America Still Has Iran Sanctions—And They're Hurting the Nuclear Deal

November 13, 2016 Topic: Economics Region: Middle East Tags: IranIran Nuclear DealP5+1SanctionsFinanceBanking

America Still Has Iran Sanctions—And They're Hurting the Nuclear Deal

Since January 2016, when the implementation went into effect, the lifting of sanctions has not benefitted Iran's economy as expected.

Sanctions had severe adverse impacts on Iran’s economy. Lifting of the sanctions and improving the economic situation constituted one of the main objectives of Iran throughout the negotiations, and still continues to be of paramount importance. However, since January 2016, when the implementation went into effect, the lifting of sanctions has not benefitted Iran’s economy as expected. Post-JCPOA, Iran expected to achieve 8 percent expansion in its economy, given its economic potential and highly-educated and skilled workforce. However, due to the slow return of investors in the absence of OFAC assurances, and low oil prices, the IMF estimates the growth to be around 4.5 percent during the current Iranian calendar year.

The United States is criticized for deterring companies and investors from entering the Iranian market. Iran believes that while the legal and political foundations of sanctions have been removed, the United States has fully kept the primary sanctions in force, preventing the practical removal of the secondary sanctions that were to be lifted. The State Department claims that they are implementing their commitments and working on the problems mentioned by Iran. They point out, however, that it would take time to resolve all outstanding problems. President Obama has signed the legal orders to end the nuclear-related sanctions. The European Council of Ministers has also passed the required legislation. But removing the current negative atmosphere in financial interactions requires positive action by the U.S. Government – by OFAC. Through devising innovative ways to assure the major international banks, OFAC can maintain the momentum of progress and increase the confidence of the international community on the future of this agreement.

For Iran, difficulty in the smooth – and expected – implementation of the deal would work against President Rouhani. Congressional actions in limiting Iran’s access to economic and financial benefits from this agreement has hurt Rouhani and played into the hands of the opponents of the deal. The President is criticized for not being able to deliver the expected benefits from the deal limiting Iran’s nuclear capabilities. The unfortunate situation is that the conservatives in both Iran and the United States have been trying to constrain, to the extent possible, the effective implementation of the hard-won agreement. Rouhani has about eight months before the next presidential election in Iran to demonstrate the tangible benefits of the agreement to the people.

This agreement, an achievement for President Rouhani, is also the most significant foreign policy accomplishment of President Obama, led by Secretary Kerry. For the legacy to be saved and maintained, it needs to be implemented effectively. Even if somehow restrained in taking major actions to this end under the circumstances, Obama will undoubtedly have the opportunity to make it a lasting legacy after the elections and before the end of his term.

Mohammad Reza Amirkhizi is a former staff member of the United Nations Office on Drugs and Crime (UNODC): Representative and Director of UNODC in Afghanistan, Senior Adviser to the Special Representative of the UN Secretary-General for Afghanistan, and Senior Policy Adviser to the Executive Director of UNODC. Prior to joining UNODC, as a diplomat at the Foreign Ministry of Iran, he served as Adviser to the Minister, Director-General for International Political Affairs, Director-General for International Economic and Social Affairs, and Ambassador and Permanent Representative of Iran to the United Nations and other International Organizations in Vienna. Currently, he is a lecturer of international law and politics at University of California, Irvine. He holds a PhD from Graduate School of International Studies at University of Denver.

Image: Iranian 100-rial note. Wikimedia Commons/Public domain