The Standoff between Iran and the US Continues

The Standoff between Iran and the US Continues

On February 11, demonstrations were held in Iran to mark the anniversary of the 1979 revolution. Revolution Day in Iran is the annual culmination of the ten-day Fajr (Dawn) celebration, which begins on Feb. 1 – the day in 1979 when the founder of the Islamic Republic of Iran, Ayatollah Khomeini, returned from exile to Tehran. On that day millions of Iranians took to the streets.

But observing the masses of Iranians marching through their cities, it should be noted that the slogan «Death to America» is no longer ubiquitous. But does this signify the end of the confrontation between Iran and America? Probably not. Thirty-seven years after the Islamic revolution, diplomatic relations between the countries have not yet been restored. The tiny steps toward easing the Iranian-US confrontation, evident during the preparations for the agreement on the Iranian nuclear program, have not borne fruit. The US remains the main obstacle preventing Iran’s return to a full relationship with the rest of the world, even though the Islamic republic has definitely turned a new page in its history.

During the 37th anniversary of the Islamic revolution, Tehran pointed to the adoption of the Joint Comprehensive Plan of Action (JCPOA) as the biggest victory of Iranian diplomacy. That plan made possible Iran’s peaceful nuclear program and safeguarded Iran’s right to conduct atomic research. Speaking at a meeting with foreign ambassadors, the Iranian president emphasized that a solution had been found to one of the most difficult problems of international security. A few days ago, President Hassan Rouhani awarded the highest state honors to the members of his negotiating team. Gold medals were presented to 28 officials, including the foreign minister, defense minister, and head of the Atomic Energy Organization of Iran. It should be noted that Iran rarely decorates its officials, but this esteem for the negotiators was well-deserved, with the Iranian media even dubbing them «nuclear martyrs».

It is commonly believed that this victory is significant because Iran has been liberated from sanctions, but the leaders of the Islamic Republic of Iran have a different opinion: for them the crucial point is that Iran did not agree to the principal concessions demanded by the US on key foreign policy issues. Despite pressure from world powers, Tehran surrendered almost nothing and preserved its national sovereignty. In addition, President Rouhani has repeatedly mentioned in recent days that his cabinet has no desire to perpetuate the confrontation with the West.

Tehran is working out new rules for its relationship with Washington. On one hand, Iranians still do not trust America and are not ready to work together politically, but on the other – they are clear that they are not opposed to the restoration of economic ties and the return of American businesses to the Iranian market. In an interview on Iranian state television, President Rouhani stated that he has no objection to trade and economic cooperation with the US. «If US companies are willing to come and invest in Iran, to bring manufacturing to Iran, we have no problem with that». The problem lies elsewhere. The full benefits of the repeal of the sanctions have not yet been seen, which significantly reduces Tehran’s potential opportunities for trade and economic cooperation, primarily with Europe.

First of all, many of the technologies that Iran would like to obtain from European companies were actually imported from the US, and there are licensing restrictions on their export, meaning that they cannot be shipped to Iran without the consent of the American engineers who created them. Second, there is still a ban in place on trade deals with Iran that go through the US financial system. Despite the repeal of sanctions and the desire of European businesses to return to Iran, the continent’s biggest banks are still reluctant to handle payments to that country. The US Federal Reserve ruled that EU banks may conduct business with Iran on the condition that they refrain from working with certain individuals and legal entities that remain blacklisted and subject to sanctions for reasons having to do with terrorism and human rights violations.

European banks, specifically Deutsche Bank, which have previously been fined by US regulators for sanctions violations, must be cautious in their dealings with the Iranians. The Iranian government’s decision to employ the euro in its international trade has actually resulted in few changes, since Iran has still not managed to embark on any collaboration with Germany even after that decision was made. Twelve billion euros of investments are in the offing. German companies plan to complete the construction of six petrochemical works in Iran and to begin the construction of a new plant to manufacture petrochemical products in the biggest natural gas field in the world near the Iranian town of Assaluyeh. Many other projects are also in the works. Before the introduction of sanctions, Germany was a leader in trade with Iran. But the White House is still cautioning European banks and insurance companies about the risks of doing business with Tehran.

Europe is very dependent on Washington and will not be able to demand additional guarantees from the US. Iran is calling on Americans to publicly vouch for the safety of European banks, in order to reassure the banks that Washington will not again interfere in their relations with Iran. But in response, the US Congress is endeavoring to block the nuclear deal with Tehran. US lawmakers have still not abandoned their attempts to vote down the agreement on Iran’s nuclear program that was signed by President Obama’s administration. In addition, Congress has already begun work to extend the Iran Sanctions Act, which expires at the end of 2016. Sanctions based on claims of Iran’s nuclear violations can be recast as new restrictions tied to accusations that Iran supports terrorism and violates human rights. The Senate hearings on this law, which are scheduled for late February, will run concurrently with a study of new potential sanctions against Tehran that are connected with its missile programs. There can be no doubt that yet more discriminatory restrictions affecting the Iranian economy will be approved. How can Iran respond?

Iran’s leaders believe that the repeal of sanctions will alleviate no more than 40% of the country’s economic problems, and that most of the issues must be resolved domestically. But Iranians are refusing a return to their pre-sanctions economic policy. They intend to put an end to the country’s preference for exporting its raw materials, in order to preclude a return to dependence on the sale of oil. In the budget for its first fiscal year since the lifting of sanctions, which begins in Iran on March 21, 2016, only 25% of the country’s revenue is slated to come from oil exports. The search for investments and new business partners for the Iranian economy will have to find workarounds in order to overcome the obstacles America has constructed.

Tags: Iran  Middle East  US