Given the strength of hardliners in Iran and the red lines that have been laid down by Supreme Leader Ayatollah Ali Khamenei, I have been pessimistic about the prospects for a negotiated settlement to the nuclear crisis. In a good start to the new year, however, President Hassan Rouhani has threatened to go over their heads by putting the matter directly to the Iranian people.

In an astonishing speech at an economic conference on 4 January, Rouhani noted that the constitution of the Islamic Republic of Iran allows for a public referendum on important policy matters. This constitutional provision has never been employed and it is doubtful that Rouhani could force a referendum without Khamenei’s approval. But by suggesting this tactic, the president warned opponents that they should not prevent his negotiators from reaching a deal.

Rouhani also showed how keen he is to resolve the nuclear matter. In his speech, he said Iran must end its international isolation if the economy is to enjoy sustainable growth. Sanctions have not brought Iran to its knees; economic growth was positive last year and the inflation rate dropped from near 40% to under 25% in 2014. Yet there is no doubting their strong negative impact, especially when combined with the 40% drop in oil prices since June. The exchange rate suffered a 10% decline in the last weeks of the year and the stock market was down 20% from the previous year.

Some Iranians charge Saudi Arabia and the United States with conspiring to bring down the oil price as a weapon against Iran. Some even argue that in retaliation, Iran should walk out of the nuclear negotiations and end cooperation with the International Atomic Energy Agency.

Any such provocation would be a ‘make my day’ gift to US hardliners. With the Congress now fully under Republican control, many legislators are eager to impose additional sanctions on Iran in order to tighten the economic pressure. Senate Majority Leader Mitch McConnell is cautious about bringing such legislation to the floor unless he knows he can entice enough Democratic votes to sustain a presidential veto. This will be difficult as long as a diplomatic solution appears in sight.

One element of a solution appeared to fall into place at the turn of the year when AP reported that in the December round of negotiations there was tentative agreement to ship stockpiled low-enriched uranium (LEU) out of the country. Although the Iranian Foreign Ministry denied the story, it remains plausible. Iran has previously pronounced itself willing to export LEU as an element to an agreement.

The AP also reported that for the first time negotiators drew up a catalogue outlining areas of potential accord and differing approaches to remaining issues. One of the key remaining issues involves the extent to which sanctions will be eased and when. President Obama has offered to suspend sanction implementation, but he does not have the authority to lift several key measures without congressional approval. Iranian hardliners insist that sanctions must be removed entirely, even though there is currently no possibility that the US Congress would agree to do so. Hence Rouhani’s warning about seeking a referendum.

Another key issue is the allowable size of Iran’s enrichment programme. The Western nations negotiating with Iran seek a limit of 4,000 first-generation centrifuges, while Iran wants to retain an equivalent of the nearly 10,000 now operating. In his speech, Rouhani indicated flexibility, hinting that size does not matter. ‘Our ideals are not bound to centrifuges’, he said. ‘Our ideals are bound to our hearts, brains and determination.’

I assume what Rouhani meant is that Iran should be smart enough not to pass up the prospect for making a deal with the best negotiating partner the country will face in the foreseeable future. President Obama’s boldness in restoring relations with Cuba is well known in Tehran. Similar rapprochement with Iran is not in the cards, but striking a deal on the nuclear issue can be done if Rouhani can overcome internal resistance.

Mark Fitzpatrick is Director of the IISS Non-Proliferation and Disarmament Programme.

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