Sanctions and Extensions: How Much Will Iran Receive?

January 15, 2015

by Laicie Heeley

Negotiations with Iran are set to resume in Geneva on January 18, and with a new deadline for an agreement looming, returning lawmakers are poised to make a move toward additional sanctions. Republicans may choose to hold off until signs of a breakdown in negotiations have surfaced, but others have suggested that a bill could move more quickly.

On Sunday, Sen. Corker said that a bill would be expected to move through “regular order” in the banking committee, but did not imply that would happen immediately. His answer when asked about timing was, “we’ll see.” But Sen. Graham has suggested that a bill will be taken up in January. Substantively, Congress may still consider a bill that would impose so-called “trigger sanctions,” which would take effect in the event of a failure in negotiations or extension beyond a certain date. Experts such as David Albright, Gary Samore, and Matthew Kroenig, however, have argued against this approach for various reasons.

Still, others are concerned that Iran may be stringing negotiations along, enjoying the benefits of sanctions relief with no intention of following through. This would seem to be in Iran’s best interest, if the amount of relief currently granted to the country was large enough to have a significant impact on its economy.

This does not, however, appear to be the case. According to recent reports, the amount of cash relief Iran has received has been less than originally thought, with estimates placing the initial number at as much as $7 billion. Treasury, however, has reported the number at $4.2 billion.

Just before the holidays, the P5+1 (the United States, United Kingdom, Germany, France, Russia, and China) and Iran agreed to a second extension of the Joint Plan of Action (JPA). As a part of this agreement, the U.S. government agreed to extend the sanctions relief provided for in the JPA through June 30 of this year. During this time, the US retains the authority to revoke this limited sanctions relief at any time if Iran fails to meet its commitments under the JPA.

Beyond this relief, all other sanctions, including financial sanctions, sanctions pertaining to the purchase of Iranian crude oil, and sanctions on investment in Iran’s energy and petrochemical sectors, remain in effect.

As mentioned above, the P5+1 has fulfilled its commitment to facilitate the release of $4.2 billion of Iran’s Restricted Funds during the initial period of JPA relief. In addition to this initial amount, the P5+1 facilitated the release of $2.8 billion of Iran’s Restricted Funds through November 24, 2014, during the first extension of the JPA.

During this additional extension period, Iran will receive installments to total an additional $4.9 billion. But the buck stops there. Negotiators have set a deadline of March for a framework agreement, bringing them closer than ever before to a final deal. And Congress won’t need much convincing to step in with additional sanctions if things don’t work out.

For now, though, the P5+1 has agreed not to impose additional sanctions while the terms of the JPA remain in place. While so-called “trigger sanctions” may be something of a loophole, there is little doubt that they would violate at least the spirit of the agreement. And few can argue that it would take long for Congress to impose additional sanctions in the event of a breakdown in negotiations.

Though it may feel as if Iran is getting one over on the rest of the world by staying at the negotiating table, the reality is that Iran has received a relatively small amount relief when one considers that approximately $100 billion in foreign reserves remain inaccessible or restricted. These figures make no mention of Iran’s $120 billion losses in oil revenue or the depreciation of its currency, which as of July had depreciated by approximately 50 percent since January 2012 and seven percent since the JPA was announced last November.

The impact on Iran’s economy can be seen in the numbers; but recently, it’s become even more obvious on the ground in Iran. Pressure on Iran’s President Rouhani to deliver a deal has mounted over the course of the JPA, as the country’s citizens wait for the economic relief they were promised. And public support has begun to slip.

On January 4, Rouhani pushed back against Iran’s hardliners, who are skeptical of a nuclear deal, calling for a more open, pragmatic diplomacy with the West. He pointed out, importantly, that Iran’s ideals “are not linked to centrifuges but to our heart and determination.” The statement has been interpreted as a sign of willingness on the part of Iran to compromise on centrifuge numbers, a key issue remaining in negotiations.

Rouhani added that “Our political life has shown we can’t have sustainable growth while we are isolated,” and threatened to call a referendum allowing the Iranian people to vote on a nuclear deal. Rouhani’s confidence may be slipping, but his trust in the people’s support only reinforces evidence of the tight squeeze current sanctions have had on Iran’s economy. Sanctions have taken more than half of Iran’s oil exports off the international market, restricted its access to hard currency, and limited its trade in goods and technology. And falling oil prices have only made Iran’s situation worse.

If there was ever a time that Iran needs a deal, particularly its President, this is it.

The question is, can Rouhani deliver a deal that the hardliners in his country will accept. And can the members of the P5+1 do the same? Negotiations will answer that question, but only if they’re given the time.

Laicie Heeley is Policy Director at the Center for Arms Control and Non-Proliferation. Her piece was originally posted on our website.

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The Center for Arms Control and Non-Proliferation is a Washington,
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