Bloomberg News

Iran Agrees to Deal With Powers to Curb Nuclear Work

November 24, 2013

Iran

A heavy-water production plant in the central Iranian town of Arak. Photographer: Arash Khamoushi/ISNA via AP Photo

Iran’s accord with world powers to limit its nuclear program in exchange for as much as $7 billion in relief from sanctions left Presidents Barack Obama and Hassan Rouhani the task of selling the deal to critics.

By agreeing to curtail its nuclear activities, Iran won an easing of certain sanctions on oil, auto parts, gold and precious metals for six months. The deal, which is reversible, was announced early yesterday after five days of talks in Geneva. Without removing sanctions on oil exports, it releases some of Iran’s oil assets and allows it to keep exporting crude at current levels.

The accord is the first major crack in the deadlock over Iran’s nuclear program since 2003, when Rouhani, now the president of the Islamic Republic, was its top negotiator. Since then, the dispute over the purpose of the program has helped deepen the rift between Shiite and Sunni Muslims in the Middle East, sparked threats of military action by the U.S. and Israel, and raised concerns that the oil-rich region was heading for a nuclear arms race.

Diplomacy has “opened up a new path toward a world that is more secure,” Obama said in a televised speech soon after the announcement, as he urged members of Congress not to proceed with plans to impose fresh sanctions on Iran. The American president called Israeli Prime Minister Benjamin Netanyahu yesterday, seeking to prevent a rift with a U.S. ally after Netanyahu called the deal “a historic mistake.”

‘Commitment to Israel’

“The president underscored that the United States will remain firm in our commitment to Israel, which has good reason to be skeptical about Iran’s intentions,” Josh Earnest, a White House spokesman, told reporters.

Rouhani, securing a deal that may strengthen his hand against hardliners in Iran opposed to his policy of detente, said in an address that it marked “a starting point for a new chapter for the Iranian nation” as “the world came to realize that respecting the Iranian nation will bring about positive results.”

The deal marks a breakthrough in relations between the U.S. and Iran 34 years after the country’s Islamic Revolution fractured ties.

“Everything that had happened since 1979 is a deterioration of relations between Iran and the West,” said Ghanem Nuseibeh, the London-based founder of Cornerstone Global Associates, which advises clients on risk in the Middle East. “This is the first major reversal of that deterioration.”

Diplomats in Geneva

The agreement was announced early yesterday in Geneva by diplomats including Iranian Foreign Minister Mohammad Javad Zarif and U.S. Secretary of State John Kerry. China, Russia, the U.K., France and Germany also joined in the negotiations and signed on to the results. The two sides now will work to conclude a comprehensive accord within six months.

The agreement halts Iran’s nuclear progress, and “key parts of the program will be rolled back,” Obama said in his televised speech. “These are substantial limitations which will help prevent Iran from building a nuclear weapon.”

Western nations have accused Iran of harboring ambitions to develop nuclear weapons, an assertion it denies. The U.S. and Israel have said they are willing to use force if needed to prevent Iran from obtaining the capability to make such weapons.

U.S. Lawmakers

Eric Cantor of Virginia, the second-ranking Republican in the U.S. House of Representatives, said the U.S. “must remain vigilant and respond immediately and severely to any cheating or wrongdoing by Iran. And we must rebuild our alliances in the region and stand firmly with our closest partners against Iranian aggression.”

What the Deal Means for the Next Six Months

The House previously has passed legislation to impose more sanctions on Iran, and a number of senators said yesterday that they will seek to act on such a measure after the Senate, now on a Thanksgiving holiday, returns on Dec. 9. They didn’t make clear whether new sanctions would apply only if Iran fails to live up to the terms of the interim agreement or only after the six months it’s in effect.

The “disproportionality of this agreement makes it more likely that Democrats and Republicans will join together and pass additional sanctions when we return in December,” Senator Charles Schumer, a New York Democrat, said in a statement. “It was strong sanctions, not the goodness of the hearts of the Iranian leaders, that brought Iran to the table.”

Risk of ‘Unraveling’

Obama said in his address that “now is not the time to move forward on new sanctions because doing so would derail this promising first step, alienate us from allies and risk unraveling the coalition that enabled our sanctions to be enforced in the first place.”

Under the deal, Iran must improve cooperation with United Nations monitors, commit to eliminate its stockpile of uranium enriched to 20 percent levels and halt advanced centrifuge installation, the White House said in a statement. Iran also won’t commission its heavy water reactor at Arak, which, if it became operational, could produce plutonium and give the country a second path to nuclear weapons.

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In return, Iran will be able to repatriate $4.2 billion in frozen assets, the Obama administration said. The accord will “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,” the administration said.

The accord also provides $400 million in tuition payments to schools for Iranian students studying abroad, and will allow access to civilian aircraft parts.

Gold Trading

Some curbs on gold trading also will be removed. While Iran will be allowed to buy and sell precious metals, including gold, it will be barred from accepting them as payment for oil or any other sanctioned transaction, according to the officials. Iran sits on the world’s fourth-largest proven oil reserves.

The agreement was reached after foreign ministers made unscheduled trips to Geneva over the weekend to push the third round of talks in six weeks to a conclusion.

The deal compels Iran to clarify work that has been the focus of International Atomic Energy Agency inspectors. The agency, which convenes a quarterly meeting to discuss Iran this week, two years ago published a list of people and places that may have been involved with nuclear-weapons work.

While the accord fell short of demanding a visit to a military site south of Tehran where Iran is alleged to have tested nuclear-weapons triggers, it forms a commission with international monitors “to facilitate resolution of past and present concerns with respect to Iran’s nuclear program, including the possible military dimension of Iran’s nuclear program and Iran’s activities at Parchin.”

Oil Prices

The agreement probably will have a “somewhat muted” effect on oil prices, according to analysts including Mark Keenan, cross-commodity research strategist at Societe Generale in Singapore. “We can, however, expect some price weakness as the market adjusts to the future prospect that Iranian exports will resume,” he said by e-mail.

Brent crude slid 2.2 percent to $108.60 a barrel by 10:11 a.m. in Tokyo, falling from a six-week high, while West Texas Intermediate crude slipped 0.9 percent. Gold fell as much as 0.5 percent before trading little changed at $1,243.51 an ounce. Futures on the Standard & Poor’s 500 Index gained 0.4 percent and the MSCI Asia Pacific Index climbed 0.5 percent.

Israel and Saudi Arabia, both longtime U.S. allies, have opposed any deal that allows Iran to retain sensitive nuclear technologies. Israel has signaled that it’s ready to take military action against Iran to halt a nuclear program.

‘Historic Mistake’

“What was achieved last night in Geneva is not historic; it is a historic mistake,” said Netanyahu. “The world has become a much more dangerous place,” he said in comments broadcast on Israel Radio. “Israel is not bound by this agreement.”

Israeli Economy Minister Naftali Bennett made the case in more graphic terms. “If five years from now a nuclear suitcase explodes in Madrid and New York it will be because of the agreement signed this morning,” he said in an e-mailed statement.

The United Arab Emirates, a Sunni Arab U.S. ally in the region, welcomed the agreement, describing it as a first step toward a permanent accord, the state-run WAM news agency reported.

Business between Iran and the U.A.E. declined 83 percent to $4 billion because of sanctions against the Islamic republic, Kerry said Nov. 11.

To contact the reporters on this story: Jonathan Tirone in Geneva at jtirone@bloomberg.net; Indira A.R. Lakshmanan in Geneva at ilakshmanan@bloomberg.net; Kambiz Foroohar in Geneva at kforoohar@bloomberg.net

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


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