On two very different fronts—Greece and Iran—the world is seeing what happens when one side pushes a negotiation to the edge of failure because it may believe it has supreme leverage.

In negotiations with six powers over their country’s nuclear program, Iranian leaders appear to be operating on the assumption that the United States is so invested in an Iran deal to end the thirteen-year-old crisis that Tehran can, in the eleventh hour, wrest concessions that the powers vowed only a year before would be out of the question.

In what looks like an equally seemingly endless test of wills, Greece dramatically escalated a negotiation with the European Union over the latest terms of an ongoing financial bailout. Athens is apparently confident that EU leaders’ unsaid bottom line is that letting Greece default and leave the eurozone would be a political disaster for the EU.

Mark Hibbs
Hibbs is a Germany-based nonresident senior fellow in Carnegie’s Nuclear Policy Program. His areas of expertise are nuclear verification and safeguards, multilateral nuclear trade policy, international nuclear cooperation, and nonproliferation arrangements.
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In Iran, talks started after the International Atomic Energy Agency belatedly confirmed that for twenty years, Tehran had violated its safeguards obligations under the Nuclear Non-Proliferation Treaty. By 2013, a deal was in the offing under which sanctions imposed by the United States, the EU, and the UN Security Council would be lifted step-by-step in response to Iranian actions to restore confidence that its nuclear program is wholly peaceful.

The United States, after years of avoiding any direct engagement with Iran, joined other powers at the table, took charge of the negotiation, and spent political capital to persuade allies and domestic adversaries that the game was worth the candle. But in the run-up to the June 30 deadline for a conclusion to the talks, Iran’s leadership hardened: they said they would allow no inspections in military installations, demanded that most sanctions be lifted in advance of Iran’s implementation, and gave no firm commitment for the entry into force of Iran’s Additional Protocol.

The trajectory of the crisis between Greece and the EU looks similar. It too was a long time coming. For years, the Greek state excessively spent and borrowed beyond levels permitted by the EU’s treaties. By 2010, Greece’s peril was so great that the country could no longer borrow from international lenders. EU states and institutions engaged with Athens to put the fire out, extending over €200 billion ($225 billion) in credit in exchange for Greek commitments to austerity and reform.

Greece limped along under this arrangement until early 2015, when a coalition led by the radical left Syriza party took power, repudiated austerity, and vowed to reinflate the Greek economy. During the last six months, the EU has urged Greece to return to its previous commitments. But Athens drove the crisis to a dramatic brink by rejecting a EU compromise package. Instead, Greece announced that a referendum would be held on the package on July 5—after the deadline of June 30 for Greece’s latest loan repayment.

The crisis between #Greece and the EU was a long time coming.
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What should observers take away from these two episodes?

First and foremost, in both cases, a group of states supported by intergovernmental agencies is negotiating collectively with a national government that is fighting off domestic political forces opposed to compromise. Leaders’ own supporters are spearheading efforts to demonize foreign negotiating parties. Greek Prime Minister Alexis Tsipras’s biggest headache is the leftist wing in his own political camp. Iranian Supreme Leader Ali Khamenei faces the wrath of clerics, conservative nationalists, military brass, and sanctions profiteers.

Rulers in both Athens and Tehran may be betting that their interlocutors are so heavily invested in achieving a deal that they can be confident of securing last-minute concessions. “They need us,” Khamenei said of the United States in mid-June. EU leaders from European Commission President Jean-Claude Juncker to German Finance Minister Wolfgang Schäuble have reiterated so often over the last six months that they want Greece to remain in the eurozone that Tsipras may have concluded that for the EU, a so-called Grexit is not an real option.

If both negotiations succeed this week, that will not imply closure in either case. Even if the EU and Greece settle in the days ahead, a fresh negotiation must get under way in fall 2015 over the fresh money Greece will need to keep the state liquid. The powers that are talking with Iran reiterate that “nothing is agreed upon until everything is agreed upon”—but experienced negotiators expect that, should both sides conclude a comprehensive agreement, Tehran will look hard for ways to renegotiate specific items, especially those it considers onerous.

Recent events in Greece suggest that #Tsipras may have overplayed his hand.
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Recent events in Greece suggest that Tsipras may have overplayed his hand. He will hold the referendum on July 5. But the EU’s riposte of allowing an emergency credit line to Greek banks to run out informs Greek voters (who, according to polls, want to keep the euro) that their condition will worsen if Tsipras doesn’t compromise.

Iran’s leaders, too, may be mistaken that the United States will blink first. When U.S. Secretary of State John Kerry suggested on June 16 that Iran would not have to reveal past details of its nuclear activities to make a deal, his remarks were immediately corrected in the direction of Iran and U.S. allies. U.S. President Barack Obama, and others in his administration, may be less willing to bend to Iran. And if the president walks away from the Iran negotiation shortly after June 30, he won’t be punished by either Republicans or Democrats.

The United States and the EU may conclude that if they are not resolute, they will not succeed. EU finance ministers warn that if they give in to Tsipras’s demands, other EU states with similar structural problems but far bigger economies—Italy, France, and Spain—will be encouraged to challenge the EU’s resolve to maintain discipline. The United States may conclude that if it gives in to Iran on sanctions sequencing, disclosure, and other issues, such a weaker deal may not survive a domestic political challenge.

Finally, if no agreement in either negotiation is announced this week, that will not mean that the United States will go to war with Iran, or that Greece will leave the eurozone. A stalemate with Iran is more likely. Foes of diplomacy in Iran will have little to gain from further escalation. The U.S. Congress might enact more sanctions, potentially a nonevent if diplomacy is on hold.

If Greece were to default, the EU treaties do not include provisions for a member state to exit the eurozone. Tsipras may even take the case to the European Court of Justice to keep Greece in the currency union should EU states try to force Athens out.