This Article is From Jan 18, 2016

What Happens Once Sanctions Are Lifted?

What Happens Once Sanctions Are Lifted?

The actions signaled what diplomats have called Implementation Day. (File Photo)

The International Atomic Energy Agency declared Saturday that Iran had fulfilled requirements to limit its nuclear activities, a step that automatically lifted nuclear-related economic sanctions imposed by the United Nations, European Union and United States. The move freed Iran to sell much more oil and gain control of roughly $100 billion in impounded money, ending a prolonged isolation that has driven the country into a deep economic malaise.

The actions signaled what diplomats have called Implementation Day - the most important phase so far of the historic nuclear agreement, known as the Joint Comprehensive Plan of Action, that Iran reached with the major world powers on July 14.

Q: Why were the actions taken simultaneously?

A: The coordinated timing was an important face-saving element built into the nuclear accord to avoid giving the impression that Iran had capitulated to Western pressure before sanctions were lifted. Iran's supreme leader, Ayatollah Ali Khamenei, who has final authority over nuclear policy, had said the country would not regard the agreement as legitimate while the sanctions remained in force.

Q: What did Iran do to comply?

A: The International Atomic Energy Agency, the nuclear proliferation monitoring agency of the United Nations, had to verify the following steps had been taken by Iran to ensure its atomic work remains peaceful, at least for the next 15 years:

Reducing its low-enriched uranium stockpile by 98 percent, leaving only about 660 pounds, an amount insufficient for weaponizing. The reduction was completed Dec. 28, with the bulk of the uranium exported to Russia in a Russian ship.

Dismantling 12,000 centrifuges used to enrich uranium. Iran said it had completed that work in November.

Answering questions from international investigators about Iran's past nuclear work with "possible military dimensions." The IAEA said on Dec. 15 that Iran had done so. Yukiya Amano, the agency's director general, announced that it had "no credible indications" of such work after 2009.

Removing and disabling the core of the nuclear reactor in Arak, which could have produced roughly two weapons' worth of plutonium per year. Iran said it had completed that step this past week.

Q: What sanctions were lifted?

A: The EU rescinded restrictions on trade and investment in oil, petrochemicals, metals, shipping, shipbuilding and other transportation industries, as well as banking, insurance and other related services, including Iran's ability to move money electronically overseas. Visa bans and asset freezes on companies and individuals were lifted for these industries and for some others related to nuclear, arms and ballistic missile activities.

Through President Barack Obama's executive waiver authority, the United States halted the application of nuclear-related restrictions on Iran's financial, oil, gas, petrochemical, shipping, metal and automotive industries, which had severely impeded the country's ability to conduct business around the world. The United States also removed hundreds of individuals and companies from blacklists that had subjected them to asset freezes and other penalties.

The U.S. steps included the creation of special licenses enabling U.S. manufacturers to sell civilian aircraft to Iran, which has one of the world's oldest fleets and is said to need 400 to 600 new planes.

The United States also will allow imports of Iranian carpets, pistachios, saffron and caviar, and - perhaps most important - it will permit foreign subsidiaries of U.S. companies, with certain restrictions, to do business in Iran. That provision could lead to the legal sale of U.S. products there.

Nonetheless, other U.S. sanctions remain in force. The U.S. government regards Iran as a state sponsor of terrorism and an abuser of human rights. It also accuses Iran of meddling in the affairs of U.S. allies in the Middle East. A trade embargo severely restricts most U.S. business with Iran. While Iranian banks can buy and sell dollars, they cannot use the U.S. banking system, an important conduit for global commerce.

Q: How quickly will Iran benefit economically from these changes?

A: The most immediate benefit to Iran will be access to roughly $100 billion of its money that was frozen in foreign accounts. Of that total, outside analysts estimate roughly half already is committed to other obligations, such as payments to foreign creditors including China. Iran also will be able to sell as much oil as it likes. But with the collapse of the oil market - prices have fallen 70 percent in the past 18 months - Iran will derive far less revenue than it had anticipated, and Iranian sales could further depress prices.

More broadly, the lifting of the sanctions is expected to diminish a psychological cloud in Iran, even if it is not felt immediately. "Iran's international logistics for banking and shipping and insurance was so ravaged by the sanctions that the relief they will get now, albeit not perfect, is a large step up," said Farhad Alavi, a lawyer in Washington who specializes in sanctions and trade law.

Q: How will the lifting of sanctions change relations with the United States?

A: Economic relations, at least, are not expected to change much because of the other non-nuclear sanctions. Many U.S. companies have little interest in navigating the complicated web of restrictions that remain in force for them. Critics of Iran in the United States who opposed the nuclear agreement have sought to emphasize what they call the resilient legal hazards for Americans.

"I don't think you're going to see a flood of business into Iran right now," said Mark D. Wallace, chief executive of United Against Nuclear Iran, a New York-based group that campaigned against the deal reached in July.

However, political relations, while still estranged after 35 years, showed signs of easing even before Implementation Day. One of the starkest examples was Iran's seizure of 10 Navy sailors who had errantly trespassed into Iranian territory in the Persian Gulf last Tuesday and their release less than 24 hours later. While critics of the Obama administration said Iran scored a propaganda victory at America's expense, others said the speedy resolution reflected the close ties between Secretary of State John Kerry and Foreign Minister Mohammad Javad Zarif of Iran, forged over the course of the nuclear negotiations. Kerry correctly predicted the sailors would be quickly freed.

"It helped that Kerry could call 1-800-Zarif and get an answer right away," said Cliff Kupchan, chairman of the Eurasia Group, a political risk consulting firm.

Q: What about longer-term relations with the United States?

A: It is premature to say. But under the nuclear deal, the United States is committed to taking legislative action that would permanently remove the sanctions, not just suspend their application - provided that Iran sticks to its pledges as well.

Kupchan said he believed that the agreement would start a "slow, nonlinear thaw" between the two countries over the next few years. Even with Khamenei's deep-seated mistrust of the United States and the repressive force of the Islamic Revolutionary Guards Corps in Iran, Kupchan said, "the tectonic plates are going to move."
© 2016, The New York Times News Service
.