By Barbara Slavin
Nearly a year after Iran and a U.S.-led international community reached a landmark nuclear deal, the good news is that there almost isn’t any news about Iran’s nuclear program.
In its second report since the Joint Comprehensive Plan of Action (JCPOA) was implemented Jan. 16, the International Atomic Energy Agency (IAEA) found no evidence that Iran has failed to comply with its pledges to restrict its nuclear activities. Stringent IAEA monitoring is one reason why it is extremely unlikely that Iran could build a nuclear weapon undetected.
The United Nations, European Union and the United States have also fulfilled their obligations to lift nuclear-related sanctions and as a result, the Iranian economy is slowly picking up steam.
At a symposium on Iran at the Atlantic Council last week, John Smith, the acting director of the Treasury Department’s Office of Foreign Assets Control (OFAC), cited Iranian statistics showing that the country had received $3.4 billion in foreign investment since January and had boosted oil production to 3.5 million barrels a day and exports to 2.3 million barrels – more than twice the figure under sanctions.
Smith also noted deals to sell Iran 230 new civilian aircraft, including a $17 billion sale of more than 100 planes by Boeing.
Contrary to Iranian complaints that the United States has failed to lift required sanctions, Smith said “Iran has already reaped significant benefits.”. Even though major foreign banks are still shy about returning to Iran, Iran’s banking system has been reconnected to the SWIFT system of electronic transactions and Iran has opened 350 new correspondent accounts, he said.
OFAC, which for decades was in the business of discouraging commerce with Iran, has shifted gears since the JCPOA was signed. Smith said U.S. officials have gone to more than two dozen countries to explain what sanctions have been relieved and has published nearly 100 pages of guidance on the OFAC website.
While most U.S. business with Iran – apart from the sale of commercial airliners, food, medicine and medical devices – remains barred because of Iran’s support for groups regarded as terrorist, its missile program and its abuse of human rights, non-U.S. firms are free to return to the Iranian market. Smith said foreigners have only two things to watch out for: doing business with a person or entity among 200 still on a specially designated sanctions list and that transactions don’t involve a U.S. citizen or the U.S. financial system.
Even the second caveat has an important loophole. Responding to a question from this analyst, Smith said Boeing could use an American bank to process payments for its planes, assuming the deal is authorized by his department (OFAC). “The banking for that can be an authorized part of the transaction,” Smith said.
Many non U.S. firms have been wary of business with Iran because of huge fines levied in the past against banks such as BNP Paribas and Credit Suisse for sanctions violations.
Smith said that those banks had committed egregious and obvious violations, such as falsifying the nature of transactions. “OFAC will not be playing gotcha for companies that conducted the appropriate due diligence [but] unwittingly find themselves doing business” with a still-sanctioned entity, such as a front company for Iran’s Revolutionary Guards, Smith said.
The fact that foreign companies have been slow to return to Iran could actually be helpful in putting pressure on Iranian authorities to limit the role of the Guards in the economy and to improve transparency in the banking sector.
A major factor that has held banks back from Iran is that Iran is one of only two countries – along with North Korea – in the high risk category for money laundering and terrorism financing in the view of the Financial Action Task Force (FATF), a Paris-based multilateral watchdog.
The Barack Obama administration could do more to bolster the Iran deal by allowing U.S. Treasury Department experts to advise the Iranians on steps necessary to get off the FATF blacklist.
OFAC could also issue a general license permitting Americans who work for foreign banks in senior positions to supervise Iranian compliance with international banking regulations and norms.
Experts say the Iranian government, in its eagerness to sell the nuclear deal, oversold its benefits and that it has taken time for Iranians to readjust their expectations for an immediate windfall.
The Boeing deal, assuming it gets approved, would be a particular boon to the government of President Hassan Rouhani, providing tangible evidence that the JCPOA is making a difference in the lives of ordinary Iranians. Many Iranian planes are antiquated and the country has suffered numerous crashes because of an inability to buy modern aircraft.
OFAC approval is also necessary for Iran to complete the purchase of 118 planes from Airbus because the planes have engines made by General Electric.
These deals are to last for many years – nearly a decade in the case of Boeing – and could provide added insurance that the JCPOA will survive beyond the Obama administration.
Deputy national security adviser Ben Rhodes told the Atlantic Council audience that he doubted Obama’s successor would “tear up” the JCPOA, even if that successor was Donald Trump, who has harshly criticized the agreement.
“You would precipitate a crisis, in all likelihood, and Iran would then be advancing once more towards potentially having a nuclear weapons capacity,” Rhodes said. “You would be alienating the United States from all of our key allies who helped us negotiate this deal… Having worked for a president who had to come into office with enough problems, I think the basic principle is you don’t come into office and create a massive new problem for yourself.”
Barbara Slavin is Acting Director of the Future of Iran Initiative at the Atlantic Council in Washington.