Iran Nuclear NewsIran can't withdraw much oil revenue under interim nuclear...

Iran can’t withdraw much oil revenue under interim nuclear deal

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Wall Street Journal: Iran has been unable to withdraw much of the unfrozen oil revenue it was to receive under a November interim nuclear deal, a possible complication for efforts to end the decadelong standoff over Tehran’s nuclear ambitions.

 

Difficulties could hinder negotiations for a comprehensive agreement

The Wall Street Journal

By Laurence Norman, Nour Malas and Benoit Faucon

Iran has been unable to withdraw much of the unfrozen oil revenue it was to receive under a November interim nuclear deal, a possible complication for efforts to end the decadelong standoff over Tehran’s nuclear ambitions.

The problems were outlined in interviews with nearly a dozen Western and Iranian officials and diplomats, bankers and lawyers with knowledge of the issue.

An estimated $100 billion in payments for Iranian oil imports has been locked up in accounts in the importing countries in compliance with U.S. banking sanctions that have been among the most effective in pressuring Iran economically.

Only $4.2 billion was to be freed up gradually under the interim deal. One reason Iran is having difficulty tapping the unfrozen revenues is that banks remain fearful they could violate tight U.S. financial sanctions, especially while the outcome of the final nuclear talks remains uncertain. If financial institutions flout sanctions, they could be shut out of the U.S. banking system, through which dollar transactions must be cleared, or face huge fines.

Some Western officials also partly blame Iran for the delay. Tehran has been slow to set payment instructions specifying where the money should be sent and, in some cases, how it will use the funds—information banks may require before releasing the money.

Iran’s difficulty withdrawing the funds could undermine confidence building between Tehran and the six world powers it negotiates with. It could stymie President Hasan Rouhani’s ability to showcase domestically the benefits of the interim nuclear deal. He came to office last summer promising diplomatic outreach to ease sanctions.

Iran’s United Nations mission and foreign ministry officials declined to comment. However, Iranian Foreign Minister Javad Zarif last month publicly questioned the West’s willingness “to fulfill its commitments” to implement November’s accord. Western officials insist they are doing so.

The negotiations between Iran and the six powers, now focused on a comprehensive, permanent agreement to prevent Iran from obtaining nuclear weapons, are set to resume in Vienna on Tuesday.

Iran’s economy has stabilized somewhat and oil revenues have increased since the interim deal was reached in November.

There are concerns in the U.S. Congress and elsewhere that sanctions relief could undermine international pressure on Tehran to reach a final nuclear deal. Tehran’s troubles tapping the funds suggest sanctions remain a powerful constraint and may temper those worries.

Seeking to speed the release of funds, the U.S. and other Western governments have stepped in, working quietly to encourage international banks and regulators to help Iran access the revenue, diplomats said. But those efforts have only partly succeeded.

The unfrozen oil revenues were the biggest single gain in a package of sanctions relief worth around $7 billion for Iran, according to U.S. officials. In exchange, Iran agreed to curtail some of the most dangerous elements of its nuclear program.

Iran insists its pursuits are for purely peaceful purposes such as producing energy and medical research.

The difficulty helping Iran withdraw the funds shows the practical challenges of delivering money to a country largely isolated from the global banking system because of the tight web of sanctions.

On February 3, the first payment of $550 million in unfrozen oil revenues was transferred from a Japanese bank to Banque de Commerce et de Placements, or BCP, in Switzerland. As of Wednesday, the funds had not been withdrawn.

A BCP spokesman declined to comment. A spokeswoman for the Swiss Economic Affairs department, Marie Avet confirmed the money had come to a Swiss bank. Switzerland, which hosted the talks that produced November’s accord, had been asked to help facilitate the repatriation of funds, she said.

A senior U.S. official confirmed that three tranches, worth $1.55 billion, have been released—meaning the U.S. has legally informed banks holding the money it is no longer subject to sanctions.

The U.S. plans to unfreeze another $1 billion over five days starting Wednesday.

It remains unclear where the other two tranches of already released funds are. Several diplomats said Iran hasn’t yet tapped a significant part of the total.

Western officials said they were making progress identifying a group of banks that can work with Iran to repatriate unfrozen funds.

“We have done everything we made a commitment to do,” a senior U.S. official said late Friday. “Our teams have been working very hard to facilitate everything that was required.”

Banks were already cautious about financing trade with Iran that was permitted before the interim deal, such as food and medicine. That remains true of commerce opened up under the deal.

Several European banks have been hit by huge fines from U.S. authorities over the last two years for allegedly engaging in improper dealings with Iran. BNP Paribas said in February it had set aside $1.1 billion against potential fines for any violations of U.S. sanctions.

After years of restrictions, “financial institutions are very careful when it comes to Iran and, before doing something, want to be reassured 1,000 times,” said one Western diplomat.

To ease concerns, the U.S. has sent letters to a number of banks “clarifying the applicability of U.S. sanctions to various circumstances,” a senior official said. There have also been regular discussions between U.S., European and Iranian officials in recent weeks about the problem.

One concern is that Iran could eventually use the funds for purposes the U.S. doesn’t approve of. U.S. officials have warned publicly they will crack down vigorously on all those involved in violations of the remaining sanctions.

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