Follow us on social

Boeing

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)
Analysis | Middle East
Nato Summit Trump
Top photo credit: NATO Secretary General Mark Rutte, President Donald Trump, at the 2025 NATO Summit in The Hague (NATO/Flickr)

Did Trump just dump the Ukraine War into the Europeans' lap?

Europe

The aerial war between Israel and Iran over the past two weeks sucked most of the world’s attention away from the war in Ukraine.

The Hague NATO Summit confirms that President Donald Trump now sees paying for the war as Europe’s problem. It’s less clear that he will have the patience to keep pushing for peace.

keep readingShow less
Antonio Guterres and Ursula von der Leyen
Top image credit: Alexandros Michailidis / Shutterstock.com

UN Charter turns 80: Why do Europeans mock it so?

Europe

Eighty years ago, on June 26, 1945, the United Nations Charter was signed in San Francisco. But you wouldn’t know it if you listened to European governments today.

After two devastating global military conflicts, the Charter explicitly aimed to “save succeeding generations from the scourge of war.” And it did so by famously outlawing the use of force in Article 2(4). The only exceptions were to be actions taken in self-defense against an actual or imminent attack and missions authorized by the U.N. Security Council to restore collective security.

keep readingShow less
IRGC
Top image credit: Tehran Iran - November 4, 2022, a line of Iranian Islamic Revolutionary Guard Corps troops crossing the street (saeediex / Shutterstock.com)

If Iranian regime collapses or is toppled, 'what's next?'

Middle East

In a startling turn of events in the Israel-Iran war, six hours after Iran attacked the Al Udeid Air Base— the largest U.S. combat airfield outside of the U.S., and home of the CENTCOM Forward Headquarters — President Donald Trump announced a ceasefire in the 12-day war, quickly taking effect over the subsequent 18 hours. Defying predictions that the Iranian response to the U.S. attack on three nuclear facilities could start an escalatory cycle, the ceasefire appears to be holding. For now.

While the bombing may have ceased, calls for regime change have not. President Trump has backtracked on his comments, but other influential voices have not. John Bolton, Trump’s former national security adviser, said Tuesday that regime change must still happen, “…because this is about the regime itself… Until the regime itself is gone, there is no foundation for peace and security in the Middle East.” These sentiments are echoed by many others to include, as expected, Reza Pahlavi, exiled son of the deposed shah.

keep readingShow less

LATEST

QIOSK

Newsletter

Subscribe now to our weekly round-up and don't miss a beat with your favorite RS contributors and reporters, as well as staff analysis, opinion, and news promoting a positive, non-partisan vision of U.S. foreign policy.