(Bloomberg) -- Sign up for our Middle East newsletter and follow us @middleeast for news on the region.

Two months after negotiators left Vienna, expectations are fading that Iran nuclear talks will resume, leaving the world with the remains of an agreement no one’s willing to pronounce dead. 

A media tent erected in anticipation of a grand announcement has been quietly dismantled, showy multilateral pow-wows in the Austrian capital giving way to furtive messages exchanged between the US and Iran via the European coordinator. 

European Union envoy Enrique Mora is in Tehran this week for a last-ditch effort to revive the landmark 2015 accord, which curbed Iran’s nuclear activities in return for sanctions relief, including on oil.

Hopes are not high.  

Likely Limbo

Four officials, who asked not to be identified so they could speak freely about the state of diplomatic efforts, said Mora’s visit was unlikely to yield a breakthrough. 

Iran Nuclear Talks Suspended as Window Closes on Key Deal

Diplomats once optimistic they could revive the deal abandoned by Donald Trump in 2018, say extending the state of limbo is now their best hope to avoid escalation. 

For now, European parties to the multilateral accord won’t declare it dead because that could force the United Nations to snap back international sanctions, taking more Iranian oil off the market just as soaring energy prices threaten to derail the global economic recovery.

That, in turn, could lead to a resumption of tit-for-tat attacks on Middle East shipping lanes and energy infrastructure -- risking another military conflict while the world is still grappling with the fallout of Russia’s war on Ukraine. 

Oil traders and analysts who’d predicted a deal would bring Iranian oil back onto global markets, are no longer factoring in those barrels. JPMorgan Chase & Co. cut its global supply assumption for this year by 400,000 barrels a day and for next year by 1 million barrels a day. 

“We now expect Iranian crude production and exports to remain at current levels for the foreseeable future,” analysts including Natasha Kaneva wrote in a May 4 note. 

Fade Away

It’s an anticlimactic turn for talks launched with high hopes after President Joe Biden took office last year, promising to make good on his campaign pledge to reinstate the agreement.

With US sanctions squeezing the Islamic Republic’s economy, the diplomatic process even survived an Iranian election that ushered in a hardline government last June. 

Negotiators came tantalizingly close to a breakthrough before Russia’s invasion of Ukraine reshuffled the geopolitical deck and reduced the incentives for compromise, according to two European diplomats.

Russia’s War Has Changed the Iran Nuclear Deal Calculus

Talks have for weeks been stuck over Iran’s demand that the US remove the Iranian Revolutionary Guard Corps from its list of terrorist organizations. 

For Biden, the political cost of such a symbolic concession is rising as knife-edge Congressional elections loom in six months. 

Biden’s under pressure from Americans frustrated that sanctions on Russia are raising the price of gasoline and groceries at home. And a bipartisan majority warned the White House last week that Congress is opposed to lifting sanctions on the IRGC.

For Iran, $100 oil has mitigated the urgency to secure sanctions relief. Crude prices have almost doubled since talks began a year ago. 

Iran also increased exports of oil and refined fuel by almost a third to 870,000 barrels per day in the first quarter, according to commodity data firm Kpler. Most of that oil goes to allies such as China and Venezuela.

In the last month, Iran’s announced a military-cooperation deal with China and a long-term food-supply contract with Russia -- both parties to the nuclear deal

Iranian officials said last month they’d only reconvene to finalize the accord -- something that looks improbable unless they can agree on the IRGC designation and a handful of other politically-fraught issues that are not part of the text itself.

A U.S. official said it was premature to write off the deal, but acknowledged the process wasn’t moving in the right direction. 

He said the Biden administration would pursue a diplomatic path with Iran so long as it remains in U.S. interests to restore the agreement. A time would come when that’s no longer the case, but Biden has not decided that yet.

Atomic Advances

With talks stuck, Iran has continued enriching uranium beyond agreed limits, gaining knowledge over a suite of technologies to which the pact once prevented access. 

That accumulation of know-how has prompted US officials to warn since July that a failure to restore compliance quickly could render the original provisions obsolete. 

“The international community cannot afford not to close the nuclear deal with Iran,” said Emilia Jose Peña Ruiz, a Spanish policy adviser who’s written extensively about how Iran’s energy reserves add weight to its negotiating power. “If such an agreement is not reached, we could have another nuclear actor of the North Korea type.”

While Iran has always asserted it doesn’t want to follow Pyonyang’s path to nuclear weapons, the 2015 nuclear agreement was formulated to assuage international doubts. 

One of the European diplomats said Tehran may calculate that exercising some voluntary restraint could allow tit to continue nuclear work beyond the scope of the agreement while maintaining it on life support.  

Iran said in December it wouldn’t enrich uranium to levels needed for a bomb. It subsequently rendered part of its inventory of highly-enriched uranium unsuitable for that purpose. 

International Atomic Energy Agency monitors continue to check activities and stockpiles at Iran’s primary enrichment facilities.

Secret Sites

But it’s concern over potential secret activity that’s changing the tone. 

The UN nuclear watchdog is scheduled to report next month on the results of a two-year probe into the source of uranium particles detected at several undeclared sites. A deal’s unlikely until that investigation is settled. 

“It’s hard to be optimistic,” said Ali Vaez, Director of the Iran Project at the Washington-based International Crisis Group. “The option is not between a deal now or a deal six months from now. It’s between a deal now or a deal six years from now.”

©2022 Bloomberg L.P.