Iran Gets Sanctions Relief Jan. 20 as Nuclear Deal Begins

Photographer: Sajad Safari/Document IRAN via Bloomberg

A technician works inside the turbine room at the Bushehr nuclear power plant in Bushehr, Iran. Close

A technician works inside the turbine room at the Bushehr nuclear power plant in Bushehr, Iran.

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Photographer: Sajad Safari/Document IRAN via Bloomberg

A technician works inside the turbine room at the Bushehr nuclear power plant in Bushehr, Iran.

President Barack Obama urged Congress to hold off on imposing new sanctions on Iran after the Islamic Republic agreed to curtail its nuclear activities starting Jan. 20 under a deal with world powers.

The agreement restricts Iran’s nuclear activities and imposes more intrusive inspections while starting a six- to 12-month timetable to reach a permanent accord. In return, Iran will benefit from sanctions relief, which the U.S. values at $6 billion to $7 billion over six months.

“It’s going to be difficult, it’s going to be challenging but ultimately this is how diplomacy should work,” Obama said today at the White House after meeting with Spanish Prime Minister Mariano Rajoy.

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The accord was reached after Iran and the so-called P5+1 countries -- China, France, Russia, the U.K. and the U.S., plus Germany -- arrived at an understanding over the weekend on how to implement a deal negotiated in November. There were no immediate signs that it would quell efforts in Congress to escalate pressure on Iran with further sanctions.

Iran has threatened to abandon talks if Congress votes to tighten economic restrictions, and Obama has vowed to veto additional sanctions while negotiations continue.

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Women shop at a bazaar in Tehran, Iran. Close

Women shop at a bazaar in Tehran, Iran.

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Photographer: Franco Czerny/Getty Images

Women shop at a bazaar in Tehran, Iran.

“Now is not the time for new sanctions,” Obama said.

Iran's Uranium Enrichment

House Majority Leader Eric Cantor, a Virginia Republican, said in a statement that the implementation deal “only furthers a deeply flawed agreement.” As many as 59 senators, most of them Republicans, have signed on in support of sanctions legislation by New Jersey Democrat Robert Menendez and Illinois Republican Mark Kirk.

Senate Supporters

At the same time, Senate Majority Leader Harry Reid, a Nevada Democrat, hasn’t indicated he intends to bring the sanctions measure to the floor for action, and the bill has been opposed by a number of Democratic committee chairmen -- including Carl Levin of Michigan, who heads the armed services panel and Dianne Feinstein of California, who leads the intelligence committee.

Sanctions constraining sales of Iranian oil remain in effect, and the U.S. hasn’t seen indications that major oil companies are violating them, an Obama administration official told reporters in Washington today on condition that he not be identified discussing details of the sanctions regime.

Shell, BP, Total

Major companies including the U.K.’s Royal Dutch Shell Plc and BP Plc and France’s Total SA, have had partnerships with Iran.

West Texas Intermediate crude fell as much as 1.2 percent today. WTI for February delivery fell 85 cents, or 0.9 percent, to $91.87 a barrel at 1:36 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 12 percent below the 100-day average. Oil is down 6.7 percent so far this year.

Under the accord, Iran is to immediately begin actions to eliminate within six months its entire stockpile of 20 percent enriched uranium, which could be most quickly processed to fuel nuclear weapons, according to one of three U.S. administration officials who briefed reporters yesterday on the condition that they not be identified.

Iranian officials also agreed not to install or operate more advanced uranium centrifuges and to take steps to prevent use of current equipment for 20 percent enrichment, which will be verified as part of a tougher inspection regime by the International Atomic Energy Agency, one U.S. official said.

Permanent Agreement

Negotiations on a permanent agreement will begin within a few weeks, Lebanese al-Mayadeen television reported, citing Iranian Deputy Foreign Minister Abbas Araghchi.

Obama has said he sees no more than a 50-50 chance those negotiations will succeed, while emphasizing it’s important to seek such a diplomatic solution before the possibility of military action. One of the officials yesterday said that, while Iran’s behavior was encouraging, the odds are unchanged.

U.S. Secretary of State John Kerry told reporters in Paris yesterday that the next phase in the talks will be “very difficult.” In comments posted on his Facebook page on Jan. 8, Iranian Foreign Minister Mohammad Javad Zarif said “access to a comprehensive solution is fully possible” provided that all parties involved in the negotiations remain committed to the preliminary agreement.

Israeli Prime Minister Benjamin Netanyahu, who opposed the agreement, declared today at the funeral for former Prime Minister Ariel Sharon that his country wouldn’t let Iran acquire nuclear weapons capability. Iran has asserted its program is for peaceful purposes, though the U.S., Israel and other nations say the Islamic Republic is seeking a weapons capability.

Biden’s Visit

U.S. Vice President Joe Biden, who flew to Israel to attend Sharon’s funeral, planned to use the trip to address concerns raised publicly by Netanyahu that even limited concessions will undercut the broader sanctions regime and embolden Iran.

Netanyahu said at the state memorial service that while Sharon “greatly valued our partnership with our great ally, the United States,” he “also knew how to stand up resolutely for our vital interests at critical moments.” That principle remains in force now, and Israel “will act in every way to prevent Iran from attaining the capability to arm itself with nuclear weapons,” Netanyahu said at the Jerusalem ceremony outside Israel’s parliament, the Knesset.

Biden had a working dinner with Netanyahu after meeting earlier in the day with Israeli President Shimon Peres to discuss the Iran accord and continued efforts to broker an Israeli-Palestinian peace deal.

Congressional critics such as Menendez and Cantor have objected that the deal permits Iran to continue enrichment up to 5 percent, a level for use in civilian power reactors that could be further enriched for weapons, and development of more advanced centrifuges.

Developing Centrifuges

Centrifuge development was one of the last issues resolved. While Iran is able to continue work it has under way based on previous IAEA reports, it can’t develop or install newer technology, one U.S. official said.

The P5+1 countries agreed to a series of steps to ease some sanctions while leaving in place the core energy and banking sanctions as well as those on Iran’s energy shipping and ports, according to a third administration official.

They will suspend sanctions on Iran’s petrochemical exports and imports of goods and services for its auto sector. The U.S. will also put on hold efforts to further reduce Iran’s exports of oil to the six nations still purchasing its crude, the official said. Under sanctions law that took effect in July 2012, the U.S. would otherwise have demanded more “significant reductions” in imports from Iran.

Gold Trade

Also, the nations will suspend sanctions on Iran’s imports and exports of gold and other precious metals, with some restrictions, and will expedite license applications for parts and services for its civil aviation industry. They will also take steps to facilitate financing of humanitarian trade through non-U.S. financial institutions, the official said.

Iran will get access to $4.2 billion in oil revenue held in foreign banks, to be released in monthly increments tied to its compliance with the commitment to eliminate the 20 percent enriched uranium stockpile, the official said.

Iran’s compliance will be monitored by the IAEA and the sanctions relief will be stopped and reversed if the country fails to meet its obligations, the first administration official said. At that point, he said, the administration would support moves by Congress to impose further sanctions.

IAEA Inspections

The implementation agreement substantially expands the IAEA’s powers. It will inspect Iran’s Fordo and Natanz enrichment facilities daily, rather than weekly, and for the first time get access to centrifuge production facilities. Iran is also obligated to resolve outstanding questions about suspected past nuclear militarization tests, including activities at its Parchin military facility, a U.S. official said.

“As this agreement takes effect, we will be extraordinarily vigilant in our verification and monitoring of Iran’s actions,” Kerry said yesterday.

The accord starts a six-month timetable to reach a final agreement. That period could be extended a further six months by mutual consent.

Iran’s oil exports, the country’s largest foreign-currency earner, plunged last year as U.S. and European Union sanctions meant that banks and insurers couldn’t handle Iranian sales of the fuel.

The nation’s economy is already “showing signs of recovery,” said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, and Rachel Ziemba, an analyst at Roubini Global Economics in London, in a Jan. 9 report. Sanctions relief and a perception the U.S. was no longer committed to tightening economic pressure on Iran were responsible, the two wrote.

To contact the reporters on this story: Terry Atlas in Washington at tatlas@bloomberg.net; Michael C. Bender in Washington at mbender10@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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