Explanation:

The error here is in fragment C as the correct word is precedent and not precedence. Precedence means being considered more important than someone or something else while precedent means an earlier event or action that is regarded as an example or guide to be considered in subsequent similar circumstances.

Correct: A collapse of the deal would not only exacerbate the Iran nuclear crisis but also set a bad precedent in international diplomacy.

Hence, option C is correct.