How Trump Can Strike Gold for America in Iran

There is a curious line in the Omani statement issued following the latest round of nuclear negotiations between the United States and Iran in Rome, which concluded on Saturday. The statement declares that Iran’s foreign minister, Abbas Araghchi, and Trump’s special envoy, Steve Witkoff aim to “seal a fair, enduring and binding deal which will ensure Iran [is] completely free of nuclear weapons and sanctions.” The sentence is striking because it implies that the US is considering lifting primary as well as secondary sanctions, something that goes beyond the sanctions relief provided under the Joint Comprehensive Plan of Action (JCPOA).

Is this just a case of sloppy drafting by the usually diligent Omani mediators? Well, the Wall Street Journal has reported that Iran has offered Trump a high-level meeting in Washington if a deal can be reached, something that would be difficult to imagine if Iran were to remain under an effective US embargo after the deal’s implementation.

Iranian officials have certainly been touting the possible economic benefits of a renewed nuclear deal for the US. When Araghchi described Iran as a “trillion-dollar opportunity” in a recent op-ed, he had one investor in mind—Donald Trump. As the US and Iran take further steps in the nuclear negotiations, Iranian officials have been eager to make clear that agreeing a new nuclear deal, which would at a minimum require the US to lift secondary sanctions on Iran, could prove a boon not just for the Iranian economy but also for the American economy. To emphasize the point, Iranian President Masoud Pezeshkian even announced that Iran’s Supreme Leader, Ali Khamenei, has “no objection” to American investment in Iran—an attempt to conjure a positive atmosphere ahead of the first round of indirect talks between Araghchi and Witkoff in Muscat.

It remains unclear whether the Trump administration will be able to achieve a viable deal with Iran. The administration’s position on key issues, such as Iran’s ability to maintain uranium enrichment, remains ambiguous, and there is significant distrust on both sides. If the negotiations are to succeed, they will need to find a win-win formula—hence the Iranian insistence on portraying any new agreement as not just a nuclear deal, but also a business deal. Iranian leaders have been watching Trump’s recent moves—his aggressive use of tariffs, his imposition of a critical mineral deal on Ukraine—and they have smartly concluded that Trump cares more about American enrichment than Iranian enrichment.

Is Iran really open for American businesses? The answer is yes, especially if Iranian and American policymakers make the restoration of their bilateral economic relationship a priority alongside restoration of a nuclear deal. Lifting primary sanctions would have a dramatic impact on US-Iran economic relations. But even if those sanctions remain in place, there are ways in which the US and Iran can structure their bilateral economic relations, opening new channels for trade and investment.

The heyday of US-Iran economic relations dates to the 1960s and 1970s. American firms like General Electric, General Motors, and DuPont played a central role in Iran’s industrialization, helping the country’s oil and manufacturing sectors achieve global prominence. Consumer brands like Gillette, Colgate, and Coca‐Cola were beloved by Iranian households.

The 1979 Islamic Revolution brought an end to diplomatic relations between the United States and Iran. That year, the US imposed sanctions targeting the Iranian economy for the first time. The New York Times reported on the exodus of American firms from Iran with a report titled, “Iranian Festival Is Over For American Business.”

But the change in Iran’s geopolitical and ideological orientation did not change a basic economic reality—the 1990s were an era of unipolarity and it was prudent to do business with the world’s largest economy. Iranian President Hashemi Rafsanjani tried to rekindle economic relations with the United States, believing that higher levels of trade and investment would help restore relations between the two countries. He offered the Islamic Republic’s first post-revolution oil field development contract to ConocoPhillips, maneuvering around domestic opposition to the deal. But the deal was blocked by the Clinton administration, which subsequently tightened US sanctions on Iran. The episode served as an early warning that the hardliners most capable of thwarting diplomacy were those in Washington, not Tehran.

American firms maintained a small presence in Iran in the early 2000s while European firms emerged as Iran’s preferred partners. The Europeans established joint ventures and wholly owned subsidiaries in the country and did brisk business. French oil giant Total took over the deal first offered to Conoco-Philips. French and German automakers retooled the Iranian automotive industry, making it one of the largest in the world. European brands flew off supermarket shelves as Iranian household purchasing power recovered on the back of 16 consecutive years of economic growth.

Iran’s economy hit a stumbling block in 2012 as the international community tightened international sanctions—with the measures hinging on President Obama’s unprecedented package of financial sanctions imposed at the start of that year. Subsequent nuclear negotiations focused on restoring Iran’s trade and investment ties with Europe, but the Obama administration did understand that enabling more trade between the US and Iran could create broader constituencies in Washington who backed the JCPOA, which was implemented in January 2016.

While primary sanctions remained in place after implementation of the deal, the JCPOA opened three pathways for US business that wished to pursue opportunities in Iran. First, certain US companies were able to apply for specific licenses from the Office of Foreign Asset Control (OFAC), part of the Treasury Department, permitting deals that would otherwise be blocked by primary or secondary sanctions. Among the contracts licensed in this way were the roughly $20 billion in deals Boeing negotiated for the sale of commercial aircraft to Iranian airlines, contracts that became symbolic of the nuclear agreement’s broader potential.

Many American companies took advantage of General License H, which stipulated that non-US subsidiaries of US companies could broadly engage with the Iranian economy. For example, Procter & Gamble, which ran its Iran operation out of its Swiss subsidiary, rapidly re-entered the Iranian market, where it could reliably generate over $100 million in annual revenue. American technology companies took advantage of a similar license called General License D-1 to export digital services to Iranian users.

Finally, American companies were even able to export to directly Iran without relying on a licensing regime if their sales were consistent with longstanding exemptions for humanitarian trade. Medical device companies like GE Healthcare and Baxter enjoyed bumper sales to Iranian hospitals. Pharmaceutical giants like Eli Lilly and Pfizer also increased sales, taking advantage of an opening in financial and logistics channels. American commodities giants like Cargill and Bunge sold wheat, sugar, and soybeans to Iranian buyers, including crops grown on American farms.

In short, American companies were making inroads in Iran as recently as eight years ago. It was President Trump’s unilateral decision to exit the Iran nuclear deal and reimpose secondary sanctions that brought an end to these renewed economic relations, leading to the cancellation of billions of dollars of contracts.

Immediately after Trump’s election, Boeing began to lobby the administration not to withdraw from the JCPOA—something Trump had promised to do on the campaign trail. The planemaker argued that the huge Iran contracts supported “tens of thousands of US jobs” and tried to appeal to Trump’s interest in reviving American industry. The appeals did not work. But it is easy to imagine Trump grasping benefits of a massive Boeing deal at this juncture, given the how darling of American industry has lost its shine. Demand for aircraft in Iran could also help compensate for the impact of Trump’s new China trade war on Boeing. Earlier this week, China banned the purchased of American aircraft, putting hundreds of Boeing orders in doubt.

The JCPOA experience makes clear that there was no prohibition in Iran against doing business with US companies. In fact, relations with the US nosedived after Trump’s abrogation of the nuclear deal, but some direct economic links persisted. Iran offered a lifeline for many American soybean farmers who were hammered during Trump’s first trade war with China. When China retaliated by ending the import of American soybeans, crashing the price, Bunge stepped in, delivering multiple cargoes of American-grown soybeans to Iran, even as Trump brought secondary sanctions back in force.

Clearly, a new nuclear deal could rekindle US-Iran economic relations. But the rebound in trade and investment will likely be modest unless there is a concerted effort by both the American and Iranian governments to make deeper economic relations a cornerstone of a new deal—especially if primary sanctions remain in force. Most American firms will be wary about entering the Iranian market given the inherent concerns that any deal between the two countries could break down, leading Trump to reimpose sanctions once again. Companies are also increasingly risk averse in the face of a volatile global economy. Leaving it to the private sector to singlehandedly realize the economic opportunities of the nuclear deal, the strategy taken back in 2016, is unlikely to work. Bilateral trade may rise from its low base, but investment will not materialize given risk perceptions, meaning there will be little in the way of shared incentives to bind the US and Iran together. A more structured plan for cooperation is needed.

Iranian negotiators are seeking structured cooperation, although their vision remains somewhat ill-defined. Reprising a demand from the talks that were undertaken with the Biden administration, Iranian negotiators continue to target some form of “guarantees” that would ensure the US cannot easily and costlessly withdraw from the nuclear deal while Iran remains in compliance with its obligations. Political and legal guarantees will have little weight. But deeper US-Iran economic cooperation can act as a kind of “technical guarantee” that serves to increase the credibility of the long-term commitments enshrined in any new nuclear deal.

Trump’s turn towards a decidedly “America First” economic policy might actually help Iran as it tries to find a win-win formula for economic cooperation that goes beyond increased purchases of American consumer goods, pharmaceutical products, and agricultural commodities. As economist Djavad Salehi-Isfahani has recently detailed in a review of investment data, Iran desperately needs to renew its capital stock and reverse a decade of technological regression. Meanwhile, the US is trying to rekindle domestic manufacturing of capital goods. The interests align nicely.

The economic commitments related to any new US-Iran nuclear deal should be structured to enable Iranian industrial giants to make major purchases of American-made capital goods—machinery, equipment, aircraft, and vehicles.

Iran’s capital stock is primarily European and was installed around 20 years ago, when European firms were making major investments in the country. But a significant portion of this machinery remains American in origin or design—a reflection of the fact that large parts of Iran’s industrial sectors have not been updated since the 1970s. Many turbines spinning in Iranian power plants and diesel locomotives chugging on Iranian rails are based on GE designs. Many drill heads used to bore oil wells are derivatives of Schlumberger designs—the Texas company’s former Iran subsidiary lives on. Another former American subsidiary, Iran Combine Manufacturing Company, was once called “Iran John Deere.” The company continues to produce trademark green and yellow tractors and combine harvesters—using American designs from 50 years ago. American engineers will find familiar technologies in use at Iranian industrial plants. Renovating and upgrading these facilities will be straightforward, especially given the incredible acumen of Iranian industrial engineers and technicians who will be eager partners.

Importantly, a surprisingly small portion of Iran’s capital stock is Chinese. Chinese exports of capital goods to Iran totaled $6 billion in 2023. But this is the same level as achieved in 2017, the last year that Iran enjoyed sanctions relief. Meanwhile, Chinese investment in Iran has languished under sanctions, plateauing since 2014. There are no major Chinese manufacturing investments in the country and Iran has not been able to substitute the loss of its European industrial partners with Chinese partners. That leaves a uniquely large and open market for American exporters—perhaps the last major economy in the world where the US could reasonably overtake China as an industrial partner.

Given the aligned interests of their respective industrial policies, the US and Iran should think ambitiously about the scope of their economic relations. Iranian firms will be eager customers for new machinery and equipment. Crucially, this kind of trade does not make Iran dependent on the US. Rather, it restores the strength and resilience of the Iranian industrial sector. Once capital goods are installed, they can last for decades—a kind of guarantee that the benefits of a US-Iran deal will last.

Finally, Iranian purchases of American equipment must be financed by American banks. This will make it more likely that the financial logjams associated with JCPOA sanctions relief will be solved. If US banks do business with Iran on Trump’s instructions, global banks will follow. Notably, Trump’s efforts to revitalize the Export-Import Bank could give American exporters access to crucial export credit, insurance, and guarantees.

Trump loves gold. If he remains pragmatic and focused when it comes to Iran, he could strike gold in several ways. He could forge the kind of nuclear deal Thomas Pickering once called the “gold standard for non-proliferation agreements,” once again subjecting Iran to the strictest IAEA verification regime ever devised. He could earn billions in export revenue for the US—and given the US is unlikely to import much Iranian oil—generate a rare trade surplus with a country that is poised to return to its position as one of the twenty largest economies in the world. Finally, if Trump is ambitious and if Iran’s leaders are courageous, he could finally earn the gold medal he has always wanted—a Nobel Prize.

Photo: The White House

Verification and the Credibility of Sanctions Relief for Iran

Following a week of speculation about the Biden administration’s foreign policy priorities, Iran’s Supreme Leader, Ali Khamanei, gave an important speech today in which he outlined Tehran’s “final” stance on US re-entry into the nuclear deal. Khamenei kept the door open for the US to rejoin the Joint Comprehensive Plan of Action (JCPOA), while declaring that the Biden administration must “completely lift” US sanctions before Iran returns to its nuclear deal commitments in full. 

Despite this stance, it appears likely that the US and Iran can find a way to “choreograph” a mutual restoration of their obligations under the nuclear deal. What was significant about Khamenei’s speech was not his declaration on sequencing, but rather the introduction of a new requirement for any choreography that would enable the US to re-enter the agreement. 

While the sequencing tango was a major part of the negotiations that led to the JCPOA and of Iranian concerns over the optics of that sequencing, Khamenei’s specific concern over the verifiability of sanctions relief is new. To understand the context of this concern speech, it is useful to refer back to a speech made by then Treasury Secretary Jacob Lew five years ago, just a few months after the implementation of the JCPOA. 

Taken together, these two speeches point to a fundamental—if overlooked—asymmetry within the JCPOA. Iran’s commitments under the nuclear deal are subject to extensive verification. The International Atomic Energy Agency (IAEA) has in place the world’s most extensive inspection regime to keep tabs on Iran’s nuclear program. In return for compliance with limitations on its nuclear program, the JCPOA parties committed to the lifting of a wide range of UN, EU, and US sanctions. But there is no verification mechanism in place to ensure that sanctions relief has been implemented “in practice,” and not just “on paper”—a distinction Khamenei highlighted today. 

Iran’s experience with sanctions relief under the JCPOA has been bitter. Even prior to the Trump administration's reimposition of secondary sanctions in May 2018, Iran had felt that it was not receiving the full benefits of sanctions relief. There were a number of reasons for this, but the primary barrier to increased trade and investment was the reluctance of major banks to facilitate transactions or provide financing for Iran-linked projects. As a result, most of the milestone deals signed around the time the JCPOA was implemented—including orders for Boeing and Airbus aircraft, joint ventures with automakers Renault, Peugeot, and Daimler, energy deals with Total and CNPC, and rail projects with Siemens and Alstom—hit a roadblock even before Trump was elected to office and the future of the nuclear deal was thrown in doubt. Obama administration officials acknowledged these challenges at the time. Lew and Secretary of State John Kerry were even drafted in to provide reassurances to global banks and economic actors about the reliability of US sanctions relief commitments. But their efforts largely failed. 

In March 2016, just a few months after the implementation of the JCPOA, Lew gave a major speech on the future of US sanctions policy—sanctions lifting was a key focus. He noted how the “experience with Iran demonstrates how difficult [sanctions lifting] can be, essential as it is.” Commenting on the quid-pro-quo of the nuclear deal, Lew noted that “since Iran has kept its end of the deal, it is our responsibility to uphold ours, in both letter and spirit.” He cited the “global outreach” that the Treasury Department was undertaking to provide guidance to foreign business and governments on how to conduct compliant trade with Iran. But reading Lew’s remarks today, it’s clear that he knew at the time that this guidance would prove insufficient and that a dilemma had presented itself for US foreign policy. “Since the goal of sanctions is to pressure bad actors to change their policy, we must be prepared to provide relief from sanctions when we succeed. If we fail to follow through, we undermine our own credibility and damage our ability to use sanctions to drive policy change,” he warned. Not only would the Obama administration fail to deliver sanctions relief in the manner envisioned, but the Trump administration would take the betrayal one step further, reimposing secondary sanctions despite Iran’s verified compliance with its commitments under the deal. 

It is the Biden administration’s undermined credibility, five years in the making, that led the Supreme Leader to insist that the US must lift sanctions “in practice, not verbally or on paper” and that Iran would seek to “verify” the implementation of sanctions lifting before fulfilling its own commitments. Importantly, the Supreme Leader believes that verification is possible, stating that if the international community wants “Iran to return to its obligations under the JCPOA,” it will do so after the US verifiably lifts sanctions.

The focus on verification suggests that Iranian leaders see dealing with the United States as a technical challenge. Iran is not going to take it on faith that the Biden administration will make good on its obligations—it will seek to ascertain that obligations have been met. This is an interesting echo of how President Obama justified the nuclear deal to the American public in July 2015, insisting that the deal was built “not on trust, but on verification.” The key difference, of course, is that the US had the means by which to perform its verification—the authority and access afforded to IAEA inspectors put American stakeholders at ease that Iran was making good on its commitments. It would seem that some effort needs to be made to give Iran similar tools of verification, both for its own sake, but also for the sake of Europe, Russia, and China, whose economic relations with Iran so vastly outweigh those of the United States. It is through these relations that the economic benefits of the deal must flow. 

The Biden administration should work closely with the other JCPOA parties to devise new mechanisms to verify that sanctions relief is being successfully implemented and identify where relief may be following short. One option might be to establish a new panel of experts or special rapporteur at the United Nations responsible for gathering, interpreting, and assessing evidence on the implementation of sanctions relief. 

There are several reasons why the United Nations may be the ideal organisation to establish such a verification mechanism. First, the nuclear deal is enshrined as a matter of international law in United Nations Security Council Resolution 2231, establishing an obligation for “promoting and facilitating the development of normal economic and trade contacts and cooperation with Iran.” Second, a United Nations agency, the IAEA, is already involved in verifying half of the nuclear deal’s quid-pro-quo. Third, Iran has itself turned to United Nations bodies to seek recourse for the failure of the United States to hold up its end of the nuclear deal, for example by filing suit at the International Court of Justice against the US. Fourth, the issue of sanctions relief impacts Iran’s relationships with the wider international community, and not just its relations with the United States or the other parties to the JCPOA. Countries which are not parties to the deal may not wish to raise politically sensitive concerns over the impact of sanctions on their bilateral economic relations with Iran in a forum that will be dominated by the United States. The UN offers as much impartiality as is possible in the international system. Finally, the issue of credible sanctions relief is not relevant to the Iran nuclear deal alone, but will be of concern for the growing number of economies subject to restrictive measures. A UN verification capacity could prove important for countries such as Venezuela, Cuba, Syria, and North Korea should a political breakthrough lead to the prospect of sanctions relief in any of those cases. 

Of course, setting up a new verification mechanism for sanctions relief won’t be possible in the short period of time that Tehran and Washington have to save the nuclear deal. But should the Biden administration acknowledge this concern and set in motion steps to create a verification mechanism, it may reassure stakeholders in Tehran that the bitter experience of the JCPOA is not bound to be repeated. This would also be consistent with the interim step of “freezing” Iran’s moves away from the nuclear deal—an approach that is reportedly being considered by the Biden administration. The provision of economic relief, whether in the form of oil waivers or eased access to foreign exchange reserves, would offer an instance where Iran could “verify” that the US has made good on a promise of sanctions relief prior to the delicate choreography of mutual restoration of the nuclear deal. Such a step would enable Khamenei and other voices in Iran to suggest that a new condition of JCPOA re-entry, set by Iran, had been provisionally met, opening the door to talks around fuller sanctions relief.

What’s clear is that Iran to wishes to build a deal not on trust, but on verification. The international community ought to afford Iran the means to do so.

Photo: IRNA

The Politics of Sanctions Relief in Iran: Three Roles for the Private Sector

As politicians and analysts consider the wisdom of offering Iran sanctions relief in exchange for restrictions on the country’s nuclear program, a key stakeholder group remains unaccounted for in the debate – the private sector.

Iran’s private sector stands to gain the most from sanctions relief, and they are uniquely positioned to advance the agenda of normalization through their interactions with both domestic and international business people. Corporate leaders are poised to play three vital roles— interlocutors, stewards, and creators—without which the long awaited nuclear deal will not successfully improve the economic situation in Iran in the way many Iranians anticipate. Policymakers must take account of the relationship between sanctions relief and private sector leadership for the deal to have its much-awaited impact.

In the aftermath of a deal, Iran’s private sector business leaders will be the ideal actors to pick up where the diplomats leave off. These individuals, with global outlooks and ambitions, have already begun reaching out to their peers in the West. And while this outreach is primarily about securing new investment and business opportunities for themselves, it also offers an opportunity to present Iran in a new light, and undo the effects of political vilification and cultural misconception. 

The notion of “business diplomacy” has emerged in the last decade as a serious topic of strategic thought, suggesting that the business executive can serve as a special kind of “ambassador.” And in the transition from high-stakes diplomacy to the “business as usual” mentality expected from a détente between Iran and the West, business diplomacy is the essential intermediate step. 

But in order to take on this role, Iran’s private sector business leaders will need a place at the table.  They must be welcome to visit Western countries much the same way American and European trade delegations have begun visiting Iran. Sanctions, stigma, and arcane visa policies should not prevent an Iranian CEO from coming to London, Paris, or New York to discuss his country and his company in the hope of finding an investor or partner. On the contrary, this should be welcomed as a necessary and productive kind of engagement.  

If Iran’s private sector business leaders can consolidate their economic position on the back of foreign investment and trade, they will be able to take on a vital role as stewards of a nuclear deal.  

For the average Iranian, the nuclear deal has one fundamental promise: greater prosperity. The mechanism embraced by the United States and its allies of using sanctions as a coercive policy tool has had the effect of conditioning Iranians in an almost Pavlovian way— geopolitical strife begets economic pain. Consequently, the signal of political accord and the “relief” of sanctions seems to be triggering the expectation of the relief of this economic pain, and even that of economic reward. Indeed, as opinion polls suggest, President Rouhani’s legitimacy in the eyes of the Iranian public hinges on his rebuilding of the economy.  

But the rollback of sanctions will not bring about relief unless it translates directly into an increased flow of goods, services, and capital into Iran. Following the change in the Iran regulatory environment, only private sector companies will be able to establish the flows necessary for economic growth— whether to introduce vital pharmaceuticals, the latest fashions, or investment funds into the country.

Iran’s private sector is uniquely positioned to create value for Iran’s long-term development. Value creation, as a concept of management, entails the proper treatment of shareholders, employees, and customers as part of corporate social responsibility. When value creation is more than the policy of a single business, and instead reflects the ethos of a whole industry or economic sector, private enterprise can take on a true social significance.

In this sense, Iran’s private sector firms, if properly empowered, can serve as the anchor for Iranian civil society. Through a commitment to corporate citizenship, companies can become advocates for the citizenry within the context of Iranian political economy.

In the current situation, the Iranian state and private enterprise compete for access to limited resources and capital. Livelihoods are either tied to a state affiliate or to a private concern Knowing this, class and cultural divisions are exacerbated by economic antagonism. Issues of public health, environmental degradation, educational policy, and legal protection will not be effectively addressed.

The Islamic Republic’s support for privatization has been surprisingly persistent, if unfulfilled. The technocrats are well aware that state owned enterprises struggle to generate economic gains of real value.

The Rouhani administration is committed to privatization and to the success of the non-governmental sector in Iran. The aim is to give new actors a voice in the wider arena of public affairs.  

This commitment has been signaled since the early days of the administration's tenure, and in Rouhani's cabinet’s engagement of the current crop of Iran’s private sector business leaders. The logic is clear. The Iranian state ought to focus on security and governance, and rent seeking should be formalized through taxation. 

But in the history of modern Iran, and especially in the age of globalization, economic policy has never been a national prerogative.

The imposition of sanctions and their aftermath are testament to this fact. As key actors in Iran try to turn over a new leaf, it is up to the P5+1 to empower Iran’s private sector as interlocutors, stewards, and creators, and thereby ensure that policy treats such empowerment not as an afterthought, but as an intended effect of a nuclear deal. Sanctions relief ought not to be seen as merely the quid-pro-quo of any final nuclear agreement. It is truly the sine-qua-non of everything promised by the ongoing détente. 

Photo Credit: AP Photo/Michael Euler