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Treasury: Sanctions Relief Limited, Temporary and Reversible

            On December 12, Under Secretary for Terrorism and Financial Intelligence David S. Cohen outlined Iran’s relief package from the Geneva nuclear deal. Tehran committed to roll back its nuclear program and allow increased monitoring “in exchange for limited, temporary, and reversible relief,” he told the Senate Committee on Banking, Housing and Urban Affairs. Cohen also assured the members that Washington will vigorously enforce existing sanctions and keep the core banking, financial and oil sanctions in place. The following are excerpts from Cohen’s testimony at the Senate hearing on the interim agreement.    

 
            The relief offered Iran is limited in several important respects. First, under the JPA, we will allow Iran access to a set amount of its own money – $4.2 billion in installments over the six- month course of the JPA – in a carefully controlled manner. Second, we will suspend some sanctions to allow Iran to engage in specified additional commercial activity – petrochemical exports, imports for its automobile industry, and gold trade – that altogether have at best marginal economic value to Iran. And third, the vast bulk of our sanctions, including the core oil, financial, and banking sanctions that have had such a dramatic impact on Iran's economy, remain in place and will continue to exert pressure on Iran's decision makers over the next six months.
            The relief offered Iran in the JPA is also temporary in that it expires at the end of six months. At the end of six months, no additional funds will be made available to the Iranians, and the suspended sanctions will snap back into place. Because the JPA is renewable only "by mutual consent," at the six-month mark we could then consider whether, and to what extent, to provide additional relief to the Iranians in light of the circumstances. But if we decide not to provide additional relief, the relief described in the JPA expires at the end of six months.
And the relief in the JPA is reversible. If Iran fails to fulfill its commitments under the JPA, or refuses to enter into a comprehensive, long-term solution, we can stop the gradual release of funds, reimpose the suspended sanctions and impose new and enhanced types of sanctions.
 
The Relief Package
            The relief package described in the JPA is composed of several discreet elements, as follows:
 
Access to Restricted Funds
            The majority of the relief will come from granting Iran access, in installments over the six-month tenure of the JPA, to $4.2 billion of its own funds currently held in bank accounts outside of Iran – funds to which Iran has limited access and which right now can only be used for bilateral trade or humanitarian purchases. Let me underscore this point. These funds already belong to Iran, but under the international sanctions framework cannot be moved to third countries (except to facilitate humanitarian trade) nor repatriated to Iran. Not a single dollar of U.S. taxpayer money will be provided to Iran.
 
Temporary Pause in Reduction of Iran's Crude Oil Sales
            We have agreed to hold Iran's exports of crude oil flat for a period of six months rather than requiring further significant reductions in the amount of Iranian oil purchased by oil-importing countries. To be clear, this will not allow Iran to increase its oil exports. To the contrary, Iran will be held to its currently depressed levels, down 60 percent from what it was selling in early 2012. This provision, moreover, will apply only to Iran's six current crude oil purchasers – Japan, Republic of Korea, China, Taiwan, India and Turkey. They will not be allowed to increase their purchases and no other country will be allowed to begin importing Iranian oil.
 
Temporary Suspension of Petrochemical Sanctions
            U.S. sanctions on Iran's petrochemical exports will be temporarily suspended as part of this first step deal. We estimate that this will allow Iran to generate a maximum of $1 billion in new revenue over the next six months, but only if Iran is able to produce additional petrochemicals for export (some of its petrochemical plants have been retrofitted to boost gasoline production capacity for the domestic market) and only if Iran is able to find additional petrochemical customers – who typically prefer stable, long-term supply contracts – willing to sign contracts with Iranian exporters knowing that the sanctions are suspended under the JPA for only six months.
 
Temporary Suspension of Sanctions on Iran's Auto Industry
            We will also temporarily suspend U.S. sanctions on exports by third countries to Iran's automobile industry. We estimate that this could provide Iran some $500 million in revenue, assuming Iran can resume prior levels of production and revitalize its car exports. Iran's automobile industry, however, is riddled with structural problems and was in steep decline even before our auto sanctions were put in place. Moreover, if Iran hopes to revive its auto sector, it would need to spend some of its limited foreign currency to pay for car kits from abroad.
 
Temporary Suspension of Gold Sanctions
            Sanctions on Iran's ability to buy and sell gold will also be temporarily suspended. However, we expect that this provision will be of limited value to Iran because the only funds Iran can use to buy gold are its limited unrestricted hard-currency reserves. Because of the sanctions architecture that remains in place, Iran will be permitted to use neither its restrained foreign reserves nor its own currency, the rial, to buy gold. As a consequence, any gold Iran purchases would be offset by the hard currency it would spend to buy it, resulting in negligible economic benefits.
 
Limited Access to Funds for Tuition Purposes
            Under strict guidelines, we will allow Iran to transfer $400 million of restricted Iranian funds to defray tuition costs for Iranian students studying outside of Iran, and will ensure that these funds are used for their intended purpose.
 
License Safety-Related Repairs And Inspection for Certain Airlines in Iran
            We will license Iranian aircraft, to occur in Iran. Previously, we had licensed these activities for Iranian aircraft only outside of Iran. Notably, Mahan Air, an Iranian airline that has been designated by Treasury for providing financial, material and technological support to Iran's Islamic Revolutionary Guard Corps-Qods Force and Lebanese Hizballah, will not be permitted to benefit from these repairs, nor would any other entity subject to sanctions under our counter-terrorism authorities.
 
Financial Channel to Facilitate Humanitarian Trade
            Finally, we will assist in establishing a financial channel to facilitate humanitarian trade in food, agricultural commodities, medicines, medical devices for Iran's domestic needs, and to pay for the medical expenses of Iranian citizens incurred abroad. This will not provide Iran access to any new source of funds, because humanitarian trade with Iran is not targeted under existing sanctions authorities and because we intend that funds for medical expenses will come from Iran's limited stores of unrestricted hard currency. Humanitarian transactions have been explicitly exempted from sanctions by Congress and U.S. law places limits on the President's ability to regulate such trade.
 
The Relief Package in Context
            The total value of the relief package – approximately $6 billion to $7 billion – will not materially improve the condition of the Iranian economy. Indeed, at the end of the six-month period, we expect that Iran will be even deeper in the hole economically than it is today due to the continuing and mounting impact of the sanctions we have in place and that we will continue to energetically enforce.
            Indeed, the limited relief offered Iran in the JPA is dwarfed by the depths of Iran's economic distress. Our oil, financial and banking sanctions, in particular, have driven Iran into a deep recession. Since 2011, oil sanctions imposed by the EU and the U.S. have forced Iran's oil exports to decline from about 2.5 million barrels per day at the end of 2011 to about 1 million barrels per day today – costing Iran roughly $80 billion in lost sales. In that same period, Iran's currency, the rial, has lost around 60 percent of its value against the dollar. Approximately $100 billion of Iran's foreign exchange holdings are restricted or inaccessible due to our financial and banking sanctions. Over the last year, inflation in Iran has been about 40 percent. All told, last year Iran's economy contracted by more than five percent, and we expect Iran's economy to contract again this year. By contrast, according to the IMF, the economies of Iran's neighboring oil exporting competitors expanded last year by an average of over five percent and are expected to grow by an average of almost four percent this year.
            These macroeconomic indicators reflect the impact of sanctions on, and the deep structural problems with, Iran's economy, none of which will be solved by the limited relief agreed to in Geneva. Indeed, over the six-month duration of the JPA, our oil sanctions alone will cost Iran an additional $30 billion (i.e., 4-5 billion per month) in lost revenue, which far surpasses the total sum of the relief package. Even taking into consideration the modest relief package, these staggering figures represent a bleak reality for Iran's economy, which we expect will continue to deteriorate over the next six months.
 
The International Sanctions Regime Remains Robust
            We and our international partners will continue to impose increasing pressure on Iran's economy through the implementation and enforcement of sanctions, the overwhelming majority of which are not affected at all by the JPA. This includes the core architecture of our oil, financial and banking sanctions, which remain firmly in place.
            Throughout the duration of this first-step deal, we will continue to enforce sanctions to ensure that Iran's oil sales are held down at their current, greatly depressed levels. Moreover, our financial sanctions remain fully in place, in particular the sanctions imposed by section 504 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which became effective on February 6, 2013, and that "locks up" Iran's oil revenue in the few jurisdictions that still import oil from Iran.
            As a result, with the exception of the $4.2 billion in funds that we will allow Iran to access in stages over the next six months, the revenue that Iran earns from its oil sales during the six- month duration of the JPA will remain subject to our financial sanctions. Those sanctions prevent Iran from using those funds for any purpose other than paying for goods from the oil importing country or humanitarian transactions. And any financial institution that facilitates a payment to Iran for oil imports beyond what is provided for in the JPA risks being cut off from the United States financial markets. In other words, over the next six months Iran cannot sell any more oil than its current levels, and any additional oil revenue it does earn (other than the limited funds to be made available under the JPA) will be locked-up and unavailable for transfer or repatriation.
            In addition, the key banking sanctions imposed by the U.S. and the EU, which have resulted in the near-total isolation of Iran's financial sector, remain fully intact. That means that under Section 104 of the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, any foreign bank that engages in a significant transaction with Iran's designated banks risks losing its correspondent account access to the U.S. And it also means that all the banks designated by the EU will remain cut off from specialized financial messaging services, denying them access to critical networks connecting the rest of the international financial sector. Taken together, these sanctions – which remain fully in force – will ensure the continued isolation of Iran from the global banking system, and will continue to make it extraordinarily difficult to do business with Iran.
            We also are focusing on enforcing additional elements of the U.S. sanctions program that deprive Iran of other sources of revenue. For example, sanctions will continue to constrict Iran's energy sector. Not a single prohibition or sanction on investment in Iran's energy sector will be suspended – for U.S. or international companies. All of the United States' sanctions on long- term investments in Iran's energy sector will remain in effect, as will the related sanctions on providing technical goods and services to the energy sector. This will ensure that Iran's oil and gas infrastructure remains severely impaired and increasingly obsolete.
            Furthermore, all UN and EU designations, as well as our targeted sanctions on the more than 600 individuals and entities tied to the Government of Iran, its nuclear and ballistic missile programs and its energy, shipping, and shipbuilding sectors, remain in effect. Among other things, these sanctions mean that selling Iran cargo ships and tankers, providing insurance services or support for most Iranian shipping activities, providing flagging and classification services to Iranian ships, and helping Iran build port terminals or other facilities remain sanctionable activities.
            In addition, sanctions remain in place against Tidewater Middle East Company, an IRGC-owned port operating company that manages the main container terminal at Bandar Abbas – which has been responsible for some 90 percent of Iranian container traffic and has operations at six other Iranian ports. These sanctions will continue to deter the export of products to Iran as well as the import of products from Iran.
            This first-step deal also does not affect the longstanding U.S. trade embargo, meaning that Iran will continue to be shut out of the world's largest and most vibrant economy and precluded from engaging in business with U.S. companies and U.S. subsidiaries overseas.
            Finally, it remains the case that Iran is the leading state sponsor of terrorism in the world today. Nothing in the JPA affects our continued efforts to contest and combat Iran's support of terrorism, its abhorrent human rights practices, or its destabilizing activities in Syria. All of our sanctions programs aimed at undermining this loathsome Iranian conduct remain active and energetic.
 
Vigorous Enforcement of Existing Sanctions
            As President Obama said when he announced the JPA on November 23, "the broader architecture of sanctions will remain in place and we will continue to enforce them vigorously." This vigorous enforcement will be accomplished through the continued dedicated, resolute and creative work of professionals in our intelligence community, in the Treasury and State Departments, and across the Administration. We understand well the important role that sanctions pressure on the Iranian economy played in the lead-up to the JPA, and how important maintaining that pressure will be over the next six months as we explore the possibility of a long- term, comprehensive solution.
            As I have just discussed, the vast majority of our sanctions remain in place, which we will continue to vigorously enforce, even as implement the JPA. We are determined to continue – in the days, weeks, and months ahead – to respond to Iran's evasion efforts, wherever they may occur, and to continue to aggressively enforce our sanctions.
            For example, just yesterday, Treasury reached a $33 million settlement with the Royal Bank of Scotland plc for, among other things, apparent violations of U.S. sanctions on Iran and other sanctioned parties, including removing material references to U.S.-sanctioned locations or persons from payment messages sent to U.S. financial institutions. A few weeks ago we announced Treasury's largest settlement outside of the banking industry for violations of U.S. sanctions on Iran. As part of a combined $100 million settlement with several federal government partners, Weatherford International, Ltd. agreed to pay $91 million to settle its potential liability for extensive oilfield services provided in Iran from 2003 to 2007.
            We believe our actions have put the international business community on notice: Iran is still off limits, including designated Iranian banks and businesses. Foreign banks and businesses still have to make a choice – they can do business with Iran, or they can do business with the U.S.— not both. I can assure this that we will continue to take action against those who evade, or attempt to evade, our manifold sanctions on Iran.
            New designations and enforcement actions, moreover, are only one part of our strategy to ensure that the international business and banking community understands that now is not the time to expand activity in Iran. We have already begun a global campaign to ensure that foreign governments and the international private sector understand that the relief in the JPA is limited and targeted and that we and our partners are committed to ensuring that the pressure brought to bear on the Iranian economy remains robust. This campaign will continue in the weeks and months ahead, so that no one makes the mistake of believing that Iran is now open for business. It is not.
            I have a clear message for every government, bank, business or broker that thinks now might be a good time to test our resolve: We are watching closely, and we are prepared to take action against anyone anywhere who violates, or attempts to violate, our sanctions.

Click here for the full testimony.
 

GCC Annual Summit: Communique on Iran

            On December 11, the Gulf Cooperation Council issued a communique welcoming Tehran’s new efforts to engage with member states. The group -- which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates -- discussed regional developments at a two-day summit in Kuwait. The following are excerpts from the communique on Iran.

 
Relations with Iran
 
      The Supreme Council stressed the importance of closer cooperation between the GCC countries and Iran on the basis of the principles of good neighborliness and non-interference in internal affairs, respect for the sovereignty of countries in the region, and to refrain from the use of force, or the threat of the use of force.
 
      The Supreme Council welcomed the new trends of the Iranian leadership towards the GCC countries, hoping these trends are followed by concrete steps that would reflect positively on the peace, security and stability in the region.
 
Iran's Nuclear Program
            The Supreme Council welcomed the interim agreement which was signed by the P 5 +1 with Iran on November 24, 2013 in Geneva, as a preliminary step towards a comprehensive and lasting solution to the Iranian nuclear program , that would put an end to concerns on the international and regional level about this program, and enhance the region's security and stability , and contribute to the elimination of all weapons of mass destruction , including nuclear weapons; and the Supreme Council reaffirmed the importance of the strict implementation of the agreement in full under the supervision of international Atomic Energy Agency (IAEA).
 
Disputed Islands
            The Supreme Council renewed emphasis on the continued occupation of the Islamic Republic of Iran of the three islands, Greater and Lesser Tunbs and Abu Musa, which belong to the United Arab Emirates, a point that has been stressed in passed communications. The Supreme Council further emphasized the following:
 
• Support for the right of sovereignty of the United Arab Emirates over its three islands of Greater and Lesser Tunbs and Abu Musa, and the territorial waters, airspace, continental shelf and exclusive economic zone of the three islands as an integral part of the United Arab Emirates.
• Any decisions, practices or acts carried out by Iran on the three islands are null and void and do not change any of the historical facts and the legal right to the sovereignty of the United Arab Emirates over its three islands.
• We invite the Islamic Republic of Iran to respond to the efforts of the United Arab Emirates to resolve the issue through direct negotiations or resorting to the International Court of Justice.
 
Faris Al Sulayman, a research assistant at the Woodrow Wilson International Center for Scholars, contributed to this translation.
 

Iran & South Asia #2: India Readjusts Ties

Sunil Dasgupta

What is the status of relations between India and Iran?
            New Delhi has had relatively close ties to Tehran since the mid-1980s, but India has recalibrated relations over the last few years as Iran became the litmus test for its ties with Washington. India has also been under pressure from Israel—one of India’s leading military equipment suppliers—and the Gulf states — where millions of Indian migrants live and work – to cut back relations with Iran. So while the Indian government would have preferred to pursue unimpeded diplomatic and trade ties with Tehran, it ultimately opted to diminish dealings with the Islamic Republic.
      India continues to import Iranian crude oil using exemptions from the U.S. sanctions, but it backed out of a multi-billion-dollar natural gas pipeline project with Iran due to the complications from U.S. sanctions and the fact that the pipeline was going to traverse Pakistan.
      New Delhi and Tehran continue to coordinate on development and trade issues on Afghanistan. But broader political coordination on Afghanistan is now minimal compared to the 1990s. They have not as yet joined forces, for example, to influence the succession to President Hamid Karzai or to counter Pakistani influence in Afghanistan.
            The Indian government is paying a price domestically for this policy shift. It faces opposition—particularly among political forces on the left and Muslim leaders—to moving away from Iran and toward the United States.
            So New Delhi welcomed the nuclear deal struck by Iran and the world’s six major powers in November 2013, which it hopes will eventually lead to the lifting of sanctions. India’s one concern, however, is that Iran’s return to the global oil market will cut its interest in trading oil with New Delhi in Indian rupees — on terms favorable to India.
 
On what issues do they collaborate? On what issues are they divided?
            People-to-people contacts between India and Iran are limited despite often-cited rhetoric from both governments. India has one of the world’s five largest Muslim populations, but 90 percent are Sunni—while Iran is predominantly Shiite. So India-Iran relations—and contacts—center narrowly on three main issues:
 
  oil and gas, with entrepreneurs in both state-owned and private firms pushing for more opportunities
  regional issues, notably Afghanistan and Pakistan, which are pursued mainly by Indian intelligence agencies
  defending Indian freedom of action in foreign policy, which has been a priority for politicians and thinkers who want to protect Indian national sovereignty
 
           Oil and Gas: On energy, India and Iran are natural trade partners. India depends on imports for up to 80 percent of its crude oil needs and 25 percent of its natural gas needs while Iran has the world’s fourth-largest proven oil reserves and second-largest natural gas reserves. India imported $11.6 billion of Iranian oil in fiscal year 2012-2013. New Delhi is Tehran’s second-largest oil customer. Some of this trade was conducted in Indian rupees, which was beneficial to India.
            Over the last decade, the Indian government had made some efforts to promote a natural gas pipeline from Iran to India through Pakistan. Pakistan had signed on to the project and even executed a gas purchase agreement with Iran. But U.S. sanctions on Iran and Indian apprehension about Pakistan derailed the project. Even if Washington lifted its sanctions, New Delhi’s interest in the pipeline project would be unlikely to revive without significant improvement in India-Pakistan ties.  
           
            Regional Issues: On Afghanistan, India worked with Iran to develop trade links that bypass Pakistan. The 135-mile Chabahar-Zaranj-Delaram Highway, completed in 2009, is one example, but developing alternative trade routes is an uphill—and perhaps quixotic—task for five reasons.
 
  Movement of people and goods across the Afghanistan-Pakistan border is larger and more established.
  Cultural ties across the Afghanistan-Pakistan border are stronger and involve Afghanistan’s largest ethnic group, the Sunni Pashtuns. In contrast, the Shiite Hazaras are a smaller population.
  Since Kabul is the main Afghan market, going through Iran is longer and more expensive.
  Private infrastructure already in place makes the Pakistani route cheaper and more feasible.
  Pakistan is unlikely to sit back and allow its influence to wane.
 
      Coordination between India and Iran on Afghan development is likely to remain limited. India’s overall development assistance to Afghanistan outweighs what New Delhi does there jointly with Tehran. Surprisingly, India and Iran do not appear to be coordinating their public positions on future political developments in Afghanistan, even with the prospect of the imminent U.S. withdrawal.
 
 
 
What is New Delhi’s position on Tehran’s controversial nuclear program?
            Since India tested nuclear weapons in 1998, New Delhi has rejected the argument that its nuclear tests and subsequent rehabilitation within the international non-proliferation regime sets a precedent that applies to Iran. New Delhi has tried generally to prevent India and Iran being seen in the same category. Even domestic critics of the government embrace this position, which explains why India voted against Iran at the IAEA on a 2009 resolution sponsored by Russia and China. The IAEA resolution, which criticized Iran for building a secret nuclear plant, became the basis for U.N. action against Iran and U.S. sanctions.
      The problem in India’s position has been that it has not been willing to accept the connection between the nuclear issue and its oil and gas trade with Iran. The United States and Israel view Iran’s oil wealth as a key resource for Tehran’s nuclear program— and sanctioning its trade as a way to pressure Iran into dismantling the program. But India has wanted to treat the issues separately out of self-interest.
 
 
 
India, Iran and Russia were key supporters of the Northern Alliance against the Taliban in the 1990s. In Afghanistan, what issues have Iran and India cooperated on? What has divided them?
            India and Iran have interests that align, but that does not always translate into alliances in action. The lack of public coordination between India and Iran on Afghanistan after the withdrawal of most U.S. troops has been particularly surprising, given the history of joint support for the Northern Alliance. India and Iran still cooperate on infrastructure projects and want to develop an alternative trade route bypassing Pakistan, but both are quixotic and limited in scope.
 
In 2005, Indian Prime Minister Manmohan Singh told The Washington Post “Iran is the largest Shiite Muslim country in the world. We have the second largest Shiite Muslim population in our country…And I do believe that thanks to our unique history we can be a bridge.” What kind of relationship does India’s Shiite population have with Iran, the world’s largest Shiite country? Have the two countries pursued ties along these lines?
 
     There is a difference between rhetoric and reality here. Yes, India has the second largest Shia community. But this Shia community is a small albeit vibrant minority of India’s Muslims. Indian Shiites do have religious ties to Iran, but even Indian Shiites go to Mecca for Hajj. The relationship between Shiite scholars is not so much religious as it is intellectual.
 
 
 
 
 
 
 
Sunil Dasgupta is director of the University of Maryland, Baltimore County’s Political Science Program and a nonresident senior fellow at the Brookings Institution.
 

Click here for Iran & South Asia #1: Pakistan’s Delicate Balancing Act

Click here for Iran & South Asia #3: After US Withdrawal from Afghanistan

Click here for Iran & South Asia #4: Issues, Facts & Figures

Photo credits: President Rouhani via President.ir, Manmohan Singh by World Economic Forum [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons, Bushehr nuclear power plant via NuclearEnergy.ir, Moulana Shahwar by Moulanashahwar (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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Zarif: Sanctions Would Kill Nuclear Deal

            The following article first appeared in Time magazine. 

Robin Wright
      In a wide-ranging interview with TIME in Tehran on Dec. 7, Iran’s Foreign Minister Mohammed Javad Zarif spoke to writer and Iran expert Robin Wright about how the Geneva nuclear deal came together, how the government has to appeal to Iran’s own parliament not to undermine the interim pact, and how any new sanctions passed by the United  States Congress would kill the deal. The agreement, reached between Iran and six world powers in November, calls for a freeze on parts of Iran’s nuclear program in exchange for an easing of sanctions. It is meant to pave the way for a final settlement between Iran and the international community on Iran’s nuclear program. Iran says the program is for civilian purposes only; world powers fear that it has a military component. Speaking in the ornate Foreign Ministry building, Zarif also indicated that Iran might not be wedded to Syria’s President Bashar Assad, a long-time ally, and he said that Iran hoped for a “duly monitored” democratic election in Syria. Iran’s most high-profile cabinet official warned that the deepening sectarianism playing out in Syria does not recognize borders and has implications “on the streets of Europe and America.”
 
What are biggest differences between Iran and the six major powers in making a permanent agreement? The biggest issues and obstacles?
            There are a number of issues. One is the removal of all sanctions – both U.N. Security Council sanctions as well as national and multilateral sanctions outside the U.N. – and second is the issue of Iran having an enrichment program.
            These are the two elements of the final deal that are going to be there. How we shape the final deal to include all these elements will be a matter for discussion. The two other members, Russia and China, may also have concerns but they are more confident about the peaceful nature of our nuclear program.
 
But what are the obstacles then?
            I don’t see any obstacles. I believe it’s rather straightforward. We can reach an agreement but there are some areas which are more difficult than others. One of those areas may be how we make sure that [Iran’s heavy water production plant at] Arak will remain peaceful. It is our intention that it will remain exclusively peaceful but how we give them the necessary assurances that it will remain peaceful that may be one of the more difficult areas.
 
Why do you even need Arak?
            Why do we even need Arak? Because we need to produce radio isotopes for medical purposes and even Arak alone is not enough for us. This was the technology that was available to us. Some people believe that we chose this technology because it provided other options. They’re badly mistaken.
            You see you have to look at Iran’s nuclear program from the perspective of denial, the fact that Iran was denied access to technology. And we used or we tried to get access to whatever was available to us and this technology was available to us. Other technologies were not. And we made a lot investment both in terms of human capital as well as in terms of material resources and we have reached almost the end game of getting this research reactor into actual operation. So it’s too late in the game for somebody to come and tell us that we have concerns that cannot be addressed. We have to find solutions. We believe there are scientific solutions for this and we are open to discussing them but that will be one of the more difficult issues.
 
Are you willing to accept a level of enrichment that is only for facilities that Iran has constructed?
            We are going to accept measures that would ensure that our program will remain exclusively peaceful but the rest will have to be decided in the negotiations in good faith. We have no intention of producing weapons or fissile material programs. We do not consider that to be in our interests or within our security doctrine.
 
What are the prospects that Iran will be part of the Geneva talks on Syria?
             If Iran is invited without preconditions Iran will be a part of the talks. I think people will decide to invite Iran if they are interested in having a helpful hand in finding a resolution to the Syrian tragedy and they will decide not to invite Iran to their own detriment. Iran believes that what is happening in Syria can have a huge impact on the future of our region and the future beyond the region. Because we believe that if the sectarian divide that some people are trying to fan in Syria becomes a major issue it will not recognize any boundaries. It will go beyond the boundaries of Syria. It will go beyond the boundaries of this region. You will find implications of this on the streets of Europe and America.

Did you or any other Iranian diplomats discuss Iran’s position on Syria with American diplomats?
            No, we didn’t except for a very, very brief sort of reference en passé in my first meeting with John Kerry.

Do you think it’s possible that the many different sides of the Syrian conflict and the outside parties to that conflict can find common ground?
            It’s up to the Syrians to decide; we can only help. We can only facilitate. And I think Iran will not be an impediment to a political settlement in Syria. We have every interest in helping the process in a peaceful direction. We are satisfied, totally satisfied, convinced that there is no military solution in Syria and that there is a need to find a political solution in Syria. If you want to prevent a void, the types of consequences that we are talking about, I mean if you want to avoid extremism in this region, if you want to prevent a Syria becoming a breeding ground for extremists who will use Syria basically as a staging ground to attack other countries – be it Lebanon, be it Iraq, be it Jordan,  Saudi Arabia, even Turkey – these countries are going to be susceptible to a wave of extremism that will find its origins in Syria and the continuation of this tragedy in Syria can only provide the best breeding ground for extremists who use this basically as a justification, as a recruiting climate in order to wage the same type of activity in other parts of this region.
 
Is Iran going to stick at the side of Bashar Assad?
            We will stick to the side of stability and resolution to Syria. But at the end of the day, we are not going to decide who will rule Syria. It should be the Syrian people to decide. We’re proposing that we should not give ourselves the role that the Syrian people should play.
 
We’re hearing that you’re still facing tough opposition in the Gulf and that Saudi Arabia doesn’t even want to see you yet.
            I was well received by every country in the Persian Gulf that I visited [on a recent trip]. I had extremely positive discussions both on regional issues, the fact that all of them welcomed the  Geneva agreement, the fact that all of them considered that as a positive development for security and cooperation in our region, the fact that everyone expected a new chapter in relations between Iran and countries on the southern shore of the Persian Gulf. And that was very encouraging for me.
            As for Saudi Arabia, I indicated to them that I was prepared to go to Saudi Arabia. Meetings were arranged. But there was a problem with the meetings. We could not arrange all of the meetings that should have been arranged. We decided to go at a time that was more convenient. It doesn’t mean a political problem between Iran and Saudi Arabia. Now we have differences. In every family you have differences of views, even between brothers and sisters. And we all have our differences. There are issues on which we have different opinions, different approaches, different strategies, different tactics. It wasn’t that they were not prepared to see me. 
               
But you did mention the deepening sectarian gap in the region personified by the differences between Iran and Saudi Arabia.
            We both have members of both sects among our population and it’s in our interest to avoid this, to have a cordial and brotherly relations between various Islamic sects. So for Iran and Saudi Arabia, it is important and very significant to reach a common understanding on how to avoid this and not to personify such a sectarian difference.
 
What opposition are you facing at home to the Geneva deal? And what are you doing about it?
            The most opposition here emanates from the lack of trust because we do not have a past on which we can build. It’s a psychological barrier to interaction that we need to overcome. The fundamental reason for opposition: they believe the West and particularly the United States are not sincere, are not interested about reaching an agreement. They believe that they will try to use the mechanism of negotiations in order to derail the process, in order to find new excuses. And some of the statements out of Washington give them every reason to be concerned. Now we know that Washington is catering to various constituencies and is trying to address these various constituencies. We read their statements in the light of their domestic constituency process. But not everybody in Iran does that. We believe that the U.S. government should stick to its words, should remain committed to what it stated in Geneva, both on the paper as well as in the discussions leading to the plan of action.
 
After all these negotiations, do you see the prospect for working together with the United States on other subjects, including Afghanistan?
            We have to wait and see whether the behavior that will be exhibited in the course of negotiations and implementation of our agreements on the nuclear issue creates the necessary confidence for us to move to other areas.
 
Is there anything different now between Iran and the United States after the talks in Geneva after the process that’s been launched?
            In terms of using these talks to foster confidence, I don’t think we have been very successful in that process. Because the talks have been followed by public statements that have not differed that significantly from statements that used to be made before the talks.  Basically in this day and age, you don’t have secret negotiations, everything is done is out in the open. You cannot pick and choose your audience. And that is one of the beauties of globalization and one of the hazards of globalization whichever way you want to say it. When Secretary Kerry talks to the U.S. Congress, the most conservative constituencies in Iran also hear him andinterpret his remarks. So it’s important for everyone to be careful what they say to their constituencies because others are listening and others are drawing their own conclusions.

What happens if Congress imposes new sanctions, even if they don’t go into effect for six months?
            The entire deal is dead. We do not like to negotiate under duress. And if Congress adopts sanctions, it shows lack of seriousness and lack of a desire to achieve a resolution on the part of the United States. I know the domestic complications and various issues inside the United States, but for me that is no justification. I have a parliament. My parliament can also adopt various legislation that can go into effect if negotiations fail. But if we start doing that, I don’t think that we will be getting anywhere. Now we have tried to ask our members of parliament to avoid that. We may not succeed. The U.S. government may not succeed. If we don’t try, then we can’t expect the other side to accept that we are serious about the process. 
 
What can you tell us about the back channel that began last March?
            I can tell you that we started discussing this issue on the sidelines of the P5+1 with various countries but with all the countries that were involved we have normal diplomatic relations. It may become more interesting when it involves the United States. That started a long time ago – probably three years ago. Our nuclear negotiator at that time, Dr. [Saeed] Jalili, met with [Undersecretary of State] Bill Burns on the sidelines of Geneva. And since then, there have been back and forth discussions between Iran and the U.S. inside and on the sidelines of P5+1. So that has taken place and I think with some positive outcome.
 
Did it make possible, did it facilitate Geneva?
            I think had it not been for bilateral discussions between Iran and various members of P5+1 we would not have had a positive outcome. Formal meetings of Iran plus six countries and [Senior E.U. foreign policy official] Cathy Ashton usually remain very formal. If you want to reach agreement you need to talk to all of these individually as well as collectively. So we did talk to all members of the P5+1 individually. But as it was not a big deal for us to talk to France or Russia or even the U.K. For the U.S., it was a different issue. And our discussions with the U.S. on the sidelines of P5+1 became a story in themselves.
 
How alive is that channel now?
            When my colleagues go to Vienna, probably they’ll have side discussions with the U.S. and that’s a very important channel. The U.S. is probably the most important player because it has the largest amount of sanctions against Iran, most of them or all of them illegal in our view. But nevertheless it has a lot of sanctions. It imposes a lot of sanctions on various countries that do business with Iran and that is why it has to do the most. In the resolution, it had a lot to do in the creation of the trouble so it has a lot to do in the resolution of the trouble. So that requires Iran and the U.S. to have a lot of discussions on the sides.
 
Would you have had Geneva without that back channel with the United States?
            Well, hypothetical questions: we would not have been able to reach an agreement without having discussed all various issues on the sidelines of P5+1 with various members, particularly the United States.
 

This article is reposted from Time magazine.

 

Robin Wright has traveled to Iran dozens of times since 1973. She has covered several elections, including the 2009 presidential vote. She is the author of several books on Iran, including "The Last Great Revolution: Turmoil and transformation in Iran" and "The Iran Primer: Power, Politics and US Policy." She is a joint scholar at USIP and the Woodrow Wilson Center.

 

Kerry Warns Congress Against New Sanctions

           On December 10, Secretary of State John Kerry urged Congress to hold off on imposing new sanctions while world powers seek a comprehensive deal on Tehran’s nuclear program. “We’re asking you to give our negotiators and our experts the time and the space to do their jobs,” he said at a House Foreign Affairs Committee hearing. Kerry argued that the interim nuclear agreement, announced by Iran and the world's six major powers on November 24, is an important first step towards solving the dispute. He also emphasized the delicate nature of the diplomatic situation. “One path could lead to an enduring resolution… The other path could lead to continued hostility and potentially to conflict,” Kerry warned.
            Some members of Congress, however, think Washington will have greater leverage in future negotiations if it imposes new sanctions. The committee’s ranking Democratic, Eliot Engel (NY), told Kerry that new sanctions “could potentially strengthen your hand.” After the three-hour hearing, Foreign Affairs Committee Chairman Ed Royce (R-CA) and Engel stated they would continue working with the Senate to pass a bill that would immediately trigger new sanctions if a satisfactory agreement is not reached within six months.
            On the same day as the hearing, however, the Senate Banking Committee voted to refrain from passing new sanctions “The President and Secretary Kerry have made a strong case for a pause in Congressional action on new Iran sanctions, so I am inclined to support their request and hold off on Committee action for now,” Chairman Tim Johnson (D-SD) told Politico. The following are Kerry’s opening remarks to the House Foreign Affairs Committee.

            SECRETARY KERRY: Well, Mr. Chairman, thank you very, very much. Ranking Member Engel, Members of the Committee, thanks very much for welcoming me back, and I am happy to be back here. There’s no more important issue in American foreign policy than the question of the one we’re focused on here today.
            And obviously, from the Chairman’s introduction, you know that I come here with an enormous amount of respect for your prerogatives on the House Foreign Affairs Committee, as we did in the Senate. And it’s entirely appropriate that we’re here to satisfy your questions, hopefully allay your concerns and fears, because I believe the agreement that we have ought to do that and I think the path that we’re on should do that. And as I describe it to you, I hope you’ll leave here today with a sense of confidence that we know what we’re doing, our eyes are open, we have no illusions. It’s a tough road. I don’t come here with any guarantees whatsoever. And I think none of what we’ve done in this agreement begs that notion. In other words, everything is either verifiable or clear, and there are a set of requirements ahead of us which will even grow more so in the course of a comprehensive agreement. And we can talk about that – I’m sure we will – in the course of the day.
            Let me just begin by saying that President Obama and I have both been very clear, as every member of this committee has been, that Iran must not acquire a nuclear weapon. And it is the President’s centerpiece of his foreign policy: Iran will not acquire a nuclear weapon. This imperative is at the top of our national security agenda, and I know it’s at the top of yours as well. So I really do welcome the opportunity to have a discussion not only about what the first-step agreement does, but also to clarify – I hope significantly – what it doesn’t do, because there’s a certain, as there is in any of these kinds of things, a certain mythology that sometimes grows up around them.
            The title of today’s hearing is “The Iran Nuclear Deal: Does It Further U.S. National Security?” And I would state to you unequivocally the answer is yes. The national security of the United States is stronger under this first-step agreement than it was before. Israel’s national security is stronger than it was the day before we entered into this agreement. And the Gulf and Middle East interests are more secure than they were the day before we entered this agreement.
            Now, here’s how:
            Put simply, once implemented – and it will be in the next weeks – this agreement halts the progress of Iran’s nuclear program – halts the progress – and rolls it back in certain places for the first time in nearly ten years. It provides unprecedented monitoring and inspections. While we negotiate to see if we can conclude a comprehensive agreement – if we can conclude – and I came away from our preliminary negotiations with serious questions about whether or not they’re ready and willing to make some of the choices that have to be made. But that’s what we put to test over the next months. While we negotiate to see if we can conclude a comprehensive agreement that addresses all of our concerns, there’s an important fact: Iran’s nuclear program will not move forward.
            Under this agreement, Iran will have to neutralize – end – its entire stockpile of 20 percent enriched uranium, which you all know is a short step away from weapons-grade uranium. So if you remember when Prime Minister Netanyahu held up that cartoon at the UN with the bomb in it in 2012, he showed the world a chart that highlighted the type of uranium that he was most concerned about – and he was talking about that 20 percent stockpile. Under this agreement, Iran will forfeit all – not part, all – of that 20 percent, that 200 kilogram stockpile. Gone.
            Under this agreement, Iran will also halt the enrichment above 5 percent and it will not be permitted to grow its stockpile of 3.5 percent enriched uranium. Iran cannot increase the number of centrifuges in operation, and it will not install or use any next-generation centrifuges to enrich uranium.
            Under this agreement, we will have increased transparency of Iran’s nuclear program, giving us a window into their activities that we don’t have today. We will have access to Fordow, a secret facility in a mountaintop that we’ve never been in. We will now get into it not once or twice – every single day. We will get into Natanz and have the ability to know not once or twice, but every single day what is happening in Natanz. And we will have access each month to the Arak facility, where we will have an extraordinary ability to be able to know through inspections whether or not they are complying with their requirements.
            Now, this monitoring is going to increase our visibility into Iran’s nuclear program as well as our ability to react should Iran renege on this agreement. And taken together, these first steps will help prevent Iran from using the cover of negotiations to continue advancing its nuclear program in secret – a concern that everybody on this dais shares.
            Now, in addition – this is very important – one of our greatest concerns has been the Arak – A-r-a-k – nuclear reactor facility. And this is a heavy-water, plutonium-capable reactor. That’s unacceptable to us. In the first step, we have now succeeded in preventing them from doing any additional fuel testing, from transferring any fuel rods into the reactor, and from installing any of the uninstalled components which are critical to their ability to be able to advance that particular reactor. So it’s frozen stone cold where it is in terms of its nuclear threat and capacity. Iran will not be able to commission the Arak reactor during the course of this interim first-step agreement. That’s very important.
            Now, we have strong feelings about what will happen in a final comprehensive agreement. From our point of view, Arak is unacceptable. You can’t have a heavy-water reactor. But we’ve taken the first step in the context of a first step, and they will have to halt production of fuel for this reactor and not transfer any fuel or heavy water to the reactor site. It cannot conduct any additional fuel testing for this. and Iran is required to give us design information for the site. We’re actually going to have the plans for the site delivered to us. We’ve long sought this information, and it will provide critical insight into the reactor that has not been previously available to us through intel or any other sources.
            Now, those are the highlights of what we get in this agreement. And I know many of you have asked, “Well, what does Iran get in return?” And I’ve seen outlandish numbers out there in some articles talking about 30, 40, 50 billion dollars and so forth, or disintegration of the sanctions. My friends, that’s just not true. It’s absolutely not true. We have red-teamed and vetted and cross-examined and run through all the possible numbers through the intel community, through the Treasury Department, through the people in charge of sanctions, and our estimates are that at the end of the six months, if they fully comply, if this holds, they would have somewhere in the vicinity of $7 billion total.
            And this is something that I think you ought to take great pride in. I was here as chairman when we put his in place. I voted for these sanctions, like we all did in the United States Senate. I think we were 100 to nothing as a matter of fact. And we put them in place for a purpose. The purpose was to get to this negotiation. The purpose was to see whether or not diplomacy and avoidance of war could actually deliver the same thing or better than you might be able to get through confrontation.
            Now, sanctions relief is limited to the very few targeted areas that are specified in this agreement for a total of about the $7 billion that I’ve described. And we will continue to vigorously – Ranking Member Engel, we will absolutely not only will we – I mean, this is going to actually result in a greater intensity of focus on the sanctions because I’ve sent a message to every single facility of the United States anywhere in the world that every agency is to be on alert to see any least movement by anybody towards an effort to try to circumvent or undo the sanctions. We don’t believe that will happen. And one of the reasons it won’t happen is we have a united P5+1. Russia, China, the United States, France, Germany, and Great Britain are all united in this assurance that we will not undo the sanctions and that we will stay focused on their enforcement.
            Now, all the sanctions on Iran further on its abysmal human rights record, over its support for terrorism, which you’ve mentioned, and over its destabilizing activities in places like Syria – those sanctions will all remain in effect. They’ve nothing to do with the nuclear. They’re there for the reasons they’re there, and we’re not taking them off. This agreement does provide Iran with a very limited, temporary, and reversible relief. And it’s reversible at any time in the process if there is noncompliance. If Iran fails to meet its commitments, we can and will revoke this relief. And we will be the first ones to come to you if this fails to ask you for additional sanctions.
            The total amount of relief is somewhere between the 6 and 7 billion that I described. That is less than one percent of Iran’s $1 trillion dollar economy, and it is a small fraction of the $100 billion-plus of oil revenue alone that we have deprived Iran of since 2012.
            I want you to keep in mind this really pales in comparison to the amount of pressure that we are leaving in place. Iran will lose $30 billion over the course of this continued sanctions regime over the next six months. So compare that – they may get $7 billion of relief, but they’re going to lose $30 billion. It’s going to go into the frozen accounts. It will be added to the already 45 billion or so that’s in those accounts now that they can’t access.
            And during the six-month negotiating period, Iran’s crude oil sales cannot increase. Oil sanctions continue as they are today. There’s no diminishment of the oil and banking sanctions that you put in place. We have not lifted them. We haven’t eased them. That means that as we negotiate, oil sanctions will continue to cost Iran about the 30 billion I just described, and Iran will actually lose more money each month that we negotiate than it will gain in relief as a result of this agreement. And while we provide 4.2 billion in relief over the six months, which is direct money we will release from the frozen account, we are structuring this relief in a way that it is tied to concrete, IAEA-verified steps that they’ve agreed to take on the nuclear program. That means that the funds will be transferred not all at once, but in installments, in order to ensure that Iran fulfills its commitments. And it means that Iran will not get the full measure of relief until the end of the negotiating period, when and if we verify, certify, that they have complied.
            So now we have committed – along with our P5+1 partners – to not impose any new nuclear-related sanctions for the period of the six months. I’m sure there are questions about this. I know I’ve seen, and there are some in Congress who’ve suggested they ought to do it. I’m happy to answer them. I will tell you that in my 29 years, just about shy of the full 29 I’ve served in the Senate, I was always a leading proponent of the sanctions against Iran. I’m proud of what we did here. But it was undeniable that the pressure we put on Iran through these sanctions is exactly what has brought Iran to the table today, and I think Congress deserves an enormous amount of credit for that.
            But I don’t think that any of us thought we were just imposing these sanctions for the sake of imposing them. We did it because we knew that it would hopefully help Iran dismantle its nuclear program. That was the whole point of the regime.
            Now, has Iran changed its nuclear calculus? I honestly don’t think we can say for sure yet. And we certainly don’t just take words at face value. Believe me, this is not about trust. And given the history – and Mr. Chairman, you mentioned the question of deception – given the history, we are all rightly skeptical about whether or not people are ready to make the hard choices necessary to live up to this. But we now have the best chance we’ve ever had to rigorously test this proposition without losing anything. At least twice in this agreement, it is mentioned that nothing is agreed until everything is agreed, and that is specific as to the final agreement. In addition, where it does talk about the potential of enrichment in the future, it says “mutually agreed upon” at least four times – three or four times in that paragraph. It has to be agreed. We don’t agree, it doesn’t happen.
            Every one of us remembers Ronald Reagan’s maxim when he was negotiating with the Soviet Union: Trust, but verify. We have a new one: Test, but verify. Test, but verify. And that is exactly what we intend to do in the course of this process.
            Now, we’ve all been through tough decisions. Those of you in the top dais have been around here a long time, and you’ve seen – we all know the kinds of tough decisions we have to make. But we’re asking you to give our negotiators and our experts the time and the space to do their jobs, and that includes asking you while we negotiate that you hold off imposing new sanctions.
            Now, I’m not saying never. I just told you a few minutes ago if this doesn’t work, we’re coming back and asking you for more. I’m just saying not right now. Let me be very clear. This is a very delicate diplomatic moment, and we have a chance to address peacefully one of the most pressing national security concerns that the world faces today with gigantic implications of the potential of conflict. We’re at a crossroads. We’re at one of those, really, hinge points in history. One path could lead to an enduring resolution in international community’s concerns about Iran’s nuclear program. The other path could lead to continued hostility and potentially to conflict. And I don’t have to tell you that these are high stakes.
            We have an obligation to give these negotiations an opportunity to succeed. And we can’t ask the rest of the P5+1 and our partners around the world to hold up their ends of the bargain if the United States isn’t going to uphold its end of the bargain. If we appear to be going off on our own tangent and do whatever we want, we will potentially lose their support for the sanctions themselves. Because we don’t just enforce them by ourselves; we need their help. And I don’t want to threaten the unity that we currently have with respect to this approach, particularly when it doesn’t cost us a thing to go through this process knowing that we could put sanctions in place additionally in a week, and we would be there with you seeking to do it.
            I don’t want to give the Iranians a public excuse to flout the agreement. It could lead our international partners to think that we’re not an honest broker and that we didn’t mean it when we said that sanctions were not an end in and of themselves, but a tool to pressure the Iranians into a diplomatic solution. Well, we’re in that. And six months will fly by so fast, my friends, that before you know it we’re either going to know which end of this we’re at or not.
            It's possible, also, that it could even end up decreasing the pressure on Iran by leading to the fraying of the sanctions regime. I will tell you that there were several P5+1 partners at the table ready to accept an agreement significantly less than what we fought for and got in the end.
Mr. Chairman, do you want me to wrap?
            CHAIRMAN ROYCE: If you could, Mr. Secretary.
            SECRETARY KERRY: Okay. Let me just say to you that the Iranians know that this threat is on the table.
            I do want to say one quick word about Israel and Prime Minister Netanyahu. I speak to the Prime Minister usually a couple times a week or several times. I talked to him yesterday morning, and I am leaving tomorrow and I'll be seeing him Thursday night. We are totally agreed that we need to focus on this final comprehensive agreement. And Yossi Cohen, the national security advisor to the Prime Minister, is here in Washington this week working with our experts. And we will work hand in hand closely, not just with Israel, but with our friends in the Gulf and others around the world, to understand everybody's assessment of what constitutes the best comprehensive agreement that absolutely guarantees that the program, whatever it is to be, is peaceful, and that we have expanded by an enormous amount the breakout time.
            This first-step agreement, Mr. Chairman, actually does expand the breakout time. Because of the destruction of the 20 percent, because of the lack of capacity to move forward on all those other facilities, we are expanding the amount of time that it would take them to break out. And, clearly, in a final agreement, we intend to make this failsafe that we can guarantee that they will not have access to nuclear weapons.
            So I’d just simply put the rest of my testimony in the record, Mr. Chairman. I look forward to your questions.
 

  

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