Feb 6, 2021
Biden Weighs Easing Iran’s Pain Without Lifting Key Sanctions
(Bloomberg) -- The Biden administration is weighing ways to ease Iran’s financial pain without lifting crushing economic sanctions -- including on oil sales -- as a step toward reviving the 2015 nuclear deal abandoned by former President Donald Trump.
Some options U.S. officials are debating include providing backing for International Monetary Fund lending to Tehran for coronavirus relief and easing up on sanctions that have stymied international coronavirus aid from getting into Iran, according to four people familiar with the administration’s thinking. Such moves could be justified on humanitarian grounds.
President Joe Biden could also sign an executive order reversing Trump’s decision to quit the multinational deal, according to the people. But issuing sanctions waivers to allow Iran to sell oil on the international market isn’t currently under serious consideration, according to the people.
“Over recent months there’s been a lot of thinking in both Europe and the Democratic camp on a number of immediate measures the U.S. can realistically take,” said Ellie Geranmayeh, a senior fellow at the European Council on Foreign Relations. She described the ideas under consideration as measures that “can still give Iran tangible relief.”
Reviving the Iran deal has emerged as one of the Biden administration’s highest-profile foreign policy challenges, part of a slew of actions meant to halt or reverse initiatives championed by Trump’s national security team. That includes freezing a planned troop drawdown in Germany, withdrawing support for offensive actions supporting Saudi Arabia in the war in Yemen and reviewing the previous administration’s outreach to North Korea.
Biden’s National Security Council held a meeting on Mideast issues Friday that was believed to focus on Iran, but White House spokeswoman Jen Psaki said on Twitter that “no pending policy announcements” were expected from the gathering.
Biden has long criticized Trump’s decision to quit the Iran accord, saying it reduced the “breakout period” Tehran needs to build a nuclear weapon, but getting back into the deal is also fraught. Iran’s leaders are demanding an end to U.S. sanctions and have since breached the agreement by enriching uranium beyond levels permitted by the accord, known as the Joint Comprehensive Plan of Action.
The Biden administration insists that Iran return to compliance with the JCPOA before the U.S. goes further, and Secretary of State Antony Blinken has said any full return is still a “long ways off.” But Iran says the U.S. needs to make the first move, and President Hassan Rouhani’s government is taking a series of steps aimed at increasing pressure on the U.S. for a speedy deal.
Robert Malley, the State Department’s new envoy for Iran negotiations, declined to comment. State Department spokesman Ned Price said the U.S. wants to consult with European allies that were part of the deal before allowing coronavirus aid or any other relief. Those nations were infuriated when Trump quit the accord and reimposed a raft of economic sanctions.
“Before we announce any changes in policy along those lines we would want to make sure we’ve undertaken those consultations, and we’re in the process of doing those now,” Price said.
Those talks began on Friday, according to U.K. Foreign Minister Dominic Raab.
Yet it’s still early days for the Biden administration. Malley was appointed only last week and Wendy Sherman, an architect of the nuclear deal who is Biden’s pick to be deputy secretary of state, has yet to have her Senate confirmation hearing.
Iran’s key demand for a return to compliance is for the removal of crippling restrictions the U.S. put on the country’s ability to sell oil. In a sign that the Trump administration’s “maximum pressure” campaign is losing effectiveness, the country’s oil exports have risen steadily in recent months, though they remain far below historic levels.
Skeptics fear that easing oil sanctions now would deny the U.S. a key source of leverage and make Iran less likely to go back into the deal. At the same time, oil analysts at Rapidan Energy group foresee an additional 500,000 Iranian barrels of oil coming back on the market in the next two to three months, possibly with U.S. approval.
“To do a deal reset that requires compliance for compliance, the Biden administration recognizes they’ve got to allow those barrels back on the water,” said Scott Modell, managing director at Rapidan. “The final pathway hasn’t been paved yet, but I think they’re working on it.”
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One of the biggest challenges the new administration faces is the wave of sanctions Trump imposed late in his administration targeting Iran over its sponsorship of terrorism. That includes the decision to impose terrorism-related sanctions on Iran’s Central Bank. Any sanctions relief -- even on humanitarian grounds -- could fail to deliver if the terror designation remains because the central bank oversees virtually all the country’s financial activity.
“Unless Iran’s central bank is going to be allowed to freely operate in the international banking system, Iran is not going to accept returning to compliance with the JCPOA,” Kenneth Katzman, a senior analyst on Middle East issues at the nonpartisan Congressional Research Service, told an Atlantic Council event last week. “The central bank is the hub of Iran’s international banking activity.”
There are a few signs of movement. South Korea is in the final stages of talks with the U.S. about unfreezing some of the billions of dollars of Iranian money trapped in the Asian country due to sanctions, the Yonhap News Agency reported. That came after Iran released the crew of a South Korean-flagged ship that was seized in the Persian Gulf on Jan. 4.
The U.S. Treasury Department could also issue licenses allowing limited trade with Iran, or offer assurances that trade via a humanitarian channel set up by European nations known as Instex won’t be affected. Although the Trump administration insisted humanitarian trade with Iran was allowed, many participants felt they didn’t get the safeguards they needed to go ahead.
Yet as much as the Biden team would like to move carefully and in lockstep with Europe, Iran and the U.S. are heading toward a crisis at the end of February that’s likely to make reviving the deal even harder. On Feb. 21, Iran has threatened to stop abiding by what’s known as the Additional Protocol -- a series of voluntary measures that allow for snap nuclear inspections by the International Atomic Energy Agency.
One IAEA diplomat, who asked not to be identified discussing private deliberations, described the sides as sleepwalking into conflict. On Feb. 1 and Feb. 2, the IAEA circulated restricted documents to diplomats confirming fresh breaches to the accord, and Iran is moving forward with higher levels of uranium enrichment at both its Fordow and Natanz facilities.
“The United States needs to come back into compliance and Iran will be ready immediately to respond,” Iranian Foreign Minister Mohammad Javad Zarif told CNN this week. “The timing is not the issue, the issue is whether the United States, the new administration, wants to follow the failed policies of the Trump administration or not.”
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