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Where Do Things Stand With the Iran Nuclear Talks?

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Earlier this year, after months of negotiations, the US and Iran appeared to be closing in on an agreement to revive the 2015 Iran nuclear deal. However, it subsequently became clear that the two sides remained divided over several critical issues, causing the earlier sense of optimism to evaporate. As things stand today, there's little visibility into when a deal might be reached — or indeed whether an agreement will be possible at all. Below, Energy Intelligence looks into some of the key questions surrounding the talks.

Why have the Iran nuclear talks gone so quiet?

The latest round of talks has been a bit of a roller-coaster. In February, a deal seemed just days away. There were hopes that the remaining few — yet crucial — obstacles were about to be resolved. Optimism was further boosted by a successful meeting in Tehran in early March between the head of the International Atomic Energy Agency (IAEA) Rafael Grossi and the head of Iran's nuclear agency.

But soon after that, Russia injected a new element of uncertainty into negotiations to revive the so-called Joint Comprehensive Plan of Action (JCPOA). It sought guarantees from the US and the three European parties to the JCPOA that Russia's trade with Iran would not be impacted by sanctions that Washington and other Western countries imposed on Moscow after its Feb. 24 invasion of Ukraine.

Talks in Vienna have not resumed since, with Iran and the US blaming each other for the problems that have prevented a successful conclusion of the talks. The main reason for the lack of progress remains the apparent gridlock between Tehran and Washington over issues on which neither side appears willing to compromise. Those include Tehran's demand for the US to revoke the Trump administration's 2019 designation of Iran's Revolutionary Guard as a foreign terrorist organization (FTO).

Even a partial lifting of that designation would be a hard sell in domestic political terms for the administration of President Joe Biden. If a deal is agreed, Biden would probably already have to lift the FTO designation that the Trump administration applied to oil-related entities — such as the National Iranian Oil Co. — in order for Iran to be able to sell its oil.

And there has been public agitation from lawmakers of the president's own Democratic Party against lifting the FTO designation applied to the Revolutionary Guard. This has included West Virginia Sen. Joe Manchin, who recently wrote to US Secretary of State Antony Blinken, urging him to refrain from doing so. Manchin also called for the current sanctions against Iran to remain in place until Tehran demonstrates "verifiable efforts towards curbing their malign influence holistically."

Why did the issue of the Revolutionary Guard's FTO designation suddenly pop up?

Although this appeared to emerge only toward the very end of the nuclear talks, it didn't come completely out of the blue.

People familiar with the situation say the FTO question had simply been "parked" for a while to allow progress to be made on other issues, with both sides possibly assuming that it could ultimately be resolved satisfactorily. However, that has clearly not been the case. Other disagreements related to the removal of sanctions are also understood to be unresolved.

Is Russia deliberately holding things up?

There has been some speculation that Moscow might be deliberately holding up a deal, given the current tensions with the West over the war in Ukraine. Reaching an agreement could be seen as helping Europe to secure additional oil as sanctions are lifted and Iranian barrels return to the market, leading to lower crude prices, while also allowing Iran to capture market share that Russia looks set to lose, especially in Europe.

However, Moscow has insisted that differences between between the US and Iran are the real obstacle to a deal. Russia did seek guarantees from Washington that sanctions implemented because of the war in Ukraine would not automatically stymie Moscow's trade and economic relations with Iran. But Energy Intelligence understands that this was not a precondition for further negotiations on reviving the JCPOA. And Russian Foreign Minister Sergey Lavrov later said that the issue had been resolved.

So what's it going to be — deal or no deal?

Although the likelihood of a deal appears to have decreased, it still cannot be ruled out.

A group of 40 former government officials and nonproliferation experts called on Thursday for "the prompt and successful conclusion of negotiations" to restore mutual compliance with the JCPOA, arguing it "is the best available way to deny Iran the ability to quickly produce bomb-grade nuclear material."

However, the longer the current state of limbo drags on, the more likely it is that the Biden administration's desire for a return to the JCPOA will continue to wane.

Last year, US officials said that a return to the JCPOA was a first step toward a "longer and stronger" deal that would prolong constraints on Iran's nuclear activity. However, Tehran has rejected this, and the longer the deadlock continues, the weaker the case for pursuing an agreement becomes, given the advances that Iran has been making in its nuclear program.

"A return to the agreement as it was, especially with the sunset provisions soon on the horizon, is not the stronger and longer deal the administration talked about," Democratic Sen. Bob Menendez of New Jersey, the chair of the Senate Committee on Foreign Relations, said in a recent podcast interview. Under the JCPOA's sunset clause, certain restrictions on Iran's enrichment of uranium would be lifted after 2025 and others in 2030.

Meanwhile, Tehran shows no signs of willingness to sign a deal that does not meet its expectations, even though the economic benefits would be substantial, especially given current high oil prices and the likelihood of strong global demand for Iranian crude if it were to become available.

For now, however, the administration of President Ebrahim Raisi is unwilling to compromise on its key demands, especially as it was the US that unilaterally withdrew from the JCPOA under President Donald Trump in May 2018.

Topics:
Sanctions, Oil Supply
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