FORTUNE — Wall Street may be the latest victim in the long-running chess game involving Iran and the U.S. Equity prices shot up across the globe as oil prices fell Monday on the news that Iran and the so-called P5-plus-1 had reached an agreement over the weekend, which would curb development of Iran’s nuclear program in exchange for the easing of economic sanctions.
But a closer look at the deal suggests there is little to be excited about, at least not this early in the game. While one hopes this could be the first step to a peaceful resolution, there still remains a good chance that things could blow up.
Listening to President Obama speak about the agreement his diplomats sealed with Iran over the weekend, one might think he deserved another Nobel Peace Prize for averting all-out thermonuclear war. But while the deal is historic, as it marks the first time the U.S. and the Islamic Republic of Iran have officially penned an agreement together, it isn’t as historic as, say, the agreement between the U.S. and the USSR in 1962 that ended the Cuban Missile Crisis.
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The Iranian deal is primarily about giving both sides a little breathing room, setting the stage for upcoming negotiations and shouldn’t be seen as anything but that. The two sides have six months to a year to hash out a more comprehensive agreement. During that time, each side will get a little something as a good faith gift — a very little something. Neither side really budged from its hardline position, limiting the amount of change in the status quo.
Consider what the Iranians gave to the other side. They first agreed to allow IAEA inspectors to monitor their nuclear facilities. That wasn’t much of a giveaway, though, considering that IAEA inspectors already have access to most of Iran’s facilities, with their most recent report issued in August.
The Iranians also agreed to halt construction of a facility that could possibly make plutonium. That too is a bit of a weak giveaway as the facility reportedly remains unfinished because the tighter sanctions have prevented Iran from acquiring the necessary parts to bring the sucker online anyway.
Lastly, Iran agreed to halt the enrichment of uranium to levels that are higher than what is required to feed certain types of nuclear reactors. That also doesn’t seem to be a big deal as the latest IAEA report points out that only around 4% of the nation’s uranium stockpiles have been enriched beyond that worrisome threshold and that production remains low.
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The Iranians don’t seem to be giving up too much in the deal. As such, the U.S. and its allies aren’t either.
The agreement, which the Obama Administration refers to as “Limited, Temporary, Reversible Relief,” is pretty much as terrible as that moniker suggests. Iran will still be allowed to export oil to just six countries, at capped amounts that add up to around 1 million barrels a day, which is 1.5 million barrels a day below the country’s export capacity. The U.S. government estimates that continued sanctions will cost the Iranian government around $5 billion a month. So far the Iranian government has given up an estimated $80 billion in lost oil sales since the enhanced sanctions went into effect last year. In addition, around $100 billion of Iranian foreign exchange assets (used to purchase oil in the past by other nations) will remain frozen across the globe.
What Iran does get is a hodge-podge of sanction relief, which the U.S. government estimates will add about $7 billion in extra revenue to Iran’s coffers. While that figure is nothing to sneeze at, it hardly makes up for the billions of dollars that the government is giving up by keeping its nuclear program going. Restrictions on the sale of petrochemicals, gold and other precious metals were also lifted. It is unclear how much gold Iran will be allowed to trade, though, as the U.S. will want to make sure Iran isn’t just swapping oil for gold as it had been in large amounts before sanctions on gold imports tightened in June of this year. In addition to the extra revenue, the U.S. and its allies also offered a few self-serving perks to their new Iranian frenemies. For example, one eases restrictions on the importation of commercial aircraft parts from the U.S. (Boeing (BA)) and E.U. (Airbus). Apparently, the U.S. and E.U. can promote peace and business at the same time.
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Inside Iran the deal is being seen as a cautious first step to alleviating the damaging impact the sanctions have had on the nation’s currency. Since the sanctions began last year, the street price of Iran’s currency is down as much as 80% to the dollar, creating massive distortions in asset prices throughout the country, according to sources inside Iran. At the same time, inflation is hovering somewhere around 40%, these people say.
Iran’s nuclear ambitions have clearly caused a lot of headaches for the Iranian people. Nevertheless, things haven’t gotten so bad to cause widespread civil disobedience on the streets of Tehran. For now, Iran’s security forces appear vigilant and fully committed to the nation’s leader, Ayatollah Khamenei.
So why has Iran decided to talk now? The Obama Administration would say that the threat of further economic pain is what forced Iran’s Mullahs to the bargaining table. But the nation has endured 10 years of sanctions, two of which have cost Iran nearly $100 billion in lost revenue. Are the Iranians just incredibly stubborn or is there something greater at stake here than Iran’s “right” to use nuclear energy? If Iran is developing nuclear weapons, as Israel believes wholeheartedly, it is doing so at a site that is unknown to the IAEA and the U.S. As such, any agreement made with Iran would be futile as it fails to achieve the objective of denying nuclear weapons to Iran.
Discovery of a new nuclear enrichment site could bring the negotiations to a screeching halt. On the other hand, if all goes well and a deal is imminent, Israel may choose to take matters into its own hands, rocking what is an already shaky situation. That’s why the next six months will probably be more, not less, volatile, for both the Middle East and the markets.
