When the Biden administration announced a breakthrough in its long-running diplomatic dalliance with Iran earlier this month, it predictably touched off a firestorm of controversy. The new White House deal involves the unfreezing of $6 billion of previously-escrowed Iranian oil revenue held in South Korea in exchange for Iran’s release from prison of five wrongfully detained American citizens: Siamak Namazi, Emad Shargi, Morad Tahbaz and two unnamed others.
Critics have charged that the deal amounts to a ransom payment to the Islamic Republic, and is sure to encourage more bad behavior from Tehran — and from other troublesome regimes, such as Russia and China.
The White House and its surrogates maintain that it represents no such thing. Rather, they say, the money would be segregated in specially-created accounts, closely monitored and used only for humanitarian purposes that are permitted under U.S. sanctions anyway.
To hear them tell it, the arrangement is benign, even beneficial. “[T]his is a way of actually facilitating their use strictly for humanitarian purposes and in a strictly controlled way,” Secretary of State Antony Blinken has argued. “Iran will not have direct access to these funds. There will be significant oversight and visibility from the United States.”
But Team Biden isn’t fooling anyone. Money, after all, is fungible. That means a surge of previously inaccessible funds, however they happen to be earmarked, will represent a net expansion of the Islamic Republic’s overall budget.
Providing Tehran with additional money to spend on humanitarian necessities won’t automatically make it spend more on those things. What it will do is free up scant resources for the Iranian regime to spend on other things, such as its burgeoning nuclear and missile programs, as well as its extensive support for regional proxies.
That, after all, is precisely what happened last time. Back in 2014 and 2015, in pursuit of a nuclear deal with the Islamic Republic, the Obama administration presided over a massive rollback of U.S. sanctions against Iran, entailing hundreds of billions of dollars in direct and indirect economic relief to the ailing Iranian economy. The official thinking back then was this would lead the regime in Tehran to moderate politically, prioritize domestic development, and seek the betterment of Iranian society. In fact, the opposite happened.
Western sanctions relief didn’t lead to a domestic peace dividend within Iran. Rather, flush with additional cash, the Iranian regime chose to embark upon a major strategic expansion. Between 2015 and 2018, the Pentagon subsequently calculated, Iran’s real defense expenditures rose from $19.5 billion (4.3 percent of its GDP) to $27.3 billion (6.1 percent of its GDP). That was mirrored by a surge of regional instability, as an emboldened Islamic Republic expanded its strategic arsenal, its support for terrorist proxies, and created new asymmetric capabilities with which it set about reshaping politics in Persian Gulf and Levant.
The same thing is liable to happen again. In its latest annual budget, released this past Spring, the Iranian regime allocated the equivalent of some $9.23 billion to its military.
Given the Iranian regime’s consistent preference for guns over butter, at least some portion of the newfound wealth it has gained in recent days is likely to be used to bolster things like weapons systems, terrorist proxies and regional activism. If all of it is, Iran’s current military spending will swell by more than 65 percent. So too will the country’s regional profile and threat potential.
Every American should naturally applaud steps that help bring our unjustly imprisoned countrymen home. But anyone who understands the dangers posed by the Islamic Republic should also be deeply concerned about the costs incurred by doing this in the way Biden has chosen.
Ilan Berman is senior vice president of the American Foreign Policy Council in Washington, D.C.