Originally Published in Foreign Policy Association Blogs
Aniseh Bassiri Tabrizi is a Visiting Fellow at the European Council on Foreign Relations (ECFR) and the author, most recently, of “The EU’s sanction regime against Iran in the aftermath of the JPA.” Ms. Bassiri is a PhD candidate at King’s College London, where her research deals with the E3-EU diplomatic initiative on the Iranian nuclear crisis. She is also an associate member of the European Iran Research Group (EIRG). She has written extensively on Iran’s political and economic issues, providing research and analyses to several think tanks and consultancies. Ms. Bassiri recently spoke to Reza Akhlaghi about her newly released report on EU sanctions against Iran and the interim six-month nuclear agreement with Iran that comes to an end on July 20, 2014.
Based on your research, you argue in your new report that in return for Iran’s commitment to limit the most sensitive parts of its nuclear activities — as agreed by two sides in the Joint Plan of Action (JPA) — the P5 + 1 found challenges in providing Iran with sanctions relief. Why has the JPA not translated into new openings for economic relations between Iran and the EU?
The sanction relief offered to Iran under the JPA was “limited, targeted, and reversible,” while the bulk of restrictions and the international coalition that implemented sanctions against Iran over the last four years have been kept in place. Furthermore, even in those sectors in which trade with Iran would in fact be legitimate, EU businesses still face significant restraints on dealings with Iran.
This has meant that despite their interest in doing business with Iran and despite the fact that a number of trade delegations have visited Tehran in the aftermath of the JPA, the chilling effect of sanctions led potential European investors to remain reluctant to return to the Iranian market, failing to take advantage even of the available (albeit limited) opportunities. In a nutshell, EU companies did not rush back into singing contracts with Tehran as forecasted in the media and the economic benefit Iran has seen as a result of the interim deal has been less than initially estimated.
What was the process through which the EU sanctions became as extensive as those of the U.S.?
Since 2006, when the nuclear dossier was referred to the United Nations’ Security Council, up until 2010, the EU simply adopted sanctions aimed at Iran’s nuclear activities, implementing the UNSC Resolutions to the European territory. However, after the implementation of Resolution 1929, the dual-track approach has been increasingly characterized by a stronger emphasis on exerting pressure on Iran through unilateral measures. The EU, driven by the advocacy of then French president Nicholas Sarkozy, joined the U.S. in adopting a legislation that targeted Iran through comprehensive restrictions, which sanctioned the country’s financial and energy sectors with the goal of curbing Iran’s nuclear ambitions. The EU put in place the broadest sanctions regime it had ever imposed and, as a consequence, European companies progressively divested from Iran.
What regulatory body has the authority to lift the sanctions on Society for Worldwide Interbank Financial Telecommunications (SWIFT)?
EU sanctions against Iran, and therefore, the restrictions since March 2012 that ban SWIFT from providing specialized financial messaging services to EU-sanctioned Iranian banks, can be suspended or lifted through a unanimous decision by the Foreign Ministers of all 28 EU member states reunited in a Foreign Affairs Council meeting, a specific conformation of the Council. However, because of the secondary effects of many U.S. sanctions, any lifting of EU restrictions against Iran would have real impact only if they were coordinated with the American side.
What is the key concern of those in the US Congress about easing of sanctions against Iran and what do you think of the validity of their concern?
Sanction hawks and those in Congress opposed to a peaceful resolution of the nuclear issue argue that, even if a final agreement is reached, pressure on Tehran should be unchanged and the sanction relief granted should be at best temporary and reversible. They justify their position by stating that this would deter Iran from not complying with a final deal. Needless to say, Iranian negotiators are unlikely to agree to a scenario in which concessions on the nuclear program are made without reciprocal incentives on the sanctions front. Furthermore, the JPA already proved wrong those who argue that the sanction relief granted under the interim deal would have translated into a reduction of the P5+1’s critical leverage on Tehran. As the reports of the International Agency of Atomic Energy confirm, during the JPA, while the P5+1 faced difficulties in implementing part of the limited relief granted to Tehran, Iran has fully complied with its part of obligations.
Can you elaborate on factors behind the lack of new openings for EU trade with Iran during the six-month interim period?
To name just a few, the JPA limited the granted sanction relief only until its expiry date, which is July 20. This means that all contracts had to be executed by this date or else those transactions would be potentially subject to penalties. The six-month period proved to be a too limited timeframe for such transactions which involve, among other things, delivery of products and services, and receipt of payments. These time-induced challenges made most EU companies refrain from conducting business with Tehran.
Furthermore, Iran is still largely isolated from the global banking system as a result of the sanctions in place. Moreover, financial institutions in the EU fear of accidentally breaching U.S. sanctions that could make them subject to penalties. Therefore, many European banks have refrained from processing payments and undertaking economic transactions with Iran even in the case of legitimate trade. During the current six-month interim agreement, European companies have mostly focused on re-engaging with Iran in anticipation of future opportunities that might emerge from a comprehensive deal, rather than on signing deals.
How Syrian and Iraqi dynamics could impact, or may have impacted, nuclear negotiations and easing of sanctions against Iran?
Negotiators on both sides have been very careful in separating the nuclear issue from any other topic, including regional developments. This has been underlined especially in light of the fast approaching JPA deadline. As a consequence, the crisis in Iraq has only been discussed briefly on the sidelines of the last nuclear talks during a visit to Vienna by William Burns, U.S. Deputy Secretary of State. But overall, there has been no direct impact of regional events on the nuclear talks and, despite converging U.S.-Iranian interests, it is important that this continues to be the case. If cooperation to tackle these developments could be beneficial in further increasing the level of contacts and trust between the two sides, keeping the issues separate is fundamental in boosting the momentum and increasing the chances of finalizing a deal.
From the perspective of both sides, what do you believe to be the key sticking points that could act as serious obstacles to signing a permanent agreement?
Notwithstanding the genuine commitment of the negotiators and the unprecedented political capital invested by Iran and the P5+1 countries to reach an agreement, in the two-week marathon of nuclear talks that will take place from July 2 to July 15, gaps between the two sides are likely to remain significant.
Two of the main sticking points are likely to be the nuclear infrastructure and level of enrichment Iran will be able to keep after a comprehensive agreement, and the time-frame and order in which sanctions would be lifted. If a compromise is not found before the JPA deadline, the latter could be extended for a maximum of six additional months. During this phase, however, chances of reaching an agreement might be hampered by the increasing domestic pressures of those opposed to a deal, both in the U.S. and Iran. The looming end of mandate of EU foreign policy chief and P5+1 chairman, Catherine Ashton, who in the past four years acted as a mediator among the parties, would only add another layer of uncertainty to this scenario. Hence, all sides will put their utmost effort into closing all the remaining gaps to reach a final settlement by July 20.