Sanctions lifted on Iran

A report from the Washington Post notes the lifting of sanctions on Iran “Iran reentered the global economy Saturday, as years of crippling international sanctions were lifted in exchange for the verified disabling of much of its nuclear infrastructure. For Iran, implementation of the landmark deal it finalized with six world powers last summer means immediate access to more than $50 billion in long-frozen assets, and freedom to sell its oil and purchase goods in the international marketplace. Tehran has hailed the deal as vindication of its power and influence in the world. “Today marks the moment that the Iran nuclear agreement transitions from promises on paper to measurable progress,” said Secretary of State John F. Kerry”.

The report goes on to mention that “The removal of sanctions comes as President Obama begins his last year in office, and almost seven years to the day since he called on Iran to “unclench your fist” and take steps toward rapprochement with the United States and the world. As a result of the agreement, he said in his last State of the Union speech this week, a “nuclear-armed Iran” has been prevented, and “the world has avoided another war.” The triggering event for implementation was certification by the International Atomic Energy Agency Saturday that Iran had successfully completed all the nuclear steps it agreed to in July: sending the bulk of its enriched uranium outside the country, mothballing most of its centrifuges, and disabling its Arak nuclear reactor, capable of yielding plutonium. The IAEA is also charged with monitoring and verifying Iran’s continued compliance”.

Interestingly the piece goes on to note “IAEA certification of compliance opened the door to announcements and speeches by high-level officials from the negotiating parties. A new U.N. resolution codifying the deal immediately goes into effect. The IAEA begins strict monitoring provisions on the ground in Iran. White House executive orders and implementation guidance issued by the European Union and the U.S. Treasury, along with waivers of certain restrictions signed here by Kerry, will start the wheels of international business and finance turning. To the consternation of critics in the United States — including Republican presidential hopefuls who have called it a dangerous sellout by Obama and vowed to dismantle it — the deal is now done”.

The Obama administration hopes that “In the long term, the agreement is a major milestone in the Iranian revolution, with the potential for far-reaching economic, political and cultural ramifications. The end of Iran’s near-total economic isolation could drive more modernization and open the country to moderating outside influences. More money spent at home to upgrade failing infrastructure and jump-start the economy would allow pragmatist President Hassan Rouhani to showcase the sanctions relief he pledged in his 2013 campaign. U.S. and international opponents, including Israel, Saudi Arabia and other U.S. allies see the agreement as a dangerous gift to an aggressive and duplicitous regime, and have warned that Tehran will use the money to increase spending on terrorist groups that serve as its proxies in a fight for regional dominance”.

Crucially the author notes that “Although Iran has more than $100 billion in available frozen assets — most of it in banks in China, Japan and South Korea — slightly less than half will more or less automatically go to preexisting debts. How the rest is spent will reveal the direction of internal power battles between Iranian hard-liners and pragmatists. That kind of money is too much to be transferred in one fell swoop. Richard Nephew, a former sanctions chief of the U.S. negotiating team, said the Iranians will likely transfer it out in chunks, and may even leave it in place while they decide how to spend it”.

The piece notes the context for the lifting of sanctions, “Despite official rejoicing by the negotiating partners, implementation comes at a particularly inauspicious time for Iran and the United States. Oil is at its lowest price in more than a decade, in part because of expectations Iranian crude will flood the market, and Iran’s currency has declined precipitously. Tehran will be getting far less income than it anticipated when the negotiations took hold in late 2013, making it difficult for the government to deliver the jobs and economic boom Iranians have been told will ensue. Many think it will take years to repair the country’s decrepit energy infrastructure in order for oil to flow at its pre-sanctions rate”.

 

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