October 15, 2014

Can U.S. Uphold Its End of an Iran Nuclear Deal?

Reza Marashi on CNN

With Iran’s Foreign Minister Javad Zarif and U.S. Secretary of State John Kerry set to meet in Vienna and the November 24 deadline to the P5+1 and Iran nuclear talks in sight, the White House’s ability to provide Iran with significant sanctions relief early in a nuclear deal remains unclear. At the same time, any perceived failure by the U.S. to deliver could complicate, if not poison, what will already be a tenuous post-deal period.

U.S. negotiators have not helped their cause. During the latest round of talks in New York, the U.S.’s lead negotiator, Wendy Sherman, promised that “as soon as we [the U.S.] suspend our major sanctions — which will happen very early in the agreement — the world will flood into Iran.” Her comment was echoed by that of Western diplomats, who likewise urged the Iranians “not [to] underestimate the huge economic relief for their people” in case of a nuclear deal.


Holding out the carrot to Iran is a sensible negotiating strategy, but only insofar as the U.S. and its European partners can deliver on it. Few, however, believe that to be the case. Companies that would otherwise jump at the opportunity to capture Iran’s enormous market are being advised to take a wait-and-see approach in the case of a nuclear deal. At the same time, Iran’s population —according to recent polling — remains in a state of disbelief as to the U.S.’s willingness to lift the sanctions and turn the page in its relationship with Tehran.

This should be a major source of concern. It’d be the ultimate tragedy for the White House, which has spent as much political capital as it has on the nuclear negotiations, to have defeat snatched from the jaws of victory thanks to the lingering effects of its sanctions. With a region in turmoil as ISIS, which calls itself the “Islamic State,” continues its rampage through Iraq and the Levant, the Obama administration cannot afford the outbreak of hostilities with Iran. That’s why President Obama must take steps to instill confidence in all parties that the U.S. can uphold its end of any nuclear bargain.

What can the White House do?

First, control the process. What the White House needs to do is take control of the sanctions file, create a plan of action for sanctions relief, and oversee the various federal agencies involved with sanctions enforcement. Some of that has occurred during the interim period of negotiations — as the White House was not keen on any surprises that would frustrate the Iranians and the nuclear talks in the process — but White House involvement needs to accelerate if sanctions relief is to take place in a clear and coordinated fashion.

Why is this so important? Because European, Asian, and even potentially U.S. firms will be looking at the roll-out of sanctions relief to gauge the speed and confidence with which they (re-)enter Iran. Companies’ legal advisers will be paying close attention to whether there is uniformity in the way federal agencies interpret the relevant rules and regulations, including what are expected to be broadened licensing schemes for more expanded trade with and investment in Iran. Uniformity of this kind can only come about under the explicit direction of the White House.

Second, signal a shift. While a nuclear deal promises to bring to a close the most tense chapter in U.S.-Iran relations, the post-deal landscape could see the two parties hedging their bets, as commitments are weighed and obligations deferred. Outside observers will view all of this with skepticism, and caution will give way to stasis as the risk of a nuclear deal falling apart dissuades foreign companies from starting up business in or with Iran.

That is why the White House must signal a shift in their approach to Iran. That means not just relieving sanctions on a schedule agreed to in the negotiations, but also taking additional measures that persuade firms that there is a sea-change underfoot in the way the West deals with Iran.

For starters, the White House should continue a dialogue that has been opened with the Iranians for the first time in three-plus decades. It is no secret that the regional landscape has turned decisively in favor of U.S.-Iran cooperation — ISIS is a mutual antagonist. Continued negotiations on the range of outstanding issues could signal a change of pace between the two long-time adversaries.

The White House could also take discrete measures that instill confidence in firms interested in doing business with Iran. This includes setting up a direct financial channel to select Iranian financial institutions for the processing of licensed transactions. Such a channel could be run from the Federal Reserve, which maintains correspondent relations with banks all over the world. This would ensure that OFAC-licensed activities are able to be undertaken by U.S. persons and would signal to U.S. and foreign financial institutions alike that dealings with Iran are not as risk-prone as in the prior period.

Third, reach out and advise. Fair or not, there is a lot of fear out there. Most firms avoid Iran — even when engagement is permitted — out of terrified respect for U.S. sanctions enforcers.

That means there will need to be a lot of hand-holding to guide U.S. and foreign firms through the thicket of rules and regulations providing Iran sanctions relief. Most companies will need official assurance not once, not twice, but again and again, before undertaking transactions with or activities in Iran. The White House should be prepared to do the requisite outreach and ensure that both the Treasury and State Department are well-staffed to advise firms on the scope of permissible activities.

In spite of the wrong-headed advice of its closest allies, the Obama administration has courageously pursued the diplomatic path with Iran. That political courage cannot have been in vain. If, as a senior Obama administration official said this week, “the next two years will be transformative in…[the U.S.-]Iran relations…,” then the White House needs to first ensure that it upholds the U.S.’s end of a nuclear bargain. That means not just being prepared to offer Iran sanctions relief, but making sure that the relief sticks and its benefits inure to Iran and its people. There is no better way, after all, to avoid the outcome a nuclear Iran.

This article originally appeared in CNN.

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