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Iran nuke deal 'uncharted territory'

Gero Schließ, Washington / groJanuary 24, 2016

The US faces unknown challenges now that it has lifted its sanctions on Iran. Iran seems to be benefitting from the changes less than expected.

Österreich Wien Atomverhandlungen USA Iran
Image: Reuters/K. Lamarque

"It is all uncharted territory," an official from the US State Department told DW just over a week after the nuclear deal was implemented and sanctions against Iran were lifted. The official had internal information on negotiations with Iran and was referring to the structuring of complex processes that have arisen after the lifting of sanctions.

The official would like to remain unnamed as his view does not adhere to the official version, which was meant to convey the impression of concerted action carried out by the US, the Europeans and other participating nations.

An enormous need to coordinate

US diplomat Stephen D. Mull was involved in the negotiations with Iranian negotiators and he leads US efforts to implement the nuclear deal. At a short-notice press presentation for foreign correspondents reporting on US affairs, he spoke of a "coherent approach."

Stephen Mull US Koordinator Umsetzung Nuklearabkommen mit Iran
US diplomat Stephen Mull is coordinating the implementation of Iran nuclear dealImage: Getty Images/AFP/N. Kamm

Yet the need for information and coordination measures seems to be enormous. US Treasury officials flock to countless briefings, meetings in Washington with foreign ambassadors or quick trips to European capitals. The US Treasury has published a detailed, nearly 50-page follow-up to the implementation. The paper reveals what will change - and what will remain the same - in banking, financial transactions, trade agreements, oil and energy exports, the arms trade and other delicate areas.

Many open questions

Anthony Cordesman, a respected politics expert from the Washington-based think tank "Center for Strategic International Studies" (CSIS) took his lead from President Obama's statement about "unprecedented control mechanisms" that have come into effect because of the nuclear deal. "It is not only new and hitherto unprecedented," said Cordesman in an interview with DW, "it is not even yet defined in many cases." Cordesman speaks of a very complex agreement.

In principle, foreign companies can now do business with Iran in many sectors, such as energy, commodities, ship building and the automotive industry. Financial transactions with Iranian banks are also possible again, but first, those banks must put in place the necessary administrative and technical infrastructure.

However, one cannot expect to turn a switch and have the sanctions disappear from one day to the next, says Cordesman. Instead, many complex arrangements must be worked out, he says. In addition, many areas, such as the arms trade, are subject to a gradual timetable. According to Cordesman, the problem lies in the lack of cooperation between the US and Europe, as there is "not a lot of coordination, because they are competing for business in Iran." But, he warns, the Europeans and other nations should "consider the full extent of the US sanctions that remain." And Europe should watch its step here, as possible US countermeasures, such as prohibiting trade with American companies, could harm foreign companies. However, ambassador Mull is trying to reassure everyone that the US is not interested in obstructing other countries' business transactions with Iran.

US companies excluded from trade

Mull notes, however, that American companies are still largely excluded from this trade. In the course of the implementation, the US has actually only lifted the so-called "secondary sanctions" that were enacted in connection to the nuclear program. The "primary sanctions," which serve as the US's penalty for Iran's alleged support of terrorism and its destabilizing activities in the region, still remain.

Airplane parts and carpets

And these sanctions largely prohibit trade with American companies, with the exception of food products, carpets and aircraft spare parts. According to Mull, this latter exception is to ensure that Iran can bring its ageing airplane fleet up to par. Here, the US was concerned solely about international air safety and was not seeking to further the economic interests of the aircraft industry with its strong lobby, said Mull in an interview with DW.

Less financial leeway

The initial effects of the lifted sanctions can now be observed on the international market. Iran has "very quickly" started selling its oil and has "already been marketing it very aggressively," says Cordesman. At the same time, it is safe to assume that Iran is trying to re-activate confiscated assets. Iranians now have access to a little more than $50 billion (46 billion euros), estimates ambassador Mull. But, he says, what many people do not know is that most of the money is tied to "previously incurred liabilities," meaning that Iran must first settle outstanding invoices.

The financial restrictions and the current low oil prices will probably lead to a re-assessment of the changes that are likely to result from the end of the sanctions. In any case, old calculations made by the Iranians have been scrapped, and fears on the part of the West and Iran's neighbors have been put into perspective.

The role of intelligence agencies

Apart from the mechanisms that were set in motion by lifting the sanctions, extensive monitoring activities have been initiated.

Officially, one hears only about International Atomic Energy Agency (IAEA) inspectors. Yet Cordesman and many other experts are certain that the IAEA primarily depends on information provided by intelligence agencies from the six countries involved in the nuclear deal. "Their work is critical to the work of inspectors from the International Atomic Energy Agency," said Anthony Cordesman. He said IAEA had received all its information on Iran's weapons programs "quietly" from intelligence agencies.

Snapback and many questions

In the event that Iran is caught violating the deal, the entire range of sanctions could automatically be re-imposed as a penalty: the so-called snapback mechanism. This whole set-up is "unique and new," admits ambassador Mull. Until now, no one has been able to tell him which of the countries that signed the deal would even be in a position to re-impose the sanctions at short notice, stated Anthony Cordesman. The CSIS security expert says that all of this is yet to be defined.

But that is not all. The threat of "snapback penalties" hovers over all future business transactions with Iran like a sword of Damocles. "None of this is protected if Iran violates the agreement," said Cordesman. "It is a completely new situation for businesses, banks and governments."