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US Scientists Endorse Deal in Obama Letter

On August 8, 29 top U.S. scientists wrote to President Barack Obama in support of the Iran nuclear deal. The “innovative agreement” has “much more stringent constraints than any previously negotiated non-proliferation framework,” according to the co-signers, who include six Nobel laureates, nuclear experts and former White House advisers. The letter was published by The New York Times amidst an Obama administration campaign to build support for the deal in Congress, which has about a month left to review the agreement. The following is the complete text.

Dear Mr. President,
 
As scientists and engineers with understanding of the physics and technology of nuclear power and of nuclear weapons, we congratulate you and your team on the successful completion of the negotiations in Vienna. We consider that the Joint Comprehensive Plan of Action (JCPOA) the United States and its partners negotiated with Iran will advance the cause of peace and security in the Middle East and can serve as a guidepost for future non-proliferation agreements.
 
This is an innovative agreement, with much more stringent constraints than any previously negotiated non-proliferation framework. It limits the level of enrichment of the uranium that Iran can produce, the amount of enriched uranium it can stockpile, and the number and kinds of centrifuges it can develop and operate. The agreement bans reconversion and reprocessing of reactor fuel, it requires Iran to redesign its Arak research reactor to produce far less plutonium than the original design, and specifies that spent fuel must be shipped out of the country without the plutonium being separated and before any significant quantity can be accumulated.
 
A key result of these restrictions is that it would take Iran many months to enrich uranium for a weapon. We contrast this with the situation before the interim agreement was negotiated in Lausanne: at that time Iran had accumulated enough 20 percent enriched uranium that the required additional enrichment time for weapons use was only a few weeks.
 
The JCPOA also provides for innovative approaches to verification, including monitoring of uranium mining, milling, and conversion to hexafluoride. Centrifuge manufacturing and R&D will be monitored as well. For 15 years the Natanz facility will be the only location where uranium enrichment is allowed to take place and it will be outfitted with real-time monitoring to assure rapid notice of any violation. The authority is provided for real-time monitoring of spent fuel as well.
 
Concerns about clandestine activities in Iran are greatly mitigated by the dispute resolution mechanism built into the agreement. The 24-day cap on any delay to access is unprecedented, and will allow effective challenge inspection for the suspected activities of greatest concern: clandestine enrichment, construction of reprocessing or reconversion facilities, and implosion tests using uranium. The approach to resolving “Possible Military Dimensions” is innovative as well: the International Atomic Energy Agency (IAEA) must be satisfied that it is fully informed about any previous activities, in order to guide its future verification plans, but Iran need not be publicly shamed. This agreement, also for the first time, explicitly bans nuclear weapons R&D, rather than only their manufacture as specified in the text of the Non-Proliferation Treaty (NPT).
 
Some have expressed concern that the deal will free Iran to develop nuclear weapons without constraint after ten years. In contrast we find that the deal includes important long-term verification procedures that last until 2040, and others that last indefinitely under the NPT and its Additional Protocol. On the other hand, we do believe that it would be valuable to strengthen these durable international institutions. We recommend that your team work with the IAEA to gain agreement to implement some of the key innovations included in the JCPOA into existing safeguards agreements. This will reduce the proliferation risks associated with national fuel cycle facilities worldwide. Thus in the future, when Iran is treated the same as all non-nuclear weapons states with nuclear energy programs, all such programs will be more stringently constrained and verified.
 
As you have stated, this deal does not take any options off the table for you or any future president. Indeed it will make it much easier for you or a future president to know if and when Iran heads for a bomb, and the detection of a significant violation of this agreement will provide strong, internationally supported justification for intervention.
 
In conclusion, we congratulate you and your team on negotiating a technically sound, stringent and innovative deal that will provide the necessary assurance in the coming decade and more that Iran is not developing nuclear weapons, and provides a basis for further initiatives to raise the barriers to nuclear proliferation in the Middle East and around the globe.
 
Sincerely,
Richard L. Garwin, IBM Fellow Emeritus

Robert J. Goldston, Princeton University

R. Scott Kemp, Massachusetts Institute of Technology

Rush Holt, American Association for the Advancement of Science Frank von Hippel, Princeton University

John F. Ahearne, Director, Ethics Program at Sigma Xi, The Scientific Research Society

Philip W. Anderson, Professor Emeritus, Princeton University

Christopher Chyba, Princeton University

Leon N. Cooper, Brown University

Pierce S. Corden, Former Director, Office of International Security Negotiations, Bureau of Arms Control: Department of State

John M. Cornwall, Professor of Physics and Astronomy, UCLA

Sidney D. Drell, Stanford University

Freeman Dyson, Professor Emeritus, Institute for Advanced Study, Princeton University

Harold A. Feiveson, Princeton University

Michael E. Fisher, Professor Emeritus, Cornell University and University of Maryland

Howard Georgi, Harvard University

Sheldon L. Glashow, Boston University

Lisbeth Gronlund, Union of Concerned Scientists

David Gross, Professor of Theoretical Physics, Kavli Institute for Theoretical Physics, UCSB
Sigfried S. Hecker Center for International Security and Cooperation, Stanford University

Martin E. Hellman, Professor Emeritus of Electrical Engineering, Stanford University

Ernest Henley, University of Washington

Gregory Loew, Emeritus Deputy Director and Professor, SLAC National Accelerator Laboratory

C. Kumar N. Patel, Professor Emeritus of Experimental Condensed Matter, UCLA

Burton Richter, Stanford University

Myriam Sarachik, City College of New York, CUNY

Roy F. Schwitters, The University of Texas at Austin

Frank Wilczek, Massachusetts Institute of Technology

David Wright, Union of Concerned Scientists
 
Click here for a PDF version.   
 

 

Report: Guide to Assessing the Nuclear Deal

Assessing the final nuclear deal “boils down to assessing relative risks – accepting the current agreement…or taking the chance that a better agreement can be achieved down the road,” according to a new report from Harvard Kennedy School’s Belfer Center for Science and International Affairs. The report, edited by Gary Samore, presents information and analysis on the major aspects of the deal, including uranium enrichment, plutonium production, verification, and sanctions relief. The following is an excerpt of the report.

The Joint Comprehensive Plan of Action (JCPOA) is intended to stop Iran from acquiring nuclear weapons. If fully imple - mented, the physical constraints and verification provisions of this comprehensive nuclear agreement will effectively prevent Iran from producing fissile material for nuclear weapons at its declared nuclear facilities for at least 10 to 15 years. During this period, the provisions of the JCPOA—along with continuing national intelligence efforts—increase the likelihood of detecting any Iranian attempts to build covert facilities to produce fissile material, thus helping to deter Tehran from attempting to do so. Over 10 to 15 years, the physical constraints on fissile material production at declared facilities and most of the specialized verification and enforcement provisions of the JCPOA expire. At that point, Iran could expand its nuclear capabilities within a few years to create more practical options to produce fissile material for nuclear weapons, whether at declared or secret facilities. Actual production of nuclear weapons would violate Iran’s safeguards agreement with the International Atomic Energy Agency (IAEA), the JCPOA, and the Non-Proliferation Treaty (NPT). The agreement poses no restrictions on what the U.S. or other countries could do in that circumstance.
 
The central nuclear limits of the JCPOA are physical restrictions on Iran’s ability to produce fissile material for nuclear weapons (either separated plutonium or enriched uranium) at its declared nuclear facilities.
 
The Plutonium Route
 
The physical limits on plutonium production in the JCPOA essentially close that pathway for the foreseeable future. The redesigned Arak heavy-water research reactor will not be able to produce large amounts of plutonium, its spent fuel will be shipped out of the country for the lifetime of the reactor, and Iran is not allowed to build additional heavy-water reactors or a reprocessing facility to separate plutonium from spent fuel for at least 15 years. Any Iranian attempt to secretly produce or divert plutonium from the Bushehr nuclear power plant would be quickly detected. Even after 15 years, when the ban on build - ing new heavy-water reactors and a reprocessing plant becomes “voluntary” (i.e. Iran expresses the “intent” not to build such facilities), Iran would require years to build them. Although the Arak reactor will not be dismantled, it would require at least a few years to convert the reactor back to its original specifications and the effort would be easily detected.
 
The Uranium Route
 
The physical limits on enrichment at declared facilities in the JCPOA are less robust. While the agreement requires Iran to dis - mantle two-thirds of its installed centrifuges and eliminate 98% of its current enriched uranium stock, it permits Iran to retain a substantial uranium enrichment infrastructure and to begin to expand that infrastructure after 10 years. For 10 to 15 years, Iran will restrict the number and types of centrifuges installed and operating at Natanz, end enrichment at Fordow, limit research and development on advanced centrifuges, maintain a small stockpile of low-enriched uranium, and cap the level of enrich - ment. While these measures are reversible over a period of a few months to a few years, any reversal would be quickly detected.
 
Under these limits, “breakout time” at Natanz over the next decade would be extended to roughly a year, from the current estimated breakout time of 2 to 3 months. From year 11 to year 15, breakout time at Natanz will decline as Iran is permitted to replace its first-generation centrifuges with limited numbers of advanced models, although the restrictions on enriched uranium stocks and enrichment level continue through year 15. Estimating breakout time during years 11 to 15 is difficult. The number and type of advanced centrifuges that Iran is permitted to deploy during this period is not public, and the performance of advanced centrifuge models under development is uncertain.
 
Some contributors to this report believe that breakout time by year 15 could be comparable to what it is today—a few months—while others believe it could be reduced to a few weeks. In any event, Iran is unlikely to attempt breakout at Natanz during this period because detection would be swift and the risk of provoking a military attack would be high. Since all enrichment will be limited to Natanz for 15 years under the JCPOA, Iran’s nuclear program would be vulnerable to military attack.
 
After 15 years, all physical constraints on enrichment imposed by the agreement will be lifted. At that point, Iran could build an enrichment plant large enough to produce low-enriched uranium to fuel a nuclear power reactor within a matter of years.
 
Such a facility could make breakout a more credible option, and the availability of advanced centrifuges and large stocks of enriched uranium would create additional options for Iran to pursue secret enrichment activities, especially as the specialized monitoring provisions of the JCPOA expire. Once the cap on enrichment level expires in 15 years, Iran could also claim that it needs to begin producing highly enriched uranium under safeguards for civil uses, such as research-reactor fuel or isotope production. If Iran accumulated a stockpile of material that could be directly used to produce nuclear weapons, it could achieve the same threshold status as countries like Japan.
 
The Covert Option
 
If the agreement effectively deters Iran from producing fissile material for nuclear weapons at its declared nuclear facilities for at least 10 to 15 years, will it deter or detect Iranian cheating on the agreement by producing fissile material for nuclear weapons at undeclared facilities? On one hand, the verification regime of the JCPOA will make it more difficult for Iran to conceal covert nuclear activities, while the provisions for rein - stating UN sanctions increase the likelihood of penalties if Iran is caught cheating. If U.S. and allied intelligence capabilities are maintained at their current level, there is a high probability of detecting major covert activity (e.g., construction of a secret conversion or enrichment plant). The provisions of the JCPOA improve the odds that intelligence agencies and international inspectors would detect covert facilities to process nuclear material.
 
On the other hand, the provisions of the JCPOA (as well as national intelligence) are less likely to deter or detect more incremental Iranian cheating, such as covert nuclear weapons research or advanced centrifuge research. While such activities are less significant than covert fissile material production, they could enhance and accelerate Iran’s nuclear weapons options if fissile material for nuclear weapons production becomes available. Finally, the detection of covert activities is heavily dependent on effective intelligence, and some nuclear activities, such as weaponization, are inherently difficult intelligence targets because they involve a small number of people and relatively little infrastructure. To the extent that Iran improves its ability to hide nuclear activities from U.S. and allied intelligence agencies, the likelihood of detecting covert nuclear activities will be diminished.
 
Long Term Implications
 
The long term implications of the JCPOA for Iran’s nuclear program are extremely difficult to predict and assess. The JCPOA constrains Iran’s nuclear option for at least 10 to 15 years through a combination of physical limits on fissile material production and verification provisions. It does not eliminate the risk that Iran will seek to acquire nuclear weapons after 15 years. JCPOA proponents argue that it could ultimately undermine advocates of nuclear weapons inside Iran by reducing the threat of military conflict with the U.S. and increasing the benefits of economic integration, all of which would be jeopardized if Iran pursues nuclear weapons. JCPOA opponents argue that it will legitimize Iran’s nuclear program and will not fundamen - tally change Tehran’s hostility toward the U.S., including the perceived need for nuclear weapons to defend itself against the “Great Satan” and to assert the Islamic Republic’s dominance in the region.
 
While it is impossible to resolve this issue, answers may become more apparent in 15 years. Assuming that Iran’s motivations have not fundamentally changed, the risk is less that Iran will suddenly dash for a bomb after 15 years, because Iran’s declared nuclear facilities will still be vulnerable to military attack. The more likely risk is that Iran will begin to gradually expand its enrichment capabilities and enrich at higher levels to create a more credible option to break out on short notice or to build covert facilities. At that point, the U.S. would have the option of accusing Iran of pursuing a nuclear weapons capability under the guise of an expanded enrichment program, or of produc - ing higher levels of enrichment that are unnecessary for its nuclear power needs. However, rallying international support for renewed sanctions or military action to block Iran’s efforts is likely to be difficult once all nuclear sanctions have been removed and after Iran has complied with the JCPOA for 15 years.
 
Conclusion
 
If Iran complies, the JCPOA buys at least 10 to 15 years before Tehran can significantly expand its nuclear capabilities. If Iran cheats during this period, JCPOA monitoring and national intelligence are likely to detect major violations, which would enhance U.S. and international options to intensify sanctions and take military action if necessary. If the agreement survives after 15 years, Iran will be able to expand its nuclear program to create more practical overt and covert nuclear weapons options. There are different views on whether the JCPOA will create conditions that help to reduce Iran’s incentives to pursue nuclear weapons in the long term. Ultimately, the decision to support or oppose the existing agreement boils down to assessing rel - ative risks—accepting the current agreement (with its known strengths and weaknesses) or taking the chance that a better agreement can be achieved down the road. That choice will have profound implications for U.S. foreign policy, the politics of the Middle East and relations among the major powers, inter - national economics, and the global effort to stem the spread of nuclear weapons.
 
Click here for the full report
 

Economic Trends: June and July

Cameron Glenn

Economic trends in June and July were heavily shaped by the nuclear deal between Iran and the world’s six major powers, which was announced on July 14. Iran is poised to benefit economically from the deal, once a number of U.N., U.S., and E.U. sanctions are lifted. European and Asian investors, businessmen, and officials flooded Iran in the weeks following the announcement, seeking to explore new economic opportunities. Iranian officials have been soliciting foreign investment, particularly in the oil and gas and automotive industries.

Domestically, Iran experienced a boost on the Tehran Stock Exchange following the deal’s announcement, and tourism income is expected to increase by 4.4 percent in 2015. Rouhani’s administration also continues to cut back on the cash handouts established under former president Mahmoud Ahmadinejad. In July, officials announced plans to suspend handouts to one million wealthy Iranians.
 
The following is a rundown of the top economic stories with links.
 
 
International
 
Sanctions
 
U.N. sanctions and nuclear-related E.U. and U.S. sanctions on Iran will be removed on the nuclear deal’s implementation day, expected to occur in early 2016. As sanctions are lifted, Iran will also recover around $100 billion in foreign exchange assets, though U.S. Treasury officials estimate that only around $50 billion of that amount will be in usable liquid assets.
 
Businessmen from Europe and Asia have been flocking to Iran in anticipation of sanctions relief. Iran is “looking for investments and new technologies, and finally an increase in our exports,” President Hassan Rouhani said on July 27. Foreign companies “are seeking a strong presence in Iran, and if we have a win-win policy in our economic planning, both sides would benefit,” according to Rouhani. Head of Iran’s Trade Development Organization Valiollah Afkhami-Rad said on July 27 that he expects Iran’s exports and domestic production to rise at least 20 percent after sanctions are lifted.
 
But officials indicated Iran will be selective in its trade partners. “We never get overexcited about the arrival of any trade delegation…we have the power to choose the best,” Government Spokesman Mohammad Baqer Nobakht said on July 28.
 
Deputy Foreign Minister Abbas Araghchi made similar remarks on July 30, stating that “European foreign ministers are queuing up to travel to Iran, but it does not mean we’ll offer them whatever they would want. Rather, it is us who have the choice.”
 
United States
 
U.S. sanctions relief will generally be restricted to nuclear-related restrictions on non-U.S. individuals and companies. A senior U.S. administration official said American companies “will still be generally prohibited from all dealing with Iranian companies, including investing in Iran or facilitating third-country trade with Iran.” Limited exceptions include civil aviation and goods like carpets, pistachios, and caviar.
 
But head of Iran’s National Carpet Center Hamid Kargar still expects an increase in carpet exports to the United States after sanctions are lifted. “Hand-woven carpet manufacturers must observe the American market and monitor the performance of rival countries so that we can boost our exports in 2016,” he said. Before the latest round of sanctions in 2010, the United States accounted for 16.5 percent of Iran’s carpet exports.
 
Additionally, on July 14, Head of Iran World Trade Center Mohammad Reza Sabzalipour announced that Iran plans to send a delegation of economic activists to the United States later this year.
 
 
Europe
 
E.U. sanctions relief will be more extensive, lifting restrictions on financial transactions, energy, investment, and other areas. European companies have been quick to explore new opportunities in the Iranian market.
 
On July 23 and 24, a conference was hosted in Vienna by the Austrian Federal Economic Chamber, Iran’s Trade Promotion Organization, and the joint chambers of commerce of Iran, France, Germany and the United Kingdom. Minister of Industry, Trade and Mine Mohammad Reza Nematzadeh led the Iranian delegation. Iran has already approved more than $2 billion in investment projects by European countries, according to Deputy Economy Minister Mohammad Khazaei.
 
Additionally, Serbian Foreign Minister Ivica Dacic visited Iran on August 3 to discuss strengthening economic ties, and Spanish Foreign Minister Jose Manuel Garcia Margallo announced that he will visit Iran in September. Food companies in Denmark, Finland, and the Netherlands are also eyeing Iran as a potential market for dairy products.

Italy
 
Italian Economic Development Minister Federica Guidi visited Iran with a team of 300 businessmen in early August. Italy, which used to be one of Iran’s major trade partners, has been trying to revive economic ties. During the visit, investment bank Mediobanca, Italy’s development ministry, and export credit agency SACE signed a memorandum of understanding “to facilitate future economic and commercial relations between the two countries.”
 

 

France
 
Minister Laurent Fabius visited Iran on July 29, meeting with Iranian Oil Minister Bijan Zanganeh and other senior officials. It was the first visit to Iran by a French foreign minister in 12 years. Fabius said France was “very firm” during the negotiations, but that it would not impact the ability of French firms to reenter Iran. French firms – particularly oil company Total and automaker Peugeot – had been active in Iran before sanctions were tightened.
 
During Fabius’ visit, Zanganeh said a “new chapter will open in cooperation with France’s Total for development of Iran’s oilfields.” Additionally, deputy head of Iran’s Civil Aviation Organization Mohammad Khodakarami said that France will explore increasing flights between Paris and Tehran. France also plans to send a delegation of businessmen to Iran in September.
 
In early July, before the deal was announced, French companies had already struck deals to renovate Iran’s cargo and passenger planes and develop railway stations.
 
Germany
 
Economy Minister Sigmar Gabriel became the first high-level European official to visit Iran after the deal was announced. “German companies are not only prepared to sell products to Iran, but also seek to expand lasting and stable economic cooperation [with Iran],” Gabriel said. But he also indicated that closer economic ties would depend on Iran improving its stance towards Israel. Gabriel was accompanied by a delegation of businessmen, and met with several Iranian officials including Oil Minister Bijan Zanganeh.
 
German and Iranian officials hope to increase bilateral trade from 2.7 billion euros in 2014 to 6 or 7 billion euros in 2016.
 
 
Greece
 
Iran plans to increase its trade with Greece to three billion euros in the next three years, according to Secretary General of the Iran-Greece Joint Council Majid Moafeq Qadiri. Iran hopes to boost exports of petrochemicals, dried fruits, carpets, minerals, and building materials. An Iranian trade delegation will visit Greece in August.
 
China
 
China – Iran’s largest trade partner – plans to ramp up its activities in Iran’s oil and gas sector. Chinese energy firms plan to pump an additional 160,000 barrels of Iranian oil per day starting in October, as part of two energy projects that had previously stalled under sanctions. China imported 671,800 barrels of Iranian crude oil per day in June 2015, up from 531,200 barrels per day in June 2014, according to Reuters.
 
Iranian Deputy Foreign Minister for Asia and Pacific Affairs Ebrahim Rahimpour met with Chinese foreign minister Wang Yi on July 28, reinforcing China’s role as a strategic partner for Iran.

Russia
 
Russian Energy Minister Aleksandr Novak said that Russia plans to explore the possibility of resuming oil and gas projects in Iran. Russian oil firm Lukoil had reopened its Iran office in April, with plans to resume operations once sanctions are lifted. Additionally, a meeting of the Russian-Iranian commission on trade and economic cooperation will be held in the fall.
 
Analysts expect that Iran’s return to the oil and gas market could have a negative impact on Russia, driving down oil prices and creating new competition. But Novak downplayed those fears, claiming that Iran’s return to the oil market will not have a significant impact on prices. “The market has assessed and absorbed all of [Iran’s comeback to the oil market] long ago," he said on July 17.
 
Domestic
 

Cash handouts

In August, Iran will suspend its monthly cash handouts to one million wealthy citizens, according to Labor and Social Welfare Minister Ali Rabiei. The monthly handouts, established by former president Mahmoud Ahmadinejad, are 455,000 rials (around $15). All Iranians had been eligible to receive them, regardless of income, but they have increasingly strained Iran’s state budget in a climate of sanctions and low oil prices.
 
 
Inflation
 
On July 13, Vice Governor for Economic Affairs at the Central Bank of Iran Peyman Ghorbani said Iran hopes to lower inflation to single digits by 2017. As of June, inflation stood around 15.6 percent.
 
Oil and Gas
 
On June 15, President Hassan Rouhani announced that Iran’s current budget is “the least oil-dependent ever.” But oil ministry officials announced plans to increase oil exports as Iran and the world’s six major powers concluded a nuclear deal. On July 6, deputy oil minister Mansour Moazzami said Iran planned to double its oil exports from 1.2 million barrels per day to 2.3 million barrels per day after sanctions are removed. On July 20, Oil Minister Bijan Zanganeh said “Gas production in Iran will surpass 1,000 million cubic meters per day in the next three days. Moreover, oil production is expected to reach 4.7 million bpd in the near future.”
 
Iran’s oil sector needs $50 billion in annual investment, according to Amir-Abbas Soltani, secretary of parliament’s energy commission. Most of these funds, Soltani said, are needed to develop Iran’s South Pars field, the world’s largest natural gas field. Deputy Oil Minister for Commerce and International Affairs Amir-Hossein Zamaninia said on July 23 that Iran could feasibly deliver liquefied natural gas to Europe within five to 10 years. Officials are aiming to implement oil and gas investment projects worth $185 billion by 2020.
 
Iran also plans to introduce new contract models, addressing some of the issues with “buy-back” contracts unpopular with foreign firms, according to Deputy Oil Minister Hossein Zamaninia. The new deals will last 20-25 years, much longer than the old contracts.
 
Auto Industry
 
Minister of Industry, Trade and Mine Mohammad Reza Nematzadeh said on July 24 that Iran hopes to produce three million vehicles by 2025, with one million units exported abroad.
 
On July 29, Iranian automaker Iran Khodro and German automaker Mercedes-Benz announced they plan to sign a five-year deal to distribute Benz cars in Iran and a 10-year deal for production of commercial vehicles.
 
Iran Khodro has also held discussions with Volkswagen and French automaker Peugeot. It hopes to expand ties with Renault and Suzuki as well, according to CEO of Iran Khodro Industrial Group Hashem Yekeh Zareh. Meanwhile, Chinese automaker Chery announced in July that its share of the Iranian market had decreased in the past year.
 
Iran’s auto industry is its second largest sector, after the oil industry, and accounts for 10 percent of Gross Domestic Product (GDP).
 
Tehran Stock Exchange
 
On July 14, stocks on the Tehran Stock Exchange rose to their highest levels since April after the nuclear deal was announced, led by oil and gas companies. The Tamim Petroleum & Petrochemical Investment Company saw the largest gains, with a 3.2 percent increase.
 

 

Growth
 
On July 1, Supreme Leader Ayatollah Ali Khamenei signed off on Iran’s economic development plan for 2015 to 2020, envisioning an average of 8 percent economic growth annually. He called for increasing foreign investment by “creating the necessary motivation and incentives,” particularly from Southeast Asia.
 
Tourism
 
The value of Iran’s tourism industry is expected to increase by 4.4 percent in 2015, according to the World Travel and Tourism Council. Iran’s investments in tourism are also expected to increase from $2.8 billion in 2014 to $2.9 billion in 2015.

 

Tags: Economy

International Groups Back Nuclear Deal

Several international organizations have expressed support for the final nuclear deal between Iran and the world’s six major powers. The United Nations Security Council endorsed the deal on July 20, and the Association of South East Asian Nations announced their approval on August 6. The Gulf Cooperation Council, while expressing concerns about Iran, indicated that the deal “contributes to the region’s long-term security.” The following are excerpted press releases from international and regional organizations on the nuclear deal.

United Nations Security Council
 
“The Security Council today coalesced around a sweeping resolution that endorsed the 14 July agreement on Iran’s nuclear programme, setting out a rigorous monitoring mechanism and timetable for implementation, while paving the way for the lifting of United Nations sanctions against that country.
 
“Unanimously adopting resolution 2231 (2015), the 15-nation body endorsed the Joint Comprehensive Plan of Action signed in Vienna by the five permanent members of the Council, plus Germany, the European Union and Iran.
 
“The Council, through the 104-page text, including annexes that detailed the sanctions-related provisions and listings, requested the International Atomic Energy Agency to undertake verification and monitoring of Iran’s compliance. It reaffirmed that Iran should cooperate fully with the Agency to resolve all outstanding issues. Upon receipt of a positive report from the Agency, the Council would terminate sanctions set out in resolutions adopted between 2006 and 2015.
 
“Furthermore, the Council decided that the resolution’s provisions should, pending confirmation of implementation, expire 10 years after its adoption, and with that, it would remove the Iranian nuclear issue from its agenda. At the same time, the text outlined the process for automatically reinstating the sanctions in the event of non-compliance.”
—July 20, 2015, in a U.N. Security Council press release
 
Click here for the full text of Resolution 2231
 
Association of South East Asian Nations (ASEAN)
 
“The Foreign Ministers of the Member States of the Association of South East Asian Nations (ASEAN), Australia, the People's Republic of China, Republic of India, Japan, the Republic of Korea, New Zealand, the Russian Federation and the United States of America, on the occasion of the 5th East Asia Summit Foreign Ministers’ Meeting, held in Kuala Lumpur, Malaysia on 6 July 2015, welcomed the Joint Comprehensive Plan of Action (JCPOA) reached on 14 July 2015 between the E3/EU+3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy) and the Islamic Republic of Iran, to ensure the exclusively peaceful nature of Iran’s nuclear programme.
 
“The Ministers further welcomed the adoption of Resolution 2231 by the United Nations Security Council on 20 July 2015, which endorsed the JCPOA; supported the commitment of states party to the Nuclear Non-Proliferation Treaty to comply fully with their obligations; and recalled the right of states party to the Treaty, in conformity with Articles I and II of the Treaty, to develop research, production and use of nuclear energy for peaceful purposes without discrimination.
 
“The Ministers recognised that the E3/EU+3 and Iran have reached an important resolution, which, if fully implemented, would contribute to building confidence in the exclusively peaceful nature of Iran’s nuclear programme and affirmed that the JCPOA reflects a step-by-step approach and includes reciprocal commitments on the part of Iran and the E3/EU+3. Implementation of the JCPOA will begin when the IAEA verifies that Iran has taken all of its “key nuclear-related steps, and the E3/EU+3 takes reciprocal lifting of sanctions. Full implementation of the JCPOA will enable the comprehensive lifting of all UN Security Council nuclear-related sanctions as well as U.S. and E.U national sanctions related to Iran’s nuclear programme.
 
“The Ministers further recognised that if the E3/EU+3 and Iran follow through on the JCPOA, the international community will be able to resolve this significant international security challenge, and to do so peacefully.”
—August 6, 2015, in a State Department statement
 
Gulf Cooperation Council
 
“U.S. Secretary of State John Kerry joined Foreign Ministers of the Gulf Cooperation Council (GCC) states and the Secretary General of the GCC in Doha today, August 3, 2015, to discuss progress and chart out next steps on GCC-U.S. strategic partnership and areas of cooperation announced at Camp David on May 14, 2015. The delegations reviewed the Joint Comprehensive Plan of Action (JCPOA) between the P5+1 and Iran, the conflict in Yemen and the necessity of a political solution there based on the GCC Initiative and National Dialogue Outcomes, and discussed regional challenges as outlined below. The Ministers also previewed the agenda for the fifth session of the GCC-U.S. Strategic Cooperation Forum (SCF), to be held in New York in late September.
 
“The Ministers discussed the JCPOA in considerable detail, including its restrictions, transparency, safeguards, access to any declared or undeclared nuclear facility, enforcement mechanisms, and its regional implications. Reiterating the position expressed at Camp David that “a comprehensive, verifiable deal that fully addresses the regional and international concerns about Iran’s nuclear program is in the security interests of GCC member states as well as the United States and the international community,” the Ministers agreed that, once fully implemented, the JCPOA contributes to the region’s long-term security, including by preventing Iran from developing or acquiring a military nuclear capability. The Ministers called for Iran to strictly honor its obligations under the JCPOA and its responsibilities under the Nuclear Non-Proliferation Treaty and relevant United Nations Security Council resolutions.
 
“The Ministers reaffirmed the commitments made at Camp David that the United States and the GCC states share a deep and historic interest in the security of the region, including the political independence and territorial integrity, safe from external aggression, of GCC member states. The United States reiterated its commitment to working with the GCC to prevent and deter external threats and aggression. In the event of such aggression or the threat of such aggression, the United States stands ready to work with our GCC partners to determine urgently what action may be appropriate, using the means at our collective disposal, including the potential use of military force, for the defense of our GCC partners.
 
“Expressing concern about recent statements by some Iranian officials, GCC member states and the United States reiterated their opposition to Iran’s support for terrorism and its destabilizing activities in the region and pledged to work together to counter its interference, particularly attempts to undermine the security of and interfere in the domestic affairs of GCC member states, most recently in Bahrain. The Ministers stressed the need for all countries in the region to engage according to the principles of good neighborliness, non-interference, and respect for territorial integrity.”
—August 3, 2015, in a State Department statement
 
Photo credit: UN logo via Wikimedia Commons
 

US Treasury Official on Nuclear Deal

Sanctions relief was a “necessary part of any deal,” according to Adam Szubin, acting Under Secretary of Treasury for Terrorism and Financial Intelligence, in his testimony to the Senate Banking Committee on August 5.  Szubin defended the deal, emphasizing that it would not have been “feasible to escalate the economic pressure in order to obtain a broader Iranian capitulation.” The following is Szubin’s written testimony for the hearing.

Chairman Shelby, Ranking Member Brown, and Members of the Committee:  Thank you for inviting me to appear before you today to discuss the Joint Comprehensive Plan of Action (JCPOA) that the United States and our negotiating partners concluded with Iran on July 14.  It is an honor to appear alongside Ambassador Sherman.  A foreign policy matter of such importance deserves a careful analysis.  I am confident that an open and honest debate based on the facts will make evident that this deal will strengthen America’s security and that of our allies.
 
Having spent more than a decade at the Treasury Department working to strengthen our diplomatic efforts by imposing sanctions pressure on Iran, I will focus on the global sanctions coalition built and led by the United States that gave us the leverage necessary to secure unprecedented nuclear concessions from Iran.  I will then discuss the nature of the sanctions relief in this deal, and how the JCPOA is designed to keep pressure on Iran to fulfill its nuclear commitments.  Lastly, I will explain the tough sanctions that will remain in place to combat a range of malign Iranian activity outside the nuclear sphere—including its support for terrorism and militant proxies in the Middle East, its missile program, and its human rights abuses.
 
The Impact of Our Sanctions: Bringing Iran to the Table
 
The powerful set of U.S. and international sanctions on Iran, and especially those imposed over the last five years, effectively isolated Iran from the world economy.  The U.S. government led this effort across two administrations and with bipartisan backing in Congress.  Together we obtained four tough UN Security Council resolutions, and built upon our longstanding primary embargo by enlisting the support of foreign partners from Europe to Asia to impose further pressure on Iran.  This campaign yielded results.  After years of intransigence, Iran came to the table prepared to negotiate seriously over its nuclear program.
 
To see the impact of the sanctions campaign, consider the following metrics.  Today, the Iranian economy is estimated to be only 80 percent the size that it would have been, had it continued on its pre-2012 growth path.  Consequently, it will take until at least 2022—even with sanctions relief—for Iran to get back to where it would have been absent our sanctions.  Iran has foregone approximately $160 billion in oil revenue alone since 2012, after our sanctions reduced Iran’s oil exports by 60 percent.  This money is lost and cannot be recovered.
 
Iran’s designated banks, as well as its Central Bank, have been cut off from the world.  The Iranian currency has declined by more than 50 percent.  We maintained strong economic pressure throughout the two-year negotiating period.  Indeed, during that time, our sanctions deprived Iran of an additional $70 billion in oil revenue, and Iran’s total trade with the rest of the world remained virtually flat.
 
To achieve this pressure, international consensus and cooperation were vital.  Around the world, views on Iran’s sponsorship of groups like Hizballah and its regional interventions differ.   But the world’s major powers have been united in preventing a nuclear-armed Iran.  Iran’s major trading partners and oil customers joined us in imposing pressure on Iran, and paid a significant economic price to do so, based on U.S. sanctions and a clear path forward.  The point of these efforts was clear:  to change Iran’s nuclear behavior, while holding out the prospect of relief if Iran addressed the world’s concerns about its nuclear program.
 
The Nature and Scope of JCPOA Relief
 
As Ambassador Sherman has described, the JCPOA addresses these nuclear concerns by closing off Iran’s pathways to a nuclear weapon and providing access to ensure compliance, while preserving leverage if Iran breaches the deal.  If Iran fully complies with the terms of the JCPOA, and if the IAEA verifies their compliance, phased sanctions relief will come into effect.
 
To be clear: when the JCPOA goes into effect, there will be no immediate relief from UN, EU, or U.S. sanctions.  There is no “signing bonus.” Only if Iran fulfills the necessary nuclear conditions—which will roll back its nuclear program and extend its breakout time five-fold to at least one year—will the United States lift sanctions.  We expect that to take at least six to nine months.  Until Iran completes those steps, we are simply extending the limited relief that has been in place for the last year and a half under the Joint Plan of Action.  There will not be a cent of new sanctions relief.
 
Upon “Implementation Day,” when phased relief would begin, the United States will lift nuclear- related secondary sanctions targeting third-country parties conducting business with Iran, including in the oil, banking, and shipping sectors.  These measures were imposed in response to the security threat from Iran’s nuclear program; accordingly, they will be suspended in exchange for verifiable actions to alleviate that threat.
 
As we phase in nuclear-related sanctions relief, we will maintain and enforce significant sanctions that fall outside the scope of this deal, including our primary U.S. trade embargo.  Our embargo will continue to prohibit U.S. persons from investing in Iran, importing or exporting to Iran most goods and services, or otherwise dealing with most Iranian persons and companies. Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.  Nor will Iran be able to import controlled U.S.-origin technology or goods, from anywhere in the world.  In short, Iran will continue to be denied access to the world’s principal financial and commercial market. The JCPOA provides for only minor exceptions to this broad prohibition.
 
Countering Malign Iranian Conduct
 
As we address the most acute threat posed by Iran, its nuclear program, we will be aggressively countering the array of Iran’s other malign activities.  The JCPOA in no way limits our ability to do so, and we have made our posture clear to both Iran and to our partners.  This means that the United States will maintain and continue to vigorously enforce our powerful sanctions targeting
 
Iran’s backing for terrorist groups such as Hizballah.  In the last two months alone, for example, we designated eleven Hizballah military officials and affiliated companies and businessmen.  We will also continue our campaign against Hizballah’s sponsors in Iran’s Islamic Revolutionary Guard Corps-Quds Force; Iran’s support to the Houthis in Yemen; its backing of Assad’s regime in Syria; and its domestic human rights abuses.  We will also maintain the U.S. sanctions against Iran’s missile program and the IRGC writ large.
 
Let there be no doubt about our willingness to continue enforcing these sanctions.  During the JPOA period, when we were intensely negotiating with Iran, we took action against more than 100 Iranian-linked targets for their WMD, terrorism, human rights abuses, evasion and other illicit activities.
 
Nor are we relieving sanctions on Iran’s Revolutionary Guard Corps, its Quds Force, any of their subsidiaries or senior officials.  The U.S. designation of Quds Force commander Qassem Suleimani will not be removed, nor will he be removed from EU lists related to terrorism and Syria sanctions.
 
Sanctions will also remain in place on key Iranian defense entities, including Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), Defense Industries Organization, Aerospace Industries Organization and other key missile entities, including Shahid Hemat Industrial Group (SHIG) and Shahid Bagheri Industrial Group (SBIG).  We will also retain sanctions on Iranian firms such as the Tiva Sanat Group, which has worked to develop a weapons-capable fast boat to be used by the IRGC-Navy, and Iran Aircraft Manufacturing Industrial Company (HESA), which manufactures unmanned aerial vehicles used by the IRGC, as well as third country firms that have assisted Iran’s missile and defense programs.  Under the JCPOA, more than 225 Iran-linked persons will remain designated and subject to our sanctions, including major Iranian companies and military and defense entities and firms.
 
It is worth emphasizing that our sanctions authorities will continue to affect foreign financial institutions that transact with these more than 200 Iranian persons on our Specially Designated Nationals List, as well as persons who provide material or other types of support to Iranian SDNs.  These measures provide additional deterrence internationally.  For example, a foreign bank that conducts or facilitates a significant financial transaction with Iran’s Mahan Air, the IRGC-controlled construction firm Khatam al Anbiya, or Bank Saderat will risk losing its access to the U.S. financial system, and this is not affected by the nuclear deal.
 
Sanctions Snap Back
 
Of course, we must guard against the possibility that Iran does not uphold its side of the bargain. That is why, should Iran violate its commitments once we have suspended sanctions, we will be able to promptly snap back both U.S. and UN sanctions, and our EU colleagues have reserved the ability to do so with respect to their sanctions as well.
 
For U.S. sanctions, this can be achieved rapidly—in a matter of days—from smaller penalties up to and including the powerful oil and financial measures that were so effective against Iran’s economy.  New measures could also be imposed if Iran were to violate its commitments and renege on the deal.
 
Multilateral sanctions at the UN also can be reimposed quickly, and the United States has the ability to reimpose those sanctions unilaterally, even over the objections of other P5 members.
 
To those with concerns that Iran can accumulate minor violations over time, it is important to clarify that if there are small violations, we can address them through a variety of measures – snap back does not have to be all or nothing.  This approach gives us maximum flexibility and maximum leverage.
 
If sanctions snap back, there is no “grandfather clause.” While we have committed not to retroactively impose sanctions for legitimate activity undertaken during the period of relief, any transactions conducted after the snap-back occurs are sanctionable.  To be clear, there is no provision in the deal that protects contracts signed prior to snap back—once snap back occurs, any prospective transaction is sanctionable.
 
JCPOA Relief in Perspective
 
Some have argued that sanctions relief is premature until Iran pursues less destructive policies at home and abroad, and that funds Iran recovers could be diverted for destructive purposes.  But Iran’s ties to terrorist groups are exactly why we must keep it from ever obtaining a nuclear weapon.  The JCPOA will address this nuclear danger, freeing us and our allies to check Iran’s regional activities more aggressively.  By contrast, walking away from this deal would leave the world’s leading state sponsor of terrorism with a short and decreasing nuclear breakout time.  We are far better positioned to combat Iran’s proxies with the nuclear threat off the table.
 
We must also be measured and realistic in understanding what sanctions relief will really mean to Iran.  Estimates of total Central Bank of Iran (CBI) foreign exchange assets worldwide are in the range of $100 to $125 billion. Our assessment is that Iran’s usable liquid assets after sanctions relief will be much lower, at a little more than $50 billion.  The other $50-70 billion of total CBI foreign exchange assets are either obligated in illiquid projects (such as over 50 projects with China) that cannot be monetized quickly, if at all, or are composed of outstanding loans to Iranian entities that cannot repay them.  These assets would not become accessible following sanctions relief.
 
Because Iran’s freely accessible assets constitute the country’s reserves, not its annual budgetary allowance, Iran will need to retain a portion of these assets to defend its currency and stability.
 
Of the portion that Iran spends, we assess that the vast majority will be used to tackle a mountain of debts and domestic needs that at over a half trillion dollars are more than ten times as large as the funds it can freely use.  Iran will also likely need a meaningful portion of its liquid foreign exchange reserve assets to finance pent-up import demand, unify official and unofficial exchange rates, and maintain an adequate foreign exchange buffer against future external shocks.  For reference, $50 billion is roughly in line with the 5-10 months of imports foreign exchange buffer that comparable emerging markets countries and the IMF consider prudent.  All the while, Iran’s economy continues to suffer from immense challenges—due to factors including budget deficits,
 
endemic corruption, dilapidated energy infrastructure, a poor business environment, and the reputational concerns of foreign companies.  Let us also recall that President Rouhani, who rose to the presidency on a platform of economic revival, faces a political imperative to show meaningful economic gains to the Iranian population.  The Supreme Leader’s approval of the negotiations suggests his understanding of this need as well.
 
We are mindful that at least some of the funds Iran receives from relief could find their way to malign purposes.  This prospect is inherent in any realistic nuclear deal, no matter its duration or terms.  But therefore it is incumbent on us to intensify our work, alongside Israel and our regional allies, to combat these malicious proxies.
 
Alternative Approaches
 
Sanctions were a means to an end, and relief was a necessary part of any deal.  The deal we have achieved in the JCPOA is a strong one.  It phases in relief in exchange for verified Iranian compliance with nuclear-related steps, and has a strong snap-back built in.  It would be a mistake for the United States to back away based on the misconception that it would be feasible to escalate the economic pressure in order to obtain a broader Iranian capitulation.
 
It is unrealistic to think that, with a broken international consensus and less leverage, we could somehow secure a “much better” deal involving Iran’s capitulation and the eradication of its peaceful nuclear infrastructure or the cessation of its support for longtime proxies such as Hizballah.
 
Our partners agreed to impose costly sanctions on Iran for one reason—to negotiate an end to the threat of a nuclear weapon-capable Iran.  If we change our terms now, and insist that these countries now escalate sanctions when we have jointly addressed this threat through the JCPOA, then our ability to impose additional pressure will be severely diminished.
 
Iran’s escrowed reserves are not in our hands, and much of the world is prepared to do business in Iran.  If the United States were to walk away from this deal, and ask our partners to continue locking up Iran’s reserves and maintaining sanctions, the consensus likely would fray, with unpredictable results.  Rejecting the deal in pursuit of objectives over which there is far less international consensus and unity would allow the sanctions regime to unravel and our leverage to dissipate.  And we would risk losing both a nuclear deal and the sanctions leverage.
 
Conclusion
 
Enforcing this deal, and securing the nuclear concessions Iran has made, will capitalize on our carefully built economic pressure strategy.  The deal’s terms accomplish our overarching goal. Blocking all of Iran’s paths to a nuclear bomb makes us and our allies safer.
 
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