Interim deal loses credibility

Interim deal loses credibility

If Iran’s negotiators were not committed to reaching a deal by the deadline, the talks must have ended then.

The failure of the Western powers to ease sanctions on Iran in exchange for freezing key aspects of its nuclear programme is not only undermining the interim deal but could also torpedo any permanent accord guaranteeing that none of its nuclear material could be used to make bombs.

Coinciding with the April 7th-8th round of talks between Iran and the five permanent Security Council members plus Germany, International Atomic Energy Agency (IAEA) head Yukia Amani reported that Tehran is faithfully implementing its side of the bargain reached last November and put into effect on January 20.

Under this arrangement, Iran agreed to dilute or convert to uranium oxide all uranium enriched above the 5 per cent level, install no new centrifuges, partially suspend centrifuge operations at two main plants, transfer no nuclear fuel to the Arak power plant, and grant the IAEA constant monitoring rights.

However, Iran has not benefitted as expected from an easing of sanctions. Although the interim accord is meant to release $4.2 billion of Iran’s $100 billion in assets held in foreign banks outside Iran, this is not happening.

International banks refuse to do business with Iranian banks (even those not embargoed). The reason for this refusal to engage is the threat of hefty US Treasury Department fines if the complicated and complex collection of sanctions is somehow violated.

As Paul Pillar blogged in The National Interest, “The marvellous sanctions machine is so powerful that it continues to exude power and have effects even after a switch has been turned off.” He said that the US Treasury Department has to clarify the situation and encourage banks to operate in accordance with the new arrangements.

Discarded promise

Under the interim deal, which has already run for half its mandate, the US and the Western powers also promised to open a “financial channel to facilitate humanitarian trade for Iran’s domestic needs” with payments taken from Iranian oil revenues held abroad. However, the US has refused to open such a channel between US banks which clear global dollar payments and Iranian banks, leaving payments in other currencies to be made through intermediaries.

One of these intermediaries is the Kolkata-based UCO Bank selected in 2012 to hold more than $3 billion in rupees for payments for Iranian oil bought by India. While India has reduced its purchases of Iranian oil, it remains a major importer,with Indian firms paying for Iranian crude by depositing rupees at the UCO bank. The rupees are then used to compensate Indian exporters for goods sent to Iran. Arranging letters of credit is a slow, red-tape-ridden process.

While foreign businessmen have flocked to Tehran, they have not reached lucrative deals because the re-imposition of the eased sanctions remains a threat after the July 20th deadline for a final accord. For example, Barbara Slavin writing for Al Monitor revealed that a multinational firm (not US Boeing) has refused an Iranian contract for aircraft maintenance services because work could not be completed by the end of July.

The interim deal is losing credibility with Iranians disillusioned with endless negotiations that provide no direct respite from sanctions. In spite of the rewards promised when it was concluded, hard pressed Iranians do not see any improvement in their economic situation. Sanctions continue to prevent the importation of essential medicines and medical devices which are not on the list of sanctioned items.

While some relief from the US Treasury Department threat may be at hand, this may be too little, too late. The interim accord has permitted India to deposit $1.5 billion in a Central Bank of Iran account outside Iran and this sum is due to be transferred to Iran soon.

Also, the US Treasury Department has graciously granted licenses for US firms Boeing and General Electric to supply certain spare parts for commercial aircraft to Iran and to service 18 engines sold to Iran before the 1979 revolution. Since 1990 Iranair, the national carrier, has 200 accidents, killing 2,000 people due to the need to fly jets long past their normal life span.

Unfortunately, as the talks got underway, Washington ramped up the rhetoric, souring the atmosphere. US Secretary of State John Kerry declared that Iran has the capability to refine within two months its 20 per cent uranium stockpile to the 90 per cent level needed for a nuclear bomb.

The US also stated its objection to the nomination of Hamid Aboutalebi, Iran’s new UN ambassador because he was a member of the student group that stormed the US embassy compound in Tehran in 1979 and held staff for 444 days. If Iran’s negotiators had not been committed to reaching a deal by the deadline, the talks might well have ended there and then.

Fed up with US obstructiveness, Russia and Iran are in the process of concluding a $20 billion oil-for-goods deal which, the US claims, would disrupt the unanimity of the Security Council negotiators and undermine the talks.