ARLINGTON, Virginia – The Iranian people breathed a collective sigh of relief last week, hoping a nuclear deal reached between their government and six world powers would provide a much needed jolt to their nation’s moribund economy by easing the onerous sanctions that have sent their country’s currency to the floor and domestic prices to the ceiling.
The interim agreement, which curtails key elements of Tehran’s nuclear program for six months in exchange for temporarily lifting some of the sanctions that have sent Iran’s economy into a tailspin, is aimed at opening a window of time in which a permanent, comprehensive accord could be negotiated between the two sides. This accord, after following four days of talks in Geneva and announced in the wee hours of November 24, is not the end of the road in nuclear negotiations between the six global powers and the Islamic Republic, but simply a rest stop on the way to a final agreement
Iran and the diplomatic bloc known as the P5-plus-1, the five permanent members of the United Nations Security Council plus Germany, forged the six month interim agreement following years of on-again off-again talks that failed to narrow the chasm-wide gap separating Tehran and western capitals. The negotiations were given fresh impetus last June with the election of moderate cleric Hassan Rouhani as Iran’s president. Rouhani replaced Mahmoud Ahmadinejad, whose eight year long tenure as president coincided with a significant deterioration in relations between Tehran and the west and an equally substantial expansion of Iran’s enrichment of uranium, the nuclear material that can fuel energy-generating civil nuclear reactors, or enriched to a higher level, form the core of an atomic bomb.
Ahmadinejad’s holocaust-denying rhetoric and frequent verbal tirades aimed at Israel set an acerbic tone for relations between Tehran and Washington that were made even more toxic by Iran’s refusal to suspend uranium enrichment and its provision of support to Hezbollah in Lebanon, Hamas in Gaza and Shia militias in Iraq that killed U.S. forces with armor piercing, Iranian-supplied roadside bombs. Although these and other important security policies are ultimately decided by Supreme Leader Ayatollah Ali Khamenei, the official who sits at the apex of power in the Islamic Republic’s theocratic system of clerical rule, Ahmadinejad’s ascension to the presidency in 2005 marked a palpable hardening of Iran’s relations with the outside world. Tehran resumed uranium enrichment- which had been suspended during the latter ruling years of Ahmadinejad’s reformist predecessor- and subsequently refused to halt it.
Tehran’s unbending posture during the hard line president’s tenure and its refusal to turn off the fast-spinning centrifuges that churn out enriched uranium precipitated a litany of sanctions against Iran, bringing the country’s hydrocarbon-rich economy to its knees.
By the time Hassan Rouhani assumed the presidency in August, the Iranian economy was being crushed by the collective weight of a sanctions regime that had inhibited Tehran’s ability to export oil and gas and repatriate the hard currency earned from these sales. An oil embargo imposed by the European Union in 2012 cut off Tehran’s access to a market that had absorbed 600,000 barrels-per-day of Iranian crude in 2011, while other measures adopted by the 28-nation bloc that year halted trade with Iran in gold and precious metals and banned insurance on shipments of oil and petrochemicals from the Islamic Republic.
Even worse for Iran’s economic trajectory, the United States Congress passed a law in late 2011 that banned foreign banks that processed payments through Iran’s central bank, the main conduit for oil payments to Tehran, from opening accounts in the United States, a measure which had a particularly deleterious effect on the value of Iran’s currency. These, and other sanctions adopted by the U.S. and its European allies, sent Iran’s currency plummeting, oil exports falling and inflation climbing as domestic prices rose and the value of Iranians’ savings fell.
Iran’s oil exports slid from an average of 2.51 million barrels per day (bpd) in 2011, to 1.53 bpd in 2012, to a low of 715,000 bpd in October 2013, while the value of the Iranian Rial recorded just as steep a fall, plunging more than 50 percent against the U.S. dollar. Like a knife cutting through a vein, the sanctions regime bled Iran’s economy’s dry, leaving the Islamic Republic, which sits on the worlds’ second and fourth-largest natural gas and oil reserves, respectively, without buyers to purchase the crude exports that provide Tehran with 50 to 60 percent of its government revenue and up 80 percent of its export earnings.
These sanctions, and the crushing economic burdens they entailed, laid the ground for the election of Rouhani, a moderate who ran on a platform of smoothing Tehran’s course relations with the outside world. The fact that Khamenei, who ultimately charts the political trajectory of Iran’s Shia theocracy, allowed Rouhani to be elected president in a field of candidates dominated by hardliners opposed to talks with the west seemed to indicate that the Supreme Leader was amenable to a nuclear deal with global powers in exchange for sanctions relief.
Such a deal was what was precisely in the cards when negotiators from Iran and the P5-plus-1 descended on Geneva late last month. In a round of negotiations held less than two weeks earlier, diplomats from the two sides had come tantalizingly close to reaching an accord in which Tehran would agree to curtail the aspects of its nuclear program that concern Washington and European capitals the most in exchange for temporarily lifting some of the sanctions that have been a yoke around the neck of the Iranian economy for the past few years.
Only last minute objections from the French and the refusal by the U.S. and its European allies to acknowledge what Tehran says to be its right to enrich uranium scuttled an agreement. When the two sides reconvened in Geneva, they were able, following four days of talks, to forge an interim agreement that partially bridged the nuclear divide separating Tehran and the west.
The six month agreement prohibits Iran during the duration of the accord from enriching uranium to more than 5 percent purity and requires Tehran to dilute below 5 percent purity, or convert into oxide form its entire stockpile of uranium with 20 percent concentrations of U-235, the isotope necessary for nuclear fission. Neutralizing this 20 percent enriched uranium is of critical importance to the U.S. and its negotiating partners because uranium enriched to this level is only a short technical step away from the weapons-grade 90 percent enriched fissile material that forms the core of an atomic bomb.
Under the “Joint Plan of Action,” Iran also agreed not to increase its stockpile of 3.5 percent enriched uranium during the six month lifespan of the agreement by converting any newly produced 3.5 percent enriched material into an oxide form. Tehran will also be barred from installing new centrifuges at its Natanz and Fordow enrichment facilities, from feeding uranium into centrifuges that are installed but not currently enriching uranium and from building new centrifuges beyond those needed to replace broken machines. Addressing western fears about another possible pathway to an atomic bomb, the accord also temporarily restricts Iran’s activities at its Arak heavy-water reactor, a facility that, when completed, could be used to produce weapons-grade plutonium.
The temporary agreement did not solve the nuclear dispute between Iran and the west, but simply provided negotiators with a six-month window of opportunity in which to negotiate a permanent, comprehensive accord. Molding the shape of such an agreement will be tough, however. Before the ink on last month’s agreement was even dry, hardliners on both sides of the nuclear divide publicly expressed their displeasure with the deal reached in Geneva. Israeli Prime Minister Benjamin Netanyahu, a vocal opponent of Iran’s nuclear program and never one to shy away from criticism, labeled the accord to which the U.S., its most stalwart ally, was a party, a “historic mistake.”
Meanwhile, on the other side of the Atlantic, U.S. lawmakers on both sides of aisle denounced the agreement and vowed to press on with further sanctions against Tehran. If a simple a six month agreement elicits such robust reactions, one can only imagine the bluster that a permanent accord will precipitate.
– Eric Erdahl