by Derek Davison
Most of the recent discouraging news about the talks between Iran and world powers has focused on the substantial disagreement regarding Iran’s uranium enrichment capacity. The two sides differ sharply on how much enrichment capacity Iran requires, how much it should be allowed to maintain once a comprehensive agreement is reached, and how quickly it should be allowed to expand that capacity over the agreement’s timeframe (the length of which is itself another contentious point).
However, while this dispute could sink the chances of reaching an agreement on its own, the focus on enrichment masks another and perhaps equally volatile issue: the process through which Iran will receive sanctions relief if a deal is reached. This question not only factors into the terms of any comprehensive accord, but also carries enough uncertainty to potentially cause any final deal to break down in the future if expectations on either side are violated. This issue was the focus of a July 8 panel discussion at the US Institute for Peace (USIP), “Iran Sanctions: What the US Cedes in a Nuclear Deal,” moderated by the USIP’s Robin Wright and including Suzanne Maloney of the Brookings Institution, Kenneth Katzman of the Congressional Research Service, and Elizabeth Rosenberg of the Center for a New American Security.
The duration of a final deal is, as Maloney pointed out, a “sleeper issue” in the negotiations, which are quickly approaching the July 20 deadline. Negotiators from the P5+1 (the US, UK, France, China, and Russia plus Germany) want to maximize the length of time that Iran’s nuclear program will remain under international monitoring while delaying sanctions relief for as long as possible. Iran, understandably, wants considerable immediate sanctions relief and a minimum duration final deal. The two sides will surely compromise on a deal that lifts sanctions progressively, with relief tied to specific Iranian activity under the terms of the accord. But the devil is always in the details, and working out the specific timetable for sanctions relief and the steps to which it will be pegged is certainly among the more difficult challenges the negotiators are facing in Vienna. This process is made all the more complicated by the fact that the US has been imposing sanctions on Iran since its 1979 Islamic Revolution, for reasons that have had nothing to do with Iran’s nuclear program. For example, Iran’s support for the militant Lebanese group Hezbollah was used as the justification for some of the earliest and strongest US sanctions against Iranian banks, and those sanctions are unlikely to be altered if a final deal is reached.
The issues of uncertainty and misunderstandings regarding sanctions relief, and the potential for this to threaten the stability of a final deal, were widely discussed by the panelists. Iran wants, and President Hassan Rouhani needs, substantial sanctions relief to boost an economy that continues to suffer from high inflation and high unemployment as well as economic sanctions. In a practical sense, as Katzman noted, the initial round of sanctions relief will have to be fairly sizable; there is no benefit to Iran if, for example, the deal lifts caps on Iran’s oil exports without also allowing Iranian companies and banks to properly access the international banking system. In a strictly legal sense, American sanctions against Iran could be quickly suspended via executive waiver, which must be renewed every six months but does not require Congressional approval in the way that a permanent lifting of sanctions would.
However, the actual speed with which companies would do business with Iran will likely be slowed by a number of complicating factors. These include concerns over the sustainability of the agreement, the stability of the Iranian regime, and the ability of Rouhani’s administration to reduce corruption, according to Rosenberg. But the primary complication will undoubtedly be uncertainty over the precise nature of the sanctions relief and the different sanctions regimes that countries, chiefly the US, will continue to levy against Iran. Rosenberg noted that there will be a period in the wake of a final deal in which companies will need to figure out the limits of sanctions relief to Iran, particularly navigating the differences between European and US law.
It may prove difficult or impossible to separate American sanctions that were put in place specifically as a result of Iran’s nuclear activity, which would be dealt with under the terms of a comprehensive accord, from those related to other issues like Iran’s support for Hezbollah, which would be untouched by such a deal. Iranian negotiators will likely be satisfied with a deal that allows European firms (especially banks) to do business in Iran again, but if those firms are still wary of other remaining sanctions, they will remain reluctant to pursue opportunities in Iran. In practical terms, then, sanctions relief will be a slow process. For an Iranian public that, as Wright pointed out, expects a deal and wants benefits quickly, such a delay could damage both US credibility and the Rouhani presidency, and could even collapse the overall framework of a final deal.
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