This Article was first published on January 2014 Issue of Trade & Export ME Magazine
A historic event took place on 23 November 2013, when P5+1 and Iran reached an initial agreement with respect to Iran’s nuclear program. There was much euphoria and skepticism regarding the agreement which is an initial step towards a comprehensive agreement between the P5+1 and Iran and reflects the first meaningful limits that Iran has accepted pragmatically with respect to its nuclear program over the last 10 years.
The outcome of the initial agreement is to provide limited sanction relief to Iran by lifting of some of the current sanctions. However, the said relief does not affect the sanctions concerning the key areas of oil, banking and financial sanctions which so far remain in place. Additionally such relief is subject to Iran keeping their part of the commitment and the same would be revoked and additional sanctions added if Iran fails to deliver their part of the bargain.
So what exactly is the relief in sanctions? Does it translate to more business with Iran?
The agreement has resulted in a specific agreement that;
- Not impose new nuclear-related sanctions for six months, if Iran abides by its commitments under this deal, to the extent permissible within their political systems.
- Suspend certain sanctions on gold and precious metals, Iran’s auto sector, and Iran’s petrochemical exports, potentially providing Iran approximately $1.5 billion in revenue.
- License safety-related repairs and inspections inside Iran for certain Iranian airlines.
- Allow purchases of Iranian oil to remain at their currently significantly reduced levels – levels that are 60% less than two years ago. $4.2 billion from these sales will be allowed to be transferred in installments if, and as, Iran fulfills its commitments.
- Allow $400 million in governmental tuition assistance to be transferred from restricted Iranian funds directly to recognized educational institutions in third countries to defray the tuition costs of Iranian students.
- Except for the above all sanctions shall remain in place which is;
- Sanctions on Iran’s crude oil export.
- Sanctions on petroleum products which results in a loss of billions of dollars.
- Iran’s foreign exchange holdings which remain inaccessible or restricted by sanctions.
- Sanctions against the Central Bank of Iran and approximately two dozen other major Iranian banks and financial actors
- Sanctions on those who provide a broad range of other financial services to Iran, such as many types of insurance; and, Restricted access to the U.S. financial system.
- All sanctions on over 600 individuals and entities targeted for supporting Iran’s nuclear or ballistic missile program remain in effect.
- Sanctions on several sectors of Iran’s economy, including shipping and shipbuilding, remain in effect.
- Sanctions on long-term investment in and provision of technical services to Iran’s energy sector remain in effect.
- Sanctions on Iran’s military program remain in effect.
- Broad U.S. restrictions on trade with Iran remain in effect, depriving Iran of access to virtually all dealings with the world’s biggest economy
- All UN Security Council sanctions remain in effect.
- All of the targeted sanctions related to Iran’s state sponsorship of terrorism, its destabilizing role in the Syrian conflict, and its abysmal human rights record, among other concerns, remain in effect.
Even though the move is termed is historic and Iran does keeps to their share of the bargain how soon could the sanctions be lifted?
The sanctions are not only imposed by the US but EU also has their own set of sanctions. Most of the US sanctions have been put in place by a Presidential order and therefore can be revoked by another Presidential order. However not all sanctions are from a Presidential order and therefore would require government approval which could be faced with delays due to skepticism and non-agreements. The EU Sanctions could take much longer to revoke as all the EU nations need to approve of the sanctions being lifted. Even if a mechanism is put in place to fast track the process it could well take a few months if not years before there is a consensus and changes to the sanctions.
Business with The UAE?
Trade between the UAE and Iran dropped from 45 billion dollars to 4 billion dollars after the application of sanctions. Even though there has been no official announcement or alterations to the present situation, a diplomatic initiative by UAE seems to have resulted soon after the agreement of P5+1 and Iran whereby a meeting was held between H.H. Sheikh Abdullah bin Zayed Al Nahyan, the U.A.E. Foreign Minister and the Iranian Foreign Minister Mohammed Javad Zarif. The agenda for the meeting was a discussion on regional developments and economic relations between the two neighboring states. In addition the UAE foreign minister also inaugurated the new UAE embassy building in the Iranian capital, raising hopes that relations between the two states will further improve. Even though the interest of local businesses would lay in the improvement bilateral trade relationships, any such changes would only be spelt out after six months when Iran delivers as promised whilst being under a constant watch by the world radar.