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Vienna Talks Preview: U.S. on Challenges

            On February 17, Obama administration officials outlined challenges facing upcoming nuclear talks between Iran and the world’s six major powers — Britain, China, France, Germany, Russia and the United States. The parties are slated to meet in Vienna on February 18. “It’s probably as likely that we won’t get an agreement as it is that we will,” said a senior administration official. “But we have also said, and I just as firmly believe this, that these negotiations are the best chance we’ve ever had for diplomacy to resolve this most pressing national security challenge,” added the official. The following is the full text of the briefing.

 
Background Briefing by a Senior U.S. Official
 
SENIOR ADMINISTRATION OFFICIAL:  These next days this week are the beginning of what will be a complicated, difficult, and lengthy process.  When the stakes are this high and the devil is truly in the details, one has to take the time required to ensure the confidence of the international community in the result.  That can’t be done in a day, a week, or even a month in this situation.  But our aim remains to move in a deliberate, concentrated manner to get the job done.
 
We don’t know if, at the end of these six months, we will be able to achieve a comprehensive agreement, though we aim to.  As President Obama has said, and I quite agree, it’s probably as likely that we won’t get an agreement as it is that we will.  But we have also said, and I just as firmly believe this, that these negotiations are the best chance we’ve ever had for diplomacy to resolve this most pressing national security challenge.  We absolutely want to ensure that the first step is not the only step or the last step.  We must build on the progress of the first step and get a final agreement, a comprehensive agreement, that addresses all of our and the international community’s concerns about Iran’s nuclear program.
 
It’s important to note that since we finalized the Joint Plan of Action in Geneva in November, we have been working very hard with the European Union, the rest of the P5+1, our other international partners, and indeed, with the Iranians to move this process forward in some important ways.  First, we translated the JPOA, the Joint Plan of Action, into a set of technical understandings that went into effect on January 20th.  Iran made some very serious commitments regarding its nuclear program, and to date they have carried out those commitments.  Similarly, we made commitments to pause a limited number of sanctions, and we have kept our commitments. 
 
And as the implementation of the first step took effect, we’ve been consulting our friends in the region, as we always do, to make sure they’re up to speed on the process and where we’re going from here, as well as making sure the international community knows what has and what hasn’t occurred. 
 
We’ve also been working quite closely with the United States Congress.  Experts from the State and Treasury Departments have been briefing both members and staffers to make sure they have all the facts about what is in the Joint Plan of Action, what Iran has done, and what we have done in return.  Part of that discussion, of course, has been to address our concerns about passing any new sanctions legislation at this point.  And we think that members have been very receptive in these discussions.
 
Finally, our experts have already begun engaging with our EU and P5+1 counterparts to begin discussions about what the contours of a comprehensive agreement would look like.  Now we are ready to sit down with Iran and begin the much more difficult task of trying to negotiate this comprehensive agreement.  One topic, of course, that will be discussed in the first round is procedurally how these talks will progress – what the format will be, what the timing will be, how much will be done at the expert level, vice the political director or foreign minister level. 
 
Substantively, as we begin to talk more about what we will need to be part of any comprehensive agreement, it’s worth keeping in mind a maxim we’ve been repeating for some time and which is explicitly written into the Joint Plan of Action: that nothing is agreed until everything is agreed.  As we dive into these discussions, it will be tempting for people to try to hone in on one or two issues or to try to figure out where the sticking points are.  But as we’ve made very clear, all of the issues must be addressed to the international community’s satisfaction during these negotiations for us to get a comprehensive agreement completed.  And some of these issues are well outlined in the JPOA.
 
As I said, we know this will be a long process.  Progress will be tough, and it may slower at times than any of us wishes.  There will undoubtedly be some ups and probably many downs.  As we prepare to sit down tomorrow to begin these comprehensive negotiations, we are clear-eyed, focused, and determined.  Now we’re going to see what we can get done.
  
 
QUESTION:  So last week it came out that Iranian oil exports have been increasing.  We’ve also seen that there’s this Russian-Iranian potential oil deal.  Today, the Iranians have been saying that perhaps there could be an exchange, an additional reactor created by the Russians in exchange for oil.  Are these things undermining your leverage in negotiating with the Iranians?  And how does this impact this process, if at all?
 
SENIOR ADMINISTRATION OFFICIAL:  There are always events that take place that have some impact, but in what you’ve just outlined, I don’t see any in particular.  In the sense that there are always fluctuations in the oil markets, there are always fluctuations in the amount of oil that is being bought, even within the cap that is in the architecture of our sanctions.  So this is very much anticipated, and so we look at the aggregate over time.  And we’re quite satisfied with where we are.
 
Secondly, in terms of the oil-for-goods deal, or oil-for-a-second-Bushehr-reactor deal, I also note that that article says that it will be very complicated to put such an agreement together, and perhaps they can get it together by August.  I think that we will hear a lot of people hoping to put things together, but I think you have heard from the President of the United States, from the Secretary of State, from me, from my colleagues at Treasury, that the major parts of our sanctions are in place and our underlying sanctions architecture is in place both on the oil side, on the financial and banking side, and if people try to evade our sanctions, we will find them.
 
 
QUESTION:  What did you make of Ayatollah Khamenei’s comments today that he thought all this was a great waste of time, and that he wouldn’t stop the negotiations, and if they succeeded, which he thought was impossible, that would be great, but enmity would continue, which is probably less important.  But how did you interpret it?  Was he preparing Iranians for a long haul, or for failure, or what do you think?
 
SENIOR ADMINISTRATION OFFICIAL:  You have to ask him what his intentions were.  But I think you know he made the statement he did today – President Obama has said that he believes this is a 50-50 proposition.  So I think, probably with all of you, we don’t have to worry about high expectations. 
 
And indeed, I think it is right to approach these negotiations with a sober frame of mind.  If this were easy to do, it would have been done a very long time ago.  It is extraordinary that we were able to take a first step, commitments of which are being kept by everyone.  We now have to build on that so that it is not the only step and it is not the last step.  But it is very complex; it is very difficult.  We are all committed to working as hard as we possibly can, as fast as we can, but this is a very detailed-oriented comprehensive agreement with very difficult decisions that have to be taken by everybody.  So I certainly think leadership all over the world is keeping expectations at the appropriate place – cautious, very cautious.
  
QUESTION:  You mentioned that you’ve been consulting closely with Congress.  And since the JPOA is supposed to expire (inaudible) concerns about pressure increasing (inaudible) or after the several weeks (inaudible) putting new sanctions bill on that, at that point, might have a veto-proof majority because we’re going into November midterms?  How do you think the domestic politics will play into the pressure that will be on your administration?
 
SENIOR ADMINISTRATION OFFICIAL:  Many people have brought up our midterm elections--and won’t that have pressure on what we do?  And I would say that throughout this process, the President, the Secretary of State have made – and policymakers in U.S. Government – have made decisions they thought served the national security interest of the United States.  If we didn’t, we wouldn’t have worked so hard to tell the Congress, “Please do not pass new sanctions legislation now.”  The politically easy thing to do would have been to say, “Okay.”  But that wasn’t, in the view of the President and the Secretary and all of us, the right thing to do. 
 
The right thing to do was to give diplomacy a chance.  And that is what we are intent on doing, and that is what we are going to continue to do.  We are grateful to the Congress for their leadership on putting sanctions in place.  They have had an important effect on this diplomatic process.  But just because something has worked in one circumstance doesn’t mean it works in the next circumstance.  And we have had a great deal of conversation, and the members of Congress have come to understand that we should get this space and time to give this diplomacy a chance.  And I’m very grateful for those choices.
 
 
QUESTION:  I have a question about the joint commission.  The narrative to this point has been there has been two tracks – the IAEA track which is looking at the PMD issues, and the diplomatic political track looking into the broader (inaudible) nuclear issues.  Those paths seem to have come to a confluence, and I’m curious to hear how you envision the joint commission working, in as much technical detail as you can provide, including how the IAEA will be participating in – at what level, et cetera.  And if you could just mention the joint commission’s role in clearing PMD issues specifically, that would be helpful.
 
SENIOR ADMINISTRATION OFFICIAL:  The joint commission is not set up to clear away PMD.  That is, in the first instance, the IAEA’s job.  And they’re undertaking that.  And in fact, the more that Iran can do to meet their obligations with the IAEA, the better for the nuclear negotiating process around a comprehensive agreement.  So the two partner with each other, but they are not the same.  The JPOA says that we will be of assistance where we can in resolving past and present issues, which reflects possible military dimensions of Iran’s nuclear program.  But we want to do that in service to the IAEA, and we don’t want to do the job that belongs to the IAEA.
 
The joint commission was set up as a mechanism, when necessary, if there are compliance issues with the JPOA or questions that need to get resolved.  So that’s what the joint commission is for.  So if Iran was not fulfilling a commitment they made or we weren’t fulfilling a commitment we had made, there would be a place to discuss those things, even while we are negotiating the comprehensive agreement, so that any compliance issues wouldn’t come to the comprehensive negotiation, but would have another mechanism for facilitation.  And it was anticipated that would happen at the expert level, and then come up to the political directors and up to foreign ministers if needed. 
 
So far, there hasn’t been need or a purpose for the joint commission to meet.  There needs to be content and substance for such a meeting.  The IAEA is preparing monthly reports to let us know how things are going.  We expect one of those shortly, and that – they have an – have taken on an enormous responsibility, for which we are very grateful, for the verification and monitoring mechanisms in the Joint Plan of Action.  And we’re very grateful that many member states have stepped forward to provide additional budget for the IAEA so they, in fact, can do their job.
 
 
QUESTION:  Are things outside of the nuclear issue included, such as ballistic missiles? 
 
SENIOR ADMINISTRATION OFFICIAL:  The JPOA lists a variety of things that are part of a comprehensive agreement.  Included in the first or second paragraph of the JPOA is a reference to the UN Security Council resolutions, and those resolutions have to be resolved before a final agreement.  So they’re part of that.  In the UN Security Council resolutions, there is reference to ballistic missiles capable of delivering nuclear weapons. 
 
So to the extent that one has to resolve the Security Council resolutions in some way as part of the comprehensive agreement, there are many other things in the UN Security Council as well.  It talks about the suspension of enrichment…  So these issues have to be addressed in some way.  What that means, how they’re resolved, how they’re addressed is part of the negotiation. 
  
QUESTION:  In the last few weeks, the gaps between the U.S. rhetoric and the Iranian rhetoric looks vast.  I mean, everyone from Salehi to Rouhani say we’re not going to dismantle anything.  You’re testifying, saying we want major dismantlement.  Are you surprised by this rhetoric, or is this basically what you kind of thought would happen as you guys enter a negotiation and stake out your positions?
 
SENIOR ADMINISTRATION OFFICIAL:  Two things.  First of all, in Security Council Resolution 1929, operative paragraph 9:  “Decides that Iran shall not undertake any activity related to ballistic missiles capable of delivering nuclear weapons, including launches using ballistic missile technology, and that states shall take all necessary measures to prevent the transfer of technology or technical assistance to Iran related to such activities.”  So if one is addressing all Security Council resolutions, you have to address this in some way.  Again, how is part of the negotiation.
 
To your question about the rhetoric, we’re at the beginning of a negotiation.  People stake out where they hope it goes.  And then you sit down and you go to work. 
 
 
QUESTION:  If there is no substantial progress, how long does the JPOA stay in effect?  You can reboot after six months; you can reboot after a year.  What happens after a year?
 
SENIOR ADMINISTRATION OFFICIAL:  Our intent is to use these six months to negotiate a comprehensive agreement. 
 
 
QUESTION:  But how far along down the line are you?  I mean, 10 percent, 50 percent, 100 percent? 
   
SENIOR ADMINISTRATION OFFICIAL:  The JPOA sets out in broad terms what needs to be addressed in a comprehensive agreement, so that’s good.  So we’re not starting from ground zero.  And I think one of the very important parts of the JPOA is it both dealt with a first step – things that Iran could do to, as you know, stop all 20-percent enrichment, make some changes in some of its facilities, stop the advance of their program, in ways that created space for the comprehensive negotiation.  But it also sets out in broad terms what we seek to accomplish – what Iran seeks to accomplish, what we seek to accomplish in a comprehensive agreement. 
 
And if you look at both the first two paragraphs of the JPOA and the last page, which lists what should be addressed in a comprehensive agreement, we have the beginning of a framework…We have had expert level meetings among the P5+1 and the EU in advance of today to begin to lay out all of the pieces that we think need to be addressed to make sure that we come into this and try to set the table.  Put everything down.  We don’t have any interest in having surprises.  We want to be transparent about our interests, and what we hope can get achieved, and I’m sure the same will be true of Iran.
 
 
QUESTION:  Should we be looking towards one-year or a six-month period realistically?
 
SENIOR ADMINISTRATION OFFICIAL:  We should be looking at the six-month framework.  Quite frankly, I want to keep the pressure on ourselves to get this done…As time goes on, it doesn’t necessarily improve the likelihood of getting to an agreement.  And I think we all need to go to work.  We all need to try to do this in an intense and deliberate way, and give it everything we’ve got.
 
 
QUESTION:  Before the interim agreement, there was a lot of bilateral consultation between the United States and Iran.  Has there been the same level of bilateral preparation for this round or not?
 
SENIOR ADMINISTRATION OFFICIAL:  What we did to – in the first step, as you all know, there was a behind-the-scenes, shall we say, bilateral track that went on for some time and then was folded into the P5+1 negotiations.  This time we’re not repeating that process.  Everything is open and transparent in the P5+1.  I would imagine that all of us, each of us, will have bilateral contacts.  Since the JPOA, since Foreign Minister Zarif and Secretary Kerry met, since we had our bilateral track, things have changed.  You all know that Secretary Kerry met again with Foreign Minister Zarif in Munich.  You know that the President of the United States called President Rouhani.  We all, when we need to solve problems, email with the Iranians.  My colleagues up here who work on the sanctions tracks have to work out tremendous number of details to do the repatriation of funds, to set up the humanitarian channel, and to do so they have to email with their Iranian colleagues. 
 
So we’re in a very different circumstance and a very different world.  If we have a concern, an issue, I know who I can contact to try to sort through that.  So it’s a different time.  Cathy Ashton will be at the center of this, the High Representative of the European Union, and we’ll coordinate this effort and be a major interlocutor in this process; along with Helga Schmidt, her deputy; with Abbas Araghchi; and then all of the political directors who will be part of this process on a regular basis, as will our experts. 
 
 
QUESTION:  What would you like to see the timing and pace of these talks be?  And do you expect to have any substantive talks this week, and if so what do you think you ought to start on?
 
SENIOR ADMINISTRATION OFFICIAL:  I’m sure we’ll have substantive talks this week.  We will try to lay out and I’m sure Iran will lay out all of the things that they want to make sure get resolved through a comprehensive agreement.  We’re basically setting the table for the negotiations. 
 
I think that you all probably know that Lady Ashton’s having dinner with Foreign Minister Zarif, which is her usual pattern.  And then we will start with Iran in a plenary – Foreign Zarif and Lady Ashton and the political director and the Iranian delegation at about 11 tomorrow morning at the UN…Then we will be having, I’m sure, very substantive conversations at the political director level, coordinated by Helga Schmidt and Abbas Araghchi. 
 
 
QUESTION:  My question is about what we heard yesterday from one of the Iranian negotiators, Ba'idinejad, regarding the centrifuges.  He was insisting that Iran is going to use its (inaudible) and it’s going to resolve them in the future – I don’t know how far is that future.  But I think I remember you saying at a Senate hearing that Iran should let go of some of its centrifuges.  Can you elaborate:  What is really the picture that the U.S. Administration had in mind regarding the centrifuges?
 
SENIOR ADMINISTRATION OFFICIAL:  In the joint plan of action for these six months, Iran can only replace damaged centrifuges with like centrifuges.  So if a IR-1 is damaged, it can only be replaced with an IR-1, not with an IR-2 – IR-2m.  So for this six months it’s pretty clear what is allowed and what is not allowed, and no more – we’re not talking about increasing the number of centrifuges during this period of time. 
 
When we get to the comprehensive negotiation, we will have a lot of elements to discuss to give the international community confidence, and the number of centrifuges is one of those very critical elements… There are a lot of things we can do, and certainly the number of centrifuges is something that is of great interest to us, but I’m not going to negotiate it here.
 
QUESTION:  If you wanted to be very optimistic and we assume that everything went according to plan, both sides played well and agreed on everything, how soon can the Iranians expect the sanctions to be lifted?
 
SENIOR ADMINISTRATION OFFICIAL:  That is a hypothetical if there was ever a hypothetical…In the Joint Plan of Action, some of the sanctions were lifted – the limited sanctions that we dealt with were lifted immediately, some of them were tied to events that took place, the dilution of 20-percent-enriched uranium. Some of them come at the beginning of the story, the middle, the end of the story.  The repatriated funds are metered out over the months, as is the conversion to oxide of some of the 20-percent-enriched uranium.
 
If you look at the JPOA, you can see that there’s a matching and a metering of both actions and relief.  And so I’m sure that we will look to that kind of pattern.  But everything is up for negotiation. 
 
 
QUESTION:  You said in the past that, as a former businesswoman, you wouldn’t rush into Iran with a six-month timeframe.  Are you satisfied – is the U.S. comfortable with the level of engagement that European companies have with Iran?  Or are there any concerns?...And if there’s no deal after 12 months, is it over? 
 
SENIOR ADMINISTRATION OFFICIAL:  So as Secretary Kerry has said, I think as the President has implied, we would, of course, prefer countries to wait to see where we get with a comprehensive agreement before rushing off to Iran.  There are areas, because of our limited sanctions relief, where business can begin again, and it’s perfectly legitimate for those businesses in the auto kit sector for instance, in petrochemicals, to see what they can do.  That business sector is open, within limits of what is written in the sanctions relief.

But what we don’t think is good for business and not good for Iran – it’s not fair, in our view, for the Iranian people for countries to go to Iran and say, “We want to get in line, so if a comprehensive agreement is reached we can be first in line.”  It raises people’s expectations, and the relief will only come if there is a comprehensive agreement. 
 
And I want to make sure that the Iranian people know that we want to provide that sanctions relief.  One of the reasons that we were glad to structure a humanitarian channel is because our sanctions never were on food or medicine or medical devices, but the Iranian people appeared to be having a hard time getting that.  I could imagine a lot of reasons for that.  But we wanted to do whatever we could to facilitate that the Iranian people directly got food and medicine and medical devices.  And so our Treasury Department has worked to facilitate humanitarian channels so banks don’t have to be afraid that they’re going to get sanctioned if they provide those things.  
 
So we certainly want – and I would say to the Iranian people this evening who listen to any of your reports that we hope they get sanctions relief.  And what it will take is the Iranian Government assuring the international community in very concrete, visible, verifiable ways that they will not obtain a nuclear weapon. 
 
QUESTION:  And 12 months?
 
SENIOR ADMINISTRATION OFFICIAL:  We are committed to working as fast as we can.  And I don’t think answering that hypothetical serves the purpose of doing that at all.
 
 
QUESTION:  As far as an implementation of the first measures is concerned, are you satisfied with the pace and scope of Iranians’ implementation so far?  And are you going to talk about it tomorrow?
 
SENIOR ADMINISTRATION OFFICIAL:  Tomorrow is focused on beginning the negotiation of the comprehensive agreement, not to look backwards at the JPOA.  As I said, the IAEA will be providing a monthly report verifying the monitoring is done and all of that is taking place.  I think Dr. Timbie told me that, in fact, the daily access is now daily.  I know from Richard Nephew, who also works on the sanctions, that we’ve put pieces in place.  And obviously Adam Szubin here from Treasury – all of that is going forward.  So I think, gentlemen, you would say satisfied that things are being implemented.  Yes. 
 
 
QUESTION:  With the six countries within the P5+1 being pretty unified so far, are you confident this is going to continue to be the case over the next six months, 12 months?
 
SENIOR ADMINISTRATION OFFICIAL:  I do.  That’s not to say we don’t have national differences.  We always have.  But when it comes to the objective we have here, which is to give the international community confidence that Iran does not have a nuclear weapons effort in mind and objective to get a nuclear weapon and that, in fact, they have taken the steps necessary so that they cannot obtain a nuclear weapon, we are completely unified on that objective.
 
QUESTION: Then how do you get there?
 
SENIOR ADMINISTRATION OFFICIAL:  Well, there’ll be some differences.  But we have always worked through those differences, and that unity of effort has been critical in getting the JPOA.  And I think that you will find from every member of the European Union, the P5+1, a great sense of relief that, in fact, that first step was taken.  It was very difficult to achieve, and now we want to build on that.  And I don’t think anybody in the EU, the P5+1, wants to waste that very good step by not building on it further. 
 
 
QUESTION: Do you think this deal has improved the mutual trust between those two countries?  And do you also say something about heavy-water reactor in Arak, and if they promise to modify to light-water reactor, so would you satisfy with that in this issue?
 
SENIOR ADMINISTRATION OFFICIAL: We have always said, and the President of the United States has said, we have decades of mistrust between our countries, and you don’t overcome that even with a very good first step of a nuclear agreement.  So we have a long way to go yet.  Do we understand each other perhaps a little bit better?  Yes.  Do we have ways to communicate with each other we’ve never had before?  Yes.  But we still have a very long way to go. 
 
And so any comprehensive agreement will be based on verification, will be based on monitoring, will be based on transparency, and will be based on concrete steps and actions that are taken that can be seen and visible and declared and understood and remove the concern that the international community has.  So it has to be very visible, very concrete, very transparent, very real.  And that’s probably true for both sides.
 

In terms of Arak, the heavy-water reactor, we hope to find an answer that is not a heavy-water reactor, which we think does not lend itself to a civil nuclear program.  And so we were pleased to see the head of the Atomic Energy Agency Dr. Salehi say that they were open to discussions of whether there were modifications that would be viable.  I think we have a long way to go in these discussions, but I think that we all have to be open to ideas and ways to address our concerns.

 

US Calls for Release of Iran Opposition Leaders

       On February 14, the U.S. State Department urged Iran’s government to release of former presidential candidates and Green Movement opposition leaders. Mir Hossein Mousavi (left) and Mehdi Karroubi (right) —a former prime minister and former speaker of parliament—remain under house arrest for their leadership of the Green Movement after the disputed 2009 election. The following is a statement by State Department Deputy Spokesperson Marie Harf.

Three Year Anniversary of the House Arrests of Iranian Opposition Leaders

             Three years ago today, the Iranian Government put former presidential candidates and opposition leaders Mehdi Karroubi, Mir Hossein Mousavi, and his wife, women’s rights advocate Zahra Rahnavard, under house arrest without formally charging them with any crimes.  We join the international community in condemning their continued imprisonment and the harassment of their family members, and in calling for their immediate release. 
            Iran’s constitution, its laws, and its international obligations guarantee its citizens minimum fair trial guarantees and provide that no one shall be subject to arbitrary arrest or detention.  The United States will continue to urge the Iranian Government to respect these obligations, and we renew our call for Iran to release all prisoners of conscience in its custody. 
 

Report: Understanding Iran’s New Leadership

            President Hassan Rouhani’s election has provided an opening for improved relations between Tehran and the West, according to a new report by the Carnegie Endowment for International Peace. Cornelius Alexander argues that Iran’s new, more conciliatory approach to solving the nuclear dispute, is “more than just talk, but the West will have to carefully calibrate its response to determine whether Rouhani’s changed rhetoric signals the beginning of a new direction for Iran.” The following are excerpts from the report.

 
The President’s Limited Powers
            At the domestic level, Rouhani quickly felt the limits to the powers his new office would wield, especially given his dependence on the supreme leader. While his mandate may be strong, [Supreme Leader Ayatollah Ali] Khamenei’s institutional grip on the presidency is stronger. This became clear with Rouhani’s selection of his ministerial cabinet, for which he accommodated the supreme leader’s express wish request that he withdraw the nomination of three individuals who had served as ministers under former president Khatami.60 Once sworn in as president, even his Khamenei-sanctioned list of ministers proved problematic for the conservative dominated parliament, which approved of only fifteen out of eighteen candidates.Parliament accused the three it did not confirm of being too close to the
“sedition” of the Green Movement.
            But Rouhani did successfully exercise his power on one critical issue—changing the composition of the nuclear negotiation team and shifting the responsibility for nuclear talks from the Supreme National Security Council to the Foreign Ministry. Now Mohammad Javad Zarif, former Iranian ambassador to the UN and Rouhani’s foreign minister, leads the negotiations. He stresses that there has been a shift in Iran’s approach by promoting “engagement” with other countries, first and foremost the international negotiation partners. At the same time, Zarif cautions that this reconsideration of Iran’s methods for enacting foreign policy “doesn’t mean a change in principles.”
            As Rouhani faces power struggles with the supreme leader, parliament, and the Revolutionary Guards, his position as a long-standing regime insider commanding influential networks will work to his advantage. He has held powerful positions in nearly all branches of government throughout his career, including as a high-ranking commander during the Iran-Iraq War, a longtime secretary of Iran’s national security council, and the country’s first chief nuclear negotiator. In addition, he has long been a member of both the Assembly of Experts—which elects the supreme leader for life and, theoretically, supervises his conduct in office—and the powerful Expediency Council.
            Rouhani also has at least conditional backing from the supreme leader to conclude the nuclear negotiations with a view to a deal that would give Iran some economic breathing room. Prior to Rouhani’s trip to speak at the September 2013 UN General Assembly in New York, Khamenei announced that he was “not opposed to correct diplomacy” and that he believed in “heroic flexibility,” a statement many interpreted to mean that he would be amenable to a negotiated compromise.63 This interpretation is consistent with the mixed reaction the president received upon his return from New York, with Khamenei explicitly expressing his support for Rouhani’s diplomatic efforts while cautioning that some of what occurred on the New York trip was “not appropriate”—widely understood as a reference to a phone conversation between Rouhani and Obama.
 
A Familiar Ideological Approach
            Since internal power relations are unlikely to change, the question of whether the seemingly “moderate” Rouhani stands for ideological change becomes pertinent. There is significant debate on this point, with some referring to his campaign promises of a government of “prudence and hope,” focused on economic revival and engagement with the world, and others pointing to the unwavering assertiveness of Khamenei’s regime.
With Rouhani’s election, a trained Shia cleric rather than a populist politician again holds the presidency. This means that his religious credentials align with those of the existing regime and that he adheres to the principles guiding the inner circles of the regime. Along these lines, a recent study portrays Rouhani as an “ideologue and defender of the Islamic Revolution” and an “abrasive intellectual.”
            So far, Rouhani’s rhetoric seems to indicate that he is embracing the regime’s ideological tenets and downplaying the more reformist promises from his campaign. Upon the confirmation of his presidency by the supreme leader, one day prior to his official inauguration by the parliament, Rouhani pledged to “take fundamental steps in elevating Iran’s position based on national interest and lifting of the oppressive sanctions.” In a speech following his public inauguration, he combined two themes from his campaign into a very general and ideology-free promise, saying that “moderation and tolerance . . . is the shared aspiration of all” and pledging to “safeguard the great achievements of the Islamic revolution . . . [and] address the concerns of the country and the shortcomings and the limited opportunities the people are suffering in the current situation.”
...
            Rouhani’s presidency has also seen evidence of the regime’s principled pragmatism and its focus on expediency. One example is the supreme leader’s credo of heroic flexibility, which was understood—in Iran as much as in the West—as an attempt by Khamenei to prepare the Iranian public for a compromise and signal to the international community that Rouhani should negotiate a settlement with his blessing. The supreme leader introduced this phrase, which before long was widely disseminated, during an address to a meeting of Revolutionary Guards commanders—that is, to the core of those hardliners that would have to be convinced of the virtues of an international understanding that would put at least some restrictions on the Iranian nuclear program and could signal the beginning of some kind of rapprochement with the United States.
            In introducing the concept of heroic flexibility, Khamenei used a metaphor of a wrestler who shows flexibility but does not forget who his opponent is. In doing so, he made it clear that this shift in policy was tactical in nature—the strategies may change, but the end goal would remain the same. As a senior adviser to Rouhani elaborated, heroic flexibility “does not mean retreating against the enemy but rather achieving the system’s interest by relying on principles and values.” This assessment echoes that of a hardline member of parliament who appears on the EU’s sanctions list: “Heroic flexibility,” Mohammad Saleh Jokar argued, “will never lead to surrender and compromise. Heroic flexibility means insisting upon principles and resistance in the path of defending the given rights of the Iranian nation.”
            Nor did the new, more flexible approach to diplomacy signal a substantial shift in the regime’s ideology, as was evident when the regime celebrated the anniversary of the November 4, 1979, seizure of the U.S. embassy in Tehran. After Rouhani’s trip to New York, a domestic discussion had begun about the appropriateness of demonstrators shouting slogans such as “death to America” (marg bar amrika, also more mildly translated to “down with the United States”) in the midst of a potential thaw in U.S.-Iranian relations. Partly in response to the phone call between Rouhani and Obama, an article in the Iranian newspaper Asre Iran proposed replacing this chant with a more general call for “death to arrogance.” On the same day, former president Rafsanjani made a similar demand, invoking an argument allegedly made by Khomeini that public “death to” chants should be eliminated.
            The proposition to drop the familiar chant immediately met vigorous opposition from the security establishment around the Revolutionary Guards, but it has since received some careful support from people close to the supreme leader. After initially dismissing the idea, Khamenei’s representative in the Revolutionary Guards, Hojatoleslam Ali Saeedi, conceded that eliminating the“death to America” chant exemplifies the changing rather than fixed tactics the Islamic Republic uses to achieve its goals. He was quick to add, however, that “the change of tactics and methods can only take shape at the hands of the Supreme Leader of the time.”And even then, it would not mean an end to the anti-American sentiment that is so engrained in the Islamic Republic…
 
Accepting Established Norms
            On norms, Rouhani is very much in line with the general stance of the country toward international law—that is, he adopts a position of ambivalence. Nothing in his remarks or actions during his first one hundred days in office suggests that he would work against established international norms. However, several of his previous statements point to a manifest uneasiness with, if not outright disregard for, the rules of the world. Immediately after the overthrow of the shah, Rouhani called for an export of the Islamic Revolution even if this were to violate international law, saying it was “not important how the Westernized people judge” Iranians.
            In the early 1990s, at the height of the controversy around Khomeini’s fatwa against Salman Rushdie, Rouhani made a dual argument about the edict calling for Rushdie’s death. He ascribed it merely to Khomeini in his capacity as a religious authority and not as the supreme leader and head of state. In this understanding, Iran was abiding by its obligations as a state according to international law because no government leader was calling for Rushdie’s execution, but Khomeini could still encourage individual actors to carry out the death sentence because he was speaking about a religious, not political, obligation. This display of “tacit external adherence, but internal opposition, to international law characterizes the Islamic Republic and Rouhani’s true commitment to its principles,” according to one expert.
            When Rouhani became Iran’s top nuclear negotiator in 2003, many in the
West—and especially in Europe—were hopeful that a preliminary deal could be concluded. This optimism proved well-founded, at least in the short term. With the Tehran Declaration of October 2003 and the Paris Agreement of November 2004, Iran opened its nuclear facilities to the IAEA and committed to voluntarily implement the provisions of an Additional Protocol to its IAEA Safeguards Agreement that would grant IAEA inspectors greater access to nuclear sites and require the state to issue a broader declaration of its nuclear activities. Rouhani also agreed to a voluntary suspension of Iran’s nuclear activities, for which he received international praise but was castigated at home. To build his defense—which he used extensively during his presidential campaign—in 2011 Rouhani published his memoirs as the head of the negotiation team, National Security and Nuclear Diplomacy.79 In an early sign of heroic flexibility, he claims he and his team tried to protect “the secrets of the country, and the honor and authority of the System . . . while at the same time building trust with the IAEA and various nations of the world”80—that is, giving away as little as possible while trying to make good on the country’s international obligations. Iran’s concessions of the time were thus acceptable to Rouhani only to the extent that they allowed the country to continue its nuclear program—for example, by completing installation work on the nuclear research facility in Isfahan or producing yellowcake uranium, a material used for weapons-grade enrichment—with much less international pressure.
            Rouhani was thus apparently in favor of furthering Iran’s nuclear program, a stance that raises the question of how he views the nuclear fatwa. There are very few instances in which he is on record speaking about this document. One is in an interview with the Tehran Bureau of PBS Frontline in which he recalls presenting the newly issued fatwa to the foreign ministers of France, Germany, and the UK in December 2004 in Tehran: “I told the three European ministers that they should know about two explicit guarantees from our side, one of which is the fatwa of the . . . [supreme leader]. He issued the fatwa and declared the production of nuclear weapons haram [forbidden]. This fatwa is more important to us than the NPT and its Additional Protocol, more important than any other law.” In the interview, Rouhani claims it was his own idea to bring up this issue during their conversation.
            Rouhani also appears to agree with the regime’s position on international norms regarding recognizing Israel, about which he has no inclination to mince his words. In an interview in 2001, he criticized the September 11, 2001, attacks as terrorist acts while claiming that anything Palestinians did against Israelis would be an act of self-defense: “Undoubtedly, if a country is invaded by an occupying force, and is fighting for the freedom of a land and country, then it is considered legitimate defense, even if it includes explosions, assassinations, and suicide operations.”
 
Shifts in Communication
            On one point, Rouhani has diverged significantly from the regime’s entrenched practices: there have been striking changes under the new president in Iran’s communication. For some, this is “only talk,” first and foremost for those who agree with the Israeli prime minister’s assessment of Rouhani as a “wolf in sheep’s clothing.” But communication is a political category of great importance. Talk without action still has significance simply because it matters how politicians talk to each other. Especially in this initial phase of new communication between Iran and the West, words can bear a symbolism that has political effect. Of course, if talk remains without actual backing for some time, it becomes empty.
Rouhani’s UN speech testified to the power words can have. Speaking a week before Israeli Prime Minister Benjamin Netanyahu, the Iranian president flatly refuted any notion of an “Iranian threat.” Instead, he declared that Iran “has been a harbinger of just peace and comprehensive security.” There was no Israeli official present at the speech to hear this, but there were plenty of journalists to report it. Western media jumped on the part of the speech in which Rouhani promised that Iran was “prepared to engage immediately in time-bound and result-oriented talks to build mutual confidence and removal of mutual uncertainties with full transparency.”
            While there were some new and hopeful words in this address, its tenor was a well-known one, steeped in praise for Iran and criticism of America. That said, there was also a follow-up in the form of a constructive first-ever P5+1 meeting with Iran at the level of foreign ministers—and hence the encounter between foreign ministers John Kerry of the United States and MohammadJavad Zarif of Iran, the highest level of bilateral contact between the two countries since the first year of the Islamic Revolution. In that sense, the speech can be seen as laying the groundwork for the meetings between the P5+1 and Iran that led to an interim agreement in late November 2013, less than two weeks after Rouhani formally concluded his first one hundred days in office.
            This new level of communication was facilitated by the fact that Rouhani has kept up lines of contact he established with his Western counterparts during his leadership of the Center for Strategic Research in Tehran, a think tank that conducts research for the Expediency Council on political and economic affairs. Through the center, Rouhani had access to both Iran’s intellectual elites and their international counterparts. So when EU High Representative for Foreign Affairs and Security Policy Catherine Ashton or European Parliament President Martin Schulz wrote letters to Rouhani to congratulate him on his inauguration, they were not addressing an unknown.
            It also helped that both Rouhani and Zarif, in addition to other members of Rouhani’s government, heavily engaged in the use of Twitter and Facebook even before assuming their offices. The simple fact that both politicians have accounts with these U.S.-based social media outlets and actively use them is meaningful. After only three months in office, the foreign minister had more than 550,000 likes on Facebook while the president’s English-language Twitter account had more than 120,000 followers. With countless tweets and retweets during his visit to New York, it is undeniable that Rouhani’s team knows about the power of social media.
            But in a country where access to international information and news on the
Internet is tightly controlled and social media sites have been generally blocked since they played a major role in organizing the 2009 revolt, Rouhani’s use of Twitter and Zarif’s activity on Facebook also send a mixed message. Here, too, it will be deeds that count—that is, the extent to which the Rouhani government lives up to its campaign promises to provide the citizens with free access to information. Hopes sparked briefly in mid-September when, in the week before the UN General Assembly, the banned social media sites were available throughout Iran—but only for a day, after which they were again blocked. Rather than a newfound freedom, this appears to have been a technical glitch or even a testing of the waters by elements within the establishment...
            On the international stage, Rouhani has made significant strides in improving Iran’s channels of communication. The United Kingdom and Iran have It is undeniable that Rouhani’s team knows about the power of social media. But in a country where access to international information and news on the Internet is tightly controlled and social media sites have been generally blocked, Rouhani’s use of Twitter and Zarif’s activity on Facebook also send a mixed message.

 

Click here for the full report.

 
 
Tags: Reports

IMF Report: Iran’s Economy Weak

            Government mismanagement, rampant inflation and international sanctions have taken a heavy toll on Iran’s economy, according to a new study by the International Monetary Fund (IMF). Martin Cerisola, Assistant Director for the Middle East and Central Asia Department, visited Tehran from January 25 to February 8 to conduct organization’s first field-based research on Iran in nearly three years. “Inflation and unemployment are high, while the corporate and banking sectors show signs of weakness,” he said in a statement. Cerisola urged Tehran to advance “reforms to promote stability, investment, and productivity” to help with high unemployment and the low growth rate. The economy actually shrunk in 2013. Cerisola noted that the Hassan Rouhani’s administration has “begun the preparatory work” for reform.

            The IMF’s findings contrasted with the upbeat tone Tehran has taken since the interim nuclear agreement was brokered in November 2013. Officials have been optimistic about prospects for economic improvements and the eventual lifting of sanctions. But Cerisola warned that those prospects “still remain highly uncertain.” The following are excerpts from his statement. A more comprehensive study is slated for release in late March 2014.
 
Statement at the Conclusion of the 2014 Article IV Consultation Mission to the Islamic Republic of Iran
            “Large shocks and weak macroeconomic management over the past several years have had a significant impact on macroeconomic stability and growth. A combination of shocks, associated with the implementation of the first phase of the subsidy reform, ambitious social-programs inadequately funded, and a marked deterioration in the external environment stemming from the intensification of trade and financial sanctions, have weakened the economy. Inflation and unemployment are high, while the corporate and banking sectors show signs of weakness. These shocks have exposed structural weaknesses in the economy and in the policy framework.
 
            “Iran now stands at a crossroad. With risks that the economy could continue to face a low-growth and high-inflation environment ahead, there is a need to begin advancing reforms to promote stability, investment, and productivity. The new authorities should embark on a prompt and vigorous implementation of fundamental reforms to the frameworks supporting product, labor, and credit markets. These reforms would lay the basis for sustained high growth and lower unemployment, especially if the external environment continues to improve. The new authorities are well aware of these challenges and the need to advance reforms, and have begun the preparatory work in many of these areas.
 
            “The pace of contraction in economic activity is slowing. The economy has continued to shrink in the first half of 2013/14 (the Iranian calendar and fiscal years run from March 21 to March 20), and staff expects further but diminishing contraction in the second half, with real gross domestic product (GDP) declining by 1-2 percent in 2013/14. Twelve-month inflation has dropped rapidly, from about 45 percent in July 2013 to below 30 percent in December 2013. This drop reflects tighter CBI credit, the appreciation of the Rial, and global disinflation in some key staples. Inflation could end at 20-25 percent by end-2013/14.
 
            “Prospects for 2014/15 have improved with the interim P5+1 agreement but still remain highly uncertain. Under the current external environment, staff projects economic activity to begin to stabilize in 2014/15, with real GDP growing by 1-2 percent in 2014/15. Inflation would potentially decline to 15-20 percent, excluding the impact of planned higher domestic energy prices.
 
            “Comprehensive reforms are needed to address many complex challenges:
 

 

The Policies for Dealing with Stagflation
            A three-pronged strategy to arrest stagflation should be centered on: i) tightening monetary policy; ii) balanced fiscal consolidation; and iii) advancing supply-side reforms (see below).
•Tighter monetary policy will help entrench disinflation. Staff analysis suggests that the output costs of disinflation in Iran could be low. While some of the recent deceleration in inflation may be temporary, the steps taken by the CBI to remove the financing of the Mehr Housing program from its balance sheet bode well for controlling liquidity and stabilizing inflation in the future. It would be important to begin increasing profit rates gradually to firmly anchor expectations and contain second-round effects from the planned increases in domestic energy prices.
 
•Containing the general government fiscal deficit at around 2-3 percent of GDP should help balance the support for disinflation and the economy. The 2014/15 draft budget continues with the government’s decision to consolidate fiscal policy in light of the sharp decline in oil revenues. Staff welcomes the proposed measures to begin broadening the revenue base away from oil, most notably, the decision to bring forward and increase the scheduled value added tax (VAT) rate, as well as the reforms to strengthen tax administration, including the reform of tax exemptions for large non-taxpayers. Staff sees scope to further increase the VAT rate in the years ahead, as well as to introduce a capital gains tax on specific activities that have experienced large gains. These measures would help to improve the quality of the fiscal adjustment and help lay the ground for a sustainable fiscal policy ahead.
 
•With the economy vulnerable at this juncture, the timing of advancing the subsidy reform should be carefully assessed. Increasing domestic energy prices is an important step to continue with the much needed reform to reduce energy consumption, improve the efficiency of the economy, and help close an estimated cash deficit of the Targeted Subsidy Organization of about 1 percent of GDP. The authorities’ intention to adjust prices gradually is prudent given stagflation risks but, as the experience of the first phase showed, external shocks could significantly undermine the hard-won stability of the currency and the envisaged relative price adjustment. In addition, the reforms needed to tighten budget constraints in the corporate sector are difficult and have yet to be well-established, notwithstanding the envisaged support to specific sectors. Without these conditions, there are risks to sustaining consistent macroeconomic policies through such relative price change.
 
Strengthening the Policy Framework for Macroeconomic Stability
•Monetary policy needs to place greater emphasis on price stability. For this, the CBI’s mandate needs to be simplified and refocused toward price stability. The CBI also needs to be granted with the operational ability to target base money consistently, by being able to set profit rates at levels that allow its limited instruments to be used effectively to respond to macroeconomic conditions. It is essential to bring the institutional decision-making setup at the Monetary and Credit Council in line with those of countries that have successfully resolved chronic inflation…
 
•The intention to unify the foreign exchange market as external conditions normalize is welcome. In the transition, the authorities should continue to manage the exchange rate flexibly in light of external risks and still high inflation, which is eroding competitiveness. The assessment of the official exchange rate is subject to an unusual degree of uncertainty due to the external environment and prospects. In current circumstances, the official exchange rate would be moderately overvalued, with the parallel market rate closer to equilibrium.
 
Reforms to Promote Financial Stability, Jobs, and Growth
•The state of the banking system and the regulatory-supervisory framework. Staff noted an overall satisfaction among market participants with the direction the CBI is imparting to financial sector policies. Nonetheless, staff sees an urgent need to strengthen the CBI’s supervisory powers and enforcement capacity, as well as the legal protection of its staff. Staff welcomes the CBI’s initial steps toward a risk-based approach to supervision. Staff shares the view of some market participants about the scope for leveling the field of competition in the system through further privatization and reforms to government-mandated credit policies. Current proposals to deal with nonperforming loans and recapitalize public banks need to be better specified and should be supported by concrete restructuring plans and reforms to enhance their risk management and accountability. In terms of crisis preparedness, it would be important to strengthen the bank resolution framework and putting the deposit guarantee fund on a sustainable financial footing. Staff held discussions on the Anti-Money Laundering/Combating the Financing of Terrorism framework.
 
•Reforms to improve the business environment and foster employment are complementary. Discussions with representatives from different economic sectors suggest the need to enhance the enforcement of the rule of law and property rights, maintain policy and macroeconomic stability, and enhance the transparency of policy making. Facing large potential entrants into the labor force in the years ahead, reforms are needed to facilitate the reallocation of labor across sectors and lower nonwage labor costs. A review of labor regulations that ease the rigidity of contracts and costs of labor could help to significantly absorb discouraged and informal workers and facilitate youth employment.
 
Click here for the full statement by Martin Cerisola.
 

Members of Congress Support Iran Diplomacy

            More than 100 members of the U.S. House of Representatives have signed a bipartisan letter supporting diplomacy with Iran on its controversial nuclear program. They sent the letter to President Barack Obama just days before negotiations on a final deal are set to begin in Vienna. Representative David Price (D-NC) said, “I believe that we must take advantage of the opportunity before us to pursue a peaceful, diplomatic resolution to Iran’s nuclear program, and that we must resist calls by some in Congress to prematurely enact a bill or resolution that risks inadvertently derailing or impeding our ongoing negotiations.” The following is the full text of the letter and the list of signers.

 
Dear Mr. President,
 
As Members of Congress—and as Americans—we are united in our unequivocal commitment to prevent Iran from obtaining a nuclear weapon. The proliferation of nuclear weapons in the
Middle East would threaten the security of the United States and our allies in the region,
particularly Israel.
 
The ongoing implementation of the Joint Plan of Action agreed to by Iran and the “P5+1”
nations last November increases the possibility of a comprehensive and verifiable international agreement. We understand that there is no assurance of success and that, if talks break down or Iran reneges on pledges it made in the interim agreement, Congress may be compelled to act as it has in the past by enacting additional sanctions legislation. At present, however, we believe that Congress must give diplomacy a chance. A bill or resolution that risks fracturing our international coalition or, worse yet, undermining our credibility in future negotiations and jeopardizing hard-won progress toward a verifiable final agreement, must be avoided.
 
We remain wary of the Iranian regime. But we believe that robust diplomacy remains our best
possible strategic option, and we commend you and your designees for the developments in
Geneva. Should negotiations fail or falter, nothing precludes a change in strategy. But we must not imperil the possibility of a diplomatic success before we even have a chance to pursue it.
 
Sincerely,
 
1 Bass
2 Beatty
3 Bishop, Sanford
4 Blumenauer
5 Bordallo
6 Brown
7 Butterfield, GK
8 Capps
9 Capuano
10 Carson
11 Cartwright
12 Christensen
13 Clarke, Yvette
14 Clay
15 Cleaver
16 Clyburn
17 Cohen
18 Connolly
19 Conyers
20 Cooper
21 Courtney
22 Cummings
23 Davis, Danny
24 DeFazio
25 DeGette
26 DeLauro 27 Dingell
28 Doggett
29 Duncan Jr (R)
30 Edwards
31 Ellison
32 Enyart
33 Eshoo
34 Farr
35 Foster
36 Fudge, Marcia
37 Garamendi
38 Grijalva
39 Gutierrez
40 Hanna (R)
41 Holt
42 Huffman
43 Jackson-Lee
44 Johnson, EB
45 Johnson, Hank
46 Jones, Walter (R)
47 Kaptur
48 Keating
49 Kelly, Robin
50 Kildee
51 Kuster
52 Larson
53 Lee, Barbara
54 Lewis
55 Loebsack
56 Lofgren
57 Lynch
58 Matheson
59 Massie (R)
60 McCarthy
61 McCollum
62 McDermott
63 McGovern
64 McNerney, Jerry
65 Meeks
66 Miller, George 67 Moore
68 Moran, Jim
69 Negrete McLeod
70 Nolan
71 Norton
72 O'Rourke
73 Pastor
74 Payne
75 Pierluisi
76 Pingree
77 Pocan
78 Polis
79 Price, David
80 Rahall
81 Rangel
82 Roybal-Allard
83 Ruppersberger
84 Rush
85 Ryan, Tim
86 Sablan
87 Schakowsky
88 Scott, Bobby
89 Shea-Porter
90 Slaughter
91 Speier
92 Takano
93 Thompson, Bennie
94 Thompson, Mike
95 Tierney
96 Tonko
97 Tsongas
98 Van Hollen
99 Velazquez
100 Visclosky
101 Walz
102 Waters
103 Welch
104 Yarmuth
 

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