Sanctions Are Eased; Iran Sees Little Relief

Halfway through a six-month nuclear deal between Iran and major world powers that was meant to allow time to reach a comprehensive agreement, the Iranians have seen little in the way of a boost from the sanctions relief they had been expecting, trade lawyers and diplomatic analysts say.

Whether Iran’s disappointment means that it will be more or less motivated to negotiate a permanent deal on its disputed nuclear program by the July 20 deadline remains unclear.

“Iran has become kryptonite for banks and shippers and insurance companies,” said Farhad R. Alavi, a sanctions law specialist at Akrivis, a Washington-based international law firm that has fielded numerous inquiries about doing business with Iran since the temporary accord took effect. Though the accord may have served as a “teaser” to Iran, he said in a telephone interview, foreign business interest has remained extremely limited.

“Is a bank in Germany going to revamp its compliance policies when the law could be changed and reverted in six months?” he said. “I think what we’ve seen is that it’s not created that breakthrough. Nobody is making that substantial step for increased economic ties between Iran and the rest of the world.”

Scott M. Flicker, a partner at Paul Hastings, a Washington-based law firm that specializes in sanctions litigation, said the nature of the American sanctions in particular had dissuaded many businesses from bothering with Iran, even temporarily.

He said they fear running afoul of the complicated rules established by the Treasury Department’s Office of Foreign Assets Control, the government’s primary enforcer of economic sanctions against Iran. Violators run the risk of severe penalties, including exclusion from the American market.

What the Iranians and others are learning, Mr. Flicker said, is that “at the end of the day, the real hammer is the U.S. financial system.”

“There’s nobody who wants to touch an Iranian financial transaction unless they have a foursquare O.K.” from the assets control office.

The temporary accord, which took effect Jan. 20, froze much of Iran’s nuclear energy activities and obliged the country to reduce its stockpile of enriched uranium fuel that, with further enrichment, could be used to make atomic bombs, even though Iran insists that its nuclear work is for purely civilian purposes.

In return, the West, which has never trusted Iran’s claims of peaceful nuclear intent, eased some of the onerous sanctions imposed in recent years, including granting access, in staggered amounts, to $4.2 billion of the approximately $100 billion of Iranian money impounded in foreign banks. The sanctions relief also allowed deals in some industries, including petrochemicals and automaking, that had been in an economic malaise, caused partly by Iran’s isolation.

Despite the initial proclamations from Iranian officials that the regimen of Western sanctions had been fractured and a new era was at hand, the country has faced difficulties even in securing its unfrozen funds because of Iran’s stigma with foreign banks, sanctions experts say. And the only announced business deals in the United States are a couple of short-term contracts in spare parts and service for its aged fleet of Boeing aircraft.

Under the temporary nuclear accord, all such work, including payments, must be completed by the July 20 deadline.

Iran does appear to be selling more oil, its most important export, and the economy appears to have stabilized, according to a recent International Monetary Fund appraisal.

But many sanctions law experts say the country is still basically hamstrung economically — excluded from the global financial networks that are a critical component of international business transactions.

“A lot of things don’t happen because banks won’t be bothered,” Mr. Alavi said.

Advocates of strong sanctions against Iran have argued that even the modest relief afforded by the six-month deal has been counterproductive, signaling what Iran perceives to be a breach in Western resolve.

Some contend that Iran is openly defying the Obama administration’s declaration that Iranian oil exports, under the temporary accord, are limited to about one million barrels a day.

Data released on Friday by the International Energy Agency, a group of oil-importing countries including the United States, showed that Iran exported 1.65 million barrels a day in February, the highest in 20 months, and that March exports also exceeded one million barrels a day.

Mark D. Wallace, the chief executive of United Against Nuclear Iran, an advocacy group in New York that has argued for far stricter sanctions, said the administration’s assurances had been “wholly contradicted by reality.”

The administration has contended that when averaged over six months, Iran’s oil exports will be closer to one million barrels a day.

Mark Dubowitz, executive director of the Foundation for Defense of Democracies, another pro-sanctions group that contends that Iran is seeking the ability to make nuclear weapons, said he viewed the increased oil exports as an ominous sign for the nuclear talks because, in his view, Iran’s leaders are feeling less economic pain.

“This enhances Iranian nuclear negotiating leverage and makes it more difficult to conclude a diplomatic deal that dismantles Iran’s military-nuclear program and persuades Tehran to come clean on its past military-nuclear activities,” he said.

Negotiators who met in Vienna last week said they still had major issues, suggesting that they were not yet close to the final drafting of a permanent accord. They agreed to meet again on May 13.

Cliff Kupchan, an Iran specialist at the Eurasia Group, a political risk consulting firm, who has assessed the prospects for a successful negotiation at 60 percent, said negotiators must be able to say soon that they have made significant progress.

“In other words, there is one more meeting (May) in which no concrete news is O.K.,” he said in an emailed analysis of the talks. “After that, no news becomes worrisome.”

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