KOENIG

A deal has been reached between the world powers and Iran over the latter’s nuclear program after a series of major American concessions, Ehud Yaari, the Middle East affairs commentator for Israel’s Channel 2 television, said Friday night. “It is done. It is done,” he said, and will be signed “early next week.”

The aim of the agreement is to put a negotiated end to a 13-year standoff with Iran over its suspect nuclear program and to block its pathway to developing a nuclear bomb in exchange for lifting biting global sanctions. Israel’s leadership has relentlessly opposed the emerging agreement, with Prime Minister Benjamin Netanyahu warning that it will pave Iran’s path to a nuclear arsenal.

According to Yaari, Israel’s most respected Middle East analyst, the deal was reached because the Americans “have made a series of capitulations over the past two to three weeks in almost every key aspect that was being debated.”

Yaari said that even those in the US who had supported the agreement with Iran “admit that it is worse than they thought.” Now, he said, the ball is in the court of Democratic lawmakers who have to decide whether to support their president as he seeks to secure Congressional approval, or to join the vocal Republican opposition to an agreement.

The Shanghai Stock Exchange Composite Index has lost 28 percent since its peak on June 12, the worst selloff in two decades. About $3.9 trillion in market valuation has evaporated, more than the total annual output of Germany—the world’s fourth-largest economy—and 16 times Greece’s gross domestic product. The benchmark is still up 82 percent in the past year, the most among the world’s major markets.

As shares tumbled, companies rushed to apply for trading suspension. More than 1,400 companies stopped trading on mainland exchanges, locking sellers out of 50 percent of the market. The China Securities Regulatory Commission also banned major shareholders, corporate executives, and directors from selling stakes in listed companies for six months.

Chinese stocks have become the most volatile among major markets after Greece. A measure of 30-day price swings on the Shanghai benchmark reached 56, the highest since 2008. The volatility is more than five times that of the Standard & Poor’s 500-stock index.

Investors who borrow money from brokerages have amplified the boom-and-bust. A fivefold surge in margin debt had helped propel the Shanghai index up more than 150 percent in the 12 months through June 12. On the way down, leveraged investors unwoundtheir holdings to repay the loans, amplifying the crash. While margin debt on the exchanges has declined by 823 billion yuan ($133 billion) since the mid-June peak, to 1.44 trillion yuan, it’s still more than triple the level from a year earlier.

Huge crowds chanted anti-Israel and U.S. slogans in Iran's capital on Friday, an indication of the power that hardliners still hold even as negotiators struggle to finalize a nuclear deal that would help normalize the country's relations with the rest of the world. 

"Today, I am here to punch Israel in the mouth," said Fatemeh Hossieni, a 61-year-old English teacher who was marching for Al-Quds Day, a holiday held to show support for Palestinians. "Israel will be destroyed, America will be destroyed — so will ISIS and England."

Negotiators for Iran and six world powers — the U.S., Britain, Russia, China, Germany and France — have missed a series of deadlines trying to craft a deal that would restrict Tehran's nuclear program in exchange for easing punishing economic sanctions. 

On Friday, as talks reportedly became fractious, Iran's Foreign Minister Mohammad Javad Zarif dismissed warnings that the U.S. was ready to leave the talks, saying they were counterproductive. The negotiations in Vienna were later extended until Monday afternoon.

The question is not whether Iran can be trusted to uphold the nuclear deal now being negotiated in Vienna (it can’t), but whether the Obama administration and its P5+1 partners can be trusted to punish Iran when it violates the agreement? 

Experience shows that unless Iran violates the deal egregiously, the temptation will be to ignore it. For instance, Iran got away with selling more oil than it should have under the interim agreement. More ominously, Tehran repeatedly pushed the envelope on technical aspects of the agreement—such as caps on its uranium stockpile—and got away with it. The Obama administration and other Western powers have so much invested in their diplomatic efforts that they’ll deny such violations ever occurred.  

More evidence of Iranian violations has now surfaced. Two reports regarding Iran's attempts to illicitly and clandestinely procure technology for its nuclear and ballistic missile programs have recently been published. They show that Iran's procurement continues apace, if not faster than before the Joint Plan of Action was signed in November 2013. But fear of potentially embarrassing negotiators and derailing negotiations has made some states reluctant to report Tehran’s illegal efforts. If these countries have hesitated to expose Iran during the negotiations, it is more likely they will refrain from reporting after a deal is struck.

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An agreement to curb Iran’s nuclear program could create a bonanza for U.S. defense contractors who already are benefiting as the Obama administration tries to assuage Israeli and Gulf Arab concerns by cutting deals for more than $6 billion in military hardware.

The details of a potential deal being negotiated between Iran and six world powers -- China, France, Germany, Russia, the U.K. and U.S. -- would determine what steps the U.S. takes to help its allies. A nuclear agreement is likely to prompt Mideast partners to seek improved defense systems from American contractors such as Boeing Co., Lockheed Martin Corp. and Raytheon Co. as well as weapons-makers in France and elsewhere.

“In theory, an Iran deal could lead to a reduction in tensions in the region that would reduce the demand for advanced weaponry,” said William Hartung, director of the Arms and Security Project at the Center for International Policy in Washington. “In the short-term, a deal could actually boost the demand for arms.”