United States Institute of Peace

The Iran Primer

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Nuke Talks: Latest from Iran, P5+1

On May 30, Secretary of State John Kerry met with his Iranian counterpart, Mohammad Javad Zarif, for six hours of talks on the nuclear issue. It was the first time that such high level discussions have taken place since the blueprint for a final deal was announced on April 2. On June 4, negotiations resumed at the deputy foreign minister level between Iran and the world’s six major powers – Britain, China, France, Germany, Russia, and the United States. With only weeks remaining before the June 30 deadline for a final deal, the issue of international inspections of military sites remained a key sticking point. French foreign minister Laurent Fabius said “if you say you cannot check any military site, then there is no [real] agreement.” Ali Akbar Velayati, an advisor to Iran’s supreme leader, said that Iran “will never allow its military sites to be inspected.”

The following are quotes from officials on the latest round of talks.
 

 

Iran 
 
Supreme Leader Ayatollah Ali Khamenei 

 

 

Foreign Minister Mohammad Javad Zarif 
 
“We have decided to discuss other solutions to resolve this issue,” referring to international inspections of nuclear sites. 
 
“We have decided to work full time for the next three or four weeks to see whether or not it will be possible to reach an agreement.” 
—May 30, 2015 after meetings with Secretary of State Kerry 
 
“There are still numerous differences, and efforts will be made in various meetings so that these differences will be reduced to minimum levels and they will be studied in the next ministerial meeting. 
 
The “differences are mainly those that have been discussed publicly.” 
—May 31, 2015 to state television 
 

Senior Advisor to the Supreme Leader Ali Akbar Velayati 

“It has been repeatedly seen that the (UN nuclear) agency’s inspectors have been a plaything in the hands of the CIA, but the Islamic Republic of Iran ... will never allow its military sites to be inspected. 
 
“Records show that some of the agency's inspectors are the agents of the U.S. Central Intelligence Agency and this fact is documented and openly known. 
 
“We have no trust in the American statesmen's conduct and remarks. 
 
“As mentioned by Leader of the Islamic Revolution [Ayatollah Ali Khamenei], Iran will not allow that they [P5+1 countries] will humiliate the country’s scientists under the pretext of meeting nuclear scientists.” 
—June 1, 2015 according to Press TV
 

Deputy Foreign Minister for Legal and International Affairs Abbas Araghchi 

 

Allowing Iran's scientists to be interviewed is "generally off the table." 
—May 30, 2015, according to the press 
 
“We have a few weeks and hope to reach a final deal by the June 30 deadline or even sooner…There has been progress but still we have a difficult way ahead of us.”
—June 4, 2015, according to the press
 
“Our basis is mistrust and this is the reality.”
 
“We don't trust the other side at all and they don't trust us either.”
 
"Thus all the provisions in a deal... whenever each party feels the other side is violating the commitments, they can snap back and implement whatever existed before the agreement.
 
"We have taken every necessary measure so this would happen for us. Naturally, the other side will do the same for sanctions.”
 
“Each word of this instrument is being discussed and sometimes quarrelled on… There are differences but work moves forward very slowly.”
—June 6, 2015, according to the press
 
“It is a tough and complicated task, and it is moving forward very slowly. It has its own sensitivities and complications but we are still working (on it).”
—June 8, 2015, according to the press
 
Deputy Foreign Minister for European and American Affairs Majid Takht-e Ravanchi
 
“If the opposite (negotiating) side does not come up with excessive demands, the negotiations will lead to a result by the announced deadline.”
 
“The Islamic Republic of Iran’s determination is (based on) pushing ahead with the negotiations seriously and strongly and making all-out efforts to reach a good, reasonable and acceptable agreement.”
—June 7, 2015, according to the press
 
Government Spokesperson Mohammad Bagher Nobakht 
 
“While the government respects their [people who criticize the talks] concerns, but these protests are illegal [because the Interior Ministry didn't issue them permits to gather]. And based on the view of the Imam [the late Ayatollah Ruhollah Khomeini] and the Supreme Leader [Ayatollah Ali Khamenei], illegal activities are also against the Sharia. 
 
“These are the final days of the negotiations and both sides naturally try to see more of their demands met, and they may even make use of provocative remarks through their officials and unofficial people. 
 
“But what matters is the issues that are written and not speeches, and we are striving to materialize the Iranian nation's rights in full in what is written. 
—June 1, 2015 in a press conference  
 
Deputy of Atomic Energy Organization of Iran Behrouz Kamalvandi
 
“Even in case of verification of information on possible nuclear activities, the IAEA is only permitted to access the site. It is a false assumption that the Agency is allowed to question the scientists one by one.”
—June 8, 2015, according to the press
                                                                                                                                                                             
United States 
 
President Barack Obama
 
“I can I think demonstrate, not based on any hope but on facts and evidence and analysis that the best way to prevent Iran from having a nuclear weapon is a verifiable tough agreement. A military solution will not fix it, even if the United States will participates, it would temporarily slow down an Iranian nuclear program, but it will not eliminate it.”
—June 1, 2015, in an interview on Israeli television
 
 
Vice President’s National Security Advisor Colin Kahl
 
“Under the deal we are negotiating... Iran's enrichment capability will be substantially rolled back.”
 
“The deal we are negotiating makes us and the region safer.”
 
“In the absence of comprehensive agreement to deal with this challenge and constrain Iran's programme, Iran would likely install and begin operating tens of thousands of fissile centrifuges in the near future.” 
—June 3, 2015 at a conference in Doha, Qatar via AFP 
 
France 
 
Foreign Minister Laurent Fabius 
 
“The best agreement, if you cannot verify it, it’s useless. Several countries in the region would say, OK, a paper [has been signed] but we think it is not strong enough and therefore we ourselves have to become nuclear. 
 
“Therefore, if you say you cannot check any military site, then there is no [real] agreement. 
 
“If it is too long a delay [between when a request to inspect a site is submitted and when permission is granted to do so by Iran], they have enough time to change everything,” he said. 
—June 1, 2015 in an interview with The Wall Street Journal 
 
French Ambassador to the United States Gérard Araud 
 
 
Russia 
 
Foreign Minister Sergei Lavrov 
 
The P5+1 countries and Iran can reach an agreement by June 30, unless some participants try “at the 11th hour to get a bit more” than what the blueprint outlined on April 2. 
—June 2, 2015 in an interview with Bloomberg Television 
 
“The talks have entered the final stage and we are convinced that the parties ought to reach agreement on all technical issues in order to comply with the already agreed political framework.”
—June 4, 2015, according to the press
 
China
 
Foreign Minister Wang Yi
 
“(We) must push forward the next stage of talks on the basis of the Lausanne framework ... and all parties should not raise any new demands to prevent complicating the talks process.”
 
“All sides' legitimate concerns ought to be paid attention to and rationally resolved; all sides should meet each other half way and not drift further apart.”
—June 4, 2015, according to the press

 

Photo credit: Kerry and Zarif by U.S. Department of State via Flickr Commons, public domain as U.S. Government work

Obama to Israelis: Military Strike Won’t Stop Iran Nuclear Program

On May 29, President Barack Obama told Israel’s Channel 2 that a military strike, even with U.S. participation, would only “temporarily slow down an Iranian nuclear program.” He pushed back on criticism of the potential deal being negotiated between Iran and the world’s six major powers. The “best way to prevent Iran from having a nuclear weapon is a verifiable, tough agreement,” he said. The president, however, also assured the Israeli people that he understands their concerns and fears.

On June 2, just hours before Obama’s interview aired, Israeli Prime Minister Benjamin Netanyahu told the Israeli public that Israel must “first and foremost” rely on itself. He warned that the deal under consideration would “pave the way for Iran to atom bombs.” The following are excerpts from Obama’s interview with Ilana Dayan and Netanyahu’s remarks.
 
QUESTION: There’s a remarkably sincere observation you made once -- you said, “Nothing comes to my desk that is perfectly solvable.”  And you said, “Any given decision I make, I wind up with a 30 to 40 percent chance that it isn’t going to work.”  I’m afraid Israelis cannot afford even three to four percent chance you’re wrong, Mr. President, because if you are, the bomb will hit Tel Aviv first.
 
THE PRESIDENT:  Well, let’s back up on this.  We know that Iran, prior to me coming into office, had gone from a few hundred centrifuges to thousands.  We know that the potential breakout time for Iran, if it chose to build a bomb, is a matter potentially of months today instead of years.   
 
And seeing that, I came in and organized an international coalition -- including countries like Russia and China that tend not to be very sympathetic to sanctions regimes -- and we have imposed the most effective sanctions on Iran over the course of the last five years that has led them to essentially lose a decade, perhaps, of economic growth. 
 
At the time, people were skeptical.  They said, oh, sanctions aren’t going to work.  Then we were able to force Iran to the negotiating table because of the effectiveness of the sanctions.  And I said that in exchange for some modest relief in sanctions, Iran is going to have to freeze its nuclear program, roll back on its stockpiles of very highly enriched uranium -- the very stockpiles that Prime Minister Netanyahu had gone before the United Nations with his picture of the bomb and said that was proof of how dangerous this was -- all that stockpile is gone. 
And in fact, at that time, everybody said, this isn’t going to work.  They’re going to cheat.  They’re not going to abide by it.  And yet, over a year and a half later, we know that they have abided by the letter of it.
 
So we have I think shown that we are able to construct a mechanism, if, in fact, we get an agreement, to verify that all four pathways to a nuclear weapon are shut off.
 
Q: But what if they take the $100 million showered at them after sanctions are lifted and not take them to build movie theaters and hospitals in Tehran, but rather divert it to military use?
 
THE PRESIDENT:  Okay, so that’s a different question, though.  So I just want to separate out the questions.  There’s one critique of a potential nuclear deal which is it won’t hold, and Iran will cheat, and they will get a bomb.  And I have confidence that if, in fact, we arrive at the kind of agreement that I’m looking for, and that was described in Geneva but now has to be memorialized, then we will have cut off their path to a nuclear weapon and we will be able to verify it with unprecedented mechanisms.
 
Now, it may be that Iran is not able to make the necessary concessions for us to know we can verify it --   
 
Q: Then there’s no deal. 
 
THE PRESIDENT:  Then there’s going to be no deal.  But let’s assume there’s a deal.  There is now a second set of arguments, which is you bring down sanctions --
 
Q: Now, that’s wishful thinking --
 
THE PRESIDENT:  -- and they’ve got $100-$150 billion, and now they can do even more mischief around the region.  I would make three points on that.
 
Number one is that we will be putting in place a snapback provision so that if they cheat on the nuclear deal, the sanctions automatically go back into place; we don’t have to ask Mr. Putin’s permission, for example, to put sanctions back. 
 
Number two, we shouldn’t assume that we can perpetuate the sanctions forever anyway.  There’s a shelf life on the sanctions, because the reason the international community agreed was to get to the table to deal with the nuclear issue, not to deal with all of these other issues.  So we will get a diminishing return just on maintaining sanctions.
 
Number three, Mr. Rouhani was elected specifically in order to strengthen the Iranian economy.  There’s enormous political pressure on them -- as I said, they’ve lost a decade of economic growth.  Their economy has been contracting each year.  And it is true that out of $100 billion or $150 billion, of course the IRGC, the Quds Force, they’re going to want to get their piece.  But the fact is, is that the great danger that the region has faced from Iran is not because they have so much money.  Their budget -- their military budget is $15 billion compared to $150 billion for the Gulf States -- I just met with them. 
 
They have a low-tech but very effective mechanism of financing proxies, of creating chaos in regions.  And they’ve also shown themselves, regardless of sanctions, to be willing to finance Hezbollah with rockets and others even in the face of sanctions.
 
So the question then becomes are they going to suddenly be able to finance 10 times the number of Hezbollah fighters?  Probably not.
 
Q: I don’t know if you noticed, Mr. President, but our Prime Minister gave a speech to Congress a few months ago.
 
THE PRESIDENT:  Really?  I didn’t notice.  (Laughter.) 
 
Q: Yes, really.  I was wondering if you noticed that.  But I asked your good friend, David Axelrod, your chief strategist, about it later and he said this was a highly political exercise. Would you agree on that?
 
THE PRESIDENT: As I said before, I think the Prime Minister cares very much about the security of the Israeli people, and I think that in his mind, he is doing what’s right. 
 
I care very much about the people of Israel as well, and in my mind, it is very much in Israel’s interest to make sure that Iran doesn’t have a nuclear weapon.  And I can, I think, demonstrate -- not based on any hope, but on facts and evidence and analysis -- that the best way to prevent Iran from having a nuclear weapon is a verifiable, tough agreement.  A military solution will not fix it, even if the United States participates. It would temporarily slow down an Iranian nuclear program, but it will not eliminate it.
 
Q: Can you even imagine a scenario where Prime Minister Netanyahu, after this deal -- which he says it’s a bad deal, that’s why he came to Congress -- launches a military strike and doesn’t even call you ahead of time?
 
THE PRESIDENT: I won’t speculate on that.  What I can say is -- to the Israeli people -- I understand your concerns and I understand your fears.  But what is the worst scenario is the path that we’re currently on in which there’s no nuclear resolution, and ultimately, we have no way to verify whether Iran has a weapon or not.
 
Sanctions won’t do it.  A military solution is temporary.  The deal that we’re negotiating potentially takes a nuclear weapon off the table for 20 years.  And so when the Prime Minister comes here, I understand he is speaking because he believes that it’s the right thing to do.  But I respectfully disagree with him.  And I think that I can show if, in fact, Iran abides by the deal that we’re outlining now -- and they may not.  They could still walk away and miss this opportunity.

—May 29, 2015 in an interview with Channel 2
 
Israeli Prime Minister Benjamin Netanyahu
 
“When speaking of Israelis' security I rely first and foremost on ourselves, and proof of this is the agreement emerging between the world powers and Iran.

The deal will “pave the way for Iran to atom bombs” and inject billions of dollars into its economy.

“With that money it can continue to arm our enemies with high trajectory weapons and other arms, and also arm its war and terror machine, which is acting against us and the Middle East, and which is much more dangerous than Islamic State's terror machine, which is also dangerous.”
—June 2, 2015 in remarks at Home Command headquarters
 

Report: Iran’s Role in Iraq

The rise of the so-called Islamic State, also known as ISIS or ISIL, is both a threat and an opportunity for Iran, according to a new study by Alireza Nader at the Rand Corporation. On one hand, the conquest of nearly one-third of Iraqi territory and potential to take more of the country threatens Iranian interests. On the other hand, ISIS’s “ascent gives Tehran the chance to showcase its importance and influence in the Middle East,” according to Nader. Proving that it is a key player could increase Iran’s leverage in nuclear talks with the world’s six major powers.

As a result, Iran has opted to publicize its role in mobilizing Shiite militias to support Iraqi government forces in the fight against ISIS. The previously elusive General Qassem Soleiamni, chief of the Revolutionary Guards’ elite Qods Force, has even been extensively photographed at the front.  
 
U.S. and Iranian military forces are actually fighting a common enemy in Iraq. On the surface, “U.S. air power seems to complement Iran’s on-the-ground presence,” Nader notes. “While the United States and Iran ultimately have divergent long-term goals for Iraq, and face disagreements on many other issues, limited tactical cooperation in weakening ISIL in Iraq may be possible,” he argues. Nader also warns that that while such cooperation could weaken the group, “it is unlikely to solve the region’s increasing insecurity, which is due in part to Iran’s sectarian politics.” The following are key excerpts from the report.
 
Iran, Political Kingmaker and Arbitrator
 
Iran’s policy of maintaining influence in Iraq is to form Shi’a-led centralized governments while making sure they do not become too powerful. Thus, Iranian influence is strong within the central government and among non-governmental actors that challenge central authority.
Qods Force commander Qassem Soleimani often acts as a political arbitrator between Iraqi Shi’a parties. He heads all of Iran’s activities in Iraq, including overseeing Shi’a militias, disbursing funds to political leaders, and overseeing “soft power” activities (Brennan et al., 2013). With connections to Shi’a, Sunni Arab, and Kurdish leaders, Soleimani has been directly involved in nearly all major Iraqi government deliberations since the fall of Saddam.
 
Iran’s Support for Shi’a Non-Governmental Militias
 
While helping its allies get elected, Iran simultaneously funds, equips, and even creates militant groups that enable it to pressure political actors to pursue policies beneficial to the Islamic Republic. The more powerful non-state actors grow, the weaker the Iraqi central government becomes. But once a militant group gains enough power to field a viable political party—thus needing to moderate its positions to appeal to a broader constituency—Iran invariably creates a new militant group to replace it (Eisenstadt, Knights, and Ali, 2011).
Iraqi Shi’a militias are often reported to be engaged in extrajudicial killings, kidnapping, and torture of Sunni Iraqis. They may appear reliable for Iran’s fight against ISIL, but their sectarian nature and abuses against the Sunni are increasing ISIL’s ideological and political appeal among the Sunni. Iran faces a major quandary, as it is unlikely to fully defeat Sunni extremist groups in Iraq as long as it bases its influence on Shi’a militants. But the weakening of Shi’a militias is likely to result in a strengthened Iraqi central government that could pose a long-term challenge to Iranian influence.
 
The Rise of ISIL: Implications for Iran

Short-to Medium-Term Gains
 
There are a couple possible explanations for Iran’s increasingly public role in Iraq. First, the Iranian government is keen to prove its reliability to Iraq’s Shi’a-led government.
Second, Iran’s active and explicit involvement in Iraq is a boon for the Rouhani government’s efforts to decrease Iran’s isolation, enhance its regional influence, and strengthen its partnership with global powers.
Iran’s decisive role in Iraq can demonstrate to the rest of the Middle East that its power exceeds that of Sunni states, which are unable to save the Iraqi government from ISIL. This is particularly useful in swaying smaller Sunni states (Oman being a good example) that may be suspicious of Iran to see the Islamic Republic as a necessary balance against Saudi Arabia.
Perhaps more importantly, Iran’s fight against ISIL may provide it additional leverage in the nuclear negotiations with the P5+1. The U.S. government has stated that its negotiations with Iran are focused solely on latter’s nuclear program and are not dependent on regional issues. Such compartmentalization can theoretically prevent greater Iranian leverage on nuclear negotiations. Tehran is unable to ease the sanctions chokehold without addressing P5+1—especially American—concerns over its nuclear program.
 
But Iran’s regional influence is not as easily contained by sanctions; Tehran can act independently and counter to American and Western interests in the Middle East despite the ongoing negotiations. Iran’s ability to destabilize (or stabilize) the region could convince the United States and its P5+1 interlocutors to be more flexible on the nuclear issue. There are, however, no indications this has been the case, despite suspicions that Washington and Tehran may be eyeing cooperation in Iraq in the future (Solomon and Lee, 2014).
 
Is There Room for Cooperation Between the United States and Iran?
 
The rise of ISIL has led to a debate in the United States regarding the utility and dangers of working with Iran in Iraq. Some commentators and analysts argue that Washington and Tehran should work together against ISIL (see Pillar, 2014), while others believe that the Iranian government is a major source of problems in Iraq (see Haykel, 2014; and Pletka, 2015). A closer examination of the issue reveals that American and Iranian interests in Iraq are not completely aligned, especially due to the Iranian government’s distrust of the United States and its commitment to a rivalry between the two nations. However, the two countries can still work together in pushing back ISIL from Iraqi territory. While their visions for Iraq and the region diverge, the current objective of both the United States and Iran is to diminish ISIL. Greater U.S.-Iran coordination could assist in achieving this goal.
The Iranian government appears to be of two minds in considering cooperation with Washington in Iraq. Rouhani government officials have advocated working with the United States in Iraq, but Iran’s most powerful leaders have opposed the idea in public.
 
Click here for the full report.
 
Click here to read Alireza Nader’s chapter on the Revolutionary Guards.
 
Tags: Iraq, ISIS, Reports

UN Report: Iran Shares Limited Information

On May 29, the U.N. nuclear watchdog released a new report on Iran’s implementation of Non-Proliferation Treaty safeguards and compliance with U.N. Security Council Resolutions. The International Atomic Energy Agency (IAEA) said that Iran “shared some information in relation to” possible military dimensions of its nuclear program. Iran had agreed in May 2014 to implement two practical measures on the outstanding questions, but has not yet completed either. “The Agency and Iran agreed to continue the dialogue on these practical measures and to meet again in the near future,” according to the report.

The U.N. watchdog also stressed the necessity for Iran to grant inspectors access to all sites, including military ones such as Parchin. Access to military sites has been a controversial issue in recent negotiations between Iran and the world’s six major powers.

The following are some key findings of the report, as outlined by the four experts from the Institute for Science and International Security; David Albright, Serena Kelleher-Vergantini, Andrea Stricker, and Daniel Schnur.
 
1) The average rate of monthly production of low enriched uranium (LEU) went up slightly, as did the average centrifuge performance of the IR-1 centrifuges in the Natanz Fuel Enrichment Plant.
 
2) With regard to the possible military dimensions (PMD) issue, Iran has “shared some information” in relation to one of the measures in the IAEA/Iran Framework for Cooperation. The IAEA and Iran agreed to continue the dialogue and meet again in the near future. However, no major breakthrough was reported. Moreover, Iran did not propose any new practical measures to resolve the PMD issue and has rebuffed requests by the IAEA to speed up the process of resolving outstanding issues.
 
3) Iran has a total inventory of 8,714 kg of 3.5 percent LEU hexafluoride and another 1,822 kg (uranium mass) 3.5 percent LEU in various chemical forms at the Enriched UO2 powder Plant (EUPP). In total, as of May 2015, Iran also has about 228 kilograms (kg) of near 20 percent LEU (uranium mass). Of this near 20 percent LEU, 61.5 kg are in uranium oxide powder, 44.9 are in TRR fuel assemblies, and 121.2 kg are in scrap and waste, and in-process (all in uranium mass).
 
4) During the last reporting period, Iran did not feed any additional LEU into the Enriched UO2 powder Plant. So far, Iran has fed 2,720 kg of LEUF6 into the EUPP. Thus, Iran has fallen behind in its pledge under the Joint Plan of Action (JPA) to feed any newly produced LEU hexafluoride into the EUPP. Its current deficit is 1,106 kg of 3.5 percent LEU hexafluoride, which will increase by a few hundred kilograms during May and June. Under the JPA, Iran must feed all of this LEU into the EUPP by the end of June.
 
5) After a lengthy delay, the EUPP has finally produced LEU dioxide. As of May 23, 2015, the plant had produced 151 kg of uranium in the form of UO2 enriched up to 5 percent uranium 235. The problem, according to Iranian officials, is that the last section of the plant that produces the LEU dioxide did not work properly. In total, Iran produced the 151 kg of LEU dioxide from 402.6 kg of uranium in the form of ammonium diuranate enriched up to five percent. 6) Most of the near 20 percent LEU fed into the line to make Tehran Research Reactor (TRR) fuel continues to end up as scrap or is in-process rather than in TRR fuel assemblies.
 
Click here for the full ISIS report.
 
Click here for the IAEA report.
 

Economic Trends: Month of May

Cameron Glenn

In May 2015, Iran continued to explore expanding trade ties with the international community, in anticipation of a nuclear deal that could lift international sanctions. On May 25, Tehran Stock Exchange CEO Hassan Qalibaf-Asl met with a group of international investment managers and said “A new global attitude toward the economic and investment environment in Iran is taking shape.” Russia, India, Oman, and Syria all took steps to expand cooperation with Iran in trade, energy, and infrastructure. Iranian officials even called for forming “unofficial connections” with American trade partners that could be expanded in a post-sanctions environment.

Domestically, President Hassan Rouhani’s administration has been pushing for economic reforms, particularly reducing the monthly cash handouts that all Iranians are eligible to receive. Officials also reduced fuel subsidies and raised the price of gasoline by 40 percent, bringing the cost to 10,000 rials per liter (around $1.28 per gallon). Despite the pressure from international sanctions, Rouhani’s economic reforms have yielded modest progress – by the end of May, inflation had dropped to 14.3 percent.
 
The following is a run-down of the top economic stories with links.
 
Domestic Developments
 
Cash Handouts: Minister of Labor and Social Welfare Ali Rabii said on May 19 that Iran can no longer afford the cash handouts established by President Hassan Rouhani’s successor, Mahmoud Ahmadinejad. In 2010, Ahmadinejad began phasing out food and energy subsidies and replacing them with monthly cash handouts. All Iranians are eligible to receive them, regardless of income, and only 2.4 million out of 80 million Iranians have opted out. The individual monthly payments are 455,000 rials (around $15). Rabii said the handouts were hindering domestic production and investment.
 
Rouhani’s administration is trying to restrict the handouts to only the poorest Iranians. Around $19.5 billion is required annually to fund the handouts, and Director of the Management and Planning Organization Mohammad Bagher Nobakht said, “we will have to eliminate a great number of people” from the payment list to reduce that cost and work within existing budget constraints.
 
Oil: Deputy Oil Minister Rokneddin Javadi said that the Organization of Petroleum Exporting Countries (OPEC) is unlikely to cut production to reduce oil prices, despite Iran’s repeated calls to reduce output. Javadi also estimated that Iran could increase oil exports to pre-sanctions levels of 2.5 million barrels per day within three to six months if sanctions are lifted. The largest buyers of Iranian crude oil – China, India, South Korea, Japan, and Turkey – recently extended their oil purchase contracts with Iran.
 
Iran also plans to increase daily exports of various oil products, not including gasoline, according to Managing Director of the National Iranian Oil Products Distribution Company Seyed Naser Sajjadi. “It is expected that about 12 million liters of gas oil and 40 million liters of fuel oil from the total surplus of the country’s oil products would be exported per day,” he said.
 
Natural Gas: On May 10, Mohsen Ghamsari, director for international affairs at the National Iranian Oil Company, said it was currently not “economically feasible” for Iran to start exporting natural gas to Europe. In April, the Iranian ambassador to Turkey, Alireza Bigdeli, had announced that Tehran was developing a project to export gas to Europe through Turkey. Natural gas prices increased by 15 percent on May 26 for household, commercial, and public sectors, according to National Iranian Gas Company Managing Director Hamidreza Araghi.
 
Gasoline: National Iranian Oil Products Distribution Company spokesman Davoud Arab-Ali announced on May 26 that the price for a liter of gasoline would increase from 7,000 rials to 10,000 rials. The price of premium gas was set at 12,000 rials. Officials are also considering eliminating fuel subsidies to unify gas and oil prices.
 
 
 
Domestic Production: Supreme Leader Ayatollah Ali Khamenei stressed the importance of domestic production in a speech on May 27.
 
Tourism: Iran is the most attractive tourist destination in the world in terms of price competitiveness, one of the 14 indicators in the World Economic Forum’s Travel & Tourism Competitiveness Index. Price competitiveness measures purchasing power parity, the cost of access to transportation and hotel services, and fuel price levels. The index also quantifies each country's enabling environment, travel and tourism policy, infrastructure, and natural and cultural resources to measure its attractiveness as a tourist destination. Iran ranks 97th out of 141 countries across all categories.
 
The number of French tourists to Iran is expected to double in 2015 from 150,000 to 300,000, according to a French embassy cultural advisor. The official noted that French tourists are flocking to Iran for its “many tourist and cultural attractions.”
 
Inflation: Iran’s inflation rate has dropped to 14.3 percent for the 12-month period ending May 21, according to Director of the Management and Planning Organization Mohammad Bagher Nobakht.
 
Aircraft production: Iran’s Minister of Roads and Urban Development Abbas Akhoundi said Iran plans to revamp its air fleet and commercial airlines. “The current situation of the air fleet is not becoming to the Iranian nation and the air fleet needs major investment,” he said on May 10. “We have conducted extensive negotiations with companies supplying planes … so that when sanctions are removed, contracts can be signed immediately.”
 
Iran also plans to purchase 400 new passenger planes in the next 10 years. Ali Reza Jahangirian, head of Iran’s Civil Aviation Organization, said Western companies have been eyeing Iran’s air industry. “We have gotten very positive signals from Western companies, including Boeing Co. and General Electric Co., about getting new spare parts for our planes,” he said.
 
International Developments
 
United States: On May 24, Head of the Chamber of Commerce, Industries, Mines and Agriculture Gholamreza Shafei said that “unofficial connections could pave the way for establishment of joint chambers of commerce between Iran and America.” Shafei has not yet officially met with an American business delegation, but noted that American businessmen have expressed interest in expanding trade relations with Iran. “They are especially showing interest as they see most Western countries are sending big trade delegations to Iran,” he said. “Trade ties with America are important for Iran’s exports because our traditional goods have a favorable market in that country.”
 
Separately, a delegation of Iranian traders, entrepreneurs, and artists visited the United States in mid-May. Hamid Hosseini, a member of the Tehran Chamber of Commerce, said the purpose of the visit was to “hold talks with American cultural institutes, universities, and trade sectors, and present Iran’s cultural and economic capacities and potential.”
 
Foreign investment: Tehran Stock Exchange CEO Hassan Qalibaf-Asl met with a group of investment managers from the United States, United Kingdom, Russia, Turkey, Egypt, Greece, Italy, and the United Arab Emirates on May 25. “A new global attitude toward the economic and investment environment in Iran is taking shape,” Qalibaf-Asl said.
 
Russia: On May 26, Russian officials announced that they will begin importing goods from six Iranian food companies, including four dairy producers and two poultry producers. Russia has taken steps to expand trade ties with Iran after facing escalating sanctions from Europe over the Ukraine crisis.
 
 
India: On May 6, Tehran and New Delhi signed a memorandum of understanding to develop the strategic Chabahar port in southeast Iran. President Rouhani said, “We welcome the presence of Indian investors in the development of Chabahar port and other southern ports, as well as the construction of roads and railroads.” Plans to develop the port date back to 2003, but were delayed by international sanctions on Iran. Following the April 2 announcement of a blueprint for a nuclear deal, India sent a delegation to Tehran to discuss potential trade, energy, and infrastructure cooperation. The port would allow India to be less dependent on land routes through Pakistan to trade with Afghanistan.

 
South Africa: On May 10, Foreign Minister Mohammad Javad Zarif met with his South African counterpart, Maite Nkoana-Mashabane, in Tehran. Zarif described Iran’s relationship with South Africa as “friendly and strategic” and noted the potential for economic cooperation in the oil and gas industry. Two days later, at the South Africa-Iran joint commission in Tehran, the South African minister spoke out against the international sanctions imposed on Iran. “Unlike others, South Africa is not waiting for sanctions to be lifted to do business with Iran,” she said, noting that bilateral trade has risen 50 percent over the past year.
 
Oman: On May 14, Iran established a new shipping route from Shahid Rajaee to the Omani port of Sohar, following an April agreement between Tehran and an Omani business delegation. The route will be used to transport agricultural products and other goods, expanding Iran’s access to regional trade.
 
In late May, Omani officials also requested Iran Khodro, a leading Iranian vehicle manufacturer, to produce cars in Oman. After oil and gas, automotive production is the second largest industry in Iran. “If the plan proves to be economically viable and necessary investment is made, Iran Khodro would like to establish a production site in Oman and supply regional markets,” said Iran Khodro’s CEO Hashem Yekke-Zare in a meeting with Hassan Ahmed al Nabhani, CEO of Oman Investment Fund.  
 
Germany: German Ambassador to Tehran Michael Freiherr von Ungern-Sternberg described Germany as “the biggest European partner of Iran in the field of the economy” during a meeting with Khorassan Razavi, governor general of Mashhad. Separately, German Foreign Ministry spokesman Martin Schaefer said that Germany would welcome a nuclear agreement between Iran and the world’s six major powers, allowing for greater energy and trade cooperation between Tehran and Berlin.
 
 
Syria: Tehran and Damascus have signed bilateral agreements for cooperation in electricity, industry, oil, and investment, according to Syria’s state news agency. Ali Akbar Velayati, a senior advisor to the Supreme Leader, also announced during a visit to Damascus that Iran would extend a new credit line to Syria.
 
Israel: The Eilat Ashkelon Pipeline Company has been ordered by a Swiss court to pay Iran $1.1 blllion in compensation over a business venture initiated before the 1979 Iranian Revolution. The Israeli company had agreed to partner with the National Iranian Oil Company to transport Iranian oil to Europe via Israel. But Tehran canceled the contract after the revolution, and claimed the Israeli company still owed $450 million in crude oil it received from Iran on credit. Israeli officials, however, say they do not plan to pay the debt. “According to the Trading with the Enemy Act it is forbidden to transfer money to the enemy, including the Iranian national oil company,” a Finance Ministry statement said.
 
Iraqi Kurdistan: Iran signed a contract to open a trade center in Erbil, with the purpose of facilitating trade with the semi-autonomous Kurdistan region in Iraq. Head of the Trade Promotion Organization of Iran Valiollah Afkhami Rad said the trade center would increase understanding of Iraqi markets and support Iranian industries looking to expand trade in Erbil.
 
 

Cameron Glenn is a senior program assistant at the U.S. Institute of Peace.

 

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