With a day left before polls open in Iran, there’s been much press given to this year’s presidential elections in Iran. Some have written these elections off due to the limited power the President holds in Iran and some have dismissed the polls due to what many may consider a lack of choice. However, the election is still important from a sanctions perspective. Most people watching the three presidential debates noticed that sanctions featured prominently and indeed sanctions are reportedly an important part of Iran’s political discourse these days. The more central question this week is, will the outcome of the election impact the sanctions regime?
I’m clearly just a lawyer and not a political analyst, but I would have to say yes. The sanctions effectively rest on three pillars – (1) [most importantly] Iran’s nuclear program; (2) Iran’s alleged sponsorship of international terrorism; and (3) human rights. Although the roles of Iran’s different (and often conflicting) power centers are not as institutionally defined as those of their western counterparts, the President does have some say in these three. Furthermore, as many have noted, the presidency in Iran still somewhat sets the tone of the image that Iran projects overseas.
The new president will have some leeway in selecting the nuclear negotiation team. Will he appoint ideologues or pragmatists? Reformist candidate Dr. Hassan Rowhani has overtly boasted about splitting U.S. and EU opinion on Iran during his tenure as the head of the negotiation team.
A team that shows good faith and even inches towards a deal can help reduce tensions. Additionally, people generally assign little value to optics. Outgoing president Mahmoud Ahmadinejad effectively took on a “bring it on” attitude towards sanctions and it appeared as if he was actually looking to make enemies. The image that the government projects internationally can impact public opinion and can make the imposition (or removal) of sanctions easier or harder.
Assuming the current head of the negotiation team Dr. Saeed Jalili does not win (if he does, expect more of the same), the new president, whether it is Dr. Rowhani or the more conservative Drs. Ali Akbar Velayati or Mohammad Bagher Ghalibaf will undoubtedly try to impose some modicum of damage control on Iran’s relations with the outside world. Undoubtedly, if a new negotiation team comes on board and even inches marginally towards a deal, this could be enough to repeal at least part of the sanctions. This could create a domino effect, but we shouldn’t hold our breath – absent a very quick deal between Iran and the P5+1 sanctions are going to be here for quite a while, albeit possibly in a lighter form.
What would be first on the agenda? If a tentative agreement is reached, expect to see the U.S. reallowing Iran to receive gold for oil, perhaps, or removing certain secondary sanctions, such as those on bank dealings and certain energy transactions or restrictions on Iran’s central bank. Banking is at the crux of the sanctions, and it is improbable that Iran will be readmitted into SWIFT any time soon, even if Iran’s negotiation team becomes a bit more friendly. The United States knows that even a slight reversing of the tide could have immensely positive impacts on Iran’s domestic economy by allowing more oil exports, more hard currency and more confidence in the economy by average Iranians. Starving Iran’s economy has been a U.S. objective for years, so the United States will likely look to reach a significant, high value deal before cutting even a noticeable break.
Naturally the major limitations on U.S. persons will likely stay for a while – there are less sensitive sanctions that are easier sells domestically that will go first. And they will need to go – for even if the US was to lift the bulk of the Iranian Transactions and Sanctions Regulations, 31 CFR Part 560 (the ITSR) tomorrow, most of the then-permitted transactions would still be logistically very challenging without adequate ways to ship goods or receive payments for them.
While a quick, Burma-type reversal of sanctions is unlikely to happen in Iran, it is clear that any removal of sanctions will inevitably impact players around the world and can detoxify Iran’s name in the eyes of international business. It will indeed be a battle of wills.