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Writing in the Wall Street Journal, Henry Kissinger and George P. Shultz make a crucial point: "Absent the linkage between nuclear and political restraint, America's traditional allies will conclude that the U.S. has traded temporary nuclear cooperation for acquiescence to Iranian hegemony." (Italics mine.)

Read MoreNuclear talks: The real test for Iran

Put another way, there could be a U.S.-Iran deal that postpones Iran's nuclear weaponization for 10 or more years. But tomorrow, and the day after, and the day after that, Iran will continue to sponsor its terrorist proxies, like Hamas in Gaza and Hezbollah in Lebanon, keep proxy troops in Syria, continue its efforts to take over Iraq, further its designs on Yemen, and confront Sunni Saudi Arabia. And don't forget, the U.S. has labeled Iran's own Quds Force and Revolutionary Guard as terrorists.

Kissinger and Shultz write, "Iranian or Iranian client forces are now the pre-eminent military or political element in multiple Arab countries ... With the recent addition of Yemen as a battlefield, Tehran occupies positions along all of the Middle East's strategic waterways and encircles archrival Saudi Arabia, an American ally."

No one doubts these facts. Iran wants to dominate the Middle East. And it will not acknowledge the rights of the sovereign state of Israel. So the question is: Why is the U.S. not including political- and terrorist-restraint clauses in any Iran deal?

Read MoreUS, Iranian 'fact sheets' on nuke deal don't match

This is why economic sanctions are crucial. Western-nation sanctions are slowly but surely smashing the Iranian economy. We have effectively stopped the flow of money and oil for Iran. The Iranian budget, which dominates the state-run economy, needs $130 a barrel. Today's $50 price is an economic killer.

So why doesn't Team Obama directly link a removal of economic sanctions with a clear pullback of Iran's terrorist activities and march to Middle East dominance? That's a daily linkage one that is observable. And since we know Iran won't agree to this, why aren't President Obama and Secretary of State John Kerry working to tighten sanctions on Iran rather than push through a bad nuke deal?

Make no mistake, the nanosecond sanctions are lifted, U.S. and Western investment will pour into Iran. Looser financial sanctions will put an estimated $50 billion into Iran's economy. And a number of European oil companies will jump to develop the world's fourth-largest proven oil reserve and second-biggest national-gas reserve.

Read MoreOp-ed: Economics make Iran nuclear deal unenforceable

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Iran must be forced to change its ways: Kudlow