Iran is Frustrated With Sanctions Relief? That's Good News - Global Trade Magazine
  June 3rd, 2016 | Written by

Iran is Frustrated With Sanctions Relief? That’s Good News

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  • Iran's frustration stems from the continued impact of U.S. economic sanctions.
  • The confluence of economic realities have prevented a quick fix to Iran's economic woes.
  • Trade and investments are beginning to flow Iran's way and it is increasingly being engaged diplomatically.

Iran is exhibiting frustration over the fact that it has been unable to quickly cash in after signing last year’s nuclear deal with the United States and other major powers. Voices from Tehran are trying to blame the U.S. for not living up to its side of the bargain and are trying to exact additional sanctions relief from Washington.

In the U.S., the downside risks of the nuclear deal with Iran were given full play. But Tehran portrayed the deal as a triumph for that country, with the promise that oil and money would soon be flowing.

Iran’s frustration stems from the continued impact of U.S. economic measures—despite the lifting of some sanctions in last year’s nuclear deal—and the confluence of economic realities that have prevented a quick fix to Iran’s economic woes.

On the other hand, trade and investments are beginning to flow Iran’s way and the Islamic Republic is increasingly being engaged diplomatically.

All which points to an Iran nuclear deal that is working, according to Suzanne Maloney, deputy director for foreign policy at the Brookings Institution, a Washington, DC, think tank, and not one that is about to unravel as some fret.

“Iran’s dissatisfaction presents a serious diplomatic dilemma for Washington,” notes Maloney, in an article posted on the Brookings site. “But Washington should resist the temptation to assuage Iran’s post-deal growing pains. If Iranians wants wholesale economic rehabilitation, their leadership needs to embrace the kind of policies that would yield that—in other words, meaningful political, economic, and foreign policy reform.”

While Iran’s leaders allege that Washington has failed to live up to its side of the bargain, the fact is that substantial sanctions against remain in place. The lifting of those was not promised the Joint Comprehensive Plan of Action (JCPOA), as the nuclear deal is formally known. Restrictive U.S. visa policies are among the measures still in place to which Tehran objects. Banking restrictions prevent Iran from getting its hands on U.S. dollars.

“The rewards of Iran’s nuclear concessions are actually widely evident,” noted Maloney, “in the volume of new trade and investment that is already underway; in the scope and velocity of diplomatic and commercial reengagement with Iran; in the swifter-than-anticipated revival of oil exports. Heads of state from Italy and India, from South Korea to South Africa are beating a path to Tehran, accompanied by contingents of eager investors.”

The problem from Iran’s perspective catch is that the money is moving slower than Iranian officials anticipated. “The explanation for this lag,” according to Maloney, “ is complex and multi-dimensional.”

Among the conditions that prevent a full-fledged gold rush have been the decline in oil prices. Others include barriers to doing business set by the Islamic Republic itself exacerbated by egregious local mismanagement of the economy. Banks find it difficult to do business with Iran because the country is still designated “high-risk and non-cooperative” by the Financial Action Task Force, an international body that combats money laundering and terrorist finance.

Tehran’s other behaviors—such as arresting tourists and dual-national businessmen and testing ballistic missiles—also don’t “provide a conducive context for Iran’s reintegration into the global economy.”

“As the old adage goes,” Maloney wrote, “capital is a coward, and the Islamic Republic is a haunted house.”

Iran’s economic challenges and the grievances of its leadership are not undermining the nuclear agreement, according to Maloney. “In fact, they only highlight its underlying logic,” she wrote. “While the deal’s scope was finite—it was not a wholesale rapprochement or rehabilitation—many of its supporters argued that its logic would prove self-reinforcing. Iran’s gradual reintegration into the global economy would bolster the case among its leadership for a broader moderation of its domestic and foreign policies precisely in order to boost their benefits. Tehran’s dissatisfaction with the payout to date suggests this formula is working.”