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The Precipice of a Deal: High Stakes in US-Iran Diplomacy

In the volatile geopolitical landscape of the Middle East, the prospect of a nearing deal between the United States and Iran has once again seized international attention. This potential agreement, emerging from a backdrop of heightened tensions, economic sanctions, and proxy conflicts, carries monumental implications not only for the two nations directly involved but for regional stability and global energy markets. The reports indicate that while progress is being made on a diplomatic front, Tehran is laying down significant demands, notably billions of dollars in what it perceives as its rightfully unfrozen assets or compensation, concurrently issuing stark warnings of a wider regional conflict should negotiations falter. This complex interplay of diplomatic engagement, financial leverage, and strategic threats underscores the precarious nature of the current moment, where a breakthrough could pave the way for de-escalation, or a breakdown could plunge an already unstable region into further chaos.

The intricate dance between Washington and Tehran has been characterized by decades of animosity, mistrust, and sporadic attempts at rapprochement. Each side approaches the negotiating table burdened by historical grievances, domestic political pressures, and strategic imperatives that often appear diametrically opposed. For the United States, the primary concerns revolve around Iran’s advancing nuclear program, its ballistic missile capabilities, and its extensive network of regional proxies. For Iran, the lifting of crippling economic sanctions, the recovery of frozen funds, and the recognition of its regional influence are paramount. The current moment, therefore, represents a critical juncture, a test of diplomatic resolve and a potential pivot point that could redefine the security architecture of the Middle East for years to come.

The Contours of a Potential Agreement: De-escalation or Broader Détente?

The precise nature of the “deal” currently under discussion remains shrouded in the typical opacity of high-stakes international diplomacy. However, informed speculation, coupled with past negotiation patterns, suggests it is likely a multi-faceted arrangement aimed at de-escalation rather than a comprehensive resolution of all bilateral issues. Such a deal would primarily seek to mitigate immediate flashpoints and perhaps stabilize the region, providing a temporary framework for managing mutual hostilities.

Nature of the Negotiations

Current negotiations are believed to be indirect, primarily facilitated by intermediaries such as Oman or Qatar, reflecting the deep-seated lack of trust that precludes direct high-level engagement. These discussions are often characterized by shuttle diplomacy, where proposals and counter-proposals are relayed back and forth, painstakingly building a framework for potential agreement. The focus is likely on a ‘less for less’ or ‘step-for-step’ approach, where each side makes reciprocal concessions designed to build confidence and create momentum. This could involve Iran limiting certain aspects of its nuclear program in exchange for limited sanctions relief or the unfreezing of assets, rather than a full return to the parameters of the Joint Comprehensive Plan of Action (JCPOA).

Core Objectives for Each Side

From the American perspective, a key objective is to rein in Iran’s accelerating nuclear program, which has seen the Islamic Republic enrich uranium to levels dangerously close to weapons-grade purity following the U.S. withdrawal from the JCPOA. The Biden administration also seeks to reduce regional tensions, particularly those involving Iran’s proxies, and to ensure the safety of vital shipping lanes. For Iran, the immediate goal is economic relief. Years of stringent sanctions have severely impacted its economy, fueling public discontent and limiting the regime’s resources. Access to frozen funds and the easing of oil export restrictions are critical for Tehran to stabilize its economy and project strength internally and externally. Beyond economics, Iran seeks an implicit recognition of its regional influence and a guarantee against future unilateral actions by the U.S., a lesson learned bitterly from the Trump administration’s withdrawal from the JCPOA.

The Diplomatic Dance: Channels and Challenges

The diplomatic dance is fraught with challenges. Communication channels, while operational, are indirect, prone to misinterpretation, and slow. Each proposal is meticulously scrutinized by multiple factions within both governments, often leading to protracted internal debates. Public posturing, including Iran’s warnings of wider war, also serves as a negotiating tactic, designed to maximize leverage and signal resolve. The very act of negotiating is a concession for both sides, requiring delicate political maneuvering to avoid appearing weak to domestic constituencies and regional rivals. The absence of a robust, direct diplomatic relationship means that trust must be built incrementally, often through small, verifiable actions rather than grand declarations.

Tehran’s Billions at Stake: Economic Demands and Political Leverage

Central to the current negotiation push is Iran’s demand for billions of dollars. This financial request is not merely an economic consideration; it is deeply intertwined with Iran’s political stability, its regional projection of power, and its leverage in the ongoing diplomatic efforts. The sums mentioned, reportedly in the tens of billions, represent a critical lifeline for a nation suffocating under an expansive sanctions regime.

Frozen Assets and Sanctions Relief

The “billions” Iran is demanding primarily refer to its assets frozen in foreign banks, largely as a consequence of international and unilateral U.S. sanctions. These funds, accumulated from oil revenues and other transactions, are held in accounts in countries like South Korea, Iraq, Japan, and China, often converted into local currencies and inaccessible to Tehran. The precise amount is subject to varying estimates, but it is widely understood to be substantial. For instance, reports have previously cited sums exceeding $7 billion in South Korean banks alone. The unfreezing of these assets, or significant sanctions relief allowing Iran to freely sell its oil and access international financial systems, is Iran’s paramount economic demand. It represents not just immediate cash flow but also a symbolic victory against the “maximum pressure” campaign.

Economic Hardship and Internal Pressures

Years of U.S. sanctions, particularly those reimposed and expanded after the Trump administration’s withdrawal from the JCPOA in 2018, have devastated Iran’s economy. The sanctions have crippled its oil exports, which are the lifeblood of its economy, severely limiting its access to foreign currency. This has led to skyrocketing inflation, a dramatic depreciation of the national currency (the rial), high unemployment, and widespread public discontent. Protests, often sparked by economic grievances, have erupted periodically across the country, posing a significant challenge to the stability of the ruling establishment. For the Iranian leadership, securing the release of these billions and achieving some measure of sanctions relief is not merely about national wealth; it’s about alleviating acute domestic pressures, maintaining social order, and demonstrating the efficacy of its “resistance economy” strategy to its own population.

The Calculus of Compensation and Guarantees

Beyond simply unfreezing assets, Iran may also be seeking guarantees against future unilateral withdrawals from any new agreement by a subsequent U.S. administration. The memory of the U.S. pulling out of the JCPOA is a powerful driver of Iranian distrust. Tehran might be demanding mechanisms or financial arrangements that would compensate it for losses incurred should a future U.S. government again renege on commitments. This could take the form of financial penalties for early termination or the front-loading of some benefits. These demands complicate negotiations significantly, as no U.S. administration can legally bind its successors on foreign policy matters without Senate ratification, which is highly unlikely for an Iran deal.

The Spectre of “Wider War”: Iran’s Strategic Warning

Coupled with its financial demands, Iran’s warning of a “wider war” is a potent and calculated diplomatic maneuver. It serves multiple purposes: to underscore the urgency of a deal, to deter potential aggressive actions, and to remind regional and international actors of the severe consequences of continued escalation or failed diplomacy. This threat is not to be dismissed lightly, given Iran’s proven capability to project power and destabilize the region through various means.

Escalation Pathways and Regional Flashpoints

A “wider war” involving Iran could manifest in several ways, each with devastating consequences. Direct military confrontation between the U.S. and Iran, while often averted through careful calculation, remains a terrifying possibility, particularly given the proximity of U.S. forces and Iranian assets in the Persian Gulf. More likely, and arguably more insidious, are escalations through proxy conflicts. The Middle East is replete with flashpoints where Iranian-backed groups operate: Yemen (Houthis), Lebanon (Hezbollah), Syria (various militias), and Iraq (various Popular Mobilization Forces groups). Failure to secure a deal or renewed pressure could see these proxies unleashed in more aggressive campaigns against U.S. interests, regional allies like Saudi Arabia and the UAE, or even Israel. Such actions could include missile and drone attacks on critical infrastructure, maritime disruptions in the Strait of Hormuz, or increased cross-border shelling.

Proxy Conflicts and Asymmetric Warfare

Iran has long perfected the art of asymmetric warfare, leveraging its network of non-state actors to project power and exert influence without engaging in direct, conventional warfare that it knows it cannot win against superior military forces. These proxies serve as an extension of Iran’s foreign policy, allowing it to harass adversaries, retaliate for perceived slights, and destabilize regions at relatively low cost. The threat of a “wider war” often implies an intensification and broadening of these proxy activities, pushing existing conflicts to new levels of violence and potentially drawing in more regional and international actors. This strategy allows Iran to inflict pain on its adversaries while maintaining plausible deniability, though its fingerprints are rarely truly hidden.

The Deterrent Effect of Threats and Red Lines

Iran’s warning also serves as a potent deterrent. It signals to Washington and its allies that pushing Tehran too far, particularly through continued economic strangulation or perceived military threats, carries a significant risk of destabilizing the entire region. This tactic seeks to raise the cost of inaction or aggression, thereby increasing the incentive for a diplomatic resolution. Furthermore, it might be an attempt to establish clear “red lines” for the ongoing negotiations, indicating that beyond certain points, Iran would resort to more aggressive measures. Such threats, while concerning, are a standard feature of high-stakes international diplomacy, designed to create leverage and urgency at the negotiating table.

A Troubled History: Cycles of Tension and Brief Thaws

Understanding the current dynamics requires a gaze back at the tumultuous history between the United States and Iran, a relationship defined by revolution, sanctions, suspicion, and a few fleeting moments of diplomatic engagement. This historical baggage profoundly influences present-day negotiations and the deep-seated mistrust prevalent on both sides.

From Revolution to Confrontation

The modern era of U.S.-Iran relations was irrevocably altered by the 1979 Islamic Revolution, which toppled the U.S.-backed Shah Mohammad Reza Pahlavi. The subsequent hostage crisis at the U.S. embassy in Tehran marked the beginning of a prolonged period of animosity. The U.S. viewed the new Islamic Republic as a radical, anti-Western force, while Iran saw the U.S. as the “Great Satan” and an imperialist power. This ideological clash fueled decades of confrontation, with the U.S. imposing sanctions and Iran developing its nuclear program under the guise of peaceful energy, but viewed with suspicion by the West.

The JCPOA’s Rise and Fall: A Precedent for Diplomacy

A significant, albeit temporary, deviation from this trajectory was the 2015 Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal. This landmark agreement, brokered by the P5+1 (the United States, United Kingdom, France, China, Russia, plus Germany), saw Iran agree to severe restrictions on its nuclear program and intrusive international inspections in exchange for the lifting of international sanctions. For a few years, it represented a success for diplomacy, rolling back Iran’s nuclear capabilities significantly. However, the deal was highly controversial in the U.S. and among some regional allies. In 2018, then-President Donald Trump withdrew the U.S. from the JCPOA, arguing it was a “terrible deal” that didn’t address Iran’s ballistic missile program or its regional malign activities. This withdrawal, and the subsequent “maximum pressure” campaign, fundamentally undermined Iran’s trust in U.S. commitments.

The Post-JCPOA Era: Maximum Pressure and Resistance

Following the U.S. withdrawal, Iran initially adhered to the JCPOA’s terms for a year, hoping European signatories would compensate for U.S. sanctions. When this proved insufficient, Iran began incrementally breaching its commitments, steadily increasing uranium enrichment levels and expanding its nuclear infrastructure. This period has been characterized by escalating tensions, including attacks on shipping in the Gulf, drone strikes on Saudi oil facilities, and Israeli-Iranian shadow wars. The “maximum pressure” campaign sought to bring Iran to the negotiating table on U.S. terms, but it largely failed, instead pushing Iran’s nuclear program closer to a weapons capability and exacerbating regional instability. The current push for a deal can be seen as an attempt to reverse this dangerous trend and find a new equilibrium.

Key Players and Stakeholders: A Complex Web of Interests

Any potential deal between the U.S. and Iran is not a bilateral affair in isolation. It is influenced by, and will in turn influence, a multitude of internal and external actors, each with their own agendas, fears, and strategic calculations.

The Biden Administration’s Balancing Act

President Joe Biden came into office promising to return to diplomacy with Iran, aiming to restore the JCPOA. However, the political reality has proven complex. The administration faces a delicate balancing act: on one hand, it wants to prevent Iran from acquiring a nuclear weapon and de-escalate regional tensions; on the other, it must contend with domestic political opposition, particularly from Republicans, who often criticize any engagement with Tehran as appeasement. It also needs to reassure regional allies, particularly Israel and Saudi Arabia, who are deeply skeptical of Iranian intentions and any deal that doesn’t fully dismantle its nuclear program and curb its regional influence. The administration’s approach has evolved from a full-throated return to the JCPOA to a more pragmatic, incremental strategy focused on de-escalation and managing the nuclear threat.

Iran’s Leadership: Supreme Leader, President, and Factional Dynamics

In Iran, ultimate authority rests with Supreme Leader Ali Khamenei, who sets the broad strategic direction. The President, currently Ebrahim Raisi, and his government are responsible for implementing these policies. The Iranian political system is not monolithic; it comprises various factions – hardliners, conservatives, reformists – each with different views on engaging with the West. Hardliners, who currently dominate the political landscape, are deeply suspicious of the U.S. and often prefer a policy of “resistance” over diplomacy. Any deal must be sanctioned by the Supreme Leader and be palatable enough to the powerful Revolutionary Guard Corps (IRGC) and other hardline elements to prevent internal sabotage. The pressure from the ongoing economic crisis, however, provides a strong incentive for even hardliners to consider a deal that offers significant relief.

Regional Allies and Adversaries: Their Influence on the Deal

Regional actors are profoundly affected by, and seek to influence, U.S.-Iran relations. Israel views Iran’s nuclear program and its support for groups like Hezbollah as an existential threat, and it has actively sought to sabotage Iranian nuclear facilities and pressure the U.S. against any deal it deems insufficient. Saudi Arabia and the Gulf States, Iran’s Sunni rivals, are wary of any deal that might empower Iran financially or legitimise its regional activities, but they also seek de-escalation after years of proxy wars. They fear that a U.S. withdrawal from the region could leave them vulnerable. Their ongoing normalization efforts with Israel and their own outreach to Iran indicate a complex hedging strategy. Any deal must therefore navigate these powerful regional currents, or risk being undermined by actors who feel their interests are not adequately protected.

The International Community’s Role

Beyond the immediate region, European powers (France, Germany, UK), Russia, and China have significant stakes. European nations were instrumental in crafting the JCPOA and have consistently advocated for its restoration, viewing it as the best mechanism to prevent Iranian nuclear proliferation. Russia and China, while often aligned with Iran in challenging U.S. hegemony, also seek regional stability and have economic interests in a functioning global oil market. Their involvement, particularly as facilitators or guarantors of any new arrangement, is crucial for its legitimacy and enforceability.

Economic Ramifications: For Iran and the Global Stage

The economic dimensions of a US-Iran deal are vast, extending from the daily lives of Iranian citizens to the delicate balance of global energy markets. The demand for billions and the potential for sanctions relief are not just bargaining chips; they represent fundamental shifts in economic power and stability.

Impact on Global Oil Markets

Iran possesses the world’s fourth-largest proven crude oil reserves and the second-largest natural gas reserves. Under sanctions, its oil exports have been severely curtailed, removing a significant supply from the global market. A lifting of sanctions, even partially, could lead to a rapid increase in Iranian oil production and exports, potentially bringing millions of barrels per day back into circulation. This influx would likely push down global oil prices, impacting oil-exporting nations (including Saudi Arabia and Russia) and benefiting oil-importing countries and consumers worldwide. The geopolitical implications are significant, as cheaper oil could alleviate inflationary pressures in many economies, but also shift power dynamics among energy producers.

Iran’s Internal Economy: Desperation and Resilience

The Iranian economy has been in a prolonged state of crisis. Sanctions have not only choked off oil revenue but also restricted access to international banking, making it difficult to import essential goods, medicines, and industrial components. The resulting inflation, currency devaluation, and unemployment have led to widespread economic hardship and social unrest. While the regime has demonstrated a degree of resilience through its “resistance economy” – promoting domestic production and developing non-oil exports – this has not been enough to offset the systemic damage. The release of billions and significant sanctions relief would inject much-needed foreign currency, stabilize the rial, boost imports, and potentially stimulate economic growth. This could ease public discontent and provide the government with greater resources for social programs and infrastructure development.

The Costs of Sanctions and the Promise of Relief

The U.S. has used sanctions as its primary tool to pressure Iran, arguing they are a non-military means to achieve policy objectives. However, the humanitarian impact of these sanctions, particularly on access to medicines and medical equipment, has been widely criticized. The current negotiations highlight the immense cost of this strategy for both sides. For Iran, the cost is measured in economic stagnation and social hardship. For the U.S., the cost includes regional instability, Iran’s nuclear advancement, and damage to its diplomatic credibility. The promise of sanctions relief, therefore, is the primary incentive for Iran to engage in diplomacy, representing a tangible pathway out of its economic predicament and a potential return to a more integrated global economy.

The Geopolitical Chessboard: Reshaping the Middle East

Beyond the immediate bilateral implications, a U.S.-Iran deal would send ripples across the entire Middle East, potentially reshaping existing alliances, rivalries, and security frameworks. The balance of power in the region is perpetually fragile, and any significant shift in U.S.-Iran relations inevitably impacts all other players.

The Middle East Power Balance

The Middle East is characterized by a complex web of alliances and antagonisms. For decades, the primary rivalry has been between Saudi Arabia (and its Sunni allies) and Iran (and its Shia proxies). Any deal that seemingly legitimizes Iran or injects billions into its economy could be perceived by Riyadh as a threat to the regional power balance. Conversely, a prolonged stalemate or escalation could lead to an even more dangerous arms race and intensified proxy conflicts. The ongoing process of normalization between Israel and some Arab states, partly driven by a shared concern over Iran, would also be affected. A de-escalation with Iran could reduce the urgency for some of these alliances, while a perception of U.S. abandonment could push regional actors to pursue more independent and potentially confrontational foreign policies.

Implications for Nuclear Proliferation

Perhaps the most profound long-term geopolitical implication lies in nuclear proliferation. If Iran’s nuclear program is not effectively curtailed and verified, it could trigger a dangerous cascade in the region. Nations like Saudi Arabia and Egypt, feeling insecure, might pursue their own nuclear weapons capabilities, leading to an unstable and perilous nuclear arms race in one of the world’s most volatile regions. A successful deal that verifiably rolls back Iran’s nuclear activities would thus be a crucial non-proliferation victory, reassuring the international community and preventing a regional nuclear nightmare. However, if the deal is perceived as too lenient or temporary, it might inadvertently accelerate proliferation concerns rather than alleviate them.

US Strategic Interests in a Changing Region

The United States has long had multifaceted strategic interests in the Middle East, including ensuring the free flow of oil, combating terrorism, protecting allies, and promoting regional stability. A deal with Iran could significantly impact these interests. De-escalation could free up U.S. resources and attention for other global priorities, such as competition with China. However, a deal perceived as weak could alienate allies and undermine U.S. credibility. The U.S. also seeks to prevent any single power from dominating the region, and its Iran policy is intricately linked to this broader strategic objective. Navigating these complex interests while trying to achieve a diplomatic breakthrough with Iran is a testament to the intricate challenges of modern foreign policy.

Challenges and Obstacles: The Perils of Negotiation

Despite the urgency and the potential benefits, the path to a U.S.-Iran deal is riddled with significant challenges and potential spoilers. Decades of antagonism have built layers of mistrust, and domestic politics in both countries, alongside regional dynamics, constantly threaten to derail progress.

Deep-Seated Mistrust and Lack of Confidence

The most fundamental obstacle is the profound lack of trust between Washington and Tehran. From the 1953 coup in Iran to the 1979 hostage crisis, and more recently, the U.S. withdrawal from the JCPOA, both sides harbor deep-seated grievances and suspicions. Iran fears that any deal could be unilaterally discarded by a future U.S. administration, rendering its concessions meaningless. The U.S., in turn, suspects Iran’s true intentions regarding its nuclear program and its regional activities. This mistrust makes it incredibly difficult to build the confidence necessary for significant concessions and long-term commitments, often requiring extensive verification mechanisms and international guarantees that are themselves subject to negotiation.

Domestic Opposition in Both Capitals

In the United States, any deal with Iran faces fierce opposition from a powerful bloc of Republicans in Congress, as well as some Democrats, who view Iran as an irredeemable adversary and advocate for continued maximum pressure. Lobbying efforts from pro-Israel groups and Saudi Arabia also play a significant role. For the Biden administration, striking a deal that can withstand domestic political scrutiny, particularly in an election cycle, is a daunting task. In Iran, hardline factions, including elements within the Revolutionary Guard Corps and conservative clergy, view negotiations with the “Great Satan” with deep suspicion and ideological opposition. They often prefer a strategy of confrontation and self-reliance, fearing that rapprochement with the West could undermine the revolutionary principles of the Islamic Republic. Any deal must be carefully framed and approved by the Supreme Leader to avoid accusations of capitulation.

Regional Spoilers and Unforeseen Events

Beyond internal politics, regional actors could act as spoilers. Israel, for instance, has a track record of covert operations against Iran’s nuclear program and could undertake actions that escalate tensions, making diplomacy impossible. Similarly, Saudi Arabia or other Gulf states, feeling marginalized or threatened, could take steps that complicate the diplomatic environment. Unforeseen events, such as a major terrorist attack, a maritime incident in the Gulf, or a significant cyberattack, could also instantly derail delicate negotiations, pushing both sides back to confrontation. The volatile nature of the Middle East means that external shocks are a constant risk to any diplomatic effort.

Potential Pathways Forward: Scenarios for the Future

As the U.S. and Iran stand on the cusp of a potential agreement, the future remains uncertain, with several distinct scenarios emerging from the complex interplay of diplomacy, economics, and threats. Each pathway carries its own set of risks and opportunities, defining the trajectory of the Middle East for years to come.

Successful De-escalation: A Fragile Peace

The most optimistic scenario involves the successful conclusion of a deal, leading to a period of de-escalation. This would likely entail Iran agreeing to halt or roll back some aspects of its nuclear program in exchange for the unfreezing of assets and some limited sanctions relief. Such an agreement, while not a full return to the JCPOA, could significantly reduce the immediate risk of a nuclear crisis and provide a breathing space for further diplomatic engagement. It could lead to a reduction in proxy conflicts, stabilize oil markets, and alleviate economic hardship in Iran. However, this peace would likely be fragile, built on mutual distrust and subject to the whims of future administrations and unforeseen regional events. It would represent a management of tensions rather than a full resolution of fundamental disagreements.

Prolonged Stalemate: The Status Quo Under Pressure

Should the current negotiations falter, perhaps over Iran’s financial demands or guarantees against future U.S. withdrawal, a prolonged stalemate is a distinct possibility. In this scenario, neither side would achieve its primary objectives. Iran’s economy would continue to suffer under sanctions, while its nuclear program would likely continue to advance, albeit without official recognition or the full benefits of a deal. Tensions would remain high, with the constant threat of escalation through proxy actions or direct confrontations. This status quo, characterized by mutual deterrence and low-level conflict, is inherently unstable and carries a high risk of miscalculation, potentially leading to unintended escalation. It would represent a failure of diplomacy to break the cycle of maximum pressure and resistance.

Escalation Scenarios: The Unthinkable

The gravest outcome is a breakdown of negotiations leading to outright escalation and the “wider war” Iran has warned about. This could be triggered by a perceived betrayal, a targeted military strike by either side (or a regional actor like Israel), or a significant provocation from one of Iran’s proxies. Such a conflict could rapidly spiral out of control, drawing in the U.S., Israel, Saudi Arabia, and other regional powers. The economic consequences would be catastrophic, particularly for global oil supplies, and the humanitarian cost would be immense. A full-scale regional war could unleash unprecedented destruction, displace millions, and further destabilize an already fractured Middle East, with global repercussions far beyond the region’s borders. The threat of a nuclear-armed Iran, or a preventative military strike against its nuclear facilities, would loom larger than ever.

Conclusion: A Delicate Balance on the Brink

The current diplomatic overtures between the United States and Iran represent a critical juncture in a relationship marked by profound hostility and periodic, tentative engagements. Iran’s demands for billions of dollars and its simultaneous warnings of a wider war underscore the high stakes involved. This complex negotiation is not merely about nuclear centrifuges or oil exports; it is about power, sovereignty, economic survival, and the very security architecture of one of the world’s most volatile regions. Both Washington and Tehran operate under immense domestic and international pressures, with each move scrutinized by wary allies and eager adversaries. The path forward is fraught with challenges, from deep-seated mistrust to the ever-present threat of regional spoilers. Whether diplomacy can forge a fragile peace, or if a failure to reach an understanding plunges the Middle East into further chaos, remains to be seen. The coming weeks and months will undoubtedly be crucial in determining whether dialogue can prevail over the specter of conflict, and if a new, albeit uneasy, chapter in U.S.-Iran relations can begin.

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