To normalise US-Iran relations

The agreement to “lift” sanctions on Iran in exchange for limiting its nuclear programme, reached with the five permanent members of the Security Council plus Germany, has been hailed as a triumph and a means for Iran to export oil, secure much needed investment, sell its products and promote growth.

In exchange for these benefits, Iran has exported 98 per cent of its stockpile of enriched uranium, decommissioned two-thirds of its 19,000 uranium enriching centrifuges, destroyed the core of its Arak reactor that produced plutonium and is submitting to intrusive inspections by the International Atomic Energy Agency.

If Iran does not comply, sanctions will “snap back”.

“Lift” is in quotation marks  because the punitive sanctions regime has not been “lifted”, but “eased” or “partially lifted”.

European sanctions have been largely “lifted”, but not those imposed by the US on US firms and banks. These sanctions are set to remain for another eight years although the US will license trade in civilian aircraft, carpets and pistachios.

Iran is also set to regain access to the SWIFT network for bank transactions and to access $37-$50 million of a reported $100,000 million in funds frozen in foreign banks.

This could, however, take some time as the money is deposited in banks around the world.

The retention of US sanctions on US firms and banks (but not on US foreign subsidiaries) complicates life for European investors and firms seeking to trade with Iran.

British and other banks have been fined by the US billions of dollars for breaking sanctions and are nervous about dealing with Iran because of the complex nature of US-imposed regulations.

These could make firms and banks reluctant to deal with Iran, and slow down its return to global markets and reinstatement in the international community.

Fresh US sanctions on non-nuclear issues could interfere with the easing of European embargoes and hinder trade and investment, creating resentment in European capitals and business circles.

The US is largely driven by politics: its continuing feud with Iran over the 1979 toppling of Washington’s longstanding ally, the shah, the detention of US diplomats at the embassy in Tehran and Iran’s backing for regional movements and groups — Hamas, Islamic Jihad and Hizbollah — the US considers hostile, mainly due to their antagonism towards Israel.

Iran is also currently supporting Syrian President Bashar Assad (US President Barack Obama asked him to stand down) and is said to be backing the Shiite Houthis in Yemen in their war with Saudi Arabia.

The US is a country that hangs onto grudges and is slow to reconcile.

Under the deal, Iran is also allowed to freely export its oil.

Due to sanctions and US pressure, the volume of Iranian exports has fallen from 2.5 to 1.1 million barrels a day since 2012.

India, Japan and China have cut purchases, while Europe has phased out Iranian oil and reconfigured refineries to process different grades of crude.

While Iran says it can promptly add 400,000 barrels a day to the current level of exports and within months recoup 2.5 million barrels a day, its former market share, this is doubtful, as the demand for oil has fallen and there is a glut of 1 million barrels a day on offer.

To make matters worse for Iran, the price of oil has fallen from $100 to $28-$30 a barrel, depriving Iran of revenues needed to repair and modernise its oil sector, which has suffered from a lack of investment due to sanctions which cost the country $160 billion in lost revenue.

It is estimated that Iran requires an urgent injection of $135 billion to upgrade the country’s infrastructure and perhaps as much as $1 trillion in investment.

On the domestic front, Iran needs to alter business practices in order to cash in on permitted trade under the sanctions relief regime.

Tehran has already changed its law on investment in the oil sector to make it more investor friendly.

Iran also needs to reform its economy, but this could be difficult to impossible if reformists supportive of President Hassan Rouhani are disqualified from the parliamentary race next month.

So far, all but a handful of reformists have been excluded by the Council of Guardians, which vets both candidates and legislation.

Rouhani has promised to tackle the council on this issue, but will need the backing of Supreme Leader Ayatollah Ali Khamenei. Without his endorsement of the negotiations and the process of downsizing Iran’s nuclear programme, the deal could not have been achieved.

Logically, therefore, he should support Rouhani in his appeal to the council to cancel disqualifications.

Although the Obama administration has promised to “refrain from policies” that could “adversely affect normalisation of relations with Iran”, the administration cannot be trusted entirely on this issue.

The Treasury Department has already slapped new sanctions on companies and individuals involved in Iran’s ballistic missile programme, under the pretext that these missiles could be used to deliver nuclear weapons, a claim that sounds false, as Iran has been effectively prevented by the nuclear deal from developing such weapons.

Additionally, the US Congress, dominated by the right-wing Republican Party, is determined to act as a spoiler.

Congress has already said it would not lift US sanctions and seeks to impose fresh sanctions under any pretext: Iran’s human rights record, alleged support for “terrorism” and ballistic missile tests.

Fresh sanctions are likely to be resisted by Europe, which is seriously interested in reconciling with Iran and ensuring that Iran is a positive force in international affairs.

However, for Iran to play such a role, Tehran has to have the feeling that the country’s interests are being taken into account and that it is not under constant threat from new sanctions, a return to the pre-deal ostracism and isolation, or military action.

Before this can happen, US politicians, especially, need to grow up and recognise that Shiite Iran cannot dominate the Sunni-majority Arab region and is not a threat to US interests.

What is needed is a courageous initiative — like Richard Nixon’s 1972 visit to China which ended 25 years of hostility — to normalise relations between the US and Iran.