Obama must find a way to break Iran logjam

April 20, 2016 9:19 AM (UTC+8)

 

The meeting between the US Secretary of State John Kerry and Iranian Foreign Minister Mohammed Javad Zarif in New York on Tuesday carried much symbolism.

US Secretary of State John Kerry and his Iranian counterpart address ways U.S. could help Iran remove banking obstacles to re-engage in global trade, finance
US Secretary of State John Kerry and his Iranian counterpart Mohammad Javad Zarif  before talks in New York on ways US could help Iran remove banking obstacles to re-engage in global trade

President Barack Obama was due to be in Riyadh the very next day. The timing underscored that Obama intended to stick to “de-hyphenated” engagement of Iran and Saudi Arabia.

However, the three-hour meeting and the decision to follow up with Friday suggests that substantial discussions took place and innovative ideas came up.

Zarif said ahead of his meeting that international banks remain wary of U.S. regulations and need “reassurances” that they can resume business with his nation even after its nuclear deal with world powers.

Zarif added, “We should prevent past U.S. regulations from being obstacles to most financial institutions in Europe and Asia having banking relations with Iran.”

European banks, which have had unhappy experiences with US sanctions regimes in the past, are holding back from financing Iran deals. Evidently, the discussion on Tuesday related to finding ways to help remove the banking obstacles, which in turn will allow Iran to re-engage in global trade and finance.

The good part is that the Obama administration seems inclined to be helpful, and is open to suggestions provided they do not amount to possible sanctions “workaround” that gives access for Iran to the US financial system or the dollar.

The bad part is that there is still entrenched opposition in the US to the administration showing conciliatory attitude toward Iran, notwithstanding Teheran’s scrupulous implementation so far of the nuclear deal signed last July.

The Obama administration realizes that the Iranian grievance is genuine when Tehran says it is still to reap the benefits of the nuclear deal, which were promised. Kerry acknowledged this when on Monday, speaking at the J Street’s Gala Dinner in Washington, he inter alia said,

  • Do you remember the debate over how much money Iran was going to get? You heard… a mistaken figure out of 155 billion… Others thought it would be about a 100 billion… We calculated it to be about $55 billion when you really take a hard look… Guess what, folks; you know how much they (Iran) have received to date as I stand here tonight? About $3 billion.

In the ultimate analysis, this is not even about money, but a crisis of confidence that is developing in the Iranian mind regarding the US’ intentions. Iran’s Supreme Leader Ayatollah Ali Khamenei voiced the misgivings on more than one occasion in recent weeks.

President Hassan Rouhani is left with hardly a year before the presidential election in the spring of 2017 to show visible improvement in Iran’s economic performance. His economic agenda rests on 3 pillars – foreign investment, foreign trade and unleashing the private sector.

On the other hand, the obstacles are many. It will be politically damaging for his re-election bid if he is seen as weakening the 1979 revolution’s commitment to egalitarianism. He also needs to overcome deep-rooted wariness about foreign influence. Above all, there are interest groups who are content with the near-siege wartime economy that Iran has lived through.

Indeed, if Rouhani fails to show achievements in the economic arena, it only strengthens those very same conservative quarters within the establishment who resist his desire for détente with the West, some of whom also happen to be beneficiaries of the protected economic climate.

Needless to say, the dialectics plays out on the foreign policy arena too, and Rouhani’s capacity to work with the US to resolve conflicts such as in Syria or Yemen would stand affected. The resultant logjam and the foreign-policy dilemma that it engenders is evident from a recent interview Zarif gave to an Iranian news agency:

  • Foreign policy is shaped by the relative advantage that other countries offer. It is not proper that we prioritize certain countries while relegating others as secondary priority. Wherever our interests demand it, we should engage with other countries.
  • Our relations with Russia and China are smooth and are developing fast because of the modest détente with these countries. But this should not lead to exclusivism. Our foreign policy is multilateral and it is guided by national interests and our cause. We use Russia for current expediencies of exporting to that country to finance our needs. With China we have signed billions of dollars worth investment in oil and gas sector and other economic projects.
  • The craft of diplomacy aims at exploiting the available resources globally. We have strategic ties with Russia and we are close partners in Syria. But we do not want to remain as a consumer market, but would seek an active role in the global production chain.

The implications are quite obvious. To be sure, if the present logjam in banking can be broken, the path opens for a far more productive phase of Iran’s engagement with the West, which the present leadership in Tehran sincerely seeks.

The fallouts of such an engagement can only be in the overall interests of regional stability. On the other hand, the US will do well to understand that the roots of a siege mentality are still very strong in Iran and the challenge facing Khamenei and Rouhani is that most Iranians are yet to benefit from the easing of sanctions.

Rouhani has promised 5% growth for the economy in the next year and he pins hopes that “with interaction with the world, we can move towards economic prosperity”. But how that is going to be possible, given the stringent US financial sanctions, is difficult to foresee.

The clock is ticking for Rouhani. And Obama’s legacy remains incomplete unless Iran fundamentally transforms and is put on an irreversible reformist path – for which Rouhani needs a second term.

In sum, Obama should help Rouhani to help him preserve his Iran legacy as an enduring legacy of the US foreign-policy as well. It is, in fact, the finest flower of the Obama Doctrine.

Arguably, Friday’s meeting between Kerry and Zarif will be a defining moment. The Obama presidency is drawing to a close – and after him the deluge.

Ambassador MK Bhadrakumar served as a career diplomat in the Indian Foreign Service for over 29 years, with postings including India’s ambassador to Uzbekistan (1995-1998) and to Turkey (1998-2001). He writes the “Indian Punchline” blog and has written regularly for Asia Times since 2001.

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