Treasury: Sanctions Relief Would Be Phased

 

Of course, keeping Iran from obtaining a nuclear weapon is not a new or recent national security priority for the Obama Administration—it has been a core priority since the very beginning.  And our commitment to stopping Iran was not just rhetoric—our commitment was backed up with action.

 

For us at the Treasury Department, that meant working with Congress, agencies across the federal government, and our counterparts around the globe to build an international sanctions regime without precedent. Let us not forget that when this sanctions regime was being put together, it was criticized—called “idiot diplomacy,” “merely a political statement,” and “an idea whose time has come and gone.”  After all, the United States had already had a near-total embargo on Iran for more than a decade.  Many doubted whether the international community would remain united to stop Iran, whether countries with great energy needs like China and India would join us and agree to dramatically rein in their oil purchases, and whether the United States government could put together a sanctions program that would be effective enough to pressure the leadership in Tehran to alter its plans. 

 

Those doubts were proven wrong.  Thanks to our sanctions, Iran finds itself isolated from the international financial system, its oil exports are slashed by more than half, and much of its oil revenue and foreign reserves are out of reach.  In other words, today, when we look at Iran, we see an economy struggling under the weight of the most effective and most innovative sanctions regime in history.  At the same time, inside Iran, sanctions helped shape the country’s political discourse.  Iran elected a president who campaigned on the importance of ending Iran’s international isolation.

 

To be clear, sanctions were always a means to an end.  They were designed to help bring Iran’s leaders to the table to negotiate a serious agreement on its nuclear program.  And while we will not know until the process is completed whether there will be an agreement, there is no doubt that our sanctions worked to bring Iran to the table, prepared to make serious concessions. 

 

Following months of hard bargaining and tough negotiations, we struck an interim understanding with Iran in November 2013.  In accordance with that arrangement, Tehran froze and rolled back parts of its nuclear program while we continued to negotiate on a longer term deal.  At that time, some denounced the interim understanding, known as the Joint Plan of Action.  They said Iran would cheat, that our sanctions would fall apart, and that this temporary deal would allow Iran to move closer to acquiring a nuclear weapon.  But none of that came to pass.  Iran remains under enormous economic pressure.  It has halted and scaled back key elements of its nuclear program.  And we have gained unprecedented insight into Iran’s nuclear activities.

 

Still, we take nothing for granted certainly not that we can simply trust Iran.  We know that Iran has historically told the international community one thing, while doing something very different.  And since the outset of our negotiations, we have abided by a critical principle: distrust and verify.  So through painstaking verification, we have made sure that the Iranians are keeping their commitments—allowing us to continue the talks knowing that Iran was not simply using negotiations as a form of smoke and mirrors.  And while Iran has received limited, reversible relief in exchange for its compliance, at the same time, we have continued to aggressively implement and enforce our core sanctions on Iran, ensuring that the pressure remains strong and that Iran has a real incentive to make concessions at the negotiating table.

 

Over the last week, there have been news reports, based on information from the International Atomic Energy Agency, that Iran’s stockpile of uranium has grown over the past 18 months.  Some took this to mean that Tehran failed to meet its commitments under the Joint Plan of Action.  But the IAEA did not reach that conclusion.  Quite to the contrary, the IAEA verified that Iran has met the terms of its agreements, that the progress on its nuclear program has been frozen, and that fluctuations in Iran’s stockpile of uranium were an entirely expected part of the chemical conversion process.  To put it another way, even though Iran’s stockpile of uranium has gone up and down at various times over the past 18 months, this was something we anticipated and at each of the deadlines that have been set, Iran’s uranium stockpile levels have been within the levels that were agreed to.

 

That brings us to the framework for a final agreement—the Joint Comprehensive Plan of Action—which we reached in Switzerland in early April, a framework that is the basis of a good, comprehensive deal.  It meets our core objective: blocking each of Iran’s pathways to a bomb.  This includes break-out attempts at the known nuclear facilities at Natanz, Fordow, and Arak as well as any potential secret path to developing a nuclear weapon.  At the same time, as the framework lays out, the final deal will be built around an incredibly robust and intrusive inspections regime on Iran’s nuclear program.  We will have more insight into Iran’s program that we have ever had.  We will be inspecting and monitoring Iran’s nuclear sites and, importantly, supply chains.  Uranium mines, uranium mills, centrifuge production sites, assembly and storage facilities, the purchase of sensitive equipment—all will be under penetrating surveillance. 

 

Make no mistake, we are not operating on an assumption that Iran will act in good faith.  This deal will only be finalized if the connective tissue of the agreement meets a tough standard  of intense verification and scrutiny.  A final agreement will have to specifically address concerns about a potential covert nuclear weapon program.  If we reach an agreement and Iran ends up flouting its obligations, we will know, and we will have preserved all our options—including economic and military measures—to make sure that Iran can never acquire a nuclear weapon. 

 

In return for meeting the demands that have been put on it by the international community, Iran would obtain phased-in relief from nuclear-related sanctions. But, in the same way that we have structured inspections around the notion that Iran might try to cheat, we have approached winding down sanctions so we can police against the same risk.

 

Should we come to a final agreement, sanctions relief will be granted under two conditions.

 

First, sanctions would be lifted in phases, only after Iran meets agreed-upon benchmarks.  Our phasing will be designed to ensure that Iran meets and maintains its commitments.

 

And second, we will make sure that if Iran violates its commitments, we will have the full capability to snap sanctions back into place and reverse the relief.

 

The framework meets our requirements in both respects, and if we can get a comprehensive deal, here is how it will work.

 

Iran will receive relief from certain UN, EU, and U.S. sanctions only after it verifiably completes major nuclear-related steps.

 

Right now, Iran is two to three months away from acquiring a bomb’s worth of nuclear material.  Under the agreement we are pursuing, for at least 10 years, Iran will be kept at least one year away from having enough enriched uranium to produce a nuclear weapon and will have no path to developing a bomb using plutonium.

 

That is because we will have blocked all four of Iran’s pathways to develop a nuclear weapon.  The core of the reactor at its only plutonium facility—Arak—will be dismantled and replaced.  As far as uranium, Iran will no longer enrich uranium at its Fordow facility, and it will reduce its centrifuges at Natanz by two-thirds.  The remaining centrifuges at Natanz will enrich uranium to below 5 percent for the next 15 years, only enough for energy purposes.  In addition, Iran will have to reduce and maintain its stockpile of low-enriched uranium from approximately 12,000kg to 300kg — a reduction of 98 percent.  But in addition to safeguarding these declared nuclear sites, a potential deal must prevent Iran from using a covert site to break out.  And that is why any deal must ensure comprehensive and robust monitoring and inspection anywhere and everywhere the IAEA has reason to go. 

 

In return for taking these steps, and only if these steps are taken, we are prepared to provide significant sanctions relief, including suspending secondary oil, trade, and banking sanctions.  And while we would suspend these sanctions using a combination of Executive authorities, the President’s authority to re-impose sanctions would remain in place.  In the meantime, our legislative sanctions authorities, which only Congress can end, will remain in place.  And we will only ask Congress to vote to end those sanctions after Iran has complied with the agreement for many years.

 

This aspect of the framework is very important.  By maintaining our sanctions architecture and providing relief through waivers, we will be able to quickly reinstate sanctions if Iran violates the agreement.  This snapback mechanism will give us crucial leverage to ensure that Iran remains in compliance for years after any agreement is reached. 

 

And, snapback provisions are not limited to U.S. sanctions alone.  The international coalition that put together the current multilateral sanctions regime remains united in the view that Iran must face the full force of international sanctions if it fails to meet its obligations under the agreement.  We are still developing the exact mechanisms by which sanctions stemming from UN Security Council Resolutions would be re-imposed.  But we will not allow such a snapback to be subject to a veto by an individual P5 member, including China or Russia.

 

Before closing, I want to explain a little about what sanctions relief will actually mean and what it will not mean for Iran should an agreement be reached and should Iran verifiably meet its commitments under that agreement. 

 

We share the concern that Iran may use the money it gets from sanctions relief to support terrorism and the activities of its dangerous proxies throughout the Middle East.  But it is important to note that our sanctions on Iran’s terrorist networks will remain in place, even after Iran takes the steps necessary to get relief from nuclear-related sanctions.  In addition, we are deepening our cooperation with Israel and our other regional partners who want to stand up to Iran’s influence and interference.

 

On top of that, the idea that Iran’s economy will instantly recover if a deal is reached is a myth.  Iran’s economy has to climb out of an incredibly deep hole.  Iran’s domestic investment needs are estimated to be at least half a trillion dollars, which far exceeds the benefit of sanctions relief.  Iran’s priority—as expressed with the election of President Rouhani—is to address those domestic needs first: fixing its budget, paying for infrastructure upgrades, increasing imports, and shoring up the rial.   Reserves that would be released are far less than what Iran requires to address all of these needs.

 

The truth is, it will take Iran quite a while to recover from the effect of the unprecedented international sanctions effort led by the United States. Consider these facts.

 

•           Our sanctions have cost Iran more than $160 billion in oil revenues since 2012 — revenues Iran can never recoup.  And even if Iran were able to quickly double its current oil exports — a big if given how low oil prices are today and how much investment Iran’s infrastructure needs to produce at this level — it would take more than three years for Iran to earn that much money.

 

•           Iran’s GDP shrank by 9 percent in the two years ending in March 2014, and it is today 15 to 20 percent smaller than it would have been had it remained on its pre-2012 growth trajectory.  It will take years for Iran to reach the level of economic activity it would be at now had sanctions never been put in place.

 

Given the state of Iran’s economy and the long road ahead, Tehran will need to channel substantial resources to address its urgent domestic needs. But that does not mean that Iran will stop supporting dangerous actors like Hizballah and the Assad regime.  That support has gone on for years now, even as Iran’s economy has suffered tremendously, and we have every reason to believe it will continue.  And the unfortunate truth remains that the cost of this support is sufficiently small, that we will need to remain vigilant with or without a nuclear deal to use our other tools to deter the funding of terror and regional destabilization.

 

But a nuclear deal was never meant to resolve all the conflicts between the United States and Iran.  That is not what this deal is about.  The framework we have established paves the way for an international agreement between Iran and America, Britain, France, Germany, the EU, Russia, and China to stop Iran from obtaining the most dangerous type of weapon the world has ever known.  The region and the world will be a more dangerous place if we fail, and a nuclear armed Iran would be more a more menacing supporter of terrorist groups and destabilizing regional forces.

 

We are resolved to hold Iran accountable and continue to use all our available tools, including sanctions, to deter Iran’s aggression, its violation of human rights, its sponsorship of terrorism, and its threats against America’s allies—like Israel.  Iran knows that our array of sanctions focused on its efforts to support terrorism and destabilize the region will continue after any nuclear agreement.  That means Treasury will continue to aggressively target the finances of Iranian-backed terrorist groups and the Iranian entities that support them, including Hizballah and the IRGC-Qods Force.  And as we have always done, we will continue to stand with Israel and publicly condemn any hateful speech towards the State of Israel from Iranian officials.

 

As we meet this afternoon, we are only a few weeks away from the deadline for a final agreement.  From now until then, our negotiators will work around the clock to try to iron out the remaining details of a comprehensive deal.  Now, as everyone here knows, Prime Minister Netanyahu does not believe Iran can be trusted.  Neither do we.  That is why the only way we will agree to a deal is if we get the access to ensure that Iran is keeping its word and we have a procedure in place to re-impose sanctions in the event that Iran violates the terms of the agreement. 

 

A diplomatic solution is the best, most enduring path to achieve our goal of keeping Iran from obtaining a nuclear weapon.  But we have also been clear, we remain steadfast in our determination to take any steps necessary to prevent Iran from obtaining nuclear weapons. That is not just important to Israel’s security but America’s security.

 

As history makes clear, we owe it to ourselves and we owe it to future generations to give diplomacy a chance.  Whether it was Nelson Mandela emerging from prison after 27 years to negotiate the peaceful end to apartheid, Ronald Reagan sitting at a table with a nation he called the “evil empire” to negotiate the end to the Cold War, or Menachem Begin meeting at Camp David to negotiate a peace accord with Egypt, Israel’s sworn enemy—diplomacy is not conducted with our friends but with our adversaries.  And when given a chance, smart, tough, hard-fought diplomacy can succeed. 

 

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