Iran Agrees to Nuclear Curbs for $7bn Relief in Sanctions, Freeze on $4.2bn Assets Lifted

Oil Prices Fall

Iran’s accord with world powers to limit its nuclear program in exchange for as much as $7 billion in relief from sanctions.

By agreeing to curtail its nuclear activities, Iran won an easing of certain sanctions on oil, auto parts, gold and precious metals for six months. The deal, which is reversible, was announced on 23 November after five days of talks in Geneva. Without removing sanctions on oil exports, it releases some of Iran’s oil assets and allows it to keep exporting crude at current levels.

The agreement was announced early yesterday in Geneva by diplomats including Iranian Foreign Minister Mohammad Javad Zarif and U.S. Secretary of State John Kerry. China, Russia, the U.K., France and Germany also joined in the negotiations and signed on to the results. The two sides now will work to conclude a comprehensive accord within six months.

The agreement halts Iran’s nuclear progress, and “key parts of the program will be rolled back,” Obama said in his televised speech. “These are substantial limitations which will help prevent Iran from building a nuclear weapon.”

Western nations have accused Iran of harboring ambitions to develop nuclear weapons, an assertion it denies. The U.S. and Israel have said they are willing to use force if needed to prevent Iran from obtaining the capability to make such weapons.

The accord is the first major crack in the deadlock over Iran’s nuclear program since 2003, when Rouhani, now the president of the Islamic Republic, was its top negotiator.

The deal marks a breakthrough in relations between the U.S. and Iran 34 years after the country’s Islamic Revolution fractured ties.

Under the deal, Iran must improve cooperation with United Nations monitors, commit to eliminate its stockpile of uranium enriched to 20 percent levels and halt advanced centrifuge installation, the White House said in a statement. Iran also won’t commission its heavy water reactor at Arak, which, if it became operational, could produce plutonium and give the country a second path to nuclear weapons.

In return, Iran will be able to repatriate $4.2 billion in frozen assets, the Obama administration said. The accord will “suspend certain sanctions on gold and precious metals, Iran’s auto sector and Iran’s petrochemical exports, potentially providing Iran approximately $1.5 billion in revenue,” the administration said.

The accord also provides $400 million in tuition payments to schools for Iranian students studying abroad, and will allow access to civilian aircraft parts.

Gold Trading

Some curbs on gold trading also will be removed. While Iran will be allowed to buy and sell precious metals, including gold, it will be barred from accepting them as payment for oil or any other sanctioned transaction, according to the officials. Iran sits on the world’s fourth-largest proven oil reserves.

The agreement was reached after foreign ministers made unscheduled trips to Geneva over the weekend to push the third round of talks in six weeks to a conclusion.

The deal compels Iran to clarify work that has been the focus of International Atomic Energy Agency inspectors. The agency, which convenes a quarterly meeting to discuss Iran this week, two years ago published a list of people and places that may have been involved with nuclear-weapons work.

Oil Prices

Brent crude slid 2.2 percent to $108.60 a barrel in Tokyo, falling from a six-week high, while West Texas Intermediate crude slipped 0.9 percent. Gold fell as much as 0.5 percent before trading little changed at $1,243.51 an ounce. Futures on the Standard & Poor’s 500 Index gained 0.4 percent and the MSCI Asia Pacific Index climbed 0.5 percent.

The United Arab Emirates, a Sunni Arab U.S. ally in the region, welcomed the agreement, describing it as a first step toward a permanent accord, the state-run WAM news agency reported.

Business between Iran and the U.A.E. declined 83 percent to $4 billion because of sanctions against the Islamic republic, Kerry said Nov. 11.

The next negotiation, scheduled for six months from now depending on both sides’ adherence to the current agreement, will seek a more permanent resolution. The key players in this were the United States and Iran. The mere fact that the U.S. secretary of state would meet openly with the Iranian foreign minister would have been difficult to imagine a few months ago.

The U.S. goal is to eliminate Iran’s nuclear weapons before they are built, without the United States having to take military action to eliminate them.

The Iranians’ primary goal is regime preservation. While Tehran managed the Green Revolution in 2009 because the protesters lacked broad public support, Western sanctions have dramatically increased the economic pressure on Iran and have affected a wide swath of the Iranian public. The election of President Hassan Rouhani to replace Mahmoud Ahmadinejad after the latter’s two terms was a sign of unhappiness. Supreme Leader Ali Khamenei clearly noted this, displaying a willingness to trade a nuclear program that had not yet produced a weapon for the elimination of some sanctions.

The View from Saudi Arabia

In a way, this marks a deeper shift in relations with Saudi Arabia than with Israel. Saudi Arabia has been under British and later American protection since its creation after World War I. Under the leadership of the Sauds, it became a critical player in the global system for a single reason: It was a massive producer of oil. It was also the protector of Mecca and Medina, two Muslim holy cities, giving the Saudis an added influence in the Islamic world on top of their extraordinary wealth. 

If the United States and Iran can agree on this quid pro quo, the basic issues are settled. And there is something drawing them together. The Iranians want investment in their oil sector and other parts of their economy. American oil companies would love to invest in Iran, as would other U.S. businesses. As the core issue separating the two countries dissolves, and economic relations open up - a step that almost by definition will form part of a final agreement - mutual interests will appear.