Reconnecting Tehran to the global economy set to have huge ramifications for the global economy, especially the oil market
The European Union and US are expected to formally lift sanctions against Iran this weekend, dismantling an intricate network of punitive measures built up over nearly a decade and reconnecting Tehran to the global economy.
The lifting of sanctions, which will include an end to an EU embargo on the imports of Iranian oil, will have huge ramifications internationally, most notably on the global oil market as Tehran is expected to immediately add almost half a million barrels per day to its crude exports. This will affect plummeting oil prices in a market already struck by oversupply.
It is also the moment when ordinary people in Iran will start feeling the impact of the landmark nuclear accord, struck in Vienna last summer, in their everyday lives, with Iranian banks re-establishing connections with the European financial system and private firms pursuing business opportunities without fear of western punishment.
Abbas Araqchi, Iran’s deputy foreign minister and senior nuclear negotiator, said on Wednesday that the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), was due on Friday to verify that Tehran had fulfilled all its obligations under the nuclear agreement, including unplugging thousands of centrifuges and significantly reducing its stockpile of low-enriched uranium.
Such a report by the IAEA will trigger the announcement of “implementation day” when the lifting of sanctions by the US and EU will come into effect and all previous nuclear-related UN resolutions will be terminated. Tehran expects this to happen on Saturday or Sunday after an expected joint statement by Iran’s foreign minister, Mohammad Javad Zarif, and the EU foreign policy chief, Federica Mogherini.
“The IAEA inspectors are supposed to issue their final report on Iran’s honouring of its commitments on Friday,” Araghchi was quoted by local news agencies as saying. He has said that the announcement of the implementation day would not go beyond Sunday but there was no confirmation on the European side.
In Washington, John Kerry, the US secretary of state, said the implementation of the nuclear deal was likely in the coming days. “As agreed, Iran is now well on its way to dismantling critical elements of its nuclear facilities,” he told an audience at the National Defense University in Washington. “Just yesterday, the foreign minister reported to me that the calandria of the plutonium nuclear reactor is now out and in the next hours it will be filled with concrete and destroyed.”
All Iran’s enriched uranium material had been shipped to to Russia for processing, he said. “That shipment that was taken out in one day more than tripled our previous timeline of two to three months for Iran to be able to acquire enough weapons grade uranium for one weapon and it is an important part of the technical equation that will bring the breakout time to at least one year for the next 10 years.
“We will ensure that the spectre of a nuclear armed Iran is removed as a threat to Middle East security and global peace, and it is not insignificant that Iran has agreed to submit to this, agreed to undertake these steps, agreed that it will not build this weapon.”
Earlier in the day, Kerry thanked Iran for the swift release of 10 US sailors captured by the Revolutionary Guards on Tuesday in the Iranian territorial waters, saying “the peaceful and efficient resolution” of the matter was “a testament to the critical role of diplomacy” between the two nations, which was unthinkable just five years ago.
A British Foreign Office spokeswoman said: “We’re still working hard to reach implementation day. Good progress is being made, but there are still areas to finalise and no date has been set.”
Ali Vaez, senior Iran analyst at International Crisis Group, said the world was facing “the most important milestone in implementing the nuclear deal, the moment of truth”.
He said: “It is the moment in which Iran will be turned from the most sanctioned country in the world into the most monitored country in the world in terms of its nuclear activity.”
Vaez said the lifting of sanctions would be particularly watched because the west had never tried to dismantle such a complex and extensive web of punitive measures. “Sanctions that have been imposed on Iran are so complicated that it is quite interesting to see how the US authorities are going to manage sanctions relief,” he said.
“Would they come up with regulations that are so complicated that would actually deter businesses from going back to Iran out of fear that there is so much red tape and it is not worth it or would they come up with detailed yet user-friendly explanation of what sanctions are going to be lifted and what will remain in place?”
Non-nuclear related US sanctions on Iran, such as those relating to terrorism, will remain in place.
Vaez predicted that the administration of Hassan Rouhani would not allow the national currency, the rial, to appreciate instantly because it wants to to inject new momentum into the country’s industrial base and its non-oil exports capability.
Ellie Geranmayeh, policy fellow at European Council on Foreign Relations (ECFR), said Tehran’s priorities were to be reconnected to the Swift network, which facilitates foreign bank transactions, and to inject cash from its frozen assets, due to be released on the implementation day, into its budget. About $30bn of Iran’s estimated $100bn in frozen assets are expected to be immediately released.
“On a global scale, Iran is showing to the world that it has fulfilled all its commitments under the nuclear deal despite all problems and, secondly, it is proving its good faith in multinational diplomacy, and the implementation day is the first test for that,” she said.
“The next phase is to see how Syria talks will go. The Iran nuclear talks have set a good precedent for Iran being able to fulfil obligations that it has signed up to, rather than those imposed on it,” she said. “Domestically, it is important for Rouhani to show he was able to deliver despite opposition and that he has the authority to implement the deal he signed up to and see the psychological boost from his constituency.”
In the immediate future, the lifting of sanctions will boost Rouhani’s profile in the run-up to next month’s parliamentary elections. Although Rouhani is serving as president for at least another two years, he is a candidate for the elections to the council of experts, which take place on the same day as the parliament poll.
“If he is allowed to sit on the experts’ council [which has the task of appointing the next supreme leader], the moderate faction including Rouhani is going to confidently say the line they pursued has yielded positive results,” Geranmayeh said.