. Many obstacles must be overcome between these talks and an agreement. Failure is a real possibility. But the stars appear to be aligning for progress.
Iran operates with a historical precedent for reaching an agreement. In July 1988, Iraq, after eight years of war with Iran, launched strategic air raids against Iran's industrial plants and began sending rockets into Tehran. The rockets caused little damage but generated panic, leading Iranians by the thousands to flee the city. With great reluctance, Ayatollah Khomeini issued a message. "Happy are those who have departed through martyrdom," his statement read. "Unhappy am I that I still survive. … Taking this decision is more deadly than drinking from a poisoned chalice."
The decision was to accept a cease-fire with Iraq. The announcement was actually made by Iran's then-president — none other than Ayatollah Ali Khamenei — now Iran's supreme leader.
Khamenei operates under the legitimacy of Iran's having accepted a hateful deal with a hated enemy.
But he seeks to realize a set of complex goals. He must avoid being seen as caving in to foreigners. The Iranian revolution was made on the basis of freeing Iran from foreign interference — of creating a truly independent Iran. The agreements Iran chooses to accept must be sold to the Iranian people as the choice of its leadership to the benefit of its people rather than as Iran's having been beaten into a deal.
That means there are no circumstances that would allow Khamenei to give up Iran's nuclear enrichment capabilities. That is seen as the scientific triumph of the "Islamic revolution" and testament to its success.
Khamenei also, desperately, wants to get the international sanctions lifted. In the end, the longevity of the revolutionary regime will depend on its ability to produce continuous economic growth. But the sanctions have really begun to bite, and the Iranian economy is in "shambles," as President Barack Obama has said.
On July 1, the European Union will add new punishing sanctions — an embargo on buying, financing, transporting and insuring Iranian oil — further pressuring the economy.
Just how vulnerable the economy is to sanctions is revealed by the fate of the rial. Iranians had rushed to dump their currency for the relative greater safety of dollars. In 2011, 10,800 rials could buy a dollar. When the sanctions really took hold, the rial collapsed. Iran's central bank lifted the exchange rate to 12,260 rials to the dollar. But the currency traders were demanding 18,200 for a dollar. Eventually the bank relented and authorized trades at any level. The rial went to 20,000.
When negotiations began between Iran and the West in April, the rial strengthened as high as 15,000 to the dollar. Since then it has fallen, but that's an indication of how the Iranian public reacts to the possibility of the lifting of sanctions and Iran giving up some of its isolation.
If Khamenei could make a deal, it could assuage a very nervous public. More important, it could lead to the lifting of sanctions.
That's the carrot. Then there are the sticks. The major one is the threat of an Israeli assault against Iran's nuclear infrastructure. Last week, for example, the U.S. ambassador to Israel, Daniel Shapiro, made it clear that: "It would be preferable to resolve this diplomatically and through the use of pressure than to use military force. But that doesn't mean that option is not fully available. And not just available, but it's ready. The necessary planning has been done to ensure that it's ready."
The major obstacle to any deal with Iran may actually come from Israel and its supporters rather than from the ayatollahs. Israeli Prime Minister Benjamin Netanyahu insists on Iran's meeting three of Israel's demands:
•Iran must stop the development of its second nuclear enrichment site at Fordo, deep under a mountain and immune from bunker-buster bombs.
•Iran must also ship its 20 percent enriched uranium out of the country to prevent a rush to enriching it to bomb strength.
•Iran must end all future enrichment.
If Israel is serious, the last of its demands is the deal breaker. Of course, Israel is not a direct party to the negotiations. But its supporters in the U.S. are extraordinarily important, particularly in the midst of the U.S. presidential campaign. "As the evidence of Iran's illicit activity continues to mount," the American Israel Public Affairs Committee recently declared, "Congress and the (Obama) administration must remain united in preventing the world's leading state sponsor of terrorism from acquiring the capability to build an atomic bomb."
The U.S. House, in parallel, just passed a resolution by a vote of 401-11 that declares it a "vital national interest of the United States to prevent the government of Iran from acquiring a nuclear weapons capability." AIPAC and its allies could certainly veto any deal the president believed to be in America's national interest.
The challenge for Iranian and U.S. negotiators is to balance the commitments of their domestic constituencies with the need for Iran to get the sanctions lifted and the bombing threat eliminated and the U.S. to end the dangers of Iran's developing nuclear weapons.
The challenges are immense but the stars seem aligned for serious negotiations in Baghdad. That certainly does not mean that an agreement will be reached soon. But this is certainly the best chance since Iran announced in 1982 that it would start importing nuclear technology again.
Marvin Zonis is professor emeritus at the Booth School of Business at the University of Chicago.