The Iranian Nuclear Deal – Part I
The Obama Announcement and the Effectiveness of Financial Sanctions
To set the tone of the debate, at the unusual hour for a Presidential address, just after 10:30 p.m. on Saturday evening, President Barack Obama appeared on television. He announced an agreement between the Islamic Republic of Iran and the P5 +1 (the USA and its partners Britain, France, the Soviet Union and China + Germany) on Iran’s nuclear program. The agreement, itself based on phased and reciprocal steps, was depicted as a first initial tentative step. Obama reiterated his unwavering policy of preventing Iran from obtaining nuclear weapons, not the capacity to make them. Further, Obama had always stated his preference for a diplomatic agreement rather than resorting to bombing Iran’s nuclear facilities and recognized that a new opening for diplomacy emerged with the election of President Hassan Rouhani who ran on a program of opening Iran to the world.
In 2011, after overcoming an initial strong resistance to proposals by Senator Mark Kirk, a former highly decorated naval intelligence officer, to target the Iranian Central Bank and Iranian financial institutions, America had become the leading agent in organizing the much more comprehensive sanctions that have crippled the Iranian economy. Soon after Obama’s TV announcement, Kirk, a Republican, partnered with Democratic Senator, Bob Menendez, to craft legislation to reinstate the full force of sanctions and impose new ones should Iran fail to roll back its nuclear program in accordance with the agreement. Further, the bill not only requires a certificate of compliance by the Administration every 30 days, but insists that Iran not be guilty of sponsoring terrorism.
Retaining the architecture of the existing sanctions, as provided in the Agreement, retains that effectiveness, Any fear of sanctions erosion is greatly exaggerated. In targeting Iranian financial institutions and the Central Bank, traders are forced to choose between America and Iran since firms were subject to substantial fines. Those firms will not resume investment and substantial trade just for a six month interim deal. Iran has a foreign debt of over US$70 billion and a much larger domestic debt. Iranian workers wait for weeks for their pay and the number of unemployed grew as the value of the rial fell. (After announcing the interim agreement, the value of the rial rose 2% in one day.) Even the Iranian Revolutionary Guards support the agreement because they can enhance their profits from the 30% plus segment of the economy they control.
The Contents of the Agreement
Obama was equivocal about the results. He did not say that the agreement allowed the world to verify that Iran’s nuclear program is dedicated to peaceful uses and that it prevents Iran from acquiring a nuclear weapon, but only that this agreement “opens a new path” for such a result. The agreement itself does not deliver that result. Does this first step achieve anything?
Remember my past blogs depicting Iran’s current capabilities. Even though many of Iran’s centrifuge cascades are not operational, even though Iran’s enrichment program is already to a large degree on hold, even though the Arak facility is some distance from completion, Iran has achieved the goal where the time between its existing capacities and the construction of several nuclear weapons has been reduced to 4-6 weeks. The break out point had been reached; Iran has remained at this stage for the last two months. The interim agreement only extends the delay period about 50%, insignificant except symbolically in the scheme of things. Further, those modest results in freezing Iran’s progress may in part have been the consequence of the secret talks in which Iran and the US have been engaged over the last year in Oman and elsewhere.
Obama insisted that the interim agreement achieved something further. First, the progress of Iran’s nuclear program was halted (no enriching more uranium past 3.5%, etc.). Second, key parts of the program are rolled back and there would be no reprocessing or construction for reprocessing. Third, Iran committed itself to halting certain levels of enrichment, not beginning a new line for enrichment and desisting from re-enrichment. Fourth, part of its stockpile would be neutralized; of the existing stock of enriched uranium at 20% purity, half would be retained as oxide and half diluted to no more than 5%; this is one of the most significant terms of the interim agreement. Fifth, Iran would not be permitted to use its next-generation centrifuges, important since the new centrifuges are three to five times more efficient than the older ones.
Sixth, Iran agreed to stop work on its Arak plutonium reactor; nuclear inspectors, who have not visited the Arak reactor since August 2011, have already been invited to come on 8 December to examine the state of the facility. Seventh, transparency will be built into this first step since new inspections will allow extensive (not comprehensive) access to Iran’s nuclear facilities, but sufficient access to ensure that the previous commitments can be verified. Specifically, Iran would provide an updated DIQ for the Arak reactor with an agreed safeguards approach and permit IAEA inspector access when inspectors are not present for design information verification, interim inventory verification, physical inventory verification, and unannounced inspections at Fordow and Natanz with additional access to centrifuge assembly workshops, centrifuge rotor production workshops and storage facilities; and uranium mines and mills.
Do these limitations – sometimes called “interim” and at others characterized as “substantial” – help prevent Iran from building a nuclear weapons? Obama insisted that these containment steps would probably prevent Iran from using the cover of negotiations to continue to advance its program. But it will not, and does not even claim to prevent or really set back significantly Iran’s ability to reach a break out point within several months if Iran decides to stop inspections after which it could produce several nuclear weapons. Further, the interim agreement does not address the Parchin facility, the military production complex south east of Teheran. The Iranian refusal to allow IAEA inspectors access to this site is a key missing link. In other words, Iran, in terms of distance from a break out point, would not be much further back than it is now.
On the other side, the P5 +1 have agreed to provide what Obama dubbed “modest” relief from the sanctions while leaving the toughest sanctions in place which, when you read the list, does not appear so modest. They include stopping efforts to further reduce Iran’s crude oil sales, enabling Iran’s current customers to purchase their current average amounts of crude oil, enable the repatriation of an agreed amount of revenue held abroad, suspend the EU and U.S. sanctions on associated insurance and transportation services, suspend U.S. and EU sanctions on both Iran’s petrochemical exports and associated services as well as on gold and precious metals and associated services. The US sanctions on Iran’s auto industry and associated services would be suspended. Licensing the supply and installation in Iran of spare parts for flight safety for Iranian civil aviation and associated services would be permitted.
Second, as mentioned in the first section, there would be no new nuclear-related UN Security Council sanctions or EU nuclear-related sanctions and the U.S. Administration would refrain from imposing new nuclear-related sanctions but not threatening to impose new sanctions if Iran fails in its compliance. Third, Iran will be allowed access to a portion of the revenues to which the country had been denied as a result of the sanctions. A financial channel would be established to facilitate humanitarian trade involving food and agricultural products, medicine, medical devices, and medical expenses incurred abroad as well as used for Iran’s domestic needs employing Iranian oil revenues held abroad using specified foreign banks and non-designated Iranian banks. Relatively quickly, the immediate result would be the payment by Indian refiners of US$5.3 billion owed to Iran, payments that had been blocked by the sanctions. The same channel would enable Iran to pay its UN obligations, direct tuition payments to universities and colleges for Iranian students studying abroad, up to an agreed amount for the six month period and, finally, increase the EU authorisation thresholds for transactions for non-sanctioned trade to an agreed amount.
Fourth, as stated above, the overall architecture of the sanctions will remain in place and enforcement of those sanctions will continue with vigour. As a corollary, the relief from these economic pressures can be turned off and the full weight and even more of the sanctions regime can be quickly reinstated. Then the targets of the six months of negotiations are listed. First, Iran will retain its right to the use of nuclear energy for peaceful purposes. Second, at the end of the six months, it must be made impossible for Iran to develop nuclear weapons. Third, the burden of proof rests on Iran to prove and permit verifiable steps that Iran will not and cannot develop nuclear weapons.
There are wider goals for this agreement which neither the interim agreement nor the longer term agreement, addresses. Supposedly, but not necessarily, by the end of six months, the role of Iran as a sponsor of terrorism, the role of Iran as a threat to Israel, the role of Iran in the Syrian civil war and its support for Hezbollah in Lebanon, may or may not be addressed. But the hope, and I stress ‘hope’, is that the agreement will lead Iran along a path towards a less hostile attitude and establish Iran as a reliable partner in promoting peace. I remain very sceptical that this goal can be achieved.
At the end of the speech, Obama certainly overreached when he insisted that “only diplomacy can bring about a durable solution to the challenge posed by Iran’s nuclear program” when it was not diplomacy but sanctions that brought Iran to the nuclear negotiations table just as Iran faced the real possibility of a military attack. Perhaps this was a sop in the speech targeting Russia and China for the two always opposed any inclusion of a threat of military action in a UNSC resolution, hence the reference to “only diplomacy”. If that is indeed the case, then diplomacy was but the third part of the necessary triangle to complement the military threat and the actual economic sanctions. Given the Russian and Chinese positions, diplomacy was the only mechanism endorsed by the UN.
Further, on rereading Obama’s speech, he qualified the assertion that only diplomacy could achieve the goal with the term “ultimately”. But the truth is that ultimately, only the complete destruction of Iran’s nuclear program could terminate such a possibility.
[Continued in Part II]