Deal Struck With Iran

Iran and six major world powers reached a nuclear deal on Tuesday, capping more than a decade of on-off negotiations with an agreement that could potentially transform the Middle East.

Under the deal, sanctions imposed by the United States, European Union and United Nations would be lifted in return for Iran agreeing long-term curbs on a nuclear program that the West has suspected was aimed at creating a nuclear bomb.

Reaching a deal is a major policy victory for both U.S. President Barack Obama and Iran's President Hassan Rouhani, a pragmatist elected two years ago on a vow to reduce Iran's diplomatic isolation.

Both men face skepticism from powerful hardliners at home after decades of enmity between countries that referred to each other as "the Great Satan" and a member of the "axis of evil".

Final talks in Vienna involved nearly three weeks of intense round-the-clock negotiations between U.S. Secretary of State John Kerry and Iran's Foreign Minister Mohammad Javad Zarif.

Western diplomats said under the final agreement, Iran had accepted a "snapback" mechanism, under which some sanctions could be reinstated in 65 days if it violated the deal. A U.N. weapons embargo would remain in place for five years and a ban on buying missile technology would remain for eight years.

"All the hard work has paid off and we sealed a deal. God bless our people," one Iranian diplomat told Reuters on condition of anonymity.

But hostility to the agreement from Washington's closest ally in the Middle East was immediate.

"This deal is a historic surrender by the West to the axis of evil headed by Iran," Israeli Deputy Foreign Minister Tzipi Hotovely said in a message on Twitter. "Israel will act with all means to try and stop the agreement being ratified."

The foreign ministers of Iran and the six powers will meet at 0830 GMT (4.30 a.m. ET) at the United Nations center in Vienna and a news conference will follow, a spokeswoman for the European Union said on Tuesday.

Iran's Foreign Minister, Mohammad Javad Zarif, and EU's Foreign Policy Chief Federica Mogherini are expected to read a joint statement, diplomats said.

The deal will still face scrutiny by the U.S. Congress, controlled by opposition Republicans who are skeptical of the Obama administration's overtures to a country that has been an enemy since Iranian revolutionaries stormed the U.S. embassy in Tehran in 1979.

U.S. allies in the region, particularly Israel and Saudi Arabia, are also worried about an agreement that would benefit Iran.

Tehran does not recognize Israel and supports its enemies. Arab states ruled by Sunni Muslims, particularly Saudi Arabia believe Iran supports their foes in wars in Syria, Yemen and elsewhere.

But there is also strong reason for the United States to improve its relations with Iran, as the two countries face a common foe in Islamic State, the Sunni Muslim militant group that has seized swathes of Syria and Iraq.

For Iran, the end of sanctions could bring a rapid economic boom by lifting restrictions that have drastically cut its oil exports and hurt its imports. 

Export Capacity Will Take Time

Analysts say it would take Iran many months to fully ramp up its export capacity following any easing of sanctions. But even a modest initial increase would be enough to pull international oil prices down further as the market is already producing around 2.5 million barrels per day above demand.

"Even with a historic deal, oil from Iran will take time to return, and will not be before next year, most likely the second half of 2016," Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects, told Reuters.

"But given how oversupplied the market is with Saudi output at record highs, the mere prospect of new oil will be bearish for sentiment."

Sanctions on the Islamic Republic have almost halved its exports to a little over 1 million barrels per day. A deal ending sanctions could see Iran increase its oil exports by up to 60 percent within a year, a Reuters survey of analysts said.

"Sanctions have crippled Iran's oil production, halving oil exports and severely limiting new development projects. The prospect of them being lifted is creating great excitement ... as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production," said Sarosh Zaiwalla, a London-based sanctions lawyer.