April 22, 2016

Translation: The Foreign Ministry's First Report on the Nuclear Deal's Implementation

The Iranian Foreign Ministry submitted its first quarterly report on the nuclear agreement’s implementation to Parliament on April 17. The following excerpt from the report’s final section on “Forthcoming Challenges and Obstacles” underscores Iran’s recognition that it cannot benefit fully from the Joint Comprehensive Plan of Action (JCPOA) without addressing structural issues within the Iranian economy. The section notes that Iran cannot quickly resolve most of these challenges and explicitly cautions against expecting a “quick benefit” from sanctions relief. It identifies the greatest challenge as building “a climate of trust” with foreign investors averse to the risks of doing business with Iran. The report places the onus on Iran itself for reforming its financial system to assuage investors’ fears, although it also criticizes America’s “intimidation” of banks and “delay” in implementing the deal. The Foreign Ministry’s report marks another push by President Hassan Rouhani’s administration to sell the deal to increasingly skeptic domestic audiences that have high expectations for swift economic benefits. With runoff elections for Parliament scheduled on April 29 and a presidential election next year, Rouhani may feel the need to shore up support for his camp in the face of growing criticism of the deal within Iran.

Forthcoming Challenges and Obstacles

Translation by John Green

1. Only the economic and financial sanctions related to the nuclear issue have been lifted due to the JCPOA and within the prerogatives given to the negotiating team. The sanctions related to other pretexts such as the missile program, terrorism, and human rights and America’s primary sanctions in general will remain. The arms and missile sanctions will also be lifted in five and eight years [respectively]. The fact that the non-nuclear sanctions will remain in place was clear from the beginning of the talks and has never been concealed. 

It is now clear that one of the challenges in the elimination of the sanctions is the interference between sanctions that have been lifted and the sanctions that have not been lifted, and especially the impact of America’s primary sanctions on the other sanctions. As an example, the prohibition on the use of America’s financial system is one primary sanction, but many of the world’s financial transactions have now become more or less involved with this system.

The interference between sanctions that have been lifted and the remaining sanctions, especially the continuation of America’s primary sanctions, has created challenges for Iran’s quick benefit from the lifting of sanctions. Through continued effort by the government’s political and economic sectors, some of these challenges have been resolved and some of them are still being pursued. Of course the regulations for the use of international financial and banking relationships have changed greatly during the period in which the Islamic Republic of Iran has been sanctioned and outside of these relationships. The requirement has been added for compliance with various arrangements, including FATF (Financial Action Task Force) provisions relating to taxation and money laundering, which is one of the main problems with the nation’s banking system and a leading cause of concern for foreign financial institutions. Positive movement has begun in this area with the enactment of the anti-money-laundering bill in Parliament and the Guardian Council. The Foreign Ministry, along with the Central Bank and the Ministry of Economic and Financial Affairs, has begun and is pursuing serious talks to bring the nation’s banking system into compliance with these regulations. 


2. It has only been three months since the implementation of the JCPOA. It will certainly take time technically and operationally to return to the situation before the sanctions. A simple example is the amount of crude oil sales. On the eve of the Geneva Agreement, our nation’s crude oil sales went from 2.5 million barrels to one million because of America’s unilateral sanctions. Many of our oil partners have gone to other producers during this period. Naturally the expectation is not that oil sales should return to 2.5 million barrels the day after the sanctions are lifted. Obviously new marketing must be done. Former buyers must be revived or new buyers must be found. Contracts must be set... The fact is that we are facing technical and administrative problems in many other areas, especially in banking, which has undergone many changes in the last ten years and has become quite complex because of the fight against money laundering and the effort to prevent abuses by smugglers and terrorist groups. These [problems] will prolong the return to the point before the sanctions.


3. Financial institutions’ concerns have created a heavy psychological atmosphere [impeding] the resumption of cooperation with Iran due to American intimidation and the recent imposition of multibillion-dollar fines on banks. Correcting this will be feasible only with a continuous effort and a comprehensive, coordinated pursuit. On the other hand, excuses, sabotage, and delay on the American side, especially the U.S. Department of the Treasury, have made matters worse. In some cases this in itself has become one of the basic problems. During and after the talks, the negotiating team has never doubted for a moment that it is negotiating in a hostile atmosphere. It has never trusted the other side and will not do so. 

Despite repeated statements by American officials about America’s commitment to meet its commitments in accordance with the JCPOA, it appears that sectors or powerful circles within the American executive apparatus have not had much interest in taking active steps to eliminate the ambiguities. In some cases they are even thwarting the efforts that have been made to remove obstacles. The Zionist regime and some of the other nations in the region are moving in this direction. Our challenges with the American side, and to a lesser extent with the European side, have not ended since implementation of the JCPOA. Our Foreign Ministry is pursuing and pressuring the other side to meet its commitments correctly. It is doing this strongly, continuously, and even on a daily basis at various levels.


4. The biggest problem and challenge that the JCPOA faces, however, is an atmosphere of trust and confidence-building in the country for foreign parties. The point is that almost all banks, companies, and corporations that are expected to return to the pre-sanctions climate and interact and cooperate economically with Iran are in the private sector and enter into economic transactions with economic logic rather than by government directive. In other words, it is the cost-benefit calculation that brings businesses into economic transactions. The most important factor in this calculation is the amount of trust in the transaction and the atmosphere around it.

If a business does not come to the conclusion that the target market is a secure environment for investment, trade, and any kind of economic cooperation in general, obviously it will not invest, transfer technology, enter big projects, or get involved in huge transactions. It will settle for short-term transactions and low-level commerce at best. In the Middle East’s turbulent and risky investment environment, [and] in a climate where the extent to which all parties will adhere to the JCPOA is full of doubt, it is natural that many businesses will take a hesitant approach until the adherence of parties to their commitments is proven. In addition to creating a sense of competition, one must also create a climate of trust for one’s economic partners to address this problem. We must give everyone a positive outlook about economic cooperation with Iran to reduce the fear and anxiety about interaction with Iran and to create the desire for cooperation.

The resistance economy, which is and has been one of the Supreme Leader’s serious and rightful demands, takes the approach of “flexible jihad, opportunity-building, endogeny, leadership, and extroversion.” Of the 24 clauses in the Supreme Leader’s proclamation of Bahman 1392 [11 January – 19 February 2014], at least five key clauses pertain directly to a strong foreign policy and interaction with foreign parties. The achievement of important objectives such as increasing exports, encouraging foreign investment, bartering, developing free trade zones, transferring advanced technology, and most importantly developing strategic ties and spreading cooperation and participation with the nations of the region and the world, which has been stated in the propagated policies of the Resistance Economy, requires the creation of a climate of trust and confidence for foreign businesses.

Businesses that first and foremost pursue economic interests will hesitate if they have the slightest doubt about the security and health of the climate they are about to enter. Unfortunately, other factors such as corruption, lack of transparency, money laundering, difficult laws, and other things have added to the problems. There is a need to oppose such problems in addition to amending laws and fighting corruption, which happens to be one of the [Supreme] Leader’s biggest demands in the implementation of the Resistance Economy. There is a need to create a suitable and trustworthy psychological climate as well.