United States Institute of Peace

The Iran Primer

US, UK Leaders Rally Against New Sanctions

On January 16, President Barack Obama and U.K. Prime Minister David Cameron urged U.S. lawmakers not to pass new sanctions legislation. New penalties from Congress would “put at risk the valuable international unity that has been so crucial,” Cameron warned at a joint press conference at the White House.

Cameron also acknowledged that he had called a couple of U.S. Senators to tell them about the U.K. position on sanctions— an extremely unusual step for a U.K. prime minister. U.K. officials said that Cameron also had plans to contact Senate Foreign Relations Chairman Bob Corker, who is working on legislation to require Congressional review of a deal, and Senator Mark Kirk, who has co-authored a bill that would impose new sanctions if talks falter. Cameron also reportedly has plans to speak with Senate Armed Services Chairman John McCain.
 
During the press conference, Obama reiterated his threat to veto any new sanctions legislation. His comments come one day after a meeting with Democratic senators in which he reportedly clashed with Senator Menendez, who has co-authored a sanctions bill with Senator Kirk.  
 
The following are excerpted remarks by Obama and Cameron.
 
President Barack Obama
 
“I am asking Congress to hold off because our negotiators, our partners, those who are most intimately involved in this assess that it would jeopardize. My main message to Congress is just hold your fire.”
 
Congress “needs to show patience” while negotiations are underway because “the chances that this will become a military confrontation is heightened” if lawmakers try to pass new sanctions now.
 
“I will veto a bill that comes to my desk, and I will make this argument to the American people as to why I am doing so. I respectfully request for them to hold off for a few months to see if we have the possibility of solving a big problem without resorting potentially to war.”
“It’s my team that’s at the table. We are steeped in this stuff day in and day out. We don’t come to these assessments blindly.”

“If Iran proves unable to say yes [to a deal]… then we’re going to have to explore other options, and I would be the first to come to Congress and say we need to tighten the screws.”
 
“We may not get there, but we have a chance to resolve the nuclear issue peacefully.”
 
U.K. Prime Minister David Cameron
 
"I have contacted a couple of senators this morning, and I may speak to one or two more this afternoon."
 
But the calls are "not in any way... to tell the American Senate what it should or should not do."
 
“It’s the opinion of the United Kingdom that further sanctions, or further threat of sanctions at this point, won’t actually help to bring the talks to a successful conclusion, and they could fracture the international unity.”
 
*Quotes via Bloomberg, Politico and CBS

 

U.S. Updates Iran Travel Warning

On January 16, the State Department warned that dual-national Iranian-Americans “may encounter difficulty in departing Iran.” Tehran does not recognize their American citizenship. The new travel warning, an update to one issued in May 2014, still cautioned that U.S. citizens may be subject to “harassment or arrest while traveling or residing in Iran.” The following is an excerpt.

The Department of State warns U.S. citizens to carefully consider the risks of travel to Iran. Dual national Iranian-American citizens may encounter difficulty in departing Iran.  U.S. citizens should stay current with media coverage of local events and carefully consider nonessential travel.  This Travel Warning updates the Travel Warning for Iran issued May 22, 2014.

Some elements in Iran remain hostile to the United States.  As a result, U.S. citizens may be subject to harassment or arrest while traveling or residing in Iran.  Since 2009, Iranian authorities have prevented the departure, in some cases for several months, of a number of Iranian-American citizens, including journalists and academics, who traveled to Iran for personal or professional reasons.  Iranian authorities also have unjustly detained or imprisoned U.S. citizens on various charges, including espionage and posing a threat to national security.  U.S. citizens of Iranian origin should consider the risk of being targeted by authorities before planning travel to Iran.  Iranian authorities deny the U.S. Interests Section in Tehran access to imprisoned dual national Iranian-American citizens because Iranian authorities consider them to be solely Iranian citizens; access to U.S. citizens without dual nationality is often denied as well.
 
The Iranian government continues to repress some minority religious and ethnic groups, including Christians, Baha'i, Arabs, Kurds, Azeris, and others.  Consequently, some areas within the country where these minorities reside, including the Baluchistan border area near Pakistan and Afghanistan, the Kurdish northwest of the country, and areas near the Iraqi border, remain unsafe. Iranian authorities have detained and harassed U.S. citizens, particularly those of Iranian origin.  Former Muslims who have converted to other religions, religious activists, and persons who encourage Muslims to convert are subject to arrest and prosecution.
 
The U.S. government does not have diplomatic or consular relations with the Islamic Republic of Iran and therefore cannot provide protection or routine consular services to U.S. citizens in Iran.  The Swiss government, acting through its Embassy in Tehran, serves as protecting power for U.S. interests in Iran.  The range of consular services provided by the U.S. Interests Section at the Swiss Embassy is limited and may require significantly more processing time than at U.S. embassies or consulates. The Iranian government does not recognize dual citizenship and will not allow the Swiss to provide protective services for U.S. citizens who are also Iranian nationals. 
 
Click here for more information.
 

Nuke Deal Could Boost US-Iran Relations

A nuclear deal could generate new opportunities for cooperation between the United States and Iran, according to a new policy brief by the Center for a New American Security. “Thirty-five years of animosity between the United States and Iran will not simply melt away,” the report says. But “a deal that truly resolves the nuclear issue can be a foundation for progress.” The following are excerpts from the full policy brief.

The prospect of a nuclear deal between the West and Iran has generated a robust debate about whether such an agreement might generate opportunities for U.S.-Iranian cooperation on a broader set of issues.  Any deal will address only the Iranian nuclear proliferation threat; even if successful, it will leave on the table many other unresolved sources of tension that have hobbled U.S-Iranian relations since the Islamic Revolution. The Obama administration has stressed that any deal regarding the “nuclear file” remains separate and distinct from the overall question of U.S. policy toward Iran. The lead U.S. nuclear negotiator, Ambassador Wendy R. Sherman, stated this clearly: “engagement on one issue does not require and will not lead to silence on others.” Iranian Supreme Leader Ali Khamenei has been equally insistent upon compartmentalizing and isolating the nuclear question from the broader U.S.-Iran relationship. But these negative statements do not determine what may happen in the days and years after an agreement.

To be sure, any thawing of the relationship would face tremendous challenges. The two countries have not had formal relations since 1979. In the decades since, successive U.S. administrations have designated Iran a state sponsor of terrorism, and imposed sanctions based on a range of Iran’s activities apart from its nuclear proliferation. Both sides harbor long lists of grievances. Iran resents American support for the Shah and for Saddam Hussein during the Iran-Iraq War. The United States remembers the takeover of the U.S. embassy in Tehran and Iranian support for militants in Iraq. Resentments on both sides mean that powerful resistance in both political systems would oppose cooperation. Moreover, Israeli and Gulf partners, whose cooperation is vital for the achievement of other U.S. interests in the region, are likely to oppose any increase in U.S.-Iran cooperation.

Despite the challenges, however, there are a number of areas where Iranian interests align with those of the United States and its partners. Both have interests in maritime security and in the free flow of energy out of the Middle East. Both would prefer a stable Afghanistan with Taliban influence limited to the greatest extent possible. Both oppose the Islamic State in Iraq and al-Sham (ISIS), and may be willing to work together against it.
 
Thirty-five years of animosity between the United States and Iran will not simply melt away even if Iran and the West can strike a nuclear deal. Resolution of the nuclear issue alone cannot untangle the violent web of politics in the Middle East. Significant resistance to increased cooperation with the United States will continue to be a central element of Iranian politics. Regional allies will remain wary of Iran either way. However, a deal that truly resolves the nuclear issue can be a foundation for progress.
 
Click here for the full report
 

Sagging Oil Prices and Iran

Matthew M. Reed

What impact has the fall in global oil prices had on Iran?
 
The oil price collapse since June has had only a modest impact on Iran— so far. But lower revenues have already forced President Hassan Rouhani to significantly reduce budget projections and even decrease Iran’s dependence on oil. More steps may lie ahead, depending on both the market and the results of Iran’s talks with the world’s six major powers on a nuclear deal.

In December, Rouhani presented a budget for 2015 based on an average oil price of $72 per barrel— down from about $100 per barrel in the 2014 budget. But oil has been trading below $50 and it may stay low. So the government has slashed the projected price again to $40 per barrel. Rouhani intends to reduce Iran’s dependence on oil from an average of 45 percent of all revenues to about 31.5 percent.
 
The imploding oil market comes at a time when Iran is already suffering serious economic challenges due to mismanagement, corruption and international sanctions. Inflation remains high even though it has halved to less than 20 percent over the last year.
 
Iran’s currency, the rial, lost half its value in 2012 amid tightened sanctions and has not recovered. The rial’s value climbed after Rouhani took office in August 2013, but it has since fallen again. By the end of 2014, it was trading on the unofficial “open market” for 35,000 per dollar, a modest improvement to the 40,000 per dollar rate at the end of Mahmoud Ahmadinejad’s term.
 
In early December, Iran raised bread prices slightly. More subsidy reform could be on the way to help cope with the shortfall in revenue.
 
Even when prices were high in recent years, sanctions did serious harm to Iran’s economy. But those same sanctions may defer some of the pain from falling prices. Iran’s oil revenues are currently held in customer countries and can only be used to pay for goods and services originating in those countries. For more than two years, revenues have been piling up in banks overseas due to sanctions. By early 2015, they totaled tens of billions of dollars in China, India and other top Iranian customers. Iran may only be adding to these accounts more slowly now that it is selling oil for less.
 
Oil traders and industry sources report that Tehran is offering generous credit terms to customers so there is a delay between oil delivery and payment. If the pain of the price drop is delayed, it won’t be for much longer.

How is Iran’s shortfall in revenue impacting the debate over nuclear talks?
 
Falling oil prices have accelerated the debate in Iran linked to the nuclear file. Supreme Leader Ayatollah Ali Khamenei and hardliners in his corner seem to prioritize Iran’s nuclear program over reconnecting the economy to world markets. They argue that belt-tightening, improvements in self-sufficiency and acceptance of some hardship can allow Iran to maintain its nuclear program— without compromising its revolutionary values. Khamenei calls this his “Resistance Economy” program. The concept, however, remains a catchphrase more than a comprehensive set of policies.
 
President Rouhani, on the other hand, has argued that Iran's economic prospects are directly tied to sanctions and its relationship with the outside world. “Our political life has shown we can't have sustainable growth while we are isolated,” he told a meeting of economists on January 4. To applause, he contended that Iran's foreign policy must serve its economy. Rouhani may not have dismissed Khamenei's “Resistance Economy” outright, but he surely hit a nerve.
 
The hardliner response was immediate and fierce. Days after Rouhani’s speech, Judiciary Chief Sadeq Amoli Larijani insisted thatone must not tie economic issues to nuclear talks.” Connecting the issues and debating them provided “reassurance” to Iran’s enemies, Larijani warned.
 
The debate is far from over but the price collapse is forcing leaders and politicians to pick sides. The supreme leader's allies in the media, judiciary, and military have since warned Rouhani not to incite public opinion against the nuclear program.

What impact have falling oil prices had on Iran’s relations with its oil-rich Gulf neighbors and other OPEC members?
 
Iranian officials have blamed the price collapse on Saudi Arabia and the United States. President Rouhani and Oil Minister Bijan Zanganeh have claimed that the collapse is a political conspiracy. “Those that have planned to decrease the prices against other countries will regret this decision,” Rouhani warned in a televised speech on January 13. “If Iran suffers from the drop in oil prices, know that other oil-producing countries such as Saudi Arabia and Kuwait will suffer more than Iran,” he added.
 
Other officials, like Deputy Foreign Minister Hossein Amir Abdollahian, have called on Saudi Arabia to cut production in order to lift prices.
 
To Riyadh, Iran’s complaints are just noise. Other cash-strapped oil producers also want Saudi Arabia to cut production and keep prices up for everyone else. The Kingdom, however, has little confidence that it or OPEC can prop up prices for long.
 
Instead of gambling on production cuts, the Saudis want to let the market self-correct: They believe in Economics 101. This may take time, but other Gulf and OPEC producers, including Kuwait and the United Arab Emirates, support this strategy. “We cannot continue to be protecting a certain price,” said UAE Energy Minister Suhail al Mazrouei on January 13.
 
Meanwhile, OPEC hawks like Iran and Venezuela can only watch from the sidelines. Venezuelan President Nicolás Maduro visited Tehran in early January to confer with Iranian leaders. “Our common enemies are using oil as a political weapon, and they definitely have a role in the sharp fall in oil price,” Supreme Leader Khamenei reportedly said in a meeting with Maduro.
 
Saudi-Iranian relations were grim before the fall in oil prices. Some foreign policy analysts speculate about whether Saudi Arabia has a secondary agenda, namely slashing prices to hurt Iran. But Riyadh would most likely keep production steady even if it had friendly relations with Iran.

How resilient are Gulf economies compared to Iran?
 
The Gulf states are more dependent on oil revenues than Iran, but they stashed money away over the last half decade to tide them over during busts. Saudi Arabia, Kuwait, the UAE and Qatar are flush with savings, so they can endure lower prices for now. The situation is more challenging for Bahrain and Oman. Unlike Iran, the Gulf states have easy access to international finance and loans.
 
Some sober analysts have argued in Iran’s reformist media that the price collapse will starve the country's oil and gas industry of much needed continuous investment, doing lasting damage. But Iran did weather the last two price collapses in 1999 and 2009.
 
Matthew M. Reed is Vice President of Foreign Reports, Inc., a Washington, D.C.-based consulting firm focused on oil and politics in the Middle East. Follow him on Twitter @matthewmreed
 

Kerry, Zarif Meet in Geneva

On January 14, Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif held intensive meetings in Geneva on the eve of nuclear talks between Iran and the world’s six major powers—Britain, China, France, Germany, Russia and the United States. The session was intended to “show the readiness of the two parties to move forward to speed up the [negotiations] process,” Zarif told reporters before meeting Kerry. “All issues are hard until we resolve them.”

The U.S.-Iran relationship has become the most critical angle of nuclear talks. The other world powers seem to have deferred to the United States to break ground with Iran. And Iranian negotiators know that Washington will have the final word on sanctions relief in any deal.

 

 
Kerry and Zarif “had substantive meetings for approximately five hours” and “discussed a broad range of issues,” according to the State Department. The two held a morning session and an afternoon session, which included an unusual walk along the streets of Geneva.
 
 
 
 

 

Zarif and Kerry also held  unscheduled late-night meeting.

On January 16, the two met again in Paris. The two had previously scheduled meetings with others, but they carved out time to meet again to continue closing gaps.

 

 

Photo credits: U.S. State Department via Flickr

 

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