U.S., EU Lift Sanctions Against Iran Amid Landmark Deal

Iran re-entered the global economy Saturday, as years of crippling international sanctions were lifted in exchange for the verified disabling of much of its nuclear infrastructure.

For Iran, implementation of the landmark deal that it finalized with six world powers last summer means immediate access to more than $50 billion in long-frozen assets, and freedom to sell its oil and purchase goods in the international marketplace. Tehran has hailed the deal as vindication of its power and influence in the world.

The removal of sanctions comes as President Barack Obama begins his last year in office, and almost seven years to the day since he called on Iran to “unclench your fist” and take steps toward rapprochement with the United States and the world. As a result of the agreement, he said in his last State of the Union speech this week, a “nuclear-armed Iran” has been prevented, and “the world has avoided another war.”

The triggering event for implementation was certification by the International Atomic Energy Agency (IAEA) Saturday that Iran had successfully completed all the nuclear steps it agreed to in July: sending the bulk of its enriched uranium outside the country, dismantling and storing most of its centrifuges, and disabling its Arak nuclear reactor, capable of yielding plutonium. The IAEA is also charged with monitoring and verifying Iran’s continued compliance.

IAEA certification of compliance will bring announcements and speeches by high-level officials from the negotiating parties. A new U.N. resolution codifying the deal will go into effect. White House executive orders and implementation guidance from the U.S. Treasury and the European Union will start the wheels of international business and finance turning.

To the consternation of critics in the United States – including Republican presidential hopefuls who have called it a dangerous sellout by Obama and vowed to dismantle it – the deal is now done.

In the long term, the nuclear agreement is a major milestone in the Iranian revolution, with the potential for far-reaching economic, political and cultural ramifications. The end of Iran’s near-total economic isolation could drive more modernization and open the country to moderating outside influences. More money spent at home to upgrade failing infrastructure and jump-start the economy would allow pragmatist President Hassan Rouhani to showcase the sanctions relief he pledged in his 2013 campaign.

U.S. and international opponents, including Israel, Saudi Arabia and other U.S. allies see the agreement as a dangerous gift to an aggressive and duplicitous regime, and have warned that Tehran will use the money to increase spending on terrorist groups that serve as its proxies in a fight for regional dominance.

Although Iran has more than $100 billion in available frozen assets – most of it in banks in China, Japan and South Korea – slightly less than half will more or less automatically go to preexisting debts. How the rest is spent will reveal the direction of internal power battles between Iranian hard-liners and pragmatists.

That kind of money is too much to be transferred in one fell swoop. Richard Nephew, a former sanctions chief of the U.S. negotiating team, said the Iranians will likely transfer it out in chunks, and may even leave it in place while they decide how to spend it.

“They’re going to find there are more demands” for the money, about $56 billion, “than they have plans to use it,” he said. “The question is to what degree will they have fights at home about what to do with it.”

The U.S. Treasury Department keeps close track of resources flowing to Lebanon-based Hizbullah, Iran’s most powerful proxy force in the region that is playing a major role in support of besieged Syrian President Bashar al-Assad. “I suspect they are going to get an increase in material support” that will “become apparent in the next couple of months,” said Dennis Ross, a former senior Obama adviser on the region.

Another indicator to watch, Ross said, is the selection of candidates for upcoming parliamentary elections in Iran in late February. To appear on the ballot, candidates must be vetted and approved by Iran’s Guardian Council, controlled by Supreme Leader Ali Khamenei.

“If it turns out that many of those who are identified with Rouhani and are more pragmatic are permitted to be candidates, that will tell us something,” Ross said. “If that is not the case, it will also tell us something.”

Despite official rejoicing by the negotiating partners, implementation comes at a particularly inauspicious time for Iran and the United States.

Oil is at its lowest price in more than a decade, in part because of expectations Iranian crude will flood the market, and Iran’s currency has declined precipitously. Tehran will be getting far less income than it anticipated when the negotiations took hold in late 2013, making it difficult for the government to deliver the jobs and economic boom Iranians have been told will ensue. Many think it will take years to repair the country’s decrepit energy infrastructure in order for oil to flow at its pre-sanctions rate.

In Washington, the deal is even more contentious politically now than it was when it was signed with Iran six months ago in Vienna by the governments of the United States, Britain, France, Russia, China, Germany and the European Union. Videos of kneeling U.S. sailors detained this week by the Iranian Revolutionary Guard navy have outraged many in Congress who were already incensed by the agreement. The sailors, whose boat strayed into Iranian waters, were released Wednesday after being held overnight.

U.S. non-nuclear sanctions related to terrorism and other Iranian activities remain in place. Lawmakers have called for additional American restrictions on Iran for test-firing ballistic missiles in October and November in apparent violation of then-existing U.N. sanctions.