Iran – Round Three Odds of Breakthrough in Geneva

Published on November 18, 2013

Negotiations between Iran and the P5+1 over Iran’s nuclear program broke off last week in Geneva with each side reproaching the other for a failure to come to an agreement. Both sides, nevertheless, also went to great lengths to praise the other for a significant narrowing of their differences, and agreed to return for a third round of intensive negotiations.

These discussions will resume this week in Geneva, on Wednesday November 20, and are slated to last until Friday, November 22.

*** We believe the major stumbling blocks that derailed the last round of negotiations, including last minute concerns raised by French Foreign Minister Laurent Fabius over potential future plutonium production out of Iran’s heavy-water nuclear reactor in Arak, will be addressed at this meeting, and put the odds of a successful first stage six month deal at greater than 50%. ***

*** That would keep the momentum for future negotiations alive and raise the specter of a nearer term easing of sanctions restricting Iran’s ability to effectively export oil. Perhaps even more importantly, it would also, in time, open up the longer term prospects for a return of foreign investment into Iran’s grossly inefficient post-revolution oil industry. In order to entice foreign capital, the new government of President Hassan Rouhani has already signaled a willingness to by-pass the onerous “buy-back” deal structure Iran has imposed on international oil and gas investors for years.  ***

*** And while Prime Minister Benjamin Netanyahu of Israel, along with some of his cabinet members, have dramatically and very deliberately stepped up the threat of military strikes on Iran’s nuclear facilities in case of a “bad deal” between the P5+1 and Iran, warning that a bad deal would be more dangerous for Israel than no deal at all, those threats appear extremely remote. That is especially the case given the limited relief that is in fact being offered to Iran in these rounds of negotiations, and Secretary of State Kerry will be making that case in person to Netanyahu when they meet this Friday, exactly as the Geneva negotiations are expected to be coming to an end. ***

Still Tough Negotiations Ahead

There is, of course, indeed a clear distinction between Israel’s stated goal of dismantling Iran’s nuclear program, and the US goal of “denying Iran the ability to produce a nuclear weapon.”

And it certainly has been, and remains, in Israel’s interests to keep maximum pressure on the Obama Administration to drive as hard a bargain as possible with Iran. Lest the point be lost, a UK newspaper over the weekend ran with yet another re-hashed story of potential “joint Saudi-Israeli” military cooperation and strikes against Iran.

In reality, the contours of the agreement being envisioned by the two key parties are far from the “utter sell-out” portrayed by skeptics and hard-liners on both sides of the negotiations.

The US (officially the P5+1) appears to be looking to offer little more than a limited unfreezing of around $3 billion of frozen Iranian assets, plus a very limited lifting of restrictions such as on gold, that would provide an estimated relief of around $7-8 billion to Iran over the six months envisioned for the first stage of a deal.

That first round would not include a lifting of the all-important sanctions on oil exports that are estimated to be costing the Iranian government at least $5 billion per month in lost revenues and helping to devastate its economy.  Iran has dropped from number two to number six in the ranks of OPEC exporters.

Iran, from what we understand, is coming back to the negotiating table resigned to those terms of the sanctions relief on offer as opposed to its opening demands for a full lifting of oil sanctions in exchange for any enrichment freeze.

Since the last meeting, President Rouhani has also hinted Tehran may drop its long-held demand that the West formally recognize its right to a nuclear program, implying that it could be satisfied with a de-facto acknowledgment of the facts on the ground.

That is being interpreted in Washington as potential grounds for “constructive ambiguity” between some of the more aggressive, yet less realistic – barring military action – demands for a full dismantling of the Iranian nuclear program, and the de facto acceptance of the reality of negotiating with Iran as a country close to, but not yet over, the nuclear breakout threshold.

Rouhani, Foreign Minister Zarif, and Deputy Foreign Minister Abbas Araghchi, with the all-important blessing of the Supreme Leader Ali Khamenei, have already indicated a willingness to at least discuss the P5+1’s key demand for a six month freeze of production of 20% enriched uranium – that level is seen as easily convertible to the weapons grade 90% enrichment level – at or near current levels, which is estimated at around 196 kilograms, and thus acceptably short of the 225-250 kilos needed for the production of a bomb.

And in order to put some action behind its words and change in tone, Iran has already slowed 20% enrichment down to a crawl since Rouhani took office in August of this year, and has even refrained from further construction on its Arak heavy-water reactor, according to the IAEA.

As to transparency, Iran has also already floated the possibility of regular – as well as unannounced – IAEA inspections of its facilities. To highlight its emphasis on verification, the Obama Administration for its part has just floated the idea of inspections possibly occurring even on a daily basis. Whether that is a step too far for the Iranians remains to be seen, but these negotiations as currently conceived hardly present a “casus belli” when compared to the existing status quo of the region.

No Lack of Skeptics

Domestic public opinion in Israel does remain firmly behind Netanyahu’s tough stance on Iran, but he is expected to soften that position if and when the P5+1 and Iran do come to a six month agreement freezing enrichment at current levels. While extremely skeptical, Tel Aviv has nevertheless repeatedly reiterated its preference for a peaceful (“good”) solution, and Justice Minister Tzipi Livni, a Netanyahu rival, even recently warned Netanyahu not to unduly jeopardize the country’s “strategic alliance” with the US if not necessary.

For his part, P5 member President Francois Hollande has, with much fanfare, announced France’s own hard line on Iran and unwavering support for Israel, culminating with a state visit to Tel Aviv last weekend. But those assurances have been carefully phrased in terms of stopping Iran from acquiring a weapon, as opposed to supporting Israel’s goal of rolling back Iran’s nuclear capacity.

There is, of course, also a good deal of speculation that Hollande’s newly found hard line may be related to dropping poll numbers at home, as well as a collapsing economy and lucrative arms sales to the Middle East.

According to published reports, French officials have just completed contracts to modernize six naval ships and tankers for Saudi Arabia, and are actively negotiating the sale of a large anti-aircraft defense system to Saudi Arabia and fighter jets to Qatar as well as anti-aircraft radar and military observation satellites. But that is a story for another day.

Meanwhile, some US Congressmen have suggested stepping up sanctions on Iran right in the middle of the first face-to-face negotiations at the ministerial level between the two countries since the 1979 Iranian revolution, just in case they are needed to toughen up the “wimpy” Obama negotiating position.

A bipartisan group of 59 House of Representative Members has written a letter to Senate Majority Leader Harry Leader and Minority Leader Mitch McConnell urging the Senate to bring a bill to the floor to tighten sanctions on Iran.

While sanctions on Iran are always a good vote-getter, Kerry has so far been able to stave off this potential foreign policy complication with the help of some friends in the Senate, notably the head of the Foreign Intelligence Committee, Senator Dianne Feinstein. The Obama administration could, certainly, when push comes to shove, veto such poorly timed legislation, but that is a choice it would obviously rather not have to make.

The President will be making the case to key Senators personally that his administration is negotiating a tough deal with Iran in the White House tomorrow, and Kerry will be making a similar case to Netanyahu on Friday. In the meantime, Kerry has indicated that he will also be on call on Friday to fly to Geneva to sign an agreement – in case those services are required this time around.

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