Political Risk Analysis - Nuclear Deal To Be Reached In June - JUNE 2015

BMI View: An agreement between the P5+1 and Iran over the latter's nuclear programme will be reached in June 2015. Significant progress appear s to have been made of late and remaining points of contention are far from insurmountable. In addition, there is significant political will and, for Iran, economic necessity fo r a deal to occur. While we think the hardliners from both sides will be sidelined at this stage , the agreement could collaps e from 2017 onward s given political changes set to occur in the US and Iran.

We expect an agreement between Iran and the P5+1 countries (the US, Russia, China, France, Britain and Germany) on the Islamic Republic's nuclear programme will be forthcoming in June 2015. Whilst much of the content of the negotiations has remained secret, significant progress seems to have been made over the past few months, and the structure of the negotiations (an outline to be agreed at the end of March, with final discussions ending in June) appears to indicate that the likelihood of another rollover of talks is small. We believe that there is significant political will on the part of the main powerbrokers in Washington, the EU and Tehran for an agreement to be made, and this will override opposition from hardliners on both sides. We expect any agreement to include the partial relaxation of banking and oil sanctions on Iran, a key requirement for Tehran to agree to any deal. In return, we believe that the nuclear programme will be suspended, with Tehran agreeing to regular inspections of sites at Fordow and Arak.

We have become more optimistic on a deal given a confluence of factors. First, much lower oil prices have increased the urgency for a deal on Iran's side. Second, the rise of Islamic State and the collapse of the Yemeni state have increased the West's sense of urgency to bring Iran back from the cold to help resolve regional challenges. Finally, US President Barack Obama's more apparent desire to set an independent foreign policy course (most recently illustrated with warming ties with Cuba) illustrates his desire for success with Iran's nuclear negotiations as part of historical legacy.

Inspections Will Be Key To Agreement Holding
Iran - Main Nuclear Facilities

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