Nuclear deal cracks open Iran economy and helps students

Iran and the five permanent members of the UN Security Council plus Germany (P5+1) on Jan. 20 began implementing an interim nuclear deal that cracks open the Iranian economy in key areas and also streamlines $400 million in tuition payments for thousands of Iranian students in US and other foreign colleges and universities.

A senior Barack Obama administration official, speaking to reporters on condition of anonymity, insisted that implementation of the Nov. 24 deal “does not mean that Iran is open for business.”

However, from now until July 20, when the deal is scheduled to expire unless renewed, the US Treasury Department is waiving sanctions that threatened legal action and hefty fines against foreign companies buying petrochemicals from Iran or providing Iran with automotive parts or precious metals. Iran will continue to export oil at current levels to six countries and have access to spare parts and maintenance for its troubled civilian airline sector. The US government has estimated that this sanctions relief would be worth about $3 billion to the beleaguered Iranian economy.

Iran will also get access to $4.2 billion of an estimated $100 billion in past oil revenues currently frozen in foreign banks. The money is to be doled out in monthly increments, assuming Iran follows through on pledges to halt its production of 20% enriched uranium and neutralize its current stockpile, as well as to curb other elements of its nuclear program.

Another US administration official said Monday that about $400 million of these funds can be used to pay tuition for Iranian students. There are more than 8,000 Iranian students currently in the United States and thousands of others in Europe, Canada and Australia.

US banking sanctions have complicated students’ ability to transfer money for tuition and room and board and also hampered Iran’s access to Western medicine, food and other humanitarian goods that were supposed to be exempt from sanctions. Under the Nov. 24 deal, the P5+1 promised to facilitate such transactions. Asked by Al-Monitor for details on Monday, the second senior US official said he would not “detail specific bank names.”

However, a Treasury Department advisory said Iran and the P5+1 “are establishing mechanisms to further facilitate the purchase of, and payment for, the export of food, agricultural commodities, medicine and medical devices to Iran, as well as to facilitate Iran’s payments of UN obligations, Iran’s payments for medical expenses incurred abroad by Iranian citizens and Iran’s payments of an agreed amount of governmental tuition assistance for Iranian students studying abroad. Foreign financial institutions whose involvement in hosting these new mechanisms is sought by Iran will be contacted directly by the US Department of the Treasury and provided specific guidance.”

Bijan Khajehpour, a managing partner at Atieh International and a contributor to Al-Monitor, called Monday's actions "very significant. It is the first time that sanctions are rolled back after more than a decade of increased pressure," he wrote in an email. "The best sign that the Iranian economy will benefit was the fact that on the free currency market, the Iranian rial gained about 5% in value within one day of trading."

In return for these concessions, Iran has taken the first concrete steps in a decade to pause its nuclear progress. The International Atomic Energy Agency (IAEA) on Monday confirmed that Iran has stopped enriching uranium above 5% U-235, disabled connections between centrifuge cascades that previously enriched uranium to 20% and begun diluting a stockpile of this medium-enriched fuel to a lower level.

A third senior US official who spoke to reporters on Monday said that Iran has pledged to cap its stockpile of low-enriched uranium hexafluoride gas at 7,650 kilograms (8.4 tons) — apparently the amount Iran had on hand as of Jan. 20. While Iran is allowed to continue to enrich uranium to 5% over the next six months, any additional stockpile is supposed to be converted into a powder form that cannot be reinserted into centrifuges for enrichment.

David Albright, a former IAEA inspector and president of the Institute for Science and International Security, told Al-Monitor that Iran does not yet have operational a facility to convert excess enriched uranium into powder. An IAEA spokesperson confirmed this but said it was not yet a concern and that Iran had time to get the facility up and running.

The IAEA also began on Monday daily inspections of Iran’s enrichment facilities at Natanz and Fordow, which previously were visited about once a week. The Vienna-based agency has doubled its staff devoted to Iran, according to US and IAEA officials. The IAEA declined comment on the total number of personnel involved but has asked for additional funds to support its expanded work in Iran. 

Albright said he was satisfied with the interim deal, but “the real battle is coming up. It’s going to be extremely tough to reach a comprehensive agreement.”

According to Albright, the US government would like to reduce Iran’s operating centrifuges from about 10,000 to 5,000, while Iran wants to keep its current inventory, including 8,000 centrifuges installed but not running. Washington also wants constraints to remain in effect for 20 years, Albright said, while Iran has said privately that it would agree to at most 10 years and Iranian Foreign Minister Mohammad Javad Zarif has spoken publicly of a period of only three to five years.

Iran must also resolve questions about past research into developing nuclear weapons to get sanctions relief from the UN Security Council, Albright said.

Reflecting the challenges ahead and the limited time before the interim deal expires, Undersecretary of State Wendy Sherman is due to meet with her P5+1 counterparts in Geneva on Tuesday to prepare for talks starting early next month on a comprehensive agreement. Sherman spent much of last week briefing the US Congress and urging it not to pass new sanctions that would violate the Nov. 24 accord.

White House spokesman Jay Carney praised Iranian actions already taken as “an important step forward." He added, "The United States remains committed to using strong and disciplined diplomacy to reach a peaceful resolution that will prevent Iran from obtaining a nuclear weapon.”