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Effective Sanctions Relief on Iran for Sanctions’ Sake
Effective Sanctions Relief on Iran for Sanctions’ Sake
A diplomatic breakdown over “snapback” tests the UN
A diplomatic breakdown over “snapback” tests the UN

Effective Sanctions Relief on Iran for Sanctions’ Sake

Originally published in The Hill

The one year anniversary of Iran nuclear agreement’s entering into force on Oct. 18, 2015 was buried in the noise and news of U.S. electoral campaign, operation to liberate Mosul and tragic agonies of Aleppo. This in itself is a testament to the accord’s remarkable success in addressing a major threat to global security. But in this success lies a peril: a “done deal” mentality that diverts attention to other priorities, treats implementation as a mere technical or bureaucratic exercise, and fails to remedy its inevitable hitches. Ensuring that Iran’s nuclear program remains peaceful and opening the door a crack or two for new opportunities to build balance, stability and security in the Middle East are worth fighting for.

Over the past year, the International Atomic Energy Agency (IAEA) has confirmed again and again that Iran has fully complied with its commitments. The U.S. and its allies too have implemented their end of the bargain, untangling the intricately woven web of sanctions around Iran, transforming it from the world’s most sanctioned state to the one with the most rigorously monitored nuclear program.

While an increasing number of small to medium-sized banks have re-engaged Iran, the persistence of the sanctions’ chilling effect still deters major financial institutions, thus hampering Iran’s reintegration into the global economy. To resolve the problem, U.S. Secretary of State John Kerry has gone the extra mile, encouraging European firms to do business with Iran – an initiative unthinkable until a few years ago. But the reasons behind these financial obstacles are manifold, and there is plenty of blame to go around.

If the deal’s dividends remain slim, they could discredit the advocates of diplomacy in Tehran and even jeopardize the accord.

Risk-averse banks are concerned that sanctions could snap back into place as a result of Iran’s noncompliance, the next U.S. president’s reneging or Congressional sabotage. Red tape -- U.S. primary trade embargo and secondary sanctions related to Iran’s missile program, regional policies and human rights record and state-level divestment legislations – continue to hamper commercial ties. But this was the inevitable result of a nuclear accord that was a narrow transaction, not part of a sweeping detente.

The Iranian government too has failed, including by not paving the way for the great economic “unshackling” it had promised its people. The country’s abject rank on the World Bank’s “ease of doing business” listing improved only by one level in the run-up to the agreement’s conclusion. Corruption remains rampant; banks are plagued by non-performing loans and low standards; and provocations – from missile tests to harassing the U.S. Navy in the Persian Gulf and sentencing dual national entrepreneurs like Siamak Namazi on phony accusations -- have heightened the political and reputational costs of dealing with Iran.

But the fact remains that nine months after easing the sanctions, not a single bank in London is willing to open an account for the Iranian embassy to conduct its daily business. Similar examples abound.

The sluggish pace of sanctions relief constitutes a serious threat to the accord. It has already dashed popular expectations in Iran, turning its generally pro-Western public opinion against the U.S. and playing into the hands of politicians in Tehran opposed to thawing ties with Washington. If the deal’s dividends remain slim, they could discredit the advocates of diplomacy in Tehran and even jeopardize the accord.

Some adjustments in the Iran deal’s implementation could help avert such perilous consequences.

First, the U.S. administration should provide the Office of Foreign Assets Control (OFAC) at the Treasury Department, which is in charge of enforcing the sanctions, with more resources. OFAC’s staff have been stretched thin by a greatly increased workload: publishing hundreds of pages of guidelines on Iran’s sanctions relief (including the most recent that clarifies how foreign companies and banks can operate with Iran using the U.S. dollar), answering incessant inquiries by foreign firms, granting numerous licenses, and traversing the world to clarify ambiguities.

According to a recent report by the U.S. Treasury the average time for processing licenses last year increased from 71 to 88 business days – a statistics that significantly understates the problems since half of the submissions remained unprocessed. The problem is not just the resources but institutional inertia: traditionally a source of pressure on the private sector to curb business with target countries, today the office is charged with opening the taps.

It is thus no surprise that it took nearly eight months to approve the sale of Boeing and Airbus civilian planes to Iran, which was a cornerstone of the agreement. A commitment by OFAC to publish monthly status reports on progress and create a target of reducing processing times as it enlarges staff could enhance efficiency.

Second, there is a need for more and direct communication between OFAC and the Iranian Central Bank. Contact between the two sides through the Joint Commission created under the deal to monitor its implementation is infrequent and at the diplomatic level, not at the level of experts who grapple daily with the technical and legal problems of normalizing Iran’s banking relations.

Failure here could doom future negotiations with countries, like North Korea, that are watching the Iranian experience carefully.

Third, the U.S. Treasury should rescind the designation of Iran under the USA Patriot Act as a zone of primary money-laundering concern, to facilitate Iran’s rehabilitation in the global financial system. This would be a reasonable follow-on to last June’s decision by the Financial Action Task Force (an international group that monitors money laundering worldwide) to suspend its measures against Tehran in response to the latter’s adoption of an action plan to address its anti-money laundering and anti-terror financing deficiencies. Additional measures to allow Iran to clear foreign currency transactions that require tangential reference to U.S. dollar could also smooth legitimate business with Iran.

Taking these steps is no mean feat for the Obama administration, soon to enter its twilight. Yet ensuring that Iran benefits from the dividends of the nuclear deal is neither a new concession to Tehran nor an endorsement of its regional policies. It is rather a necessity. At stake is not only preserving an accord that has removed the shadow of nuclear weapons from a region engulfed in turmoil, but also the reliability of the U.S. government’s word and even the credibility of sanctions as an instrument of coercive diplomacy.

Failure here could doom future negotiations with countries, like North Korea, that are watching the Iranian experience carefully.

Contributors

Project Director, Iran
AliVaez
Thomas R. Pickering
Crisis Group Board Member
Op-Ed / United States

A diplomatic breakdown over “snapback” tests the UN

Originally published in The Interpreter

After the United States experienced a rebuff at the United Nations last week – with almost the entire membership of the Security Council rejecting its attempt to re-impose UN sanctions on Iran – US officials warned that the dispute could lead to a major crisis in the Council, damaging the institution’s authority.

They are not alone in this analysis. Russian foreign minister Sergey Lavrov, a vocal critic of the US sanctions drive, has accused Washington of risking “a very serious scandal and rift” at the UN.

But these dire predictions may prove to be exaggerated.

The argument pivots on the US claim that, acting on the UN resolution that endorsed the 2015 Iranian nuclear deal (the Joint Comprehensive Plan of Action, or JCPOA), it can demand the reactivation of UN sanctions resolutions on Iran that were terminated as part of the bargain. The negotiators of the deal agreed on a complex process to “snap back” these resolutions if Tehran broke its commitments and other dispute resolution mechanisms failed. (A recent International Crisis Group report looks at this process in detail.)

When Secretary of State Mike Pompeo announced the US was triggering the snapback process on 20 August, most of other Council members responded dismissively, for the simple reason that the Trump administration quit the JCPOA unilaterally in 2018. While the US has made a legal case that it retains the standing to initiate snapback, even its European allies at the UN argue that it has forfeited its right to do so in practical terms. They suspect that the Trump administration’s real goal is to provoke Iran to renounce the JCPOA, and so kill the Obama-era deal.

While Pompeo was laying out the US case in New York, Britain, France and Germany – the European signatories of the JCPOA – released a statement rejecting the move. Overall, 13 of the 15 Council members have informed the Indonesian UN ambassador, the current president of the Council, that they did not believe the US had the standing to trigger snapback. The one member left in the US camp is the Dominican Republic.

What happens next? The Council has 30 days to debate the topic, but it is hard to see serious diplomacy taking place now. In theory, under the rules of the snapback process, if the Council does not agree to maintain the termination of the pre-2015 sanctions resolutions – which centre on military imports and exports, as well as individual travel restrictions and a total ban on uranium enrichment – they will come back into force on 20 September. While the US will claim that those conditions apply, and its allies in the Persian Gulf may support the notion, most of the wider UN membership will not.

This will lead to a surreal situation in which the US and other Council members talk past each other about what sanctions are in force. This scenario will create headaches for UN officials handling sanctions and the Middle East. But it is hard to say if it will cause a bigger crisis at the UN.

Some diplomats fret that the Trump administration, which has a track record of boycotting multilateral organisations that irritate it, such as the World Health Organization (WHO), could respond by trying to disrupt other Security Council business. Yet there are limits to how disruptive it can be before it starts harming US interests in other areas. It is hard to imagine, for example, the US breaking off talks with China and Russia over the sanctions regime on North Korea – on which the three powers grudgingly cooperate at the UN – out of spite over Iran.

The US could threaten to withhold funding to the UN secretariat’s political, peacekeeping and disarmament branches to demonstrate its dissatisfaction over Iran. The UN is already struggling financially, so such a move would make the long-suffering Secretary-General António Guterres’s life even more difficult. But it would also be a propaganda win for the Chinese and Russians, which will take every opportunity to use this crisis to argue the US cannot be trusted at the UN.

The snapback spat will doubtless hurt relations between the US and its European counterparts at the UN, but their cooperation has not been that great during the Trump presidency anyway. In July, the US blocked a German resolution calling for a new UN envoy to deal with climate change and security. This month, the Americans threatened to veto the continued deployment of peacekeepers in southern Lebanon, a French priority, on the grounds that the Blue Helmets are soft on Hezbollah. Even the UK, usually the closest US ally in New York, has been frustrated by Washington’s failure to invest in UN diplomacy over Libya and Yemen.

While European diplomats expect the snapback debate to be messy, and speculate that Washington could also use tariffs and other economic measures to put pressure on those who oppose its efforts, the US has alienated its partners to such an extent that they appear willing to endure some additional unpleasantness. They might be warier if opinion polls suggested that Trump was on track for victory in this year’s presidential elections. But the Europeans for now seem more inclined to believe in a Biden victory, and thus see the main challenge as holding off Trump’s attack on the JCPOA until next year, when it may be possible to rebuild diplomacy over Iran with a new administration. If Trump wins, the JCPOA is dead anyway.

Some argue that the snapback debate will undermine the Security Council in other ways. The spectacle of council members bickering over sanctions on Iran could inspire some states to question the validity of other sanctions regimes. African governments have, for example, criticised council measures against countries like South Sudan that do not enjoy regional support, and could use the uncertainties over Iran to re-litigate these issues. But as the snapback mechanism is unique, the dispute offers little real ammunition for such arguments.

More fundamentally, this debacle raises longer-term doubts about the Council’s value as a venue for endorsing compromises among the big powers in an increasingly fragmented international system. The Iran deal’s negotiators believed that by embedding the agreement in a UN resolution they could better guarantee its implementation. If the Council cannot resolve its differences over snapback one way or another, the Council’s status as guarantor of such complex agreements will suffer.

Nonetheless, it is probably wise to see the snapback dispute as just one of the recurrent diplomatic breakdowns that have punctuated UN diplomacy on issues from the Balkans to Iraq and Syria since the end of the Cold War. Each time Council members hit an impasse, commentators hurry to say that the UN has reached a decisive or disastrous turning point. Yet time after time, Council members – and above all the Permanent 5 – manage to patch over their differences after a cooling-off period.

The Security Council may suffer a split over snapback, but it is unlikely to be terminal.