Thanks to a long-running stand-off with the international community over the nature of Iranian nuclear ambitions and its refusal to stop enriching uranium, Iran is facing multiple sets of sanctions, and sensitive negotiations with six world powers, including a tough new EU regime. P5+1/EU negotiations with Rouhani’s new team—supplemented and accelerated by secret U.S.-Iranian engagement—led to agreement in November 2013 on a Joint Plan of Action (JPA), a six-month interim agreement designed to provide the time and space needed to work out a final, comprehensive solution.
Things changed in 2010 because the Obama administration—aided by the antics of then-Iranian President Mahmoud Ahmadinejad—convinced European and Asian governments that the only way to get a diplomatic deal with Tehran was to apply economic pressure first. This global pressure has now isolated Iran from the world economy in a way that American pressure alone never could.
Initially a step behind the US in implementing punitive action against Iran, in October the EU agreed on a further set of wide-ranging measures targeting Iran’s energy, financial and transport sectors. Four rounds of United Nations Security Council sanctions have cut Iran off from the international financial system, causing steep falls in its exprots and currency, and economic pain for its strong population. Inflation now stands at about 17 per cent and youth unemployment at about 23 per cent. Low oil prices have caused further pain in recent months. And what oil revenues Iran is allowed to generate go into heavily restricted accounts that now encumber more than $100 billion dollars. Virtually the entire sanctions architecture remains in place. Indeed, throughout the existence of the JPOA, sanctions pressure on Iran has not decreased – it has increased.
Before the JPOA, inspectors had less frequent access to Iran’s nuclear facilities. Today, the JPOA has enabled IAEA inspectors to have daily access to Iran’s enrichment facilities and a far deeper understanding of Iran’s nuclear program. Sanctions were instrumental in bringing Iran to the table. But Iran’s program continued until negotiations made the Joint Plan of Action (JPOA) possible. Sanctions did not stop the advance of Iran’s nuclear program. Negotiations did. It is also a process that cannot be rushed. The most recent discussions were serious, useful, and businesslike.
Sanction have isolated Iran from the international banking system and damaged its economy. Both the US and Iran say they are confident of reaching a deal. And we are closely following the talks with Iran and we continue to believe that the best way to do that is to negotiate a comprehensive plan of action that, when implemented, will ensure that, as a practical matter, Iran cannot acquire a nuclear weapon and that Iran’s nuclear program is exclusively peaceful.
That judgment is shared by our closest allies. Just weeks ago, Prime Minister Cameron could not have been clearer: “…It is 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… which has been so valuable in presenting a united front to Iran.”
The hope is deal will be reached (the end of March that would then be finalised by June 2015) ending sanctions in exchange for guarantees of its nuclear programme remaining peaceful. Such agreement would involve the opening up of Iran´s economy in exchange for guarantees. Those who are best placed to know – the diplomatic professionals who have been leading these negotiations and dealing directly with the Iranians and our international partners for the past several years – made progress on some issues but gaps remain on others. They also believe that the risks are real, serious and totally unnecessary.
There are also other problems as Israeli prime minister Benjamin Netanyahu identified in speech at the heart of Washington´s policy, in one of the most prominent Venues, that could make it much harder for president Obama to sell an agreement to a Republican-led Congress even if his negotiators reach one in Geneva. The Israelis argue that a deal with Iran would made them feel less safe, and therefore less willing to take risks on other security matters, particularly developments with the Palestinians, but potentially in Syria and Lebanon as well. At the sametime, President Obama is becoming increasingly dependent on Iranian fighters as he tries to contain the Islamic State militant group in Iraq and Syria without committing American ground troops.
Iraq had urged, its part, that the United States and Iran not to play out their bilateral conflict in Iraq’s battle against the Islamic State. Iran’s powerful influence in Iraq has been on display as the fight against the Islamic State militants around Tikrit has unfolded, with strong support for Shiite leaders where they were once feared. “Iran has helped the Iraqis hold the line against Islamic State advances”, analysts say, while American advisers train Iraq’s armed forces. We all have the same goal – to make the world a safer place by resolving the international community’s concerns with Iran’s nuclear program. It’s hard to imagine a scenario in which Iran has a better chance to break out of the sanctions cage than this one.
In all, however, we find that this is not a bilateral negotiation; this is a multilateral P5+1 negotiation. Having rejected the idea that additional economic or military pressure might yield a better agreement, U.S. Secretary of state John Kerry insisted that “there was no viable alternative to the agreement that the United States and its partners were attempting to negotiate — an agreement that he said would lead to improved verification measures and would lengthen the time it would take Iran to “break out” and achieve a working nuclear weapon. Time is of the essence,” he said, and important decisions need to be made.
There are big challenges to maintain solidarity between the west and its Gulf allies. Their support is crucial. Like a skilled diplomat, a leader, whether a corporate CEO or a department head, creates a common vision by building a coalition among its members to support that vision. Like Israel, which opposes the potential deal, Saudi Arabia and other Arab nations in the region see Iran as an opponent. Israel also strongly opposes a deal. But, the only force with the ability to bring Kurdish troops, the Iraqi Army and the Shiite militias together to fight the Islamic State is Iran and U.S.
We see a historic opportunity to resolve Iranian concern through diplomacy. In a year or two a lot of what you see as problems won´t be problems any more if we get the right deal with Iran. Foreign companies are renewing relations with Iran in anticipation of an agreement over its uranium enrichment programme. But, will the lifting of sanctions allow the country to finally meet its potential as an investment destination?
Growing optimism that international trade sanctions on Iran will be lifted has resulted in dozens of found managers visiting the country and carrying out due diligence on Iranian companies. Investors believe the Islamic republic would immediately become one of the more developed markets available to them if it were opened up to foreign investment.
New sanctions are unnecessary because, as noted in IISS video of the EU sanctions against Iran, Iran already is under acute pressure from the application of the existing sanctions regime. In recent months, that pressure has only grown stronger with the dramatic drop in oil prices. At this time people in Iran are also desperate for a deal to be done. Investors and advisory firms appear equally keen.
There is considerable evidence that the U.S. Strategy in Iraq can benefit from “peaceful Iran” and Iran’s effort to fight the Islamic State. Both the international community and Iran could use this to negotieate a comprehensive deal, one that involves some give and take. I continue to believe that a deal would be the best outcome for all concerned Middle Eastern (including Israel), the Obama administration seems committed to this process. The results of Israel’s upcoming elections on March 17 will matter.
Upcoming EACC Event:
Sanctions: Current Trends and Their Implications for Companies & Investors May 19, 2015 during The World Trade Week NYC 2015.