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A nuclear deal with Iran could generate billions for US economy

If done right, an agreement would be a boon for new export markets, support jobs, and high-value returns for American industry

Analysis | Middle East

As the U.S. and Iran engage in fraught rounds of nuclear talks, deep distrust, past failures, and mounting pressure from opponents continue to hinder progress. Washington has reverted to its old zero-enrichment stance, a policy that, in 2010, led Iran to increase uranium enrichment from under 5% to 20%. Tehran remains equally entrenched, insisting, “No enrichment, no deal, No nuclear weapons, we have a deal.”

In Washington, the instinct is to tighten the screws on Tehran, make military threats credible, and explore strike options to force capitulation. Yet history shows that these coercive tactics often fail. Sanctions have not secured compliance and have proven costly to U.S. interests. Military strikes are unlikely to dismantle Iran’s nuclear capabilities; instead, they risk convincing Tehran to pursue the development of nuclear weapons.

Breaking this impasse requires a strategic pivot from punishment to pragmatic economic engagement. Economic incentives are not rewards; they are essential diplomatic tools. By directly linking benefits to verified nuclear compliance, Washington can foster real cooperation and strengthen U.S. security. And it would be a real boon for both U.S. and Iran markets, which have been closed off from each other for decades.

The limits of sanctions-only diplomacy

The sanctions-first strategy sought to convert foreign economic pressure into domestic political upheaval, forcing political capitulation. In reality, sanctions have impoverished ordinary Iranians without significantly altering the regime’s calculus. Rather than capitulation, Iran has advanced its nuclear capabilities and developed a sophisticated sanctions-evasion network.

Despite significant economic hardship, Iran has maintained a modest annual economic growth rate of 4% since 2020. However, this growth conceals more profound economic challenges. Persistent inflation ranging from 30% to 40% and budget deficits between 20% and 25% have forced the government into unsustainable financial practices, such as printing money and imposing heavy taxes on the private sector, which worsen the country’s ongoing stagflation. Although sitting on some of the world’s largest energy reserves, Iran struggles with significant energy inefficiencies and shortages due to a lack of investment.

With no viable domestic political backlash, Iran’s leadership prefers “resistance” to capitulation with no payoff, calculating it can outlast sanctions as long as no real benefits are on offer. To change this calculation, the U.S. must offer targeted economic advantages to Iranian elites and citizens, creating domestic pressure for compliance and coexistence. This does not mean abandoning sanctions or rewarding adversarial behavior; rather, it involves strategically linking economic gains to verified nuclear restrictions.

By clearly tying diplomatic compliance to tangible economic improvements, Washington can build powerful constituencies in both countries committed to preserving the deal. I explain this in a new brief for the Quincy Institute entitled, "The Economic Dimensions of a Better Iran Deal."

Economic engagement as a catalyst for change

A growing number of Iranian elites now believe that unlocking Iran’s geo-economic potential and addressing escalating economic challenges hinges on the U.S. economic engagement. While military-linked hardliners resist any economic ties with America, most elites have reluctantly recognized that even under a JCPOA-like deal, partnerships with non-U.S. economies remain fragile without U.S. involvement.

Hardliners understand that greater openness would erode the power of military-linked conglomerates and undermine the rationale of economic militarization. Meanwhile, moderates acknowledge that Iran’s economy requires a durable deal that includes strong American constituencies with vested interests in maintaining sanctions relief.

Targeted economic incentives could deepen these elite divisions and pressure Tehran toward compliance.

A flexible, incentive-driven framework

A practical step includes launching an economic dialogue parallel to the technical nuclear discussions to explore options for selectively opening Iran’s substantial consumer market to American businesses. Even without fully repealing primary sanctions laws, President Trump can selectively license up to $25 billion in annual U.S. exports and enable U.S.-owned subsidiaries to engage with up to $4 trillion in untapped Iranian investment opportunities by 2040.

Licensing up to $25 billion annually in U.S. exports, particularly in aviation, agriculture, and automobiles, could create and sustain over 200,000 American jobs each year. Beyond this $25 billion export figure, Iran needs to immediately import approximately $180 billion worth of equipment and machinery to renovate just 30 percent of its outdated industrial base, $50 to $60 billion to expand and upgrade its electric transmission and distribution systems, and another $60 billion to modernize and expand its rail network. If permitted, these imports could be sourced primarily from the U.S. market.

Facilitating these exchanges provides durable incentives for both sides. Reinstating Boeing deals could revitalize manufacturing hubs in Washington and South Carolina. Similarly, American farmers, especially in the Midwest, would directly benefit from increased agricultural exports to Iran, where billions of dollars’ worth of staple commodities such as soybeans and corn are consistently imported.

Beyond immediate trade benefits, Washington can authorize a new General License H, providing a five-year window for U.S.-owned subsidiaries to operate in Iran’s designated sectors. With the largest untapped market in the Middle East, without sanctions, Iran could add $600 billion to $1 trillion in GDP by 2040. Meeting these goals requires $2.3 to $4 trillion in capital by 2040. Allowing indirect American investments, without repealing primary sanctions laws, provides a pragmatic, politically feasible pathway to integrate Iran’s economy into a broader regional economic network. As the payback period for most Iranian projects with a high return rate is less than five years, if compliance endures, it can be extended or evolve into permanent relief. It gives U.S. businesses a foothold while preserving leverage.

Engaging regional partners such as Saudi, Oman, Qatar, and the UAE to participate in joint ventures with American subsidiaries could further amplify the deal’s economic and geopolitical benefits. This regional economic cooperation would bolster stability across the Persian Gulf and raise Iran's costs if it breaches compliance terms, significantly strengthening diplomatic leverage.

A dynamic “snap-forward” mechanism could also be introduced, allowing Iran’s economic openings to accelerate as Tehran demonstrates sustained compliance and cooperation. This incentive-driven approach contrasts sharply with the reactive, punitive “snap-back” sanctions of previous agreements, creating a positive, mutually reinforcing cycle of compliance and reward.

Anchoring nuclear diplomacy in economic incentives offers U.S. policymakers a chance to achieve security goals that decades of coercion alone have failed to deliver. When tied to verifiable compliance, economic benefits become powerful leverage to force sustained Iranian compliance. Now, Washington faces a choice: double down on a sanctions-driven strategy with a track record of failure, or embrace a smarter, incentive-based policy that brings nuclear security, regional stability, and economic gains for American workers.

It’s time to recognize the limits of sanctions-only diplomacy and prioritize economic engagement as the foundation of a more effective Iran strategy for lasting security and diplomatic stability.


Top image credit: EVERETT (WA), USA – JANUARY 30 2015: Unidentified Boeing employees continue work building its latest Boeing 777 jets at its Everett factory (First Class Photography / Shutterstock.com)
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The final stage of the Vuelta a España, Spain’s premier cycling race, was abandoned in chaos on Sunday. Pro-Palestinian protesters, chanting “they will not pass,” overturned barriers and occupied the route in Madrid, forcing organizers to cancel the finale and its podium ceremony. The demonstrators’ target was the participation of an Israeli team. In a statement that captured the moment, Spain’s Prime Minister Pedro Sánchez expressed his “deep admiration for the Spanish people mobilizing for just causes like Palestine.”

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Sanchez’s support for the protesters was not merely rhetorical. On Monday, he escalated his stance, explicitly calling for Israel to be barred from international sports competitions, drawing a direct parallel to the exclusion of Russia over its invasion of Ukraine. “Our position is clear and categorical: as long as the barbarity continues, neither Russia nor Israel should participate in any international competition,” he said. This position, which angered Israel and Spanish conservatives alike, was further amplified by his culture minister, who suggested Spain should boycott next year’s Eurovision Song Contest if Israel participates.

More significantly, it emerged that his government had backed its strong words with concrete action, cancelling a €700 million ($825 million) contract for Israeli-designed rocket launchers. This move, following an earlier announcement of measures aimed at stopping what it called “the genocide in Gaza,” demonstrates a willingness to leverage economic and diplomatic tools that other EU capitals have avoided.

Sánchez, a master political survivalist, has not undergone a grand ideological conversion to anti-interventionism. Instead, he has proven highly adept at reading and navigating domestic political currents. His government’s stance on Israel and Palestine is a pragmatic reflection of his coalition that depends on the support of the left for which this is a non-negotiable priority.

This instinct for pragmatic divergence extends beyond Gaza. Sánchez has flatly refused to commit to NATO’s target of spending 5% of GDP on defense demanded by the U.S. President Donald Trump and embraced by NATO Secretary General Mark Rutte, citing budgetary constraints and social priorities.

Furthermore, Spain has courted a role as a facilitator between great powers. This ambition was realized when Madrid hosted a critical high level meeting between U.S. and Chinese trade officials on September 15 — a meeting Trump lauded as successful while reaffirming “a very strong relationship” between the U.S. and China. This outreach is part of a consistent policy; Sánchez’s own visit to Beijing, at a time when other EU leaders like the high representative for foreign policy Kaja Kallas were ratcheting up anti-Chinese rhetoric, signals a deliberate pursuit of pragmatic economic ties over ideological confrontation.

Yet, for all these breaks with the mainstream, Sánchez’s foreign policy is riddled with a fundamental contradiction. On Ukraine, his government remains in alignment with the hardline Brussels consensus. This alignment is most clearly embodied by his proxy in Brussels, Iratxe García Pérez, the leader of the Socialists and Democrats (S&D) group in the European Parliament. In a stark display of this hawkishness, García Pérez used the platform of the State of the Union debate with the EU Commission President Ursula von der Leyen to champion the demand to outright seize frozen Russian sovereign assets.

This reckless stance, which reflects the EU’s broader hawkish drift on Ukraine, is thankfully tempered only by a lack of power to implement it, rendering it largely a symbolic act of virtue signaling. The move is not just of dubious legality; it is a significant error in statecraft. It would destroy international trust in the Eurozone as a safe repository for assets. Most critically, it would vaporize a key bargaining chip that could be essential in securing a future negotiated settlement with Russia. It is a case of ideological posturing overriding strategic calculation.

This contradiction reveals the core of Sánchez’s doctrine: it is circumstantial, not convictional. His breaks with orthodoxy on Israel, defense spending and China are significant, but driven, to a large degree, by the necessity of domestic coalition management. His alignment on Ukraine is the path of least resistance within the EU mainstream, requiring no difficult choices that would upset his centrist instincts or his international standing.

Therefore, Sánchez is no Spanish De Gaulle articulating a grand sovereigntist strategic vision. He is a fascinating case study in the fragmentation of European foreign policy. He demonstrates that even within the heart of the Western mainstream which he represents, dissent on specific issues like Gaza and rearmament is not only possible but increasingly politically necessary.

However, his failure to apply the same pragmatic, national interest lens to Ukraine — opting instead for the bloc’s thoughtless escalation — proves that his policy is more a product of domestic political arithmetic than coherent strategic vision. He is a weathervane, not a compass — but even a weathervane can indicate a shift in the wind, and the wind in Spain is blowing away from unconditional Atlanticism.

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