Did Presidential Hopeful Hemmati Successfully Defend Iran's Currency?

Iran’s economic stagnation and widening inequality are top concerns for Iranian voters ahead of the presidential election on Friday. It is therefore no surprise that during three televised debates, candidates ganged up on Abdolnasser Hemmati, until recently Iran’s central bank governor. Frontrunner and head of the judiciary Ebrahim Raisi railed against Hemmati, promising voters that he would reduce the impact of exchange rates on prices, succeeding where Hemmati failed. Former IRGC officer Mohsen Rezaei claimed that Iran’s currency had lost so much value under Hemmati’s watch “the train of the revolution has turned into a scooter.”

It is true that Iran’s currency suffered a steep devaluation while Hemmati was central bank governor, but the attacks from the likes of Raisi and Rezaei are spurred not by the failure, but rather the demonstrable success of Hemmati’s management of Iran’s economic crisis. At least in the narrow area of currency policy, Hemmati made considerable progress in returning stability to foreign exchange markets at each point of crisis, meanwhile reducing the ability for special interests to profit from Iran’s system of multiple exchange rates.    

When Hemmati was appointed governor of the Central Bank of Iran in July 2018, Iran’s currency had already begun to lose value. Beginning in April 2018, Iran’s currency markets responded to the news that the Trump administration was to reimpose secondary sanctions on the country. The accelerating currency crisis would be the first test of a platform the Central Bank of Iran had introduced earlier that year—a new Integrated Foreign Currency Trading System, known by its Persian acronym “NIMA.”  

NIMA is part of Iran’s Comprehensive Trade Platform (NTSW), a set of registries and systems that enable companies to receive licenses to conduct certain kinds of trade and to purchase and sell foreign exchange as part of that trade. NIMA is paired with another platform called “SANA,” the Persian acronym for Foreign Currency Control System. The main difference between these two platforms is that NIMA is for international transactions with importers and exporters, while SANA is for transactions of foreign currency within the country, for instance between exchange bureaus. 

Using NIMA companies no longer needed to seek allocations of foreign exchange from the Central Bank of Iran or commercial banks, a system that disadvantaged companies with less established banking relationships and less political clout. All importers and exporters are required to use NIMA.  

The implementation of NIMA was slow and Hemmati, coming into office at a moment of crisis, struggled to get companies to use the new platform. By September 2018, the price of the dollar had reached a historic high of IRR 170,000 as supply-side pressure grew in advance of the full reimposition of secondary sanctions in November 2018. Imported intermediate and finished goods grew more expensive as suppliers dropped out of the market. At the same time, the Iranian financial system faced reduced liquidity in key currencies such as the Euro. As foreign exchange revenues declined, the central bank was unable to tap into foreign reserves. The Trump administration moved aggressively to freeze these reserves, even for use in humanitarian trade, leading just 10 percent of Iran’s overall reserves freely accessible by the end of 2019. To address these pressures, Hemmati sought to ensure that Iranian companies earning foreign currency made that currency available for sale through NIMA.

As per the guidelines issued by the central bank in November 2018, all exporters have a “foreign currency repatriation obligation.” According to these regulations, companies earning more than EUR 10 million a year in export revenue are obligated to repatriate 90 percent of those earnings through NIMA.

At first, adherence to the guidelines was disappointing. Hemmati publicly criticised large exporters, particularly petrochemical companies, that were failing to repatriate revenues. These companies were delaying in order to profit in rial terms as the currency continued its slide. In February 2019, CBI made a further announcement and instituted an incentive package, in which the exporters were categorised based on their performance in complying with the rules set in the market. Exporters with higher compliance—those who repatriated funds most reliably—would benefit from lower obligations for supply of foreign currency in NIMA.  

Over time, the public pressure and improved incentives led to greater uptake of the NIMA system. The electronic platform significantly increased transparency in Iran’s foreign exchange market. The earnings of exporters are linked to their export licenses, exchange bureaus bought foreign currency according to offers in which the currency, exchange rate, total value, and origin of funds are all known. Importers register their offers to buy foreign currency from exchange bureaus. Each transaction is duly recorded in NIMA.

Hemmati claimed moderate success by March 2019, noting that $19 billion of export revenue had been repatriated via the NIMA system. This was still just a fraction of Iran’s overall export revenue. But the impact of the foreign exchange market was noticeable. When combined with the economy’s structural adjustments to the reimposition of sanctions, the currency policy instituted by Hemmati saw the value of the currency remain below the September 2018 peak for the duration of the next year. A steady decline in the price of the dollar began in May 2019, at which point the price reached IRR 160,000 following the Trump administration’s revocation of waivers permitting Iran to export limited volumes of oil. By the end of 2019 the dollar price was around IRR 130,000.

In the first quarter of 2020, Iran’s economy faced a new shock—the pandemic. The impact of the pandemic was in many respects similar to the impact of sanctions—supply chain disruptions made imported goods more expensive. But at the same time, Iran’s non-oil exports fell due to the impact of lockdowns on production, logistical constraints, and reduced demand, particularly in regional markets. Iran was facing an acute balance of payments crisis. The value of the rial began to slide in earnest around February 2020, when the pandemic hit Iran. The value of the dollar peaked in October 2020 at IRR 330,000, an increase that had contributed to high rates of inflation. The situation may have been worse had NIMA not been in place. During the Iranian calendar year ending March 2021, Iranian exporters repatriated 72 percent of their foreign exchange earnings, around $52 billion.

After the dollar hit its peak price in October 2020, the rial recovered value quickly because of two factors. Iran’s economic recovery was picking-up steam. Greater oil exports to China and greater regional demand for non-oil goods had buoyed export revenue. Iran’s economic was actually returning to growth. Meanwhile, in Washington, the re-election prospects for Donald Trump were fading, and the notion that Iran could once again benefit from sanctions relief reduced demand for foreign currency, especially among ordinary Iranians who frequent exchange bureaus and purchase dollars and euros as a hedge against inflation.

Iran’s currency has been remarkably stable since October and in another indication of the success of the NIMA platform, the spread between the free market rate and the NIMA rate has been reduced significantly. Combined with a reduction in the number of goods eligible for the subsidised exchange rate of IRR 42,000, this has resulted in a de facto unification of Iran’s three-tiered exchange rate system. Given that one of the largest sources of corruption in the country has been the arbitrage between these rates, including situations in which companies would receive fraudulent allocations of foreign currency at the subsidised rate only to turn around and sell that currency at the free market rate, Hemmati’s interventions can be said to have had a significant impact on corruption—a point he alluded to during the debates.  

To understand Hemmati’s impact, it is perhaps best to compare the case of Iran with that of Turkey or Lebanon, two countries where the devaluation of national currencies is continuing unabated, precisely because leaders at the central bank lack the means or the might to arrest the decline. Hemmati saw that the train of the revolution was at risk of careening into the abyss and at least he sought to keep it on track. His opponents may not prove so adept.

Photo: IRNA

What's the Deal with Iran's Foreign Exchange Reserves?

Editors note: The IMF has now updated the footnote referenced in this piece to reflect their estimate of Iran’s gross international reserves in 2020, which stood at $115.4 billion.

When it comes to Iran, even economic data can cause controversy. The International Monetary Fund’s latest regional report for the Middle East and Central Asia places Iran’s gross international reserves at $4 billion in 2020, a tiny fraction of the $122.5 billion of reserves Iran held in 2018, and down further from the estimate of $8.8 billion published in October of last year.

For some, the IMF data was evidence of Iran’s stunning economic decline, achieved through “maximum pressure” sanctions. Former Wall Street Journal reporter Jay Solomon tweeted a screenshot of a table from the IMF report, stating that “accessible foreign exchange reserves plunged to $4 billion in 2020 from $123 billion in 2018.” Former Secretary of State Mike Pompeo, a key architect of the Trump administration’s maximum pressure policy, responded to Solomon’s tweet, boasting that “over 96% of Iran’s foreign exchange reserves have been wiped out.”  

Radio Farda ran a story claiming that Iran’s gross international reserves had collapsed to $40 billion, a figure they reached by concluding that the $4 billion of accessible reserves reflects 10 percent of Iran’s total reserves. Faced with these dire estimates, Iran’s central bank governor Abdolnasser Hemmati responded on Instagram, criticising the IMF and stating that they had used incorrect data in their report.  

The controversy stems from a misunderstanding of the assumptions made by the IMF in estimating Iran’s gross international reserves. A footnote in the statistical appendix of the latest Regional Economic Outlook report explains that the gross international reserves data for Iran “has been amended to reflect the amount of external assets that is readily available and controlled by the monetary authorities after the re-introduction of financial sanctions.”  

Since the Trump administration reimposed sanctions on Iran’s financial system in 2018, Iranian authorities have been unable to use most of their foreign assets, a situation exemplified by the current dispute over $7 billion of frozen assets held in banks in South Korea. For this reason, IMF economists estimate that only “only 10 percent of the previously reported gross international reserves are readily available for [balance of payments] purposes from 2019.” This estimate is likely derived from statements made by Trump administration Iran envoy Brian Hook in December 2019. Hook claimed that Iran retained access to just 10 percent of its $100 billion of reserves due to sanctions—Pompeo probably had this soundbite in mind when he tweeted that the $4 billion estimate meant that 96 percent of Iran’s reserves had been “wiped out.”

Given that Iran’s financial assets are a target of US sanctions, Iranian authorities do not publish their own figures on gross international reserves, although they do publish information on quarterly data on changes to reserves and a more general figure for “foreign assets.” That leaves the IMF little option but to run with the 10 percent figure to estimate what proportion of Iran’s reserves are readily accessible. Another assumption made by the IMF is that any balance of payments deficit Iran runs will need to be financed exclusively from that smaller pool of accessible reserves—this is indicated in the footnote, but it could have been made clearer.  

Working backwards, the $4 billion figure reflects 10 percent of 2019 total reserves minus Iran’s balance of payments deficit in 2020, which can be estimated from the difference between the 2019 and 2020 estimates for accessible reserves—$8.4 billion. Given the decline in accessible reserves it attributable to the balance of payments deficit, there has been no dramatic fall in Iran’s gross international reserves, which are estimated at $123.8 billion for 2019 and down by $8.4 billion to $115.4 billion for 2020. The relative stability of such reserves is corroborated by data from the Central Bank of Iran on changes to international reserves, which decreased by an average of just $1.15 billion per year between March 2017 and March 2020. Logically, if Iran is unable to access or spend the money, there is no real way for its reserves to be “wiped out.”

Iran’s dwindling accessible reserves pose a major challenge for authorities—$4 billion is equivalent to just under three weeks of Iran’s annual import total. Iranian officials will hope that the resumption of trade post-pandemic and the resurgence of Iranian oil sales will ease the country’s balance of payments crisis. Indeed, the IMF sees accessible reserves rising to $12.2 billion this year, suggesting a balance of payments surplus of $8.2 billion. Importantly, this projection does not take into account sanctions relief Iran may receive as part of ongoing negotiations with the United States.

For now, what a closer inspection of the data makes clear is that those who claimed that Iran’s foreign exchange reserves have collapsed are wrong—total reserves today are higher than in 2019, when Hook was boasting about the success of maximum pressure. Iran remains a wealthy country, albeit without the means to use much of its wealth.

Photo: Getty Images

Making Peace With Iran and North Korea Could Be Good for U.S. Workers

By Christopher Lawrence

When now-retired Republican Sen. Bob Corker put a hold on U.S. arms sales to Saudi Arabia in 2017, White House trade advisor Peter Navarro drafted a memo titled “Trump Mideast arms sales deal in extreme jeopardy, job losses imminent.” The memo, along with the Trump administration’s subsequent decision to lift the hold, is often framed as cynical trade-off: Billions of dollars’ worth of U.S.-made military hardware were helping to sustain a humanitarian crisis in Yemen, but those same dollars could help support thousands of American jobs. Faced with the choice between workers at home and human rights abroad, the Trump administration appeared to have put “America first.”

But bombs aren’t the only thing the American worker can build for the Middle East. Just as President Donald Trump was ramping up arms sales in the Gulf, he was also working to kill the Iran nuclear deal. A primary component of that deal was economic—as sanctions lifted, Western companies could help rebuild Iran’s aging civilian infrastructures by resuming trade and investment in Iran. One of the earliest contracts that Iran signed called for American aerospace manufacturer Boeing to build 110 jumbo jets—worth roughly $20 billion—to help revive Iran’s civilian air fleet. The estimated nearly 20,000 U.S. manufacturing jobs the civilian contract could have created was strikingly similar to number associated with the Saudi arms deal, yet it was terminated when Trump backed out of the Iran deal and reimposed sanctions.

These two episodes highlight what could be a turning point for U.S. foreign policy. Trump and his challenger Joe Biden both campaigned on promises to revitalize U.S. manufacturing and reduce U.S. military interventions abroad. Yet for the last four years, both Trump and his critics painted a false trade-off between those endeavors by overlooking the economic dimensions of U.S. diplomacy. Now that Biden is president, his administration can either accept that false trade-off or design new policies that pursue his domestic and diplomatic agendas in tandem. One of his biggest foreign-policy challenges is to reengage Iran and North Korea, two countries whose regimes have sought political and economic relations with the West for decades.

Under U.S. sanctions, Iran’s and North Korea’s infrastructures are in disrepair, their natural resource sectors are underdeveloped, and their populations are largely cut off from Western economies. But absent sanctions, Western firms could pursue untapped opportunities in such sectors as oil and mineral extraction, transportation, and port infrastructure, many of which would involve industrial equipment that U.S. workers could build at home.

Connecting diplomacy with domestic economics could help resolve a fatal defect of past nonproliferation agreements: They’ve generally lacked substantial domestic stakeholders in the United States with a vested interest in implementing America’s diplomatic commitments. In the case of the Iran deal, this meant that even though the Obama administration had sunk considerable political capital in crafting an effective solution to the Iran nuclear crisis, the subsequent Trump administration faced little political cost in abandoning it.

Another promising nonproliferation deal—the 1994 Agreed Framework, which substantially set back North Korea’s nuclear program—suffered a similar fate when a hostile George W. Bush administration entered office and scuttled it. In both cases, American negotiators focused on enforcing strict nuclear constraints to guard against cheating from the other side, but they neglected to ensure implementation of U.S. commitments or protect their diplomatic achievements from future U.S. administrations.

Had those deals been better connected with domestic economic benefits, they might have been more robust in the face of changing political tides. Today, now that the credibility of U.S. nonproliferation diplomacy is in tatters, other governments will expect a Biden administration to future-proof U.S. commitments by cultivating supporters of diplomacy at home.

But could economic development in a country help curb its nuclear program? History suggests that it can, and the Agreed Framework is an illustrative case. In that deal, North Korea agreed to dismantle its plutonium-production reactors in exchange for civilian power reactors from the West. North Korean negotiators explicitly described the civilian reactor project as an “indication of U.S. good faith” and a sign that the U.S. government might end its “hostile policy” toward North Korea. As construction on the civilian reactors commenced, the regime essentially gutted its plutonium infrastructure. This suggests that economic engagement can help a regime feel less committed to nuclear weapons.

Critics of engagement will reject any policy that appears to reward a country for simply abiding by the international nonproliferation norms that the rest of the international community already respects. But this misses the point of economic diplomacy. Experts have long warned that in order to truly resolve nuclear proliferation crises in Iran and North Korea, the United States must fundamentally change its relationships with those countries.

The trick, however, is that after decades of animosity and unpredictable policies, U.S. negotiators can’t simply promise to change those relationships. Instead, the U.S. government must commit some durable act that goes beyond mere words and written agreements.

In the case of the 1994 Agreed Framework, this was the point of building civilian power reactors in North Korea. In the words of one U.S. diplomat, nuclear reactors “are not the sort of things a country gives to an enemy,” and had those reactors been fully constructed, the United States and its regional allies would have been “hardwired” into the technological and economic relationships that would be required to safely operate those reactors in North Korea. Thus, reactor-construction steps helped signal that the United States would eventually normalize diplomatic relations with North Korea if the Agreed Framework were to survive, and this was just what the regime needed to feel secure in rolling back its nuclear weapons program.

A similar opportunity was missed with Iran in the 1990s, when Iranian President Akbar Hashemi Rafsanjani sought to collaborate with U.S. oil company Conoco to develop its oil infrastructure. His political goal was to facilitate a durable form of Iran-U.S. engagement to pave the way for broader reconciliation, and U.S.-based opponents of that reconciliation quickly foiled his plan. But the U.S.-Iran relationship might look different today if that project had gone forward.

Physical investments like these, if properly designed and carried out, could create a shared vested interest in preserving more positive relationships that might transcend partisan politics in Washington and regime politics in Tehran and Pyongyang. And they can send a more credible signal that nuclear rollback will lead to the secure and prosperous future that the U.S. government has promised in previous campaigns of nonproliferation diplomacy.

As Biden attempts to reengage Iran and North Korea, he should seek to establish a form of economic diplomacy that outlasts his administration. And infrastructure investments that promote both nonproliferation objectives and American jobs might finally do the trick.

Ironically, the Trump administration may have left Biden with the perfect tool for connecting diplomacy with U.S. manufacturing: a revived U.S. Export-Import Bank. While Trump reauthorized the Ex-Im Bank as part of his strategy to counter China’s Belt and Road Initiative, it could be the key to linking nonproliferation diplomacy with U.S. manufacturing.

When the Iran deal was signed and Western companies sought to do business in Iran, the main barrier they faced was that major banks did not want to finance their projects for fear that sanctions might be reimposed. The Boeing deal was among the contracts that were delayed for this reason. Facilitating some of these transactions will need to be a major part of resurrecting the Iran deal. Meanwhile, the Ex-Im Bank specializes in underwriting international transactions that benefit U.S. workers, and it has a long history of enabling U.S. businesses in exactly the sectors that need to be developed in Iran.

As for engaging North Korea, South Korean President Moon Jae-in has already proposed a series of ambitious development projects in North Korea under the heading of his “New Economic Map,” but these projects are currently barred under sanctions. If renewed U.S.-North Korea negotiations unfold, the Biden administration should not only put sanctions relief on the table but also offer Ex-Im Bank financing for some of those projects in exchange for nuclear rollback steps in North Korea. For example, if U.S. financing could help develop North Korea’s mining infrastructure to tap its deposits of rare-earth minerals, that could give North Korea a new and influential role on the world stage that doesn’t depend on nuclear weapons. At the same time, the U.S. government could tie ultimate completion of those projects to future rollback steps.

In both the Iran and North Korea cases, economic engagement that connects nonproliferation diplomacy to U.S. jobs offers the most promising path both for rolling back nuclear programs and for incentivizing future administrations to continue building on U.S. diplomatic achievements rather than squandering them and starting from scratch.

Christopher Lawrence is Assistant Professor of Science, Technology and International Affairs in the Walsh School of Foreign Service at Georgetown University. Follow him at @cclawr_law2.

Photo: Wikicommons

U.S.-Iran Talks Will Falter Unless Abdolnaser Hemmati Is at the Table

By Esfandyar Batmanghelidj and Saheb Sadeghi

The United States and Iran may soon be sitting at the negotiating table once again. In just the last week, the Biden administration has offered to restart negotiations, and Iran has struck a deal with the International Atomic Energy Agency to slow moves to limit inspections of its nuclear program. A window of opportunity has emerged for the two sides to talk, likely in a format facilitated by the European Union. If and when the United States and Iran sit across from one another again, there is a key figure who ought to be present—Abdolnaser Hemmati, the governor of Iran’s central bank.

In many respects, Iran’s central bank was the primary target of former U.S. President Donald Trump’s economic war on Iran. Much of the economic hardship that Iran has experienced due to the reimposition of secondary sanctions can be attributed to the Trump administration’s success in limiting the central bank’s access to its foreign exchange reserves.

According to the International Monetary Fund (IMF), Iran retains access to just $8.8 billion of readily available foreign currency, roughly one-tenth of its total reserves. Without access to its reserves held in countries like Iraq, South Korea, Japan, and Germany, the central bank has struggled to forestall the weakening of Iran’s currency, which is today worth less than one-fifth of its value prior to Trump’s withdrawal from the nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). This deep depreciation made imported goods more expensive, contributing to annual inflation rates of nearly 50 percent.

Hemmati, a veteran banker, was appointed as central bank governor in July 2018, parachuting in just a few months before secondary sanctions were fully reimposed on Iran. He has performed remarkably well in difficult circumstances. Iran’s currency was regaining value for most of 2019, a trend disrupted by the COVID-19 crisis, which hit the country’s economy hard, throwing trade into disarray.

Since reaching a historic low in October 2020 of just over 320,000 rials to the dollar on the free market, the currency has since stabilized at around 250,000 rials to the dollar—with this stability helping to undergird Iran’s slow economic recovery. Along the way, Hemmati has proved an adept communicator, using his Instagram account, the central bank’s website, and even select interviews with international media to outline his priorities and reassure the Iranian public about the bank’s capacity to defend the rial from hyperinflation.

Iran has not faced a full-blown economic meltdown, despite the best efforts of the Trump administration. But the country finds itself in a painful period of economic stagnation, and sanctions relief will be needed should any government wish to deliver on promises of prosperity. However, Trump sought to make sanctions relief more difficult.

In September 2019, the Trump administration designated Iran’s central bank under a terrorism authority, a move that jeopardized long-standing exemptions permitting the bank to play a crucial role in facilitating the purchase of humanitarian goods such as food and medicine.

In February 2020, the U.S. Treasury Department issued a new general license to allay those concerns. But more troubling was the intention behind the terrorism designation, which was applied to Iran’s central bank for the express purpose of making it harder for a potential Democratic administration to lift sanctions on the bank in the future.

The Biden administration will likely need to remove this designation to bring the bank back to its original status under the JCPOA—but removing a designation ostensibly tied to Iran’s purported support for terrorism may prove politically tricky as part of U.S. reentry into an agreement focused exclusively on the country’s nuclear program.

Lifting sanctions was difficult even before the Trump administration’s cynical moves. Iran’s experience of sanctions relief following the implementation of the JCPOA was disappointing. International banks remained hesitant to process Iran-related transactions, citing unclear guidance on how to conduct business in a compliant manner and the risks of punitive fines if the remaining sanctions were inadvertently violated.

This limited the rebound in trade and, particularly, investment in Iran. While there had been some technical exchanges on banking during the JCPOA negotiations, including working-level exchanges with Iran’s central bank, these were largely focused on the unfreezing of Iran’s assets—the challenges Tehran faced in mundane banking blindsided the JCPOA parties.

In March 2016, then-Treasury Secretary Jacob Lew noted that the “experience with Iran demonstrates how difficult [sanctions lifting] can be.” Despite what Lew referred to as “widespread global outreach” by officials at the U.S. Treasury and State departments, the banking challenges persisted and continued to stymie trade and investment until Trump’s eventual withdrawal from the nuclear deal.

In an interview last July, Valiollah Seif, who was central bank governor at the time of the JCPOA negotiations, suggested that Iran had not had the right experts in the room. “The JCPOA could solve the problem related to oil sales at that time, but it could not solve our banking problems. … Our economic and banking expert team was weak in the JCPOA talks,” he said.

Understandably, Iranian leaders are keen to get sanctions relief right this time around. In a recent speech, Iran’s supreme leader, Ayatollah Ali Khamenei, insisted that any sanctions relief offered by the United States must take place “in practice” and not just “on paper.” Moreover, the efficacy of that sanctions relief will need to be “verified.”

What’s clear is that as new negotiations approach, the JCPOA parties cannot rely on diplomats to untangle the complex knots that have constricted Iran’s banking ties for so long. To ensure sanctions relief succeeds, Hemmati ought to be in the room as part of a high-level technical dialogue, which could eventually include top officials such as U.S. Treasury Secretary Janet Yellen and French Finance Minister Bruno Le Maire.

There are a few reasons why a dialogue on sanctions relief, which would be similar in structure to the pre-JCPOA exchanges on nuclear issues between then-U.S. Energy Secretary Ernest Moniz and Ali Akbar Salehi, the head of Iran’s atomic energy agency, ought to center on Hemmati.

First, Hemmati has emerged as a key figure of Iran’s economic diplomacy. In the last two years, he has made trips to Iraq, Oman, South Korea, and China in order to ensure Iran retained functional financial channels with key trade partners while the Trump administration sought to put pressure on the governments of these countries. His participation in the new talks would be a natural extension of this global outreach, and most of the sanctions relief benefits promised by the United States will need to be delivered via third countries. Hemmati is the only stakeholder to have full technical knowledge of the challenges U.S. sanctions have posed in economic relations with key trade partners.

Second, Hemmati’s stewardship will be critical for the implementation of both early and late-stage sanctions relief measures. Whether it is the easing of access to foreign reserves or the granting of Iran’s COVID-19 IMF loan—both under consideration as early economic gestures by the Biden administration—or the consideration of new economic incentives such as reauthorization of the “dollar U-turn,” an exemption revoked in 2008 that allowed U.S. banks to process Iran-related transactions in cases where a payment is being made between two non-Iranian foreign banks, effective implementation depends on Iran’s central bank.

Importantly, the international community will also expect Iran to continue to reform its banking sector in line with international standards. On this point, Hemmati has been a key champion, stating recently that if the JCPOA were revived, Iran would need to complete adoption of the action plan set forth by the Financial Action Task Force, a standards-setting body, in order to see the benefits of sanctions relief in the banking sector.

Finally, Hemmati would bring some technocratic continuity to the economic implementation of a restored JCPOA. There is considerable concern that the possible arrival of a new Iranian president in August could leave any diplomatic agreement vulnerable to changing politics in Tehran.

While it may be possible for some of Iran’s top diplomats to remain in their posts in a new administration, it is Hemmati, whose term ends in 2023, who is best positioned to offer institutional continuity on implementation issues. He has proved to be an adept political operator. By insisting on the central bank’s technocratic independence, he has largely avoided the attacks regularly made against members of the Rouhani government.

He also maintains a good relationship with Khamenei and has been able to turn to the supreme leader to insulate the bank’s policies from political attacks. It is often argued that restoring the JCPOA would help boost the fortunes of Iran’s political moderates, but it is equally important for U.S. President Joe Biden to strengthen the hand of Iran’s technocrats who work on policies, not politics.

The Biden administration’s early appointments made clear that when it comes to Iran, personnel is policy. The same holds true in Tehran. If the right people are not in the room during upcoming negotiations, not only will the agreed policies be deficient, but so too will implementation falter. The United States, the other permanent members of the U.N. Security Council, and Germany need to provide Iran a pathway to the normalization of its banking ties—to do so, it would make sense to engage Iran’s top banker.

Esfandyar Batmanghelidj is the founder of the Bourse & Bazaar Foundation.

Saheb Sadeghi is a columnist and foreign-policy analyst on Iran and the Middle East.

Photo: IRNA

The Middle East’s Next Conflicts Won’t Be Between Arab States and Iran

By Vali Nasr

For more than two decades, the United States has seen the politics of the Middle East as a tug of war between moderation and radicalism—Arabs against Iran. But for the four years of Donald Trump’s presidency, it was blind to different, more profound fissures growing among the region’s three non-Arab powers: Iran, Israel, and Turkey.

For the quarter century after the Suez crisis of 1956, Iran, Israel, and Turkey joined forces to strike a balance against the Arab world with U.S. help. But Arab states have been sliding deeper into paralysis and chaos since the U.S. invasion of Iraq in 2003, followed by the failed Arab Spring, leading to new fault lines. Indeed, the competition most likely to shape the Middle East is no longer between Arab states and Israel or Sunnis and Shiites—but among the three non-Arab rivals.

The emerging competitions for power and influence have become severe enough to disrupt the post-World War I order, when the Ottoman Empire was split into shards that European powers picked up as they sought to control the region. Although fractured and under Europe’s thumb, the Arab world was the political heart of the Middle East. European rule deepened cleavages of ethnicity and sects and shaped rivalries and battle lines that have survived to this day. The colonial experience also animated Arab nationalism, which swept across the region after World War II and placed the Arab world at the heart of U.S. strategy in the Middle East.

All of that is now changing. The Arab moment has passed. It is now the non-Arab powers that are ascendant, and it is the Arabs who are feeling threatened as Iran expands its reach into the region and the United States reduces its commitment. Last year, after Iran was identified as responsible for attacks on tankers and oil installations in Saudi Arabia and the United Arab Emirates, Abu Dhabi cited the Iranian threat as a reason to forge a historic peace deal with Israel.

But that peace deal is as much a bulwark against Turkey as it is against Iran. Rather than set the region on a new course toward peace, as the Trump administration claimed, the deal signals an intensification of rivalry among Arabs, Iranians, Israelis, and Turks that the previous administration failed to take into consideration. In fact, it could lead to larger and more dangerous regional arms races and wars that the United States neither wants nor can afford to get entangled in. So, it behooves U.S. foreign policy to try to contain rather than stoke this new regional power rivalry.

Iran’s pursuit of a nuclear capability and its use of clients and proxies to influence the Arab world and attack U.S. interests and Israel are now familiar. What is new is Turkey’s emergence as an unpredictable disrupter of stability across a much larger region. No longer envisioning a future in the West, Turkey is now more decidedly embracing its Islamic past, looking past lines and borders drawn a century ago. Its claim to the influence it had in the onetime domains of the Ottoman Empire can no longer be dismissed as rhetoric. Turkish ambition is now a force to be reckoned with.

For example, Turkey now occupies parts of Syria, has influence in Iraq, and is pushing back against Iran’s influence in both Damascus and Baghdad. Turkey has increased military operations against Kurds in Iraq and accused Iran of giving refuge to Turkey’s Kurdish nemesis, the Kurdistan Workers’ Party (PKK).

Turkey has inserted itself in Libya’s civil war and most recently intervened decisively in the dispute in the Caucasus between Armenia and Azerbaijan over Nagorno-Karabakh. Officials in Ankara are also eyeing expanded roles in the Horn of Africa, and in Lebanon, while Arab rulers worry about Turkish support for the Muslim Brotherhood and its claim to have a say in Arab politics.

Each of the three non-Arab states has justified such encroachments as necessary for security, but there are also economic motivations—for example, access to the Iraqi market for Iran or pole positions for Israel and Turkey in harnessing the rich gas fields in the Mediterranean seabed.

Predictably, Turkish expansionism runs up against Iranian regional interests in the Levant and the Caucasus in ways that evoke Turkey’s imperial past. Turkish President Recep Tayyip Erdogan’s recent recitation of a poem lamenting the division of historic Azerbaijan—the southern part of which now lies inside Iran—during a triumphant visit to Baku invited a sharp rebuke from Iran’s leaders. This was not an isolated misstep.

Erdogan has been for some time suggesting that Mustafa Kemal Ataturk was wrong to give up Ottoman Arab territories as far south as Mosul. In reviving Turkish interest in those territories, Erdogan is claiming greater patriotism than that of the founder of modern Turkey and making clear that he is breaking with the Kemalist legacy in asserting Turkish prerogatives in the Middle East.

In the Caucasus, as in Syria, Turkish and Iranian interests are interwoven with those of Russia. The Kremlin’s interest in the Middle East is expanding, not only in conflicts in Libya, Syria, and Nagorno-Karabakh but also on the diplomatic scene from OPEC to Afghanistan. Moscow maintains close ties with all of the region’s key actors, sometimes tilting in favor of one and then the other. It has used this balancing act to expand its advantage. What it wants from the Middle East remains unclear, but with U.S. attention on the wane, Moscow’s complex web of ties is poised to play an outsized role in shaping the region’s future.

Israel, too, has expanded its footprint in the Arab world. In 2019, Trump recognized Israel’s half-century-old claim to the Golan Heights, which it seized from Syria in 1967, and now Israeli leaders are planning out loud to expand their borders by formally annexing parts of the West Bank. But the Abraham Accords suggest that the Arabs are looking past all of that to shore up their own position. They want to compensate for America’s dwindling interest in the Middle East with an alliance with Israel against Iran and Turkey. They see in Israel a crutch to keep them in the great game for regional influence.

The tensions between Iran and Israel have escalated markedly in recent years as Iran has reached farther into the Arab world. The two are now engaged in a war of attrition, in Syria and in cyberspace. Israel has also targeted Iran’s nuclear and missile programs directly and has been blamed most recently for the assassination of Iran’s top nuclear scientist.

But the scramble for the Middle East is not just about Iran. Turkey’s relations with Israel, Saudi Arabia, the UAE, and Egypt have been deteriorating for a decade. Just as Iran supports Hamas against Israel, Turkey has followed suit but has also angered Arab rulers by supporting the Muslim Brotherhood. Turkey’s current regional posture—extending into Iraq, Lebanon, Syria, and the Horn of Africa while staunchly defending Qatar and the Tripoli government in Libya’s civil war—is in direct conflict with policies pursued by Saudi Arabia, the UAE, and Egypt.

This all suggests that the driving force in the Middle East is no longer ideology or religion but old-fashioned realpolitik. If Israel boosts the Saudi-Emirati position, those who feel threatened by it, like Qatar or Oman, can be expected to rely on Iran and Turkey for protection. But if the Israeli-Arab alignment will give Iran and Turkey reason to make common cause, Turkey’s aggressive posture in the Caucasus and Iraq could become a worry for Iran. Turkey’s military support for Azerbaijan now aligns with Israel’s support for Baku, and Iran, Saudi Arabia, and the UAE have found themselves in agreement worrying about the implications of Turkey’s successful maneuver in that conflict.

As these overlapping rivalries crisscross the region, competitions are likely to become more unpredictable, as will the pattern of tactical alliances. In turn, that might invite meddling by Russia, which has already proved adept at exploiting the region’s fissures to its advantage. China, too, may follow suit; its talk of strategic partnership with Iran and nuclear deal with Saudi Arabia may well be just the opening act. The United States thinks of China in terms of the Pacific, but the Middle East abuts China’s western frontier, and it is through that gateway that Beijing’s will pursue its vision for a Eurasian zone of influence.

The Biden administration could play a key role in reducing tensions by encouraging regional dialogue and—when possible—use its influence to end conflicts and repair relations. In response to change in Washington, feuding adversaries are signaling a truce, and that provides the new administration with an opportunity.

Although relations with Turkey have frayed, it remains a NATO ally. Washington should focus on improving ties between not just Israel and Turkey but also among Turkey and Saudi Arabia and UAE—and that means pushing Riyadh and Abu Dhabi to truly mend ties with Qatar. The Gulf rivals have declared a truce, but fundamental issues that divided them persist, and unless those are fully resolved, their differences could cause another breach.

Iran is a harder problem. U.S. officials will have to first contend with the future of the nuclear deal, but sooner rather than later Tehran and Washington will have to talk about Iran’s expansionist push in the broader region and its ballistic missiles. Washington should encourage its Arab allies, too, to embrace this approach and also engage Iran. Ultimately reining in Iran’s proxies and limiting its missiles can be achieved through regional arms control and building a regional security architecture. The United States should facilitate and support that process, but regional actors have to embrace it.

The Middle East is at the edge of a precipice, and whether the future is peaceful hinges on what course the United States follows. If the Biden administration wants to avoid endless U.S. engagements in the Middle East, it must counterintuitively invest more time and diplomatic resources in the region now. If Washington wants to do less in the Middle East in the future, it has to first do more to achieve a modicum of stability. It has to start by taking a broader view of regional dynamics and making the lessening of new regional power rivalries its priority.

Vali Nasr is the Majid Khadduri professor of Middle East studies and international affairs at Johns Hopkins University’s School of Advanced International Studies. He served in the U.S. State Department from 2009 to 2011.

Photo: IRNA

Relations Between France and Iran in the Biden Era

The French government has welcomed the election of new US President Joe Biden, who disapproves of former President Donald Trump’s withdrawal from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), and has confirmed his desire to return to it. France, like the rest of Europe, is mostly pleased by Biden’s declared intent to rebuild transatlantic relations and consult European allies on Iranian matters, as well as on other regional tensions. Biden’s early steps to rejoin the Paris Agreement, the World Trade Organization and the World Health Organization confirm that he is following through on his campaign promises: that the United States is back and that it will play the multilateralism role, consulting allies and partners and ending the previous administration’s abrasive practices.

Against this backdrop, France, together with Germany and the United Kingdom—the E3 parties to the nuclear agreement—is facing several challenges with both Tehran and Washington. Paris seeks a clear understanding of Washington’s true intentions with Tehran, whilst also needing to realistically assess Iran’s posture and develop a European-wide vision for relations with Iran.

An Enduring Hawkishness

France’s current approach to Iran can be traced back to former President Nicolas Sarkozy, who introduced a new Middle East policy based on neoconservative intellectual visions shaped by a team of strategists nicknamed “The Sect” and led by the late Thérèse Delpech. Paris not only maintained its hawkish approach under François Hollande as president and Laurent Fabius as foreign minister, but it also hardened this approach during the painstaking negotiations leading to the Iran nuclear deal in 2015. At a series of tense meetings, Fabius endlessly added complexity to talks, claiming that US negotiators were naive and ready to make undue concessions to Iran while neglecting critical safeguarding details. The French felt that former US Secretary of State John Kerry and Iranian foreign minister Mohammad Javad Zarif were poised to strike a hurried, weak deal without taking France’s expert guidelines into consideration. Fabius nearly killed the negotiations.

Fabius and other members of The Sect also sympathised with Israeli Prime Minister Benjamin Netanyahu and included some Israeli priorities within French positions. Saudi Arabia has become a growing consumer of French weapons and Riyadh’s views were likewise taken into account, and Saudi pressures to prevent or slow Iran’s nuclear capacity have been considered. Some in France hoped for more pragmatic behaviour when Emmanuel Macron became president, but the new foreign affairs minister, Jean-Yves Le Drian, who previously worked as the defence minister, is the guardian of the hawkish line.

Macron occasionally distances himself from his more hawkish advisers. He opposed ousting Syrian President Bashar al-Assad by force before a political solution could be reached, and Macron has stated that he wants an end to a neocon policy. Macron showed his independent streak when he invited Zarif to the 2019 G7 Summit in Biarritz, bringing a four-point plan to Trump and genuinely attempting to arrange a phone conversation between the US president and Iranian President Hassan Rouhani on the sidelines of the UN general assembly later in the year. The conversation did not end up happening because Trump did not take the opportunity and Rouhani did not have the necessary political support. But the facilitation efforts were sincere and significant.

Short-Term Gains but Long-Term Costs?

French officials have repeatedly stated that they want to see the JCPOA survive. But their messages can appear to contradict that mission. In a phone call on Tuesday, Macron told Rouhani that Iran must make “clear gestures” to revive the nuclear deal. In an interview last month with the French weekly newspaper Journal du Dimanche, Le Drian said that tough discussions on ballistic proliferation and regional destabilisation by Iran will be necessary in the course of new negotiations. While the content of the message does not differ much from that set out by the Biden administration, the tone is more aggressive—an ultimatum rather than an offer to negotiate. Unsurprisingly, Iranian responses were harsh, but France’s top diplomats do not seem to understand—or do not want to understand—that posing diktats to a nationalist state is a big miscalculation.

Another miscalculation was made when Macron participated in an interview hosted by the Atlantic Council on February 4. Macron stated that Iran is closer to the atomic bomb now than before the 2015 agreement, that concerns about ballistic missiles, and the new negotiations should be global and inclusive—including even Saudi Arabia and Israel.

Macron added that the nuclear agreement cannot work if regional governments are not satisfied, but his vision of potential Saudi and Israeli involvement in the future of JCPOA is ambiguous. Is the involvement limited to consulting these “partners,” or will they be invited to the negotiation table? Biden will likely consult his regional partners without inviting them to the negotiation room—Washington is under no illusions as to the impact such a move would have. Officially inviting the Saudis and Israelis to be consulted is itself an affront to Iran. Unsurprisingly, Saeed Khatibzadeh, the spokesperson of the Iranian foreign ministry, immediately rejected the idea of new participants in nuclear deal talks after Macron’s comments were publicised.

Categoric opposition from Tehran was certain, so why did Macron make such a statement? According to Al-Quds Al-Arabi, a pan-Arab newspaper, the French president is set to visit the Saudi capital of Riyadh soon and may discuss the Iranian nuclear program with King Salman and Crown Prince Mohammed bin Salman. This will certainly please the Saudis, who will appreciate receiving France’s political support, but the Iranians see this move as deliberately provocative. On 9 February, François Nicoullaud, a highly respected expert and France’s former ambassador to Iran, commented on Macron’s proposals, saying that the mediator’s job is listening to and exploring opinions from both sides and then developing a step-by-step solution in a manner that’s as neutral as possible and that’s acceptable to everyone. Al-Quds Al-Arabi reports that talks would include reinforcing bilateral cooperation, notably military. If this is true, it might indicate that Paris is seeking advantages from Biden’s intention to review US military cooperation and weapons deliveries to the Saudis. France is likely to see this as an opportunity for juicier military contracts.

France’s flirtation with Saudi Arabia undermines its bilateral relations with Iran, depriving Macron of his claimed ambition of being a major facilitator of a “demanding dialogue” between Iran and the United States. During his interview with the Atlantic Council, Macron reiterated the role he is willing to play as a mediator. The French-Saudi alignment, even if France does not agree with all of the Kingdom’s actions and policies, will convince Iran that Paris cannot mediate impartially. If Le Drian distrusts Iran, the reciprocal is also true.

Repairing Bilateral Relations

Bilateral relations are in bad shape, and polite diplomatic language cannot hide the cracks. But it is not too late for a fix. The priority now is to safeguard the possibility of an orchestrated return to the JCPOA. Zarif has suggested that Josep Borrell, the European Union’s High Representative, could “choreograph the actions that need to be taken” by the United States and Iran. Here, France might play a role by showing that as a de facto leader of the E3, it can lend visible support to such an initiative. Macron would have the opportunity to implement its “honest broker” status. Another issue might allow France to gain credibility not only with Tehran but also with other Europeans. The Instrument in Support of Trade Exchanges (INSTEX), which facilitates transactions for European trade with Iran despite limitations in direct banking channels, deserves more attention. France, joined by other Europeans, should press Biden to quietly bless the operation of INSTEX. If France, supported by other EU member states, manages to persuade Biden to make such a step, the impact on bilateral trade between France and Iran could help repair some of the lost bilateral trust.

On regional issues, France should use its influence on Saudi Arabia, Iraq, Qatar and the United Arab Emirates to encourage direct dialogue with Iran. Paris could make suggestions both on confidence-building measures and on the practical steps for a dialogue with Iran on regional concerns, such as ballistic missile proliferation, and particularly Yemen, working in coordination with the UN envoy. First, France should try sharing these views and reactions with Tehran, and later it could present new ideas on a future region-wide security system. Excluding talks on nuclear issues would be more palatable to Tehran, unless all participants, including Saudi Arabia and Israel, start negotiating on regional denuclearisation. However, this move will likely not be seen enthusiastically by all.

France can have a fresh start with Iran, but it will take time, prudence, and humility. France’s policies towards Iran must use strategic criteria when assessing the field and devising a policy. Professional advice from governmental departments and agencies as well as from external experts, including the business sector, should not be neglected, and lessons must be drawn from past mistakes.

Photo: Wikicommons

Why Qatar Wants to Facilitate a US-Iran Breakthrough

On February 15, Mohammed bin Abdulrahman Al Thani, the foreign minister of Qatar, travelled to Tehran in the latest instance of Doha's efforts to act as a facilitator for the resolution of international conflicts.

Al Thani delivered a letter from the Emir of Qatar to Iran's President, Hassan Rouhani. Beyond matters related to bilateral issues, the contents of the letter likely included Qatar’s offer to facilitate dialogue between Iran and the United States on issues related to the Joint Comprehensive Plan of Action (JCPOA).

This trip was not the first time Qatar has attempted to play a role in resolving the conflict between Tehran and Washington. Just over a year ago, a day after the assassination of Iranian military commander Qassem Soleimani, the Qatari foreign minister made an unannounced trip to Tehran to deescalate tensions. Shortly afterward, Emir Tamim bin Hamad Al Thani's made his first official visit to Iran.

Qatar's diplomatic efforts surrounding the conflict between Iran and the United States cannot be characterized as mediation. After all, Qatar does not have direct involvement in the negotiations between Tehran and Washington, nor is it overseeing any meetings or presenting any initiatives. But the less significant role of facilitator is nonetheless important.

Until recently, Oman and, to a lesser extent, Kuwait took on the role of facilitators in the Middle East, be it in between Iran and the United States, or Iran and Saudi Arabia, or between Yemeni factions. Qatar is trying to take a further step in this regard and act as a facilitator for a wide range of international conflicts. The Qatari Foreign Ministry touts that the emirate “hosts negotiations between conflicting parties and contributes as a facilitator of dialogue between them." Examples of diplomatic achievements include "an important role in reaching Doha Peace Agreement in Darfur, releasing of Djiboutian prisoners of war in Eritrea, releasing hostages in Syria, [and] ending the presidential vacuum in Lebanon." Moreover, Qatar is involved in the Palestinian-Israeli conflict through a humanitarian capacity, it is hosting the most recent intra-Afghan talks, and attempted to facilitate the resolution of the issue between Iran and South Korea over the oil tanker in the Persian Gulf just recently. 

The focus on the US-Iran tensions reflects not just the significant security issues these tensions pose for the Persian Gulf region, but also the appreciation of Qatar’s leadership for Iranian assistance during the blockade imposed by fellow members of the GCC. The recent détente between Qatar and the other GCC states marked by the Al Ula Summit are unlikely to negatively impact the deeper relations built with Iran over the past years. This is despite the fact that curbing diplomatic and economic ties with Iran was one of the conditions set when the blockade was first imposed. Qatar did not comply with these demands.  

In contrast, the blockade propelled Qatar's post-conflict regional approach to enhance its relations with Iran. While Qatar had recalled its ambassador from Tehran in solidarity with Saudi Arabia following the January 2016 incidents at Saudi diplomatic facilities in Iran, Doha restored its diplomatic representation in Tehran by reinstating its ambassador soon after the blockade was imposed. Furthermore, to guarantee the food security of its population, to ensure an air-route for its leading international airline, and to secure regional diplomatic support, Qatar continued to deepen its relations with Iran. 

Iran and Qatar share the largest gas reserves in the world—a unique feature in the bilateral relationship between the two countries that has provided a basis for constructive relations. Along with expressing a desire to bring Iran and the United States back to the negotiating table, Qatar has repeatedly called for an inclusive GCC-wide dialogue with Iran. Statements from Qatar's Emir, foreign minister, and defence minister have described Iran as "our neighbor" and "part of [the region’s] fabric" and noted that Iran’s stability is "[Qatar’s] stability." 

In an interview a day before Joe Biden's inauguration, Foreign Minister Al Thani stated that he hopes that Iran and the United States "will reach a solution with what has happened with the JCPOA" and that Qatar will welcome the invitation if it is asked by the stakeholders to play a role. Additionally, according to Al Thani, resolving the issues around the JCPOA "will help relations between the GCC and Iran" as everything is "interconnected at the end of the day." He has further argued that "the time should come when the GCC will sit on the table with Iran and reach a common understanding between the countries that we have to live with each other, we cannot change geography." 

The Emir of Qatar was among the first world leaders to welcome the JCPOA, calling it "a positive and important step" in his address during the 2015 United Nations General Assembly, not long after the deal was struck. Since then, Doha has been vocally supportive of the agreement—it even tried to persuade the Trump Administration to stick with the deal.

The diplomatic outreach has picked-up since the election of Joe Biden. The Qatari foreign minister has been in contact with the U.S. National Security Adviser, Jake Sullivan, and the Special Representative for Iran, Robert Malley. It can be expected that he will speak to Secretary Anthony Blinken in the coming days as well. Iran is likely to be high on the agenda for this call.

In the end, the European parties to the nuclear deal—France, Germany, and the United Kingdom—are best positioned to formally mediate between the US and Iran in any period before direct talks. However, Qatar’s diplomacy may help facilitate this subsequent stage of mediation, in a role similar to that played by Sultan Qaboos of Oman in 2013. 

While in Tehran, Al Thani made clear his hopes for renewed diplomacy, stating, "We hope that with the return of the US to the nuclear deal as soon as possible, challenges and sanctions can be alleviated within the framework of the deal and Qatar will not spare any efforts to make that happen." Doha is certainly eager to notch another diplomatic success.

Photo: IRNA

Reviving the Nuclear Deal Gives the U.S. More Leverage Over Iran

By Mahsa Rouhi

As officials in Washington consider returning to the 2015 Iran nuclear deal, much of the debate has centered on whether the U.S. government will lose leverage. Some experts and officials argue that if the Biden administration rejoins the deal—also known as the Joint Comprehensive Plan of Action (JCPOA)—the United States will squander the leverage built in recent years through former President Donald Trump’s maximum pressure strategy.

While U.S. sanctions have caused Iran’s economy major challenges and limited Iran’s access to financial resources, they have not succeeded in changing Tehran’s behavior regarding its nuclear program. Indeed, Iran has not offered additional concessions. Instead, it has engaged in its own leverage-building strategy by ramping up its nuclear activities, missile program, and regional activities. Iran is not only closer to having the capacity to build a bomb, but even the political discourse of key officials on whether to cross that threshold has been shifting.

Leverage is only meaningful if it can be effectively used to produce desired policy outcomes. Continuing to build leverage merely for the sake of inflicting pain or adding pressure is neither an effective nor sustainable negotiating strategy. It leads to a vicious cycle of chasing a perfect deal that does not exist and ignoring the opportunities for incremental progress as Iran inches closer to a nuclear weapons capability. By reviving the nuclear accord, the U.S. government will not squander any sanctions leverage, but if it plays its cards wisely, it could enhance its position for follow-on negotiations on Iran’s nuclear program and regional activities.

In response to the maximum pressure effort, Tehran sought to increase its own leverage. Iran’s Islamic Revolutionary Guard Corps (IRGC) has ramped up its naval military operations in the Persian Gulf, targeting maritime trade routes through the Strait of Hormuz to signal its ability to harm U.S. interests and those of its allies. The most recent example was in early January when the IRGC seized a South Korean-flagged vessel most likely in reaction to the $7 billion in Iranian funds frozen in compliance with U.S. sanctions.

Iran has increased its nuclear activities to bring it closer to having the capacity to build a nuclear weapon if it chooses to do so. Iranian officials indicated in January that they would expand their nuclear program by resuming uranium enrichment to a 20 percent level, which is much higher than the low-level 3.67 percent limit set by the 2015 deal. Furthermore, to minimize the impact of sanctions and U.S. leverage, Iran has focused on investing in a resistance economy infrastructure to diversify the economy in ways that it will be more inward-looking and less reliant on foreign trade, particularly with the West. Today, Iran is nowhere near the brink of collapse. The country, rather, is projected to see an economic recovery in 2021.

The United States should swiftly attempt a clean return to the deal with a compliance-for-compliance approach because it can stop Iran’s quickly-growing nuclear program in its tracks. This move would not undermine U.S. leverage but rather enhance it. It would allow the United States to stop the ticking clock on Iran’s nuclear advancements, mitigate the possibility of a military confrontation between Iran and Israel or the United States, and restore multilateral diplomatic efforts. More importantly, returning to the deal would allow more time for follow-on agreements on regional issues and other areas of contention. These issues are critical to the security interests of the United States and its regional partners, and Tehran is unlikely to engage in any talks on these issues unless the JCPOA is restored.

An important component of U.S. leverage is sanctions relief. With both sides committed to compliance, lifting sanctions on Iran will not give Tehran an overnight economic boost strong enough to disincentivize further negotiations or to fund its destabilizing regional activities as some fear. Non-JCPOA-related sanctions will remain in place, and even with the JCPOA-related sanctions lifted on paper, the practical side of operationalizing trade and transactions will not be swift. Iran would only begin a slow process of economic recovery. But relief will give the United States the upper hand at the negotiating table, exchanging more immediate economic incentives for additional concessions.

Should Iran violate the deal, the U.S. government can reimpose sanctions not only with the support of Europe but also potentially from China and Russia. These other parties to the original deal all share a common interest: preventing Iran from having a nuclear weapons capability. The common interest of global nonproliferation is what created this coalition in the first place. If Iran crosses the red line on its capabilities, these countries have an inherent interest in applying pressure to pursue their own nonproliferation objectives, and a multilateral response to any violation is much more likely with a U.S. return to the deal than if Washington stays out.

The threat of reimposing sanctions is stronger today than it was four years ago. While the maximum pressure strategy failed to produce Washington’s desired policy outcomes, it showcased the power of U.S. unilateral sanctions despite international opposition. The dire consequences of isolation when facing U.S. sanctions have become crystal clear to most Iranians.

Iranian President Hassan Rouhani is under pressure both from hard-line factions and due to growing public dissatisfaction with the country’s economic challenges. He needs to secure at least the start of a process to revive the JCPOA in the coming weeks. There is a growing perception among Tehran’s political elite that the best strategy to push the United States to end the maximum pressure campaign is to present it with the choice between an unresolved confrontation escalating to war and a nuclear-capable Iran.

The assumption is that Tehran can take advantage of Washington’s reluctance to engage in military confrontation to advance its political agenda—and that it can do so by pushing the limits on its nuclear program and regional activities to a point where the U.S. government has to choose between accepting an Iran with a nuclear weapons capability and a military strike against Iran—both of which are anathema to the Biden administration.

Leaders in Tehran assume that the unattractiveness of the alternatives can make Washington conclude that time is not on its side to continue its pressure campaign through sanctions and will need to take action quickly to revive the agreement.

Iran’s brinkmanship could invite military confrontation over its nuclear program as Israel is threatening. Iranian hard-liners are overly confident about their nuclear leverage and the long-term sustainability of the resistance economy. Iran’s resistance economy faces serious challenges: There is increasing internal dissatisfaction with the pace of economic growth that is turning into political pressure. As Iran struggles to manage the pandemic, its “pre-purchase” of nearly 17 million COVID-19 vaccines from the vaccine-sharing facility COVAX had reportedly been delayed due to U.S. financial sanctions.

But maintaining this stance will come at a dire cost of domestic dissatisfaction and delayed economic development. Expanding nuclear and military activities could also endanger the political support still provided by Russia and China. Thus, by hanging on to what it perceives as leverage, Iran risks squandering a unique opportunity to reach an agreement with a U.S. administration that has signaled its willingness to engage diplomatically with Iran and is in a unique position to deliver on that.

For the Rouhani administration to be able to convince the hard-liners to reverse the steps on nuclear advancement and return to compliance with the agreement, it will need to kick-start the process of returning to the deal within the next few weeks. If there is no clear prospect of reviving the accord, then the Rouhani administration may take more drastic measures, such as halting international nuclear inspections, in a show of strength to political opponents prior to the presidential elections in June, which Rouhani will lose if he doesn’t revive the deal. Already, inspections are set to be scaled back if the United States does not return to the deal by February 21 in order to signal the time pressure on the government in Tehran.

A return to the deal would not jeopardize U.S. leverage; it would bolster it for future negotiations. Continuing to focus on holding on to leverage and adding pressure simply to inflict pain will continue to lead to the same results—namely, a lack of progress on key policy objectives. Meanwhile, it will squander the opportunity for diplomatic outreach that could rein in Iran’s nuclear weapons program.

By returning to the deal, the United States would both retain the leverage it has built by demonstrating the devastating economic effects of its unilateral sanctions and use its leverage through sustained diplomacy and multilateral efforts to produce more desirable policy outcomes. Restoring the deal would also put the Biden administration in a much stronger position moving forward to negotiate a follow-on agreement that addresses other issues and concerns, such as Iran’s missile program and destabilizing activities abroad in a regional forum.

Four decades of sanctions and the history of U.S. and European negotiations with Iran indicate that it has only pushed back on pressure by doubling down on its nuclear program and regional proxies. It has only accepted and complied with clearly defined and desirable concessions through an agreed framework such as the 2015 deal. After four years of failure to coerce Iran into changing any policies for the better, it is time for Washington to rethink how to employ leverage effectively.

The analysis and conclusions presented here are based on individual research and do not necessarily represent the policies or perspectives of National Defense University, the U.S. Defense Department, or the U.S. government.

Mahsa Rouhi is a research fellow at the National Defense University’s Institute for National Strategic Studies. She is also an associate with the Project on Managing the Atom at the Harvard Kennedy School's Belfer Center for Science and International Affairs. Follow her at @MahsaRouhi.

Photo: IRNA

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

Iran Can Solve Turkmenistan’s Natural Gas Dilemma

Bordering Iran on the northeast, Turkmenistan is a Central Asian country with a population of 6 million. What Turkmenistan lacks in population it makes up in enormous energy reserves. Domestically produced natural gas accounts for 80 percent of the feedstock used for electricity production. In 2006, discovery of the world’s second largest natural field, Galkynysh, saw the country become the country with the fourth largest natural gas reserves worldwide.

From the first days of independence from Soviet Union, Turkmen energy policy has focused on the diversification of its export destinations. At the time, Russia was the primary customer. But tensions in energy negotiations with Russia in 1997 led to concerns over dependence on a single country for energy exports. Turkmenistan launched negotiations with Iran to create a new market for its natural gas exports. That same year, the Korpezhe–Kurt Kui pipeline was commissioned and began exporting 6 billion cubic meters (bcm) per year of natural gas to Iran as part of a 25 year-long contract.

Since then, Turkmenistan has pursued other destinations for its natural has exports, with mixed success. In 2006, Turkmenistan and China signed a production sharing contract to develop a large portion of Turkmenistan’s natural gas reserves as well as an agreement on the construction of the Turkmenistan–China gas pipeline. The initial phase of the pipeline was inaugrated in 2009. That same year, the Turkmen government failed to agree upon the new contractual terms with Russia, leading to a 75 percent decrease in the volume sold to their primary customer. China became Turkmenistan’s leading customer, with construction of parallel lines on the Turkmenistan–China gas pipeline continuing through 2014.

The collective capacity of the three pipelines equaled 55 bcm per year, making China the largest buyer of Turkmenistan natural gas with more than 30 percent share of exports. Today, Turkmenistan is seeking new customers to prevent over-dependence on the Chinese energy market. For this purpose, in 2015, Turkmenistan launched construction a new pipeline connecting Turkmenistan’s natural gas fields to Afghanistan, Pakistan, and India—this project is known as TAPI pipeline.

Despite these efforts, Turkmenistan has failed to find a reliable means to increase its export capacity and its natural gas production surplus is only set to grow. Turkmenistan’s largest natural gas field, Galkynysh, currently produces 30 bcm per year. Predictions show that the number may rise to 70 bcm per year by 2025. Moreover, offshore fields which are producing at their minimum capacities, may see production rise to 20 bcm per year in near future. In addition, there are several undeveloped small fields, production potential of which estimated to be 20 bcm per year. Turkmen officials have made even more optimistic predictions of future production of natural gas. For instance, Ashirguli Begliyev, CEO of state energy giant Turkmengaz, has declared that production totals will reach as high as 230  bcm per year by 2030.

Looking to consumption side, subsidies have led to natural gas consumption figures higher than international averages. In 2015, domestic consumption was 34 bcm and is expected to rise 5 percent annually. Therefore, domestic consumption will ultimately reach to 55 bcm per year by 2030. Looking at difference between production and consumption, and subtracting the 50 bcm per year of exports to China, Turkmenistan’s surplus natural gas production can be expected to rise to at least 40 bcm per year by the end of the decade.

For Iran, Turkmenistan’s growing surplus is not only a potential source of competition in the global natural gas market, but also an opportunity. Turkmenistan will need to find ways to export its production to various new and existing customers at higher volumes than every before. Turkmen policymakers have four options.

First, Turkmenistan may rely on the TAPI pipeline. This pipeline is designed to export 30 bcm per year of natural gas through Afghanistan and Pakistan to its final destination, India. Although TAPI is the main prospect for Turkmenistan’s natural gas exports, particularly because the project is supported by the United States as an alternative to the suspended Iran–Pakistan gas pipeline, also known as the Peace pipeline, the TAPI project remains hampered by instability and security issues in Afghan territory.

Second, Turkmenistan may rely on the planned Trans-Caspian pipeline. If constructed, the pipeline would connect Turkmenistan’s gas fields to the European customers through Azerbaijan. However, the technical complexities of pipeline construction in deep sea areas, legal issues around maritime boundaries, the negative views of Russia and Iran towards the project, and Azerbaijan’s reluctance to extend the pipeline to Turkmenistan all make implementation an unlikely prospect.

Third, Turkmenistan could seek the construction of a new pipeline to China, relaying on a route across its Central Asian neighbors of Uzbekistan, Tajikistan, and Kyrgyzstan. However, such an option would be at odds with Turkmenistan’s efforts to diversify its export destinations.

Finally, Turkmenistan could seek to increase export volumes to Iran, either through the full utilization of the 24 bcm per year of capacity available in existing pipelines or through the construction of new infrastructure. Increasing natural gas exports to Iran may prove Turkmenistan’s best option. For Iran, there are also numerous benefits. Due to Iran’s proximity to Turkemistan’s natural gas fields import costs would be low. The addition of supply from Turkmenistan would enable Iran to supply the northeast, while using its southern natural gas fields to increase export volumes to Iraq and other customers. Iran’s central role in the region can also enable the country to serve as a natural gas hub, including for liquid natural gas shipments through the Persian Gulf.

Considering the difficulties associated with facilitating exports to Azerbaijan, Afghanistan, and China, Turkmenistan and Iran have an opportunity to enter new gas deals on the basis of clear mutual benefits. Iran’s strategy to become the natural gas hub of the region depends on developing several gas corridors with its neighbors—gas-rich Turkmenistan ought to be a key partner in this strategy.

Photo: IRNA

Iran's Oil Sector is Breaking Out

In August 2019, Mike Pompeo took something of a victory lap. Speaking to MSNBC, he declared that the Trump administration had “managed to take almost 2.7 million barrels of [Iranian] crude oil off of the market.” A few months prior, the United States had reimposed secondary sanctions on Iran’s oil sector, revoking eight waivers that allowed Iran’s major oil customers to temporarily continue purchasing Iranian oil. Without the waivers, just one major buyer remained—China. At the time of Pompeo’s boast, China was buying a negligible volume of Iranian oil in direct violation of US sanctions. Beijing protested loudly about the extraterritorial impact of US sanctions, but proved unable or unwilling to instruct its major refiners, banks, and tanker companies to sustain the previous level of imports from Iran. 

In Tehran, the loss of oil revenues was adding to the political and fiscal pressures felt by the Rouhani administration, already reeling from the economic fallout following Trump’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA). Iran’s oil minister, Bijan Zanganeh, vowed in October 2019 to “use every possible way” to sustain Iran’s oil exports. In the subsequent year, Iran made its tankers “go dark,” engaged in ship-to-ship transfers off the coast of the UAE and Malaysia to hide the provenance of its oil, sold to opportunistic new customers including Syria and Venezuela, and intensively lobbied China to resume purchases at higher volumes. 

Today it is Zanganeh who is taking a victory lap. He told reporters last week that Iran’s oil exports are “much better than many assume,” and the oil ministry has announced that it would begin ramping-up oil production. Data from TankerTrackers.com, which observes the number of tankers leaving Iran’s ports in order to estimate oil exports, suggests a steady uptick in sales. January 2021 will be the fifth month in a row that Iran has exported in excess of 1 million barrels per day of crude oil and condensates. The new monthly level marks a significant increase from the average of 695,000 barrels per day Iran managed in the 12 months following the Trump administration’s revocation of the oil waivers.

Should the Iranian oil industry recover in the first half of 2021, buoyed by the rise in oil prices from their pandemic lows, the sector would cease to be the deadweight holding Iran’s economy back. The second quarter of this Iranian calendar year marked the first in over two years in which Iran’s oil and gas sector was not in contraction. The International Monetary Fund, the World Bank, and the Institute for International Finance all project Iran’s economy to return to growth in 2021 on the basis of conservative projections for oil production and exports achieved in the absence of sanctions relief. Iran appears poised to match those projections. 

Iran’s rising oil exports pose a dilemma for President Joe Biden, who intends to bring the US back into the nuclear deal. There is a significant political constituency in Tehran that believes that allowing the US to rejoin the JCPOA would be a strategic mistake. The Biden administration has signalled that JCPOA re-entry would serve as the foundation for follow-on talks, a prospect that has Iranian hardliners concerned that the international community will try to force Iran into making painful concessions on strategic issues such as the country’s ballistic missile program.

The Rouhani administration remains strongly in favor of renewed talks and has indicated that it would welcome reentry into the JCPOA should the Biden administration decisively lift the sanctions imposed by Trump and thereby deliver Iran an economic uplift. But the attractiveness of Rouhani’s preferred approach depends entirely on the perceived opportunity cost should Iran fail to engage in new talks. This cost appears to be shrinking as Iran’s economic recovery picks-up steam and as the ferocity of political opposition Biden faces on the JCPOA becomes clear. Iran’s Supreme Leader, Ali Khamenei, presented “defusing sanctions and overcoming them” as the preferred alternative to Rouhani’s efforts for “lifting sanctions” in a important speech last November—a nod to the growing doubts that negotiations are necessary in the short-term.

For now, Iran’s political establishment remains open to negotiations because the country would be entering new talks from a position of relative strength. But that same strength will enable Iran’s hardliners to close the door on diplomacy should Biden dither.

Biden may be tempted to address the dilemma he faces be reasserting economic leverage. But attempting to drive down the oil exports with further sanctions would be a mistake. The only measures that might serve to stop China’s purchases of Iranian crude would require designations on China’s state-owned refiners such as Sinopec and CNPC, subsidiaries of which are widely represented in the portfolios of American and European institutional investors. Such a move would not only risk triggering a true economic war with China, but it would also cause a significant disruption to energy and financial markets.

Moreover, the risks of Iranian retaliation remain high. Iranian leaders have consistently warned that it would seek to deny oil exports by neighbors should it be prevented from selling its own oil. The September 2019 cruise missile attacks on Saudi Aramco’s Abqaiq and Khurrais facilities, which caused production capacity to drop by half, serves as an example of the very real nature of that threat. 

Clearly, Biden has no easy means to bring Iranian exports back down. So long as China continues buying, Iranian persistence will ensure the barrels reach the buyers. A few more months of sustained recovery in exports may be enough to convince Iran’s ascendent hardliners that the country’s economic outlook under sanctions is no longer so negative as to be a political or practical liability, meaning their opposition to the JCPOA will carry no real cost. Biden needs to move fast if he is to save the basic quid-pro-quo that underpins the nuclear deal. 

To do so, Biden must take steps to widen the opportunity cost between diplomacy and defiance once again. His administration ought to immediately issue new, temporary oil waivers in order to enable Iran to export oil without directly contravening US sanctions. Such a move would benefit US allies such as Italy, South Korea, Japan, and India, which count among Iran’s historical oil customers—US sanctions policy would no longer be at odds with their energy security.

The waivers would also help de-escalate tensions with China enabling cooperation on the creation of a stronger non-proliferation framework for the Middle East. The Trump administration used Iran sanctions as a means to target major Chinese enterprises including telecommunications firms Huawei and ZTE and shipping giant COSCO. These designations and the systemic threat their proliferation posed to the Chinese economy have spurred Chinese authorities to begin development of an alternative to the SWIFT bank messaging system and to instruct state lenders to prepare contingencies for further US sanctions pressure. Similar measures have even been contemplated by European governments. These moves foreshadow how the overuse of US sanctions threatens their long-term efficacy. Issuing new oil waivers would see Biden remove the primary impetus for these mitigation efforts in China and other countries. 

Restoring the waivers would also be welcomed by Iran, which could expect to see oil exports double, rising above the level possible through the complex and expensive methods of sanctions evasion currently in use. The additional foreign exchange revenue afforded by the waivers would help Iran more fully address its balance of payments crisis, easing pressure on the country’s currency and thereby reducing the rampant inflation that has led to hardship for millions of Iranians. The Biden administration can be confident that the additional revenues would have this effect because of the restrictions in place around their use. The waiver system, first designed during the Obama administration, sees revenues accrue in escrow accounts carefully monitored by authorities in the countries which have been granted the waivers. This oversight ensures that the funds are used for the purchase of sanctions-exempt goods and not for what the Trump administration termed “malign activities.” The funds cannot be transferred to Iran nor any third country without specific approvals. 

Despite these restrictions, for Iranian stakeholders, the issuing of new waivers would represent an important gesture, indicating Biden’s seriousness about restoring the economic benefits originally envisioned under the JCPOA, and setting the stage for US-Iran talks on the sequencing of steps to restore mutual compliance with the nuclear deal. Should those talks fail, Biden would surely revoke the waivers and Iran would return to selling oil in defiance of US sanctions. But should the talks succeed, the early provision of the waivers will have served to accelerate the reestablishment of Iran’s sales to oil customers, helping the country win back coveted market share. 

Iran’s oil industry is breaking out. Issuing new oil waivers is the best way to ensure Iran ceases to seek leverage by reducing its compliance with the nuclear deal and begins to believe again in the potential for “win-win” diplomacy with the United States.

Biden needs to give up some pressure in order to gain back control.

Photo: SHANA

The Plan to Save the Iran Deal Needs Private-Sector Buy-In

With the election of Joe Biden to the US presidency dialogue, between Washington and Tehran appears to once again be possible. Both Tehran and the Biden team have expressed a willingness to consider a “clean” return to the terms of the Joint Comprehensive Plan of Action (JCPOA, better known as the Iran nuclear agreement) if the other does the same. Namely – Iran would revert its nuclear activities to within the limits set out in the JCPOA, which it began breaching in May 2019, and the US would once again lift sanctions on Iran as prescribed by the agreement.

Reality, of course, will be more complicated. Securing economic benefits will be a priority for Tehran in any dialogue on the future of the deal, or any agreement that may succeed it. However, as became clear following the initial removal of US and international sanctions on Iran in 2016, the degree to which sanctions-lifting on paper translates to economic relief in practice depends in no small part on the willingness of the private sector to engage with the Iranian market. If the US and E3 hope to present renewed trade and investment as a credible and meaningful incentive for Iranian cooperation, it will be necessary to both address private sector concerns and manage Iranian expectations.

At the moment, many businesses around the world have opted out of engaging with Iran. The scope and complexity of US economic measures against Iran, as well as the high costs of potentially losing access to the US market and financial system in case of an accidental breach, is sufficient to turn even the most well-resourced compliance departments off of engaging with Iran. Iran is also one of only two countries—alongside North Korea—on the “blacklist” put forth by the Financial Action Task Force (FATF), the global standard-setter on countering financial crime. As a result of Iran’s failure to address “strategic deficiencies” in its financial crime regime the FATF currently requires jurisdictions to apply “enhanced due diligence” to their transactions with Iran, leading many banks to opt out of transacting with the country altogether. This means that businesses struggle to access financial infrastructure necessary for doing business with Iran.

There is some indication that, even if US sanctions on Iran were lifted, the uptake for private sector engagement with Iran would remain slow and limited. A few weeks ago, Iranian president Hassan Rouhani reportedly requested that Iran’s Expediency Council reprise its review of legislation that would address the deficiencies in Iran’s financial crime legislation called out by the FATF, which may help address some private sector concerns. However, persistent challenges in relations between Iran and the US and E3 will continue to create uncertainty for businesses. On December 17, the European Parliament passed a resolution condemning Iran’s detention and execution of human rights defenders and prisoners of conscience and called for the application of targeted financial sanctions on the Iranian individuals responsible. A few days earlier, a European Union-funded virtual business conference was postponed following the execution in Iran of journalist Rouhollah Zam.

Furthermore, some key US economic measures against Iran—for instance, sanctions on the Central Bank of Iran and on the Iranian Revolutionary Guard Corps (IRGC), as well as the designation of Iran as a jurisdiction of primary money laundering concern—are not related to Iran’s nuclear activities and may not be lifted as part of a return to the nuclear deal. These sanctions will continue to create complexity for banks and other businesses and will factor into private sector risk calculus. The possibility of another snap-back of US nuclear-related and secondary sanctions on Iran under a future change of administration in Washington will also discourage businesses investment. Persistent concerns over exposure to US sanctions within the financial sector in particular will complicate renewed economic engagement with Iran, as businesses will have trouble finding banks willing to support financial transactions with Iranian counterparts. Efforts by the incoming Biden administration to figure out the legal and regulatory logistics of sanctions-lifting, while ensuring that sanctions remain an effective tool of US foreign policy, will therefore also have to address challenges in the practical  implementation of sanctions-relief.

Reversing the economic impacts of private sector reticence to engage with Iran will be top of mind for the Islamic Republic as it engages with the new Biden administration. Tehran has previously called for compensation for “damages” to the Iranian economy caused by US sanctions – although Iranian leadership appears to have dropped such demands as a pre-condition for an Iranian return to compliance with the JCPOA in recent statements. And while Iran’s Supreme Leader Ali Khamenei expressed support for seeking sanctions-removal in recent marks directed at Iranian officials and the Iranian public, he also stressed the importance of “nullifying” the impact of sanctions on the Iranian economy. He distinguished “neutralizing” sanctions from sanctions-lifting and seemed to express scepticism over US and European ability to deliver on the former.

Assessing business’ levels of interest in re-engaging with the Iranian market and addressing concerns where possible will lend greater weight to US and European incentives of economic relief, hopefully encouraging greater cooperation from Iran in any future diplomacy—whether on its nuclear programme or more broadly. Relaying to Tehran the results of these private sector consultations may also help manage Iranian expectations on the level of foreign economic interest it can expect following sanctions lifting while also stressing the need for Iran to get its financial regime in order. On the part of Washington, this may include preparing comfort letters, granting sanctions exemptions, updating general licenses and expanding the guidance issued via the Office for Foreign Assets Control “Frequently Asked Questions” on Iran sanctions.

By consulting with their private sectors, the European governments can also better-understand business concerns and uncertainties around engagement with the Iranian market and how these may shift—or fail to do so—with the lifting of US sanctions. In October 2020, the European Commission launched a “Due Diligence Help Desk” aimed at supporting European companies in navigating European sanctions on Iran. While the platforms are well-intentioned and may provide businesses with helpful guidance, it is unclear how effective they will be in practice. The platforms do not address some of the key challenges raised earlier, including the lack of financial infrastructure to support transactions with Iran and concerns over exposure to US sanctions. The UK and European governments may wish to identify and reach out to specific sectors that are likely to be of greatest importance to renewed trade with Iran—for instance, the banking sector or those engaged in energy trade—to ensure they have the assurances, guidance, and infrastructure they need to proceed with confidence. Coordinated efforts across capitals—for instance, through the issuing of joint guidance by American, British, and European financial regulators, as well as dialogue with the US on the concerns of UK and European businesses—will also be valuable.

As renewed diplomacy on the Iranian nuclear question gets underway, it will have to be supplemented by consultations with businesses to assess whether the private sector will be able to make good on economic promises made at the negotiating table, as well as to manage Iranian expectations. At the same time, understanding and, where possible, addressing private sector concerns will help businesses do what they do best—moving goods, people, and capital to ensure that the lifting of sanctions on paper translates into real economic uplift for Iran.

Photo: IRNA

How Biden Can Stop Iran’s Conservatives From Undermining the Nuclear Deal

By Saheb Sadeghi

U.S. President-elect Joe Biden has so far spoken sparingly on Iran, including an op-ed on the CNN website and in an interview with the New York Times. As part of a step-by-step strategy, he has said that he would return to the nuclear deal as the first step and then address other concerns about Iran’s regional influence and missile capabilities. But how will the Iranian government react to the United States’ demand that the regional issues and the missile capabilities should be part of the negotiation?

There are two different approaches in Iran to handling comprehensive negotiations with the United States.

There is broad consensus within the Iranian establishment that Iran will not make any concessions regarding its deterrence and defense strategy.

Iran has traditionally used a deterrent strategy to strengthen its national security and defend its territorial integrity in recent years. This strategy has two prongs. The first is strengthening and supporting regional allies and militant movements in Lebanon, Iraq, Syria, Yemen, and elsewhere; the second is enhancing its missile capabilities and building and testing short- and long-range missiles, as well as ballistic missiles.

This strategy has expanded since the U.S.-led wars in Iraq and Afghanistan, which brought hundreds of thousands of U.S. troops into the region just a few miles from Iran’s eastern and western borders, dramatically increasing the risk of an imminent military strike on Iranian territory. Tehran has pointed to security threats in its vicinity and the fact that it is not a member of any regional military coalitions as the reasons it needs to develop missile capabilities and expand its influence in the Islamic countries in the Middle Eastern region.

Despite this general consensus on deterrence strategy, the Iranian government’s approach to Biden’s call for comprehensive negotiations can be divided into two camps.

The first group is made up of conservatives, who recently gained an absolute majority earlier this year in parliamentary elections and are expected to win the next presidential election. The conservatives strongly reject any talks with the United States on non-nuclear issues and their position has been further strengthened by the assassinations of the commander Gen. Qassem Suleimani in early 2020 and more recently the prominent nuclear scientist Mohsen Fakhrizadeh.

In their view, these assassinations were an attempt by Iran’s enemies to paralyze Iran’s deterrence, and now is the time to revive this deterrence, rather than negotiate. Reflecting this view, Saeed Jalili, a senior member of Iran’s Supreme National Security Council (SNSC) and the former nuclear negotiator during the presidency of Mahmoud Ahmadinejad, harshly criticized President Hassan Rouhani for discussing the missile issue with French President Emmanuel Macron in a telephone conversation. (He called for the refusal of such talks on the part of Rouhani, declaring that non-nuclear talks are prohibited and unacceptable.)

Conservatives believe that just as the West sought to limit Iran’s nuclear capabilities in past nuclear talks with the country, any negotiations on missile and regional issues would inflict a crushing blow to Iran’s national security. The hardline speaker of the parliament, Mohammad Baqer Qalibaf, recently said, “Negotiations with the United States are absolutely harmful and forbidden.” During Ahmadinejad’s presidency, when conservatives were in power, the world witnessed six years of fruitless negotiations between Iran and the West from 2008 to 2014, and this trend could repeat itself if the conservatives win the next presidential election.

The other group is made up of pragmatists and moderates who, despite emphasizing the need to strengthen Iran’s deterrence strategy, do not see non-nuclear negotiations as a threat to Iran’s national interests. Even so, they will not accept that the implementation of the nuclear agreement should be conditional on regional and missile negotiations.

In their view, if Biden’s foreign policy team focuses on the alleged need for so-called Middle East security and arms control talks instead of insisting on countering Iran’s regional influence and the need for limiting and disarming its missiles, it will be possible to reach an agreement between Iran and the West with the cooperation of countries in the region.

To them, when “countering Iran’s regional influence and its missiles,” is on the U.S. agenda, it means an aggressive approach toward Iran that does not consider the country’s legitimate security concerns. Such an approach will not be effective as the Iranians have shown with their resilience in the face of unprecedented U.S. sanctions, resulting from outgoing President Donald Trump’s maximum-pressure campaign.

The pragmatists believe that Iran’s missile policy is entirely defensive and deterrent in nature; Tehran has already stated that its missiles’ range will not exceed 2,000 kilometers (1,240 miles) while some Arab states in the region such Saudi Arabia have purchased missiles with a range of 5,000 kilometers (3,100 miles).

The pragmatists believe that in potential future region-wide negotiations, if pressure is put on Iran to limit its missile capabilities, Iran could rightfully bring up the issues of Saudi Arabia’s missiles, Israel’s nuclear warheads, and modern arms purchases by the Persian Gulf states as a justification for its insistence on keeping its own missile capabilities. The purchase of F-35 fighter jets by the UAE and Israeli nuclear weapons could be on the agenda of the possible future talks, which will give Iran the upper hand in those negotiations.

In such a situation, the United States and regional actors must decide whether to move toward a broader arms-control process in the Middle East or to recognize Iran’s right to have a missile capability. The pragmatists think that there should not be any fear of negotiation; instead, they argue that the opportunity of negotiations should be used to consolidate Iran’s regional and defense achievements. They see Biden’s victory as an opportunity to resolve Iran’s regional and international problems and see his approach to solving the Middle East’s problems as balanced in contrast to Trump’s.

This pragmatists’ view is even more relevant given Biden’s talk about reconsidering the U.S. position on Saudi Arabia. During his presidential campaign, he vowed to reassess the U.S. relationship with the Saudis and put an end to U.S. support for Saudi Arabia’s war in Yemen.

The pragmatists argue that former President Barack Obama was moving in that direction, and now Biden could step into Obama’s shoes and continue along that unfinished path. In an interview with the Atlantic in May 2015, Obama emphasized that an approach that rewards Arab allies while presenting Iran as the source of all regional problems would mean continuing sectarian strife in the region. Obama stressed that Saudi Arabia had to learn to share the Middle East region with its sworn enemy, Iran.

Biden’s pick for national security advisor, Jake Sullivan, said in a lengthy interview with The Center for Strategic and International Studies that the Biden administration will stop Trump’s maximum pressure campaign against Iran and would not hold the nuclear deal hostage for regional and missile talks, but by returning to deal it would put pressure on regional actors—including Iran and Saudi Arabia—to undertake regional talks. He also said that the United States will hand over these negotiations to regional countries and will not take the lead. Such a position aligns with Iranian Foreign Minister Mohammad Javad Zarif’s recent statement reiterating Iran’s readiness to hold talks with countries in the region on security and stability in the Middle East.

Even China’s foreign minister has recently called for Middle East security talks. Russian Foreign Minister Sergei Lavrov recently reiterated Putin’s proposal for talks between the U.N. Security Council permanent members and Iran to establish a collective security order in the Persian Gulf.

Iran’s readiness to use the influence it enjoys over the Houthis to end the Yemeni war—which Biden has insisted on and which lies at the core of Saudi Arabia’s national interests and security—seems to be a golden starting point. Iran can persuade its Yemeni allies to sign a peace agreement with Saudi Arabia.

However, there are serious barriers to regional and missile negotiations, the resolution of which will depend on the approach of the Biden foreign policy team. The atmosphere of mistrust between Iran and the United States, influenced by Trump’s maximum-pressure campaign and the assassinations of Suleimani and Fakhrizadeh, is the primary obstacle.

The second obstacle is the short period that Rouhani is still in office. With Biden taking office on Jan. 20, 2021, the two countries have only five months before Iran’s upcoming presidential election to revive the nuclear deal and work on other issues.

If the Biden administration’s plans to revive the JCPOA and lift sanctions do not go ahead as predicted, the two sides will be in serious trouble in early February, when the deadline included in a bill pushed by hardliners as an intentional spoiler and recently passed in the Iranian parliament expires.

Iran’s parliament has given European countries and the United States two months to lift sanctions. The Rouhani administration has expressed its opposition to the bill, describing it harmful to diplomatic efforts. However, because it has become law, they cannot prevent it from being enforced. Zarif has said the government will be forced to implement the law, according to which Iran will abandon almost all its nuclear obligations.

If such a law is implemented, it is possible that the JCPOA—which has survived four years of Trump administration’s immense pressure—would die in the first month of Biden’s presidency. Biden could lift the sanctions that were suspended by the nuclear deal with several executive orders, and then, as Rouhani recently announced, Iran will return to its nuclear obligations.

Saheb Sadeghi is a columnist and foreign-policy analyst on Iran and the Middle East. Follow him at @sahebsadeghi.

Photo: Wikicommons

Survey Shows Iranian Pessimism on Economy, Pride in Healthcare Response

Recent Western reporting and analyses of Iran depict dire circumstances and make natural assumptions about how the population must be reacting to an economy battered by sanctions from the United States and ravaged by the COVID-19 pandemic. A public opinion survey conducted in September and early October by the University of Maryland’s Center on International and Security Studies and IranPoll provides data to compare with these assumptions. The telephone survey included a national probability sample of 1,004 respondents. Some results are surprising, and some are remarkably similar to public attitudes about the pandemic in the United States and European countries.

The survey finds that Iran’s public is more pessimistic about the economy than they were earlier in the Trump administration’s maximum pressure campaign. But domestic mismanagement and rising inflation appear to be bigger factors in this shift than the sanctions per se. Those most directly affected by COVID-19 are more negative about the economy. Yet, the Iranian public is generally satisfied by the government’s response to the pandemic and support public health efforts, even when they make a bad economic situation worse. 

Reactions to the Economy

Those Iranians who believe the economy is very bad and getting worse are more numerous now than at any time since CISSM first asked these questions in 2015. When asked to rate Iran’s economic situation, 74 percent called it either somewhat bad (22 percent) or very bad (now a 53 percent majority). Throughout 2018 and into fall 2019, those seeing the economy as “very bad” fluctuated between 40 and 45 percent. The October 2020 level of those saying “very bad” is a marked increase—13 points higher than a year ago. When asked about the direction of economic conditions, 72 percent said they were getting worse—18 points higher than a year ago (October 2019). Only 22 percent said they were getting better.

Optimism about Iran’s economic future has declined unevenly over time. The last time our polls recorded a plurality thinking the economy was getting better was in May 2015, shortly before the nuclear deal was signed. When JCPOA conditions for suspension of nuclear-related sanctions were met in January 2016 but the economy did not show tangible gains, pessimism began to gain ground. Its previous peak was in April 2018, shortly before the Trump administration fulfilled its threat to withdraw from the JCPOA if Iran did not make more concessions. As the Trump progressively ratcheted up its maximum pressure campaign by reimposing sanctions the Obama administration had lifted and adding new sanctions on Iran, the public remained generally pessimistic. Yet, the percentage holding that view declined ten points from April 2018 to October 2019 as the negative effects of new sanctions had less impact on everyday life than anticipated, unemployment decreased, and currency devaluation slowed. 

Respondents with higher nominal monthly incomes were progressively more likely to see Iran’s economy as very bad and getting worse. For example, of those in the highest income bracket (average household monthly income over 6 million tomans), 64 percent said the economy was “very bad” and 88 percent said it was “getting worse.” In the lowest income bracket (under 1 million tomans), a lesser 52 percent said the economy was currently “very bad” and 60 percent thought it was getting worse.

This suggests that the recent jump in economic pessimism is related to Iran’s steep currency de-valuation. Average consumer prices have increased by 30 percent this year, which is high – but lower than 41 percent last year. Higher-income Iranians have experience even steeper inflation, because the currency has depreciated sharply despite government efforts to stabilize it in mid-2019. The open exchange rate went from 11,369 tomans to one U.S. dollar in October 2019 to 29,740 tomans to one dollar in October 2020--a 162 percent increase.

We periodically ask Iranians what has the greatest negative impact on their economy: foreign sanctions and pressures, or domestic economic mismanagement and corruption. Given the emphasis placed by Western media and policy experts on “crippling economic sanctions,” it would be natural to expect that a majority of Iranians see this factor as paramount, but that has never been true in CISSM surveys.

In our most recent survey, 57 percent saw domestic issues as the bigger factor, while 36 percent blamed sanctions more. Before the Trump administration withdrew from the JCPOA, a slightly higher 63 percent called domestic mismanagement the more important issue. If the renewed US sanctions have affected general public attitudes at all, they have caused more Iranians to blame foreign pressures rather than their own government. Iranians with higher monthly incomes, however, are progressively more likely to attribute bad economic conditions to domestic mismanagement, with 75 percent of those at the top holding this view. 

Reactions to the Pandemic

Iran’s weak economy and the ravages of COVID-19 are mutually reinforcing. When Iranians think about how their society should respond to the pandemic, large but not overwhelming majorities endorse strong measures, while a significant minority disagrees—a pattern similar to that found in Western countries. This is striking given the severity Iranians clearly see in the country’s economic situation. A clear majority of 58 percent thought the government should close restaurants and “workplaces where people work in close proximity” to prevent the virus’ spread--“even if this would damage Iran’s economy.” Twenty-nine percent disagreed, saying “it is more important for the government to encourage economic activities, even if this would lead to more people getting sick.” 

Experience of the virus in one’s own circle is a majority phenomenon in Iran. Fifty-nine percent knew someone who has gotten sick “among…family, friends, and acquaintances,” while 41 percent did not. Over a third (37 percent) report personally knowing someone who has died from the disease. The virus’ economic impact has also been harsh, with one in five (19 percent) Iranians reporting that someone had lost a job in their own household. Iranians who know somebody who has died from the virus or who have suffered a pandemic-related job loss are about ten points more likely to say that economic conditions are very bad than those who have not had these experiences.

For comparison with the United States, Kaiser Family Foundation found in September that a lesser 24 percent of Americans knew someone who has lost their life to COVID-19. On the pandemic’s job costs, Kaiser asked a broader question in the United States—whether someone in one’s household had “lost a job, [has] been placed on furlough, or had…income or hours reduced because of the coronavirus outbreak.” In October, 45 percent of Americans said yes. It appears that in the early fall, somewhat more Americans had been affected by job loss, while somewhat fewer had lost somebody they knew to COVID-19 than was the case in Iran. 

Despite the strain that the coronavirus has placed on Iran’s public health care system, we did not find widespread dissatisfaction. Asked to “rate the performance of the public healthcare system in Iran,” a strikingly high 85 percent called it “very good” (38 percent) or “somewhat good” (47 percent), with only 15 percent calling it somewhat poor (9 percent) or very poor (6 percent). Rural respondents viewed the system especially warmly, with 45 percent calling it “very good” (urban respondents, 35 percent). This may reflect past investments Iran has made in building out basic healthcare in more isolated areas.

Although Iran has been hard-hit compared to other countries in the region, most Iranians seem relatively satisfied with their government’s performance. We asked respondents to think of “other countries that are similar to Iran” and then ponder whether Iran’s response has been more effective, less effective, or about the same. Given this subjective yardstick, only 25 percent thought Iran had been less effective. Thirty percent thought it had been about the same, and 40 percent thought Iran had been more effective than other similar countries. The more dissatisfied quarter of respondents tended to be more urban, and more pessimistic about the economy than the average Iranian.

These numbers suggest that Iranians are less pleased with their government’s handling of the pandemic that citizens of some advanced countries are, but more positive than people in the United States and the United Kingdom. The Pew Summer 2020 Global Attitudes Survey asked respondents in 14 advanced countries whether their country had done a good job or a bad job with COVID-19. Top scores went to Denmark (95 percent) and Australia (94 percent), and Sweden (71 percent) was comparable to Iran, while the U.S. (47 percent) and U.K. (46 percent) had the lowest satisfaction levels.

We asked about personal compliance with COVID-19 guidelines and about closing schools during the pandemic. The responses were similar to attitudes in the United States. A clear majority of Iranians supports public health measures, but this is not unanimous. Thus, 91 percent said they “wear a mask over [their] mouth and nose” when going out in public, but only 57 percent said they “always” do so. When a vaccine “becomes available in Iran and is approved by Iran’s Ministry of Health,” only 10 percent said they would not take it; however, less than two thirds (62 percent) said they would definitely get themselves vaccinated. Nearly two-thirds (67 percent) said schools should remain closed while 27 percent responded that they should be open for in-person classes.

In conclusion, Iran’s public has a consensus that the country’s economic situation is worse than any time since at least 2015. But they do not see the United States as the primary cause of the country’s troubles. Iranians also seem quite aware that Iran is not the only country in crisis now. Their attitudes toward the pandemic are not different in kind from those found in richer countries, and they are generally proud of their public health service’s response. 

Photo: IRNA

What Archaeology Can Achieve in US-Iran Relations

This article is the fifth in a five-part series.

• Read Part 1 here

• Read Part 2 here

• Read Part 3 here

• Read Part 4 here

In the 1920s, relations between the United States and Iran had reached a low point, marked by the failure of Arthur Millspaugh’s financial mission (1922-27), the murder of Vice Consul Robert Imbrie (1924), and the withdrawal of American financiers from a railroad syndicate (1928-29), among other imbroglios. According to historian James F. Goode, the American chargé d’affairs at the time, Hugh Millard, wrote to the US State Department’s Near East Bureau Chief, Wallace Murray, stating that there had been “one flub after another in American efforts in Persia” but that ‘‘archaeology is about the only thing [the United States] are likely to be interested in which stands much chance of bringing results.” Perhaps the situation today is not so unlike that of the early 1930s, when—despite the accumulated ill will of the previous decade—American interest in Iran’s heritage brought the two countries into more sustained diplomatic engagement with each other.

***

Clearly, the past four decades have seen much more acrimonious relations between the US and Iran than the 1920s, with much higher stakes. As historian John Ghazvinian writes in America and Iran: A History, 1720 to the Present, for the past forty years, the United States and Iran have had few official relations at all. Between America’s support for the Shah, its arms sales to Saddam Hussein, and its policy of isolating Iran on the world stage since the Israel-Palestine Madrid Conference of 1991, a gulf in mutual understanding has opened that appears insurmountable. Decision makers on both sides operate in a context of severe and deleterious ignorance of each other’s motivations and aspirations. Indeed, bilateral relations between the two countries are so strained that they must be mediated indirectly by third parties: Switzerland (American affairs in Iran) and Pakistan (Iranian affairs in America). As Ghazvinian points out, even at the lowest depths of the Cold War, the chasm between American and Soviet leadership was not as wide as that between the US and Iran today.

More concerning still, according to Ambassador John Limbert—who was one of the diplomatic staffers held in the Embassy Seizure of 1979-81—is the fact that, since the 1980s, the American government has lost its cadre of diplomats with Iran expertise. In the past four decades, the US has trained few Persian speakers, and those it has trained have had almost no opportunity to use the language in an immersion setting. As Limbert writes, “those with both language and country expertise have aged and retired, leaving a gap that, with the best will in the world, will take at least a decade to fill.” Even prior to the embassy seizure, however, American foreign policymaking vis-à-vis Iran was sclerotic and ineffective. According to James A. Bill, a professor of international relations and government at William and Mary and an expert on US-Iran relations, the ineptitude of American diplomacy towards Iran in the late 1970s, leading to the deterioration of US-Iranian relations, was due to an institutionalized system of organizational conflict within the State Department. This allowed America’s Iran policy to be captured by special interests, and to be unduly influenced in equal measure by both ideology and ignorance.

William J. Burns—one of the diplomats who ran the Oman backchannel that led to the negotiation of the JCPOA—argues that the Trump administration has repeated and exacerbated many of these mistakes. For Burns, however, Trump’s Iran policy is a bellwether of a broader and more concerning trend. In his view, American diplomacy has slid adrift at a moment in history when American leadership is needed more than ever.

How might America regain its position of moral authority and respect on the world stage in the post-Trump era? Burns argues that American diplomacy will need to be reconstructed, from the individual on upward, requiring years of investment in the fundamentals of the craft: “smart policy judgement, language skills, and a sure feel for the foreign landscapes in which they serve and the domestic priorities they represent.” Wendy Sherman—the chief American negotiator in the P5+1 process that led to the signing of JCPOA—concurs. Sherman contends that diplomacy is most likely to succeed when its agents are not only deeply experienced, but also deployed in positions where they can draw on and that experience and put it to work. For Sherman, negotiation is not a set of stratagems, but rather comprises authentic person-to-person engagement. Unfortunately, as made clear by Limbert and Bill, for too long, the United States government has neglected to honor this principle in its dealings with Iran.

For some observers, renewed engagement with Iran is in fact key to the revival of American diplomacy. As Flynt Leverett and Hillary Mann Leverett write in “Going to Tehran,” American strategic recovery must start with a thoroughgoing revision of the US Government’s Iran policy. Similarly, Ghazvinian writes there is no problem that the US faces in the Middle East that cannot be tied one way or another to its haphazard and ineffective Iran policy. He argues that the only way that the US and Iran can resolve their differences once and for all is through an unconditional, sustained, and high-level set of negotiations. Like the Leveretts, he believes that what is most needed is an historic summit meeting between the two countries’ leaders, an international peace conference of the same magnitude as Reagan and Gorbachev’s meeting in Reykjavik or Nixon and Mao’s in Beijing. As the Leveretts argue, if America does not do this, it runs the risk of condemning itself to a future as an “increasingly flailing—and failing—superpower.”

While I am sympathetic to these calls for rapprochement through a grand bargain, an October 2019 white paper by Chatham House researchers Sanam Vakil and Neil Quilliam found that foreign policy experts from the US, Europe, Russia, the Middle East, and China were highly skeptical of the possibility of such an agreement under present conditions. A year later, however, with the coming administration of Joe Biden, it appears that good-faith engagement is back on the table.

In this series, I have shown how heritage management—in the form of cultural tourism, museum exchanges, and international scientific cooperation—have suffered under American sanctions. Clearly, renewed diplomacy and sanctions relief would benefit those whose livelihoods have been impacted by these policies. I would like to suggest here that American diplomats attempting to reestablish cordial exchanges with Iran have something to learn from the experiences of archaeologists and cultural heritage professionals. The precedents set by the University of Pennsylvania Museum of Archaeology and Anthropology and the Oriental Institute of the University of Chicago—in keeping positive relations between the US and Iran alive even during dark times—should be followed and honored.

Cultural heritage is one of the only fields in which person-to-person contacts between Americans and Iranians have been sustained through these four decades of hostility. For this reason alone, the Biden administration should create space for and leverage cultural exchanges as part of its reengagement strategy. More broadly, however, as all of the experts quoted above make clear: when those with deep knowledge of and investment in each other’s culture and history are involved in diplomatic negotiations, all stand to benefit. On whatever time-scale, no matter the form that renewed engagement between the US and Iran takes—whether a grand bargain, a direct meeting between heads of state, or some other expression of goodwill toward repairing broken ties—it can only be for the good of the people of our two countries.

My hope is that no matter the forum, American leadership chooses to call on envoys who speak Persian, or at the very least have some degree of appreciation for Iranian culture, rather than under-qualified appointees with an axe to grind. May our two governments recognize—as Hugh Millard so presciently did in the 1930s—the special role that archaeologists have played and can continue to play in improving ties between America and Iran and follow our lead in delving into a shared past to bring about a better future.

 Click here to read Part 5 of this five-part series.

Photo: Wikicommons

Iran Archaeology is Awaiting a Sanctions Breakthrough

This article is the fourth in a five-part series.

• Read Part 1 here

• Read Part 2 here

• Read Part 3 here

Cooperation in the field of archaeology between Iranian and foreign researchers has a long history. In my academic research, I am currently combing the archives associated with all the major American archaeological expeditions to Iran, beginning in 1930 and continuing until 1978, focusing on the activities of the University of Pennsylvania Museum, the Oriental Institute, the Field Museum, the Boston Fine Arts Museum, the Metropolitan Museum of Art, and the Peabody Museum of Archaeology and Ethnology at Harvard University, among others. This record shows intensive contacts between heritage professionals of both nations over a sustained interval in contexts such as field research, museum exhibits, student exchanges, and UNESCO initiatives. As positive as these relations may have been for those who participated in them, heritage collaborations were marked by the same steep power imbalances that characterized the overall midcentury relationship between the United States and Iran. 

In the early days of international collaboration in archaeology, Iranian researchers often participated only as trainees. Iranian leadership in archaeological projects was largely on Iranian projects, in which few foreigners participated. In recent years, this has changed. Since around 2000, all foreign archaeological projects in Iran have been joint endeavors; under current regulations, all cooperative research must be staffed by workers and researchers that are at least at numerical parity. The past two decades have seen major restoration projects at the citadel of Bam (an Italian collaboration), surveys and excavations in the Tehran Plain (British) and in the Mamasani district of Fars Province (Australian, British, and American), continued work at Persepolis and Pasargadae (multi-national, but especially French, German, and Australian), as well as excavations at Konar Sandal (American), and at numerous sites in northeastern Iran (German and Chinese), to name just a few examples. Indeed, one of my sources commented that the period from 2003 to 2016 was a high point for foreign archaeology in Iran.

Since 2017, conditions for foreign involvement in archaeological research in Iran have been less than favorable. However, the work continues. To get a sense of the effect of American policy in shaping archaeological fieldwork in Iran, and specifically joint international collaborative projects, I consulted colleagues and experts from a range of professional and national backgrounds. Given the sensitivity of the topic, all interviews were conducted on background. Most of my sources had worked in Iran as recently as 2018, but several had not been able to travel to Iran since 2014, or even as long ago as 2011. The consensus among these individuals is that conditions have worsened considerably in recent years, taking a particularly bad turn with the Trump administration’s executive orders known as the “Travel Ban,” maximum pressure, and the reimposition of broad-spectrum sanctions in 2018 following the US exit from the JCPOA.

***

During the early years of the Rouhani administration, before and immediately after the JCPOA rapprochement, conditions for archaeological research were seen to be improving. Nevertheless, all of my sources recognized that even in the best of times, the internal political situation in Iran complicates the regular functioning of archaeological research. I heard again and again that while procedures and protocols sometimes move along in a smooth and timely fashion, as often as not, there can be long delays in receiving permits and visas with little warning or explanation. While a considerable contingent of Iranian heritage professionals actively seeks to promote international collaborations, the shifting winds of both global and Iranian domestic politics can have drastic effects on the possibilities for cooperative research. These conditions are understood to make the conduct of archaeology in Iran a highly risky endeavor for foreign missions.

For example, one researcher I spoke with worked in Iran as recently as January 2020. After a lengthy wait, their visas and permits finally came through in late autumn 2019. Due to the rising tensions and skirmishes in the Persian Gulf, the leader of this team felt obliged to devise an escape plan and carry extra cash, charting routes to the nearest international airport, or failing that, the nearest land border through which they could escape in the event of the outbreak of conflict. The assassination of Qassem Soleimani on the 3rd of January 2020, while they were actively excavating, ultimately did not force the research team to flee, but it did show just how necessary such contingency plans had become.

My sources told me that every year it is a struggle to know exactly when one will be able to go to the field, which makes it difficult to plan work and coordinate the participation of specialists. All of the experts I spoke with expressed concern about health, safety, and professional prospects. The consensus seems to be that junior scholars in the West ought not to try to work in Iran until they have a stable position from which they can ride out the ups and downs of intermittent and unstable conditions of access to the field. Several sources related to me that every time they leave Iran after a fieldwork season, they worry that it might be for the last time.

***

Geopolitically speaking, experts agree that archaeology and heritage constitute one of the last remaining channels of good relations between Iran and the West. This has naturally made the field a political football, with foreign specialists in Iranian heritage caught in the crossfire. American archaeologists of Iran have been the most affected. European researchers have had an easier time, but invitations and the processing and issuance of visas are frequently held up by the Iranian Ministry of Foreign Affairs as retribution for unrelated international disputes. Moreover, Iran’s detainment of dual nationals on charges of espionage in recent years, including in some extreme cases lengthy prison sentences and the threat of the death penalty for field researchers, has caused considerable concern on the part of researchers who hold two passports, especially if their documents are American and/or Iranian.

More directly, American sanctions make funding archaeological research particularly difficult. Archaeology is an expensive and logistically complex endeavor everywhere in the world. Research teams typically involve anywhere from three to twenty scholars and students, and a pricey suite of digital recording instruments, including total stations, GPS devices, photography equipment, laser scanners, geophysical instruments, drones, which naturally arouse suspicion due to their perceived potential for dual use—in addition to the usual trowels, picks, shovels, dustpans, brushes, buckets, and wheelbarrows.

The particular complication in the case of foreign missions in Iran is that it is not possible to conduct bank transfers between international and Iranian banks and international credit cards cannot be used. Therefore, foreign researchers are obliged to carry cash —in some cases amounts approaching EUR 50,000—and exchange it for rials in order to conduct their business. This—in addition to general complications with bank-transfers due to secondary sanctions—is a logistical nightmare for the researchers on the ground, but also a significant concern for funding agencies and university finance departments.

American sanctions extend beyond purely financial matters as well, particularly with respect to the prohibition on the exchange of services. Several experts specifically highlighted issues with the export of scientific samples for analyses that cannot be performed in Iran. After negotiating the already challenging internal bureaucratic regulations governing the shipment of scientific samples within Iran, it is then extraordinarily difficult to transport them safely or predictably to Europe or North America. This can mean, in some cases, years-long delays, which cause particular problems for foreign researchers insofar as their employment or professional advancement may depend on the results of such analyses, not to mention the frustrations of Iranian specialists eager to participate in the international scientific community. American sanctions also prevent the use of basic and routinely-used software packages such as ArcGIS Online, which researchers may be obliged to run through university contracts with the provider of the software, ESRI. This service cannot be accessed in Iran, meaning that a crucial tool in archaeological research is unavailable for both foreign and Iranian researchers.

As it turns out, many of these complications are not due to the actual OFAC regulations themselves, which, strictly speaking, do authorize the use of software, the exchange of services, and even some limited transactions as part of routine academic research. But university lawyers are extraordinarily skittish about permitting and funding fieldwork in Iran, afraid of being sued by the US Treasury. In some cases, these concerns can be allayed through obtaining a specific license to authorize a circumscribed program of research. Due to the complicated, lengthy, and expensive process involved in obtaining such a license, however, in practice this means that it is almost impossible for American citizens to be involved in Iranian projects. This appears to be particularly true of the past five years, when licensing has been much more restricted, and the Trump administration has moved to take power out of the hands of the OFAC bureaucracy.

OFAC licensing was one of the major sticking points in the Persepolis Tablet Archive Return project, mentioned in the previous article. I learned that the process of obtaining the license took almost a year and required extensive documentation of every object being transferred and the particulars of the itinerary of the participants in Tehran. OI representatives felt the need to go so far as to print out English-language exhibit labels in Chicago, rather than run the risk of violating sanctions protocols by printing them in Tehran. Such are the absurdities of the situation. Moreover, the Oriental Institute was advised not to do a press junket in the US, to avoid drawing unwanted attention to the work from powerful Iran-hawks in the federal government that might complicate future OFAC licensing.

Simultaneously, the American policy of maximum pressure is squeezing the Iranian economy as a whole. In practical terms, for Iranian archaeologists, this means that access to equipment and the international scientific community is made all the more difficult. Necessary electronics are far more expensive in Iran, visas and funding for participation in international conferences are difficult to obtain, many artifact conservation supplies are scarce and exorbitantly priced, and certain kinds of routine analysis cannot be performed in Iran. Additionally, as discussed previously, due to the funding structure of the MCHT, there is plenty of money for the conservation of monuments and the promotion of tourism, but very little funding for primary archaeological research. Most of the scientific excavation that occurs is salvage or rescue work, which must occur on an accelerated timeline in order to recover archaeological remains in advance of construction and infrastructure projects. Given these conditions, one of the only avenues to obtain funding for academic archaeological field research is to join with a foreign collaborator who might be able to bring with them funding from abroad.

***

Despite all of these difficulties, the expert consensus is that there is huge potential for international scientific collaboration between Iranian and foreign researchers. Those that I spoke to were unanimous in their recognition of the high degree of professionalism among archaeological researchers in Iran, and the quality of their fieldwork. Foreign archaeologists see their Iranian colleagues as partners on an equal footing scientifically, and indeed, many Iranian archaeologists in leadership positions within MCHT, the Iranian Center for Archaeological Research, and in academic departments, have PhDs from the very same universities in France, Germany, the UK, the US, and Canada. Iranian archaeologists are perceived as particularly open to innovation, especially in the use of advanced technologies in archaeological fieldwork, and in archaeometric and laboratory analyses such as geophysics, petrography, metallography, paleoecology, photogrammetry, and radiography, among others. The general view is that the level of scientific work in Iranian archaeology is quite high by global standards, and all that I spoke to felt compelled to relate to me their great sense of privilege when given the opportunity to work in Iran.

The present political situation has forced many foreign archaeologists of Iran to continue their research and publishing collaborations remotely. For some, particularly American and British researchers, this was already the reality for some time. With all of the difficulties in obtaining visas and securing funding to continue cooperative fieldwork in Iran, many of my colleagues have had to come up with creative solutions to keep their work going. In some cases, this takes the form of an active social media presence and online exchanges. In others, it involves remote mentorship of students by virtual means, training them in research methods and guiding their work in data collection and analysis, ideally leading to joint publications and thereby visibility in the international scientific community for those who otherwise would not have access to it.

The question of access is central. To the extent that certain foreign nationals have difficulty accessing the field in Iran, so too do Iranian researchers have difficulty accessing collections of Iranian antiquities stored in Western museums. Several researchers I spoke to expressed strongly that—given the volume of materials stored in institutions such as the British Museum, the Metropolitan Museum of Art, the University of Pennsylvania Museum of Archaeology and Anthropology, the Oriental Institute, the Louvre, and others—Western researchers have a duty to work with these materials and to make them more accessible. Other ideas that were floated include joint projects conducted remotely, in which projects are designed and published collaboratively, with the fieldwork carried out by Iranians on the ground, and the data and analysis shared over the internet. This of course is not an unproblematic proposal, as global power imbalances would still be at play, and there is a legitimate question as to the extent to which this constitutes a sanctionable exchange of services. My reading of the terms of The US Treasury’s Office of Foreign Assets Control General License G suggests that such work is authorized, but circumspection is strongly advised.

***

Regardless of all the difficulties, my sources pointed to several bright spots. To pick just one, the Persepolis Fortification Tablet Archive Return is seen as a model endeavor, and a prime example of how to both keep open and reinforce channels of communication between specialists and stakeholders, both Iranian and foreign. As one of my sources noted, the legal case that opened the door to the 2019 return—Rubin v. Islamic Republic—represents an odd confluence of forces, in which the United States government, the Islamic Republic, and an American institution were all on the same side. How often has this been the case in the general course of the relationship between our two countries over the past four decades? As I have documented in my historical research, despite the poor condition of our bilateral relations today, archaeology and cultural heritage were once seen by US State Department officials as among the best channels for establishing positive ties between the United States in Iran. My hope is that they may someday be so again.

 Click here to read Part 5 of this five-part series.

Photo: Wikicommons

U.S. Hostility With Iran Only Serves Hardliners on Both Sides

By Barbara Slavin

In the aftermath of President-elect Joe Biden’s election victory, U.S. and European think tanks and pundits are flooding the internet with papers about how to fix this or that aspect of U.S. foreign policy after four years of President Donald Trump.

The Atlantic Council and the European Leadership Network, with an assist from the top Iran hand at the European Council on Foreign Relations, just put out a roadmap for Europe to act as a bridge between Iran and the incoming Biden team. The recommendations seek to salvage the 2015 Iran Nuclear Deal—the Joint Comprehensive Plan of Action (JCPOA)—by returning the United States and Iran to compliance, promoting regional conflict resolution, and reviving people-to-people engagement.

In the longer run, however, U.S.-Iranian relations need a more radical rethink. For about 40 years, they’ve been going in circles, with occasional flickers of détente interrupting longer periods of economic warfare, cyber-attacks, and loss of life from direct and indirect military confrontation. Just last week, Trump reportedly asked for options to bomb Iranian nuclear sites—a reckless escalation that even Mike Pompeo, his hawkish secretary of state, is said to have opposed. The mutual hostility serves hardliners on both sides—and the arms dealers that cater to their respective regional partners—but also hurts U.S. national interests and, most especially, the Iranian people. It also hobbles Iran’s ties with European and Asian democracies.

The first order of business for a Biden administration may well be to freeze Iran’s slow walk out of the JCPOA in return for calibrated sanctions relief. But the Bidenites should be thinking of something much bolder, to be conveyed to Iran through back-channel talks in the region or in Europe.

The United States’ ability to advance its interests in the Middle East has been severely undermined by its lack of a functioning diplomatic relationship with Iran, the largest, most populous, and most scientifically advanced (apart from Israel) country in the region. Estrangement has left successive U.S. administrations reliant on Arab autocrats and an increasingly undemocratic Israel, which has in turn boosted Iran’s influence among Arab Shias and handed Russia and China increasing economic and strategic power.

Twice, U.S. and Iranian interests have actually coincided to a surprising extent—in post-2001 Afghanistan and post-2003 Iraq—but the George W. Bush administration put Iran in its crosshairs as a charter member of the “axis of evil” rather than building on Washington and Tehran’s shared animosity toward the Taliban and Iraqi leader Saddam Hussein. Instead, Iran exploited the power vacuums created by U.S. military interventions and the chaos that followed the 2011 Arab Spring to build new Shia militias in Iraq and to deepen ties with Yemen’s Houthi rebel groups. Despite that success, though, Iran has dramatically underperformed in economic terms compared to countries that 40 years ago were at similar stages of development.

As long as the United States and Iran are at so deeply at odds, Iran will continue to thwart U.S. interests while also failing to achieve its potential—and its government will remain chronically unpopular and insecure.

So what to do? The Biden administration should propose a serious rollback of U.S. sanctions—including over the use of the U.S. dollar—in return for diplomatic relations, a JCPOA 2.0 that indefinitely extends restrictions on Iran’s nuclear program, and a nonaggression pact.

Critics will no doubt call such a proposal naïve and unattainable. They may point out that Iran’s leadership needs continued animosity with the United States to survive. But the prospects for a big breakthrough between the two countries are bolstered by the fact that the American people are sick of U.S. military confrontations in the Middle East, and Iranians are fed up with being isolated.

Iran, of course, has long sought a reduction in U.S. forces in the region, which it perceives as part of a provocative containment regime. As Iranian Foreign Minister Javad Zarif put it to American journalists a few years ago: “Have you seen that map with all the US bases around us and said, ‘Why are these Iranians putting their country in the middle of all these bases?’”

Since the 1980s, when the United States escorted Kuwaiti tankers down the Persian Gulf during the Iran-Iraq war, the U.S. military has had a large presence on Iran’s flanks. Since 2003, tens of thousands of American troops have been based to Iran’s east and west and the U.S. navy remains a near constant presence near the Strait of Hormuz, the main chokepoint for Iranian and Arab oil exports.

The value of that oil is declining, however, as the world confronts the need to deal with climate change. Iran’s Arab neighbors have learned that the United States, with its rotating administrations, can be a fickle friend, while Iran, as Zarif put it in a recent tweet, will be there “forever.” All of the parties involved, more than ever, need to focus on their own domestic problems and divisions, which have only grown more acute and worrisome thanks to this year’s pandemic and accompanying economic crisis.

It isn’t guaranteed that a grand bargain with Iran will work when it has not in the past. But it is still worth an effort. And even if such overtures only result in a tenuous détente, it would be better than where the world is now.

Barbara Slavin directs the Future of Iran Initiative at the Atlantic Council. Follow her at @BarbaraSlavin1.

Photo: Wikicommons

Museum Diplomacy Falters in the Face of Iran Sanctions

This article is the third in a five-part series.

• Read Part 1 here

• Read Part 2 here

In 1926, Alexander Upham Pope, an art historian, collector, and dealer who specialized in Iranian art, was contracted by the Iranian government to design the Persian Pavilion at the Sesquicentennial International Exposition in Philadelphia. The centerpiece of the exhibition was a replica of the magnificent Safavid-era mosque Masjid-e Shah from Naqsh-e Jahan square in Isfahan, which sat in what is now the Franklin Delano Roosevelt Park and the Sports Complex in South Philadelphia. The interest generated by Persian Pavilion and the precious objects displayed within it led to the convening of the First International Congress for Persian Art and Archaeology. The success of this congress in turn paved the way for an exhibition of Iranian art and antiquities sponsored by the British Royal Academy of Art, held at Burlington House in London several years later.

The Pavilion and subsequent congress captured the imaginations of two brothers-in-law, scions of established Philadelphia families: Fiske Kimball and Horace Howard Furness Jayne, the directors of the Philadelphia Museum of Art and the University of Pennsylvania Museum of Archaeology and Anthropology, respectively. Together, they sponsored Pope to travel to Iran to participate in the negotiation of a new Antiquities Law in Iran that would allow American archaeologists to conduct surveys and excavations in Iran for the first time. Pope had his own agenda, however, and his feuds with the era’s leading scholar of ancient Iran—Ernst E. Herzfeld—complicated proceedings. So Kimball and Jayne dispatched the explorer, diplomat, and amateur archaeologist Frederick R. Wulsin to Tehran to take Pope’s place. Within six months, an agreement had been reached, and the Law for the Protection of National Vestiges was ratified by the Iranian Parliament in November of 1930.

Wulsin, hailing from Cincinnati, Ohio and educated at Harvard, was one of the heirs of the Baldwin Piano Company fortune, which supported his early travels in China, Mongolia, Tibet, Vietnam, and Laos. In his capacity as the representative of the University of Pennsylvania Museum, Wulsin was the first American citizen to apply for a permit to conduct archaeological excavations in Iran, digging for two months with his wife Susanne (née Emery) at the site of Tureng Tepe (Hill of the Pheasants) near the modern city of Gorgan. It was through research on the artifacts and documents that resulted from this excavation that I first became involved in the archaeology of Iran, making him a figure of special significance for me.

This background is important because it demonstrates the meaningful role museums have historically played in the mediation of the relationship between the United States and Iran. These private institutions were among the primary American actors on the Iranian political scene and a key contributor to goodwill between the two countries during the interwar period. As I write in a forthcoming piece, museums and their representatives were in fact seen at the time by State Department officials as the United States’ best chance at improving relations with Iran at the time. Iran’s heritage has long been an important channel of cultural exchange with other countries, and despite current American policy, this has not changed today.

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Recent museum exchanges between Iran and the West, both high and low-profile, have shown the continuing importance of Iran’s heritage in its foreign affairs. These include the international tour of the Cyrus Cylinder (2013), the Louvre exhibition “The Rose Empire: Masterpieces of 19th-Century Persian Art” (2018), the Persepolis Fortification Tablet Archive Return (2019), and the planned show “Epic Iran” at the Victoria & Albert Museum (due to open in February 2021). In each case, sponsors and participants in these initiatives have had to navigate a tangle of sanctions and restrictive financial regulations, which are at least to a degree predictable. They have also had to weather less foreseeable storms, such as political fallout from skirmishes in the Persian Gulf and the assassination of Qassem Soleimani in January 2020.

In 2013, the Iran Heritage Foundation, working together with the British Museum and the Smithsonian institution, undertook an American tour of one of the most famous artifacts of ancient Iran: the Cyrus Cylinder. The Cyrus Cylinder is a 2600-year-old cuneiform document, written in the Babylonian variant of the Akkadian script in 539 BCE, which was excavated at the site of ancient Babylon in 1879 by the Assyrian-British archaeologist Hormuzd Rassam. The object has been in the possession of the British Museum since 1880.

Following Mohammad Reza Pahlavi’s formulation, the Cyrus Cylinder is often referred to as the “first declaration of human rights,” a precursor to the modern Universal Declaration of Human Rights. Since 1971, a replica has been displayed at the UN headquarters in New York as a symbol of human liberty. This is in no small part because the text of the Cylinder is understood to have encouraged “freedom of worship” within the Persian Empire and allowed the return of peoples, such as the Israelites, deported from their homelands by the Assyrians. It has thus been taken up and promoted as a symbol of “multi-culturalism, tolerance, diversity, and human rights.”

The IHF exhibition, which traveled to five cities—Washington DC, Houston, New York, San Francisco, and Los Angeles—was marketed to American audiences on the basis that Cyrus’ principles of tolerance influenced the American founding fathers, particularly Thomas Jefferson, who owned not one but two copies of Xenophon’s Cyropaedia. The reception of the tour at the time is instructive. On the one hand, politicians speaking out of both sides of their mouths hailed the artifact and its message as a way to counter the media narrative of Iran’s nuclear program and regional ambitions. On the other, commentators such as noted religious scholar Karen Armstrong highlighted the power that cultural diplomacy can have where political diplomacy has failed.

This has continued to be the case, though current American policy has made such efforts at cultural diplomacy more difficult. For example, following a French-Iranian cultural exchange agreement signed in 2016, and after two years of painstaking preparations, the 2018 Louvre exhibitions, “The Louvre in Tehran” and “The Rose Empire: Masterpieces of 19th-Century Persian Art,” faced major financial and logistical challenges due to American policy. As reported in The Art Newspaper, would-be exhibition sponsors were concerned about falling afoul of primary and secondary sanctions penalties. Ultimately, both shows went on as scheduled, but because of restrictions on cargo flights between Paris and Tehran, the number of items in the Tehran show had to be considerably reduced. Despite tensions in other domains, the exhibitions were seen, at least by the French foreign ministry, as symbols of a shared ambition to promote positive relations and bring Iran back into the fold of international affairs.

In contrast, the planned exhibition “Epic Iran,” scheduled to open in February 2021 at the V&A in London, hangs in the balance. Even prior to COVID-19, the planners of this exhibition commented publicly on the difficulties they faced due to the exit of the United States from the JCPOA, intensified sanctions, and the assassination of Qassem Soleimani. V&A Director Tristram Hunt believes that the geopolitical situation makes the show all the more significant. Under present conditions, however, there are legitimate concerns that Iran will choose not to lend approximately 40-50 promised objects, potentially compromising forthcoming sponsorship. Nevertheless, despite difficult conditions and difficulties in securing loans, Hunt maintains that, at a time of escalating tensions, the exhibition serves a vital and important purpose in educating British audiences about the art and culture of “one of the world’s greatest historic civilizations.”

The current policy environment and geopolitical standoff between the United States and Iran has also impacted the return of long-term loans of Iranian antiquities stored in the United States, most notably the Persepolis Fortification Archive at the Oriental Institute of the University of Chicago. This collection of 30,000 Achaemenid administrative documents was exported to the United States on loan for conservation and decipherment following its excavation in the mid-1930s by representatives of the Oriental Institute. In keeping with the original agreement that the tablets would eventually be returned, three batches of objects had previously been sent to Tehran, first in 1948 and 1950, and then again in 2004.

The remaining tablets housed in Chicago could only be returned recently. The delay in the continuation of the return of the tablets in the 2000s was in no small part due to a decade-long lawsuit that attempted to wrest control over the objects away from the Oriental Institute, which eventually rose all the way to the Supreme Court. Victims of a terrorist attack in Jerusalem in 1997, carried out by Hamas, but blamed on Iran, were awarded $71.5 million dollars in restitution by an earlier lower-court ruling in 2006, which Iran refused to pay. The victims sought indemnification via repossession of this collection of artifacts in lieu of the awarded settlement, presumably to sell on the art market. In 2018, the Supreme Court ruled unanimously against this petition (Rubin v. Islamic Republic of Iran), opening the door to the return of the artifacts to Iran.

The reimposition of sanctions under the Trump administration in 2017-18 further complicated the return process, however. The shipment of the tablets and their hand-delivery by personnel from the Oriental Institute had to be thoroughly vetted by the Treasury Department’s Office of Foreign Assets Control (OFAC), which is a difficult and lengthy process even in the best of times. Despite the expensive legal battles and complicated licensing required to undertake the return, the first batch of tablets in this round were returned in October 2019, to be followed by additional shipments when conditions allow. There is great hope on both sides that despite the difficulties, the broadening of contacts that this project represents could mark a renewed era of scientific collaboration between American and Iranian scholars in the heritage sector.

***

American foreign policy has complicated the ability of museums—whether University research museums, like the Oriental Institute and the University of Pennsylvania Museum, or major art museums such as the V&A and the Louvre—to conduct the exchanges of objects and personnel required put on exhibitions related to Iranian cultural heritage. Nevertheless, museum professionals in North America, Europe, and Iran recognize the importance of these events for educating the public and for establishing ties between nations. There is much more to be said about the conduct of Western museums in amassing their collections of Iranian antiquities, but that is the subject of a different essay. In the meantime, another domain where American policy has stymied efforts to engage in heritage diplomacy and intercultural dialogues is in international cooperative archaeological field research, which we will consider next week.

 Click here to read Part 4 of this five-part series.

Photo: Wikicommons

The Optimistic Case for Biden and Iran

“It’s over.”

So reads the November 8 headline of Hamshahri, one of the leading newspapers in Iran. The past four years have been brutal for ordinary Iranians. The Trump administration waged an economic war on Iran that exacerbated the political and social tensions endemic to the country. Iranians are hoping that the election of Joe Biden and Kamala Harris will enable a return to the optimism they experienced in the short period between the implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016 and the dismaying election of Donald Trump in November of the same year.

In a CNN op-ed published in September, Biden made clear his intention to “rejoin the [JPCOA] as a starting point for follow-on negotiations” so long as “Iran returns to strict compliance with the nuclear deal.” Here, Biden is accepting the basic premise of “compliance-for-compliance.” In response to Trump’s withdrawal from the nuclear deal, Iran has reduced its own commitments to the deal, particularly by increasing its levels of uranium enrichment beyond what is permitted by the JCPOA. These moves, which have dismayed the remaining parties to the agreement—France, Germany, the United Kingdom, Russia, and China—are nonetheless perceived as tactical and reversible. The administration of Iranian president Hassan Rouhani remains committed to the JCPOA and appears ready to welcome the U.S. back into the deal so long as the U.S. policymakers accept “to be held responsible for damages” caused to “the people of Iran” as a result of Trump’s withdrawal, while also providing “guarantees” that such an event would not be repeated. Notably, Iranian foreign minister Javad Zarif has described the stance of the Biden administration as “promising.”  

Despite these encouraging statements by both the Biden camp and officials in the Rouhani administration, there is a remarkable degree of pessimism surrounding the prospect of a U.S. reentry to the JCPOA. These assessments highlight pressure, particularly from U.S. allies in the Middle East, to build on the nuclear deal and achieve diplomatic breakthroughs on issues such as regional security and Iran’s missile program. They also point to the ascendency of Iran’s hardliners, a loose coalition of politicians who savaged Rouhani and his moderate bloc as the nuclear deal faltered. The vocal anti-Americanism of these conservative politicians and their labeling of figures such as Rouhani and Zarif as either naïve or knowing traitors, has furnished dire predictions for the future of U.S.-Iran diplomacy under the hardline president expected to prevail in Iran’s elections next year. 

In a recent piece, Ariane Tabatabai and Henry Rome seek to account for the likely victory of a hardliner president, arguing that “the United States shouldn’t rush to secure a deal in the hopes of shaping Iran’s domestic politics, or for fear that the window of opportunity will close.” They observe astutely that “the new administration shouldn’t assume that without Rouhani, diplomacy wouldn’t stand a chance.” Tabatabai and Rome explain that the next Iranian president “will almost certainly be more conservative,” but note that the decision to engage in diplomacy with the United States will not be the prerogative of this hardline figure. Rather, such decisions require “buy-in from the whole system.” So long as Iran’s national security interests would be advanced by negotiations, it is reasonable to expect a receptiveness to talks, even with the U.S.

According to Tabatabai and Rome, it follows that the new Iranian administration will “have no choice but to negotiate” with the U.S. principally because of the country’s weak economic position. But this assessment likely underestimates the ability of the Iranian economy to limp along under sanctions pressure—even for four or more years. Before the COVID-19 pandemic hit the country, the Iranian economy was already returning to growth despite two years under Trump’s maximum pressure sanctions. High inflation has emerged as the single most significant challenge facing Iranian policymakers, but as the case of Venezuela shows, even the most extreme circumstances of hyperinflation can prove insufficient to coerce policymakers to the negotiating table.

Trump’s national security advisor, Robert O’Brien, recently conceded that the administration was seeing diminishing returns from economic coercion, having imposed “so many sanctions” that there was little pressure to add. This view reflects the assessments of the U.S. intelligence community, which is developing a more sophisticated understanding of the Iranian economy and its adaptability to sanctions pressure. The takeaway is that Trump’s sanctions offer Biden no real leverage on Iran and that it will not be possible to coerce Rouhani nor his successor into talks.

Despite this, Tabatabai and Rome are still correct to claim that Biden will have a shot at diplomacy—a very good one at that. To understand why, it is important to look beyond Trump’s withdrawal from the nuclear deal as the critical political act of the last three years. Far more significant is the fact that Iran remains in the agreement. Sure, Iran has reduced its compliance with key aspects of the deal. But the extraordinary political price paid by the Rouhani administration, spurred by a creditable commitment to diplomacy for its own sake and also by the strategic considerations of the wider Iranian “system,” suggests that understanding the logic of Iran’s persistence with the deal is the key to understanding the prospects for U.S.-Iran talks.  

Back in 2018, on the eve of John Bolton’s appointment to lead the National Security Council, it appeared that the writing was on the wall for the Iran deal. As I wrote at the time, “by any conventional assessment, then, the Iran deal is dead.” Implementation of the deal was already faltering, and Bolton was hellbent on killing the agreement outright. But I foresaw a different outcome, arguing that “the Iran deal cannot be killed” because of a set of “several undeniable truths about Iran and its place in the world.” My argument focused on three structural factors that underpin Iran’s diplomatic engagement: the geopolitical influence of Iran, the demographic and economic drivers of the Iranian policy of engagement, and the fact that the United States has limited leverage because there is no credible or affordable military threat behind diminishing sanctions pressure.  

Each of these structural factors is even more pronounced today. The Islamic Republic is less isolated diplomatically than ever before because it opted to remain in the JCPOA following the U.S. withdrawal. In the face of reduced oil revenues, the Iranian economy is more dependent on economic diversification, including in its trade partnerships. The combination of sanctions overuse and the American public’s calls for a pullback from the Middle East will leave Biden with less scope to coerce or threaten Iran.  

The notion that Iran’s commitment to engagement (and the nuclear deal) is structural was underscored in a November 3 speech by Iran’s Supreme Leader, Ali Khamenei. Addressing the possible impact of U.S. elections on U.S.-Iran relations, Khamenei stated, “We follow a sensible, calculated policy which cannot be affected by changes of personnel.” Many took the statement to be Khamenei’s way of pouring cold water on the prospect of a Biden victory revitalizing the JCPOA. But again, in the Iranian assessment, the deal is not yet dead. The calculated policy to which Khamenei is referring is the policy of keeping the nuclear deal alive in accordance with Iran’s strategic interests.

This structural commitment means that the Biden administration does not need to rush to make a deal with Iran—the window of opportunity will not close when Iran elects a new president next summer. However, that does not mean Biden will not need to make some early gestures to signal the depth of his own commitment to diplomacy. In an excellent report envisioning a roadmap for the Biden administration’s reengagement of Iran, Ilan Goldenberg, Elisa Catalano Ewers, and Kaleigh Thomas, point to the importance of an early “de-escalation” phase, stating that the Biden administration “should start with immediate, modest unilateral confidence-building measures” in order to achieve both compliance-for-compliance on the nuclear file and “calm-for-calm” when it comes to regional tensions.

As Edoardo Saravalle has convincingly argued, the Biden administration can use executive orders to implement its sanctions relief commitments under a compliance-for-compliance framework in under sixty days. These moves can be made tangible by coordinating moves with European allies and international bodies to deliver tangible economic benefits to Iran. For example, this coordination can ensure that sanctions relief enables the unfreezing of foreign exchange reserves and the provision of Iran’s requested COVID-19 relief loan by the International Monetary Fund—moves that would ease inflation, delivering appreciable economic relief for ordinary Iranians. Should the Biden administration choose incentivization over coercion and thereby prove itself a credible counterparty for follow-on negotiations by the time of the Iranian election in the early summer of 2021, it is more than likely that any Iranian president elected—even a so-called hardliner—will take up the mantle of new talks.

The fierce opposition of hardliners to the nuclear deal was far more about the stakes of domestic politics than the terms of the deal itself. Even before talks had concluded, hardline politicians were gripped by anxiety that the successful implementation of the nuclear deal would grant Rouhani, a savvy political operator, a diplomatic and economic triumph that would consolidate the dominance of reformist politics in Iran for a generation. The opposition to the nuclear deal, which extended to efforts to undermine the deal itself, was intended to take Rouhani from the heights of popularity—he won two stunning mandates in high-turnout elections—to the depths of disgrace. The hardliners succeeded in this cynical mission and Rouhani was battered. But tellingly, the nuclear deal, as a product of Iran’s largely apolitical strategic decision-making, has survived.

A hardline president in Iran can be confident of his ability to run the country for an initial four-year term without needing a détente with Biden. The economy will limp along, regional tensions will remain high, and domestic unrest will simmer. But the presidential administration will be able to coordinate with state organs to keep Iran resilient to external and internal pressure—even as the Iranian people continue to suffer from the country’s stagnation.

But what president would choose to preside over a constant slow-moving crisis, particularly one that was not of his own making? For hardliners, 2021 represents an extraordinary political opportunity. For the first time since 1989, Iran and the United States will have first-term presidents at the same time. Meanwhile, Iran’s conservative politicians are increasingly concerned about the political legacy and legitimacy of the Islamic Revolution as it enters its fifth decade. Negotiations with the Biden administration offer Iran’s next president, and his political backers, the opportunity to give to the Iranian people that long-awaited gift—a robust, transformational deal with the world powers, chief among them the United States.   

The impact of Biden’s election on U.S.-Iran relations has been the subject of strategizing for months. Today, what was once a hypothetical has become a reality. The impetus for U.S.-Iran talks arises from both an emergent political opportunity and the unchanged structural factors that push both sides towards engagement. The mechanics and sequencing of an American reentry into the JCPOA remain to be determined, but it will not be harder than when the deal was originally struck, when taboos needed to be broken in Tehran and Washington alike. Much has been learned over the last four years about what it takes to implement an “Iran Deal” successfully. We ought to be optimistic about comes next.

It’s a beginning.

Photo: Wikicommons

For Tourism in Iran, It Wasn't Supposed to Be Like This

This article is the second in a five-part series.

• Read Part 1 here

Iran has many enticements for the intrepid foreign traveler. With its culture and history, its cuisine and its arts, Iran is a highly desirable destination. But for many throughout the world, Iran’s negative portrayal in the media has a major impact on how it is viewed. For the past forty years, Iran has been depicted as a rogue state, an international pariah, and a land of religious fanatics chanting “Death to America” and “Death to Israel.” From George W. Bush branding Iran as a member of the “axis of evil” to Donald Trump’s designation of Iran as the world’s “leading sponsor of terrorism,” a particular narrative has taken root in Anglophone media that positions Iran as a dangerous, hostile, and unwelcoming country.

Dissenting voices, however, do exist. Most important among them are journalists, such as Dutch New York Times correspondent Thomas Erdbrink, whose 2018 Frontline special feature Our Man in Tehran, provides a much needed corrective on Iranian society, focusing on human-interest stories which show Western audiences slices of life in Iran. In vivid sequences, among many other topics, Erdbrink documents “ordinary Iranians’ love of country, love of travel, of music, of fun, the craving for respect and national stature, fascination with America, hatred of injustice, and reverence for parents.”

But perhaps even more important than journalists are travel-show hosts, who show through their own personal experiences just how transformative actually visiting Iran can be. Take for example, Anthony Bourdain, who captured the effect that being in Iran can have on perception of the place and its people in his CNN show Parts Unknown. He narrates his confusion in a street-scene montage at the beginning of his famous Iran episode: “It wasn’t supposed to be like this. Of all the places, of all the countries, of all the years of traveling, it’s here—in Iran—that I’m greeted most warmly by total strangers.” Seated at a kabob restaurant, as he rips apart a piece of noon-sangak, a popular flatbread, he says directly to the camera: “Good to be here, finally—it’s taken some time. Like, a lot of time—like, four years, I’ve been trying. Finally!” Over a shot of meat and vegetable kabobs being prepared and served, Bourdain invites the viewer to “forget about the politics for a moment, if you can,” before extoling the virtues of Iran’s rich, complex cuisine, highlighting Iranian hospitality, and noting that Iranians tend to kill guests with kindness.

While food and hospitality are featured by Bourdain, Rick Steves, another famous travel-show host, highlights the allure of Iran’s other major attraction for travelers and tourists. In the first minute of Steves’ “Iran: Yesterday and Today,” images of Persepolis appear three times, Iran’s 2500-year legacy of civilization is praised, and the viewer is primed for footage of the “splendid monuments of Iran’s rich and glorious past.”

The significance of Iran’s cultural heritage in capturing the imagination of foreign travelers is further reflected in the plot of the 2006 Iranian adaptation of My Big Fat Greek Weeding, titled in Farsi Ezdevaj be Sabk-e Irani (Marriage, Iranian Style). One day while working at her father’s tour agency, the female lead Shirin meets an American, David Howard (Davood), when he comes into the office to schedule a tour to Shiraz. The scene is painfully awkward for both characters—and the viewer, I should add—but through this brief encounter, a budding courtship begins. Shirin’s father is particularly displeased and seeks to distance the two, but her Uncle Mehdi and mother Akram-Khanoum conspire to arrange for Shirin to join the tour as a guide. The first steps of a flirtatious dance between the David and Shirin occur on the tour—upon the Apadana of Persepolis itself no less—and culminate in David’s declaration of his love for Shirin at the Tomb of Hafez. The choice of these settings is far from accidental, connecting the intercultural romance—and by extension, the relationship between the protagonists’ two countries—directly to Iranian heritage.

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The significance of Iran’s cultural heritage sites, beyond their clear symbolic importance to Iran’s national identity, is reflected not just in media representations of the country, but in the fact that tourism and cultural heritage have been coupled administratively in Iran since their merger into a single government agency in 1982. In its various organizational forms, this agency has overseen the development of a network of museums and foundations, academic departments and research centers, contractors, and traditional craft producers, as well as charitable trusts and religious endowments. In 2019, the former Organization for Cultural Heritage, Handicrafts and Tourism (ICHHTO) was upgraded to the status of an official government ministry (the Ministry of Cultural Heritage, Tourism and Handicrafts or MCTH). While my sources tell me that this has not resulted in significant changes to the structure of the organization or its personnel, it has increased its prestige, and crucially, its budget. Whatever the motives for and ultimate effects of this administrative reorganization might be, the change reflects the important role that tourism has come to play in Iran’s government, public policy, and economy.

According to Mohammad-Hossein Asgharpour, MCTH’s Director General of the Office of Facilities and Resources, in its first year, the ministry oversaw the execution of approximately 750 projects, representing investments of USD 153.6 million, providing direct employment for 7266 people. These projects include everything from the development of hotels, eco-tourism resorts, guesthouses, and health villages, to supporting museums and restoration/conservation efforts. As indicated by a recent statement from the MCTH’s Director General of the Office for Tourism Studies and Training, considerable investments are being made in capacity-building and human capital. In the first six months of the Iranian year 1399 (2020-21), at least 10,000 stakeholders and professionals attended trainings sponsored by the Ministry in a range of domains. These include workshops on topics such as: facilities management, ecotourism and sustainability, applications of new technologies, quality management, financial management, etiquette and hospitality, and training and retraining tour guides. While it is difficult to ascertain the exact proportion of the ministry’s budget spent on human capital and tourism, as opposed to heritage protection, preservation, restoration, and research, there can be no doubt that archaeological sites and museums are a major draw for tourists and represent focal points of infrastructural investment in the tourism industry.

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With a favorable exchange rate, a famous culture of hospitality, and numerous UNESCO World Heritage Sites, not to mention all the investment outlined above, Iran should by all accounts be a highly sought-after destination for international travelers. Major tour operators targeting foreign tourists are certainly keen to highlight Iran’s cultural heritage on their websites and in their advertising. These firms emphasize above all else the depth of history and culture in Iran, spotlighting ancient monuments as well as Iran’s rich artistic and architectural traditions. One operator currently provides seven main tour packages, three of which are specifically focused on heritage, but all of which involve visiting heritage sites. Another tour leads its pitch with an invitation to experience “the wondrous remains of the ancient capital of Persepolis – the scale and grandeur will leave you in no doubt that this was once the center of the known world.” Welcome to Iran’s Iran Historical Tours describes Iran as a land with an “ancient civilization, rich history, [and] historical monuments,” highlighting Iran’s archaeological heritage as a particular draw for tourists interested in art and history.

English-speaking tourists who might have come into contact with this advertising copy, however, constitute only a fraction of all the tourists traveling to and within Iran. After the United States pulled out of the JCPOA, despite specific targeted attempts to attract foreign tourists to Iran from Europe and China, arrivals from these countries decreased by 25-40%, whereas arrivals from neighboring countries such as Iraq, Azerbaijan, Afghanistan, Turkey, Pakistan, and Turkmenistan increased substantially. According to MCTH, many of these “tourists” are actually pilgrims, who have come to Iran to experience the country’s Islamic—rather than ancient—heritage. In terms of visas issued, the number of pilgrims exceeded tourists in 1396 (2017-18) by approximately 100,000, and in 1397 (2018-2019) by over 1 million.

Regardless of the origins and motivations of tourists coming to Iran, heritage is clearly a draw and is recognized as potentially big business. Prior to and immediately following the signing of the JCPOA, experts and policymakers had hoped that the tourism industry would not only benefit from the normalization of Iran’s international relations, but in fact become a central part of the Iranian economy, providing a sustainable base for employment and revenue for years to come. By MCTH’s own accounting, nearly 1.3 million people are employed in the tourism industry in Iran. In 2016, the economic activity of the sector represented approximately 2 percent of the country’s GDP and all indicators suggest that it continued to grow until early 2020. Before COVID-19 struck, despite American sanctions, the Iranian heritage and tourism sector was flourishing, attracting 8 million foreign tourists in the Iranian calendar year 1397 (2018-19). This represents significant growth from ten years prior, when Iran recorded only 3 million foreign arrivals.

Ultimately, it appears that American sanctions did not significantly slow the arrival of foreign tourists to Iran, though it may have had an impact on who visited Iran and from where. In the first three months of 1399 (2020-21), however, only 74 foreign tourists visited Iran, and with inter-provincial travel subject to stiff restrictions, the tourism industry has been one of the hardest hit by the pandemic, with estimates of losses across the industry exceeding two billion dollars in the first six months of 1399. Regardless of the pandemic, however, because of the pressure of sanctions, the MCTH’s long-term strategic outlook was already focused on fostering the growth of domestic tourism as a pillar of sustainable development. Between 1397 (2018-19) and 1398 (2019-20), domestic tourism reportedly increased by 20 percent. Two European colleagues related that between 2016-2018, while there were increased numbers of Italian, French, German, and Chinese tourists visiting the sites where they were working, the overwhelming majority of tourists were Iranian. It is important to note, however, that while there is substantial domestic demand, spending by Iranian nationals is seen to be lower than that of foreign visitors, even though foreign tourists must travel with cash as it is presently impossible to make payments using international credit cards. Despite obstacles to capitalizing on the available opportunities and the Coronavirus pandemic, this sector is still seen by policymakers as one with great potential for growth.

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At the present juncture, however, it is difficult to gauge the direct and specific effect of American sanctions on the economics of the Iranian cultural heritage management sector. But by recognizing the importance of Iranian cultural heritage to the tourism industry and examining the impact of American policy on that sector, we can obliquely approximate the consequences of maximum pressure on heritage management. Currently, it appears that American sanctions have had two outcomes: first, there has been a decrease in foreign tourists from Europe and China coupled with an increase in foreign tourists from neighboring countries, presumably for pilgrimage; and second, policymakers have shifted their attention to stimulating demand for domestic tourism. By all measures, however, the industry has been severely handicapped by the COVID-19 pandemic, suffering job losses estimated at around 13,000 by August 2020 among tour guides alone, not to mention in hotels and travel agencies. Prognoses for the future remain bleak, as demand is not likely to rebound soon, and promised government support for the industry has been slow to materialize.

Yet, the importance of tourism for improving Iran’s image on the world stage is clear. According to the results of MCHT-internal surveys, tourists reported a “very positive view” of Iran after visiting, noting how much their opinion of the country had changed after seeing it with their own eyes, rather than through the lens of the media. Ali Asghar Mounesan, the Minister in charge of MCTH, recently observed that tourists are cultural ambassadors all over the world, but nowhere more so than in Iran. Indeed, according to Mounesan, tourism has the ability to bring nations closer together. Iran’s heritage plays a role in cultural diplomacy that goes far beyond tourism, however. In the next article in this series, we will explore in greater depth the impact of American sanctions on museum exchanges and inter-institutional cooperation in the heritage sector.

Click here to read Part 3 of this five-part series.

Photo: Wikicommons