America's Plan to Reward Iran, Without Lifting Sanctions

Photographer: Steve Voss/Bloomberg

Jeffrey Goldberg. Close

Jeffrey Goldberg.

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Photographer: Steve Voss/Bloomberg

Jeffrey Goldberg.

One of the several dilemmas facing Obama administration officials in their chess match with Iran is this: At what point do they meet serious Iranian nuclear concessions (assuming, as I don’t, that these concessions are in the offing) with actual sanctions relief? If Iran shows itself willing to scale back dramatically its stockpiles of enriched uranium, or give up a substantial number of its centrifuges, wouldn’t the U.S. have to meet such gestures by lifting of at least some sanctions?

And here lies a problem -- many of the Americans involved in these negotiations believe that any sanctions relief at all would lead to the quick crumbling of the entire sanctions program. Pull one brick out of the sanctions wall, I’ve heard it said repeatedly, and the entire edifice crumbles. Certainly, this is the Israeli position. Many countries, and many companies, are eager to see the sanctions disintegrate, and they would take any American move to provide even the tiniest bit of relief to Iran as a sign that the crisis is over, and that they can go back to business as usual. We may be, right now, at (to borrow a phrase) peak sanctions. It only gets harder from here for the Obama administration to hold the line.

But if the U.S. meets an Iranian concession with absolutely no concessions of its own, then the entire denuclearization effort could be in serious trouble; the Iranians, sensing no give whatsoever in the U.S. position, could simply go home and proceed apace with their nuclear program.

This dilemma has caused some in the administration to embrace a third path, a program of what might be called non-sanctions-related financial relief. More than $50 billion of Iranian money is frozen, or semi-frozen, in banks around the world, thanks to the Herculean efforts of the White House and the Treasury Department. Iran is in desperate need of this cash. The crippling of the Iranian economy by the U.S. sanctions regime is the only reason Iran is even negotiating at all.

Several administration officials told me that U.S. negotiators currently in Geneva for the Iran negotiations are prepared to offer Iran access to at least some of this money in exchange for verifiable concessions. American officials are careful to note that such access would not violate their promise -- and they’ve made this promise repeatedly -- that actual sanctions relief is not a near-term prospect, barring something like total Iranian capitulation. This plan, to reward Iran, in essence, with its own money, would not violate a pledge to keep the sanctions in place until a final deal is within reach.

This idea has an unlikely provenance: As best as I can tell, the notion first sprang from the mind of Mark Dubowitz, an Iran sanctions expert at the Foundation for the Defense of Democracies, a hawkish think tank that usually argues that President Barack Obama is soft on the issue (I’ve disagreed with this assessment, for what it’s worth). Dubowitz, who is also the foundation’s executive director, first suggested this idea privately last week, and it has since percolated through the State and Treasury Departments, and into the White House.

In an e-mail, Dubowitz explained to me how this concept might work. “If Iran agrees to meaningful nuclear concessions, it can get paid out of semi-accessible … escrow accounts where it has about $50 billion that it currently can only use for barter trade in China, India, Japan, South Korea and Turkey. Instead of being limited to these countries, where it currently cannot find enough non-sanctionable goods to spend down about half of its $3.4 billion in new monthly oil revenue -- never mind its existing funds -- it can get hard currency released from these accounts commensurate with the value of each nuclear concession.”

Placing a dollar value on Iranian nuclear concessions might make for contentious side-negotiations, but Dubowitz thinks it might be possible. The dismantling of all but a limited number of centrifuges under strict safeguards would be worth quite a lot in dollars; the removal from Iran of its stockpile of enriched uranium would be worth less than the total suspension of enrichment.

Again, this plan leaves the sanctions in place until the West is convinced that Iran has been verifiably and comprehensively constrained.

In Dubowitz’s formulation, a stick accompanies this carrot. If Iran refuses to make significant compromises in the current negotiations, the administration should, he said, layer in a provision to a new Senate sanctions bill -- one that is being held in abeyance while negotiations start. This would punish any financial institution that provides Iran with access to -- or use of -- its overseas financial reserves for any purpose except permitted humanitarian trade. The punishment? A total cutoff from the U.S. financial system.

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Dubowitz's plan could be backdated so that banks and other financial institutions that are toying with the notion of giving Iran access to these frozen cash reserves would think twice about doing so. His idea: “Regardless of when the bill is signed into law, any financial institution that gives Iran access to or use of its money between October 31st and the date of final signature by the President, will face sanctions for financial transactions dating back to Oct 31st.”

There has been a lot of debate recently about the wisdom of threatening Iran with additional sanctions now, at precisely the moment it seems ready at least to have a facsimile of a serious discussion about its nuclear program. New sanctions -- such as the aforementioned stick suggested by Dubowitz -- could be seen as unnecessarily punitive, but this is a stick that comes paired with an offer to the Iranians of immediate financial relief, if they actually make intermediate concessions.

“The basic theory of the case is, ‘I’m doing a deal with you, and we’ve all read ‘Getting to Yes,’ but we don’t trust you and you don’t trust us," Dubowitz wrote. "This is about deal structure that rewards performance and punishes non-performance. You don’t get all the money up-front -- there would be a balloon payment at the end -- but you do get money. And we get to keep the sanctions in place.”

This idea is elegant, and it is canny, and I hope it’s one the Obama administration will pursue further.

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