Eliciting a better deal from Iran

After months of public optimism, Iranian and U.S. officials are publicly hinting that they’ve reached an impasse over the nuclear negotiations. An extension to the six-month interim deal signed in Geneva last November will likely be required. But there may be silver lining: without agreed upon economic relief during this extension period, the U.S. and its partners are uniquely positioned to exact a better deal from Iran.

The U.S. and its international partners signed off on an interim agreement in November known as the Joint Plan of Action. By the Obama administration's account, Iran received $7 billion in economic relief, including $4.2 billion in cash, in return for a “freeze” in the nuclear program. The actual relief Iran experienced was almost certainly exponentially greater, however, and the Iranian economy is enjoying a modest recovery as severe international sanctions are eased.

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Nevertheless, Iran has proclaimed its disappointment at the pace of sanctions relief. This is because Tehran has been unable to access the bulk of the money frozen by sanctions. Transfers have been held up because the regime has not yet complied with bank requests to detail how the money will be used.

For what it’s worth, the banks’ hesitancy is warranted. After all, those funds had been frozen thanks to Iran’s decades-long record of international terrorism, money laundering, and proliferation.

Indeed, Iran’s illicit activity remains a serious concern for Washington, even as it negotiates a nuclear deal. In December, the U.S. blacklisted 19 Iranian companies just weeks after the nuclear negotiations began. Iran stormed away from the negotiating table, but soon returned, admitted the EU and the U.S. within their legal rights implement existing sanctions during the nuclear negotiation period. But Tehran warned nevertheless that it ran against the spirit of the deal.

Since then, the U.S. has largely refrained from targeting Iranian companies. This year, Iranian sanctions evaders been designated just twice, and only once has an Iranian official been named, for human rights violations.

The U.S. may determine it to be in the best interest of successful negotiations to hold off on further designations during the coming six-month extension. But the longer negotiations stretch, the less sense it makes to hold back from using the tools afforded to the administration by Congress. There are hundreds of companies controlled by Iran’s Islamic Revolutionary Guard Corps (IRGC), a designated terrorist entity and nuclear proliferator. Thousands of individuals and entities continue to operate without disruption by the administration.

But it may not be that simple. President Hassan Rouhani insists that sanctions relief is key to the success of the negotiations. He has already delivered significant economic relief to the Iranian people thanks to American leniency. He and his advisors say they need more relief to sustain popular support from swinging towards the “hard liners” that eschew negotiations, especially if Iranian flexibility is required.

Iranian negotiators are almost guaranteed to argue that an additional cash disbursement, beyond the billions already granted, is needed. In response, Washington must insist that there be no new relief unless Iran agrees to new concessions.

In exchange for new sanctions relief, the U.S. could demand the suspension of research and development into advanced centrifuges. Progress towards reversing Iran’s gross human rights violations and support for terrorist proxies throughout the region could also be tied to economic relief. But the most important demand would be certification by the International Atomic Energy Agency – the UN watchdog organization – that Iran come clean on all “possible military dimensions” of Iran’s nuclear program as a precondition for a final nuclear accord.

The IAEA first pressed Iran over its nuclear program’s possible military dimensions in 2008. But it is only very recently that Iran has reversed its policy of stonewalling inspectors. The IAEA has not given a time frame for the completion of its report on the military questions, but even with full Iran cooperation, there is simply no chance that this will be resolved by July 20.

Thus, delay in deal making may give Washington a little more leverage, not to mention more time to address the military dimensions of Iran’s nuclear program.

Ottolenghi is a senior fellow at the Foundation for Defense of Democracies in Washington, D.C.

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