Russia’s war on Ukraine is reshuffling Middle East diplomacy and forcing the U.S. to reassess the political costs of reviving the 2015 nuclear accord with Iran.

Clinching the deal after a year of negotiations now hangs on a sticking point that people familiar with the talks say has emerged as the most politically explosive for the administration of U.S. President Joe Biden — whether to remove Iran’s Islamic Revolutionary Guard Corps (IRGC) from the U.S. list of terrorist organizations.

The designation isn’t directly linked to the original pact, which curbed Tehran’s atomic activity in return for sanctions relief, but Iran has insisted all along that it be scrapped.

The issue has galvanized U.S. lawmakers in an election year, and united erstwhile Middle East foes in an unprecedented bid to nix a pact they fear will hand Iran an oil windfall. They include Gulf Arab nations that face regular attack from Iran-backed groups and have rebuffed requests to top up stricken oil markets unless their security needs are met.

Security guarantees

The stakes are higher for Biden than they’ve been since he came to office in January 2021. Iran now has stockpiles of highly-enriched uranium, sanctions have failed to halt its progress and not reaching a deal means potentially living with the risk it could develop nuclear weapons and set off a regional arms race.

Lifting the IRGC’s terror designation, however, would alienate Gulf Arab leaders just as Biden works to rally allies against Moscow and curb soaring gasoline prices.

It also risks upending a decades-old alliance that extended U.S. influence in a strategic region that exports more energy than any other and straddles three shipping choke points.

Two weeks after talks to revive the agreement were suspended, diplomats say it’s not clear when negotiators might return to Vienna. Russia’s decision to drop its 11th hour condition to a deal and the release last week of two British-Iranians detained for years by Tehran have yet to imbue new momentum.

Reflecting the souring mood as the Ukraine crisis redraws the political landscape, U.S. senators emerged discouraged from a classified briefing on the talks Tuesday.

“Russia was initially interested in getting the U.S. back into the deal,” said Democratic Sen. Ben Cardin, who attended the briefing in Washington. “Now they have only concern about Ukraine. Their attention isn’t there anymore.”

After suggesting for weeks that a deal was close, and that remaining hurdles could be cleared within days, State Department spokesman Ned Price said Monday “an agreement is neither imminent nor is it certain.”

Sanctions ‘symbolic’

Proponents of the deal argue that the IRGC’s terrorism designation was a symbolic measure taken by then-President Donald Trump, after he abandoned the agreement in 2018 and launched a “maximum pressure” campaign. Iran has said from the start it wants all the additional Trump-era penalties removed.

Even if the designation is scrapped, the military organization that has armed and trained proxy groups around the region, and launched attacks on the U.S. and its allies in Iraq and on tankers in the Persian Gulf, would remain subject to a slew of other sanctions.

Plus, reinstating the pact would incentivize Iran to reduce tension, potentially breaking a tit-for-tat cycle of violence that has shaken the Gulf since Trump exited the agreement.

But opponents of the deal, and even administration members who had been supportive, calculate that backing down would project weakness and carry political costs ahead of November elections in which Biden’s Democrats stand to lose control of Congress.

They’re also concerned about pushing Saudi Arabia and the UAE, which face regular attacks from Iranian-backed Yemeni fighters, further into Russia and China’s embrace, accelerating an erosion of American power already underway.

The senate briefing came hours after Israel, the UAE and Egypt held a rare summit — unthinkable just a few years ago — aimed at presenting a joint front against the Iran pact and shielding themselves from the more immediate economic turmoil triggered by the Kremlin’s month-old war.

The debate has prompted an unusual public objection from Israel. Prime Minister Naftali Bennett and Foreign Minister Yair Lapid issued a joint statement Friday urging the U.S. not to “abandon its closest allies in exchange for empty promises from terrorists.”

Another challenge to a deal could come from within Biden’s own party once he submits the text for Congressional oversight as is required by a 2015 law.

As well as broad Republican opposition it could meet resistance from some influential Democrats including Robert Menendez, who chairs the Senate Foreign Relations Committee and has warned the administration not accept a bad deal or interim agreement.

“I have no question in my mind that the Iranian Revolutionary Guard is a terrorist organization,” said Menendez. “We have acknowledged that their actions are such, so it would have to be explained.”

Mideast retreat

In the absence of an agreement, Iran’s enriched uranium stockpile looks likely to grow unabated while its government solidifies trading ties with China and Russia. Iranian Foreign Minister Hossein Amirabdollahian spoke with his Chinese counterpart following talks with Russian Foreign Minister Sergei Lavrov in Moscow only last week.

China disclosed this week that it continued importing Iranian crude in January. Security analysts have warned for months that China could provide Iran an economic escape route if nuclear talks collapse. Beijing has consistently criticized U.S. secondary sanctions that target its trading partners. The list of sanctioned companies has only grown in the wake of Russia’s war in Ukraine.

While Biden is trying to discourage China from helping sanctioned entities, he’s been slow to address the depth of anger among Gulf Arab allies over the Iran deal, damaging efforts to isolate Moscow. No Middle Eastern government, including Israel, has signed on to support the crushing sanctions the U.S. has imposed on Russia.

The State Department says it’s now in constant touch with Middle East allies to provide assurances. Having shunned Saudi Arabia’s de facto ruler and neglected for years to appoint ambassadors to the UAE and Saudi Arabia, U.S. officials say they’re trying to schedule high-level diplomatic meetings in the region in the days and weeks ahead.

The differences over a symbolic designation aren’t insurmountable, say people familiar with the talks, if both sides decide the agreement is worth it.

“Both the U.S. and Iran want a deal,” Eurasia wrote last week, albeit with the caution that “there may yet be some theatrics, with Iran trying to leverage high oil prices to win several additional concessions.”