The real reason Iran and the US cannot end the war: Money

Now, his ability to end the war in the Middle East hinges, in large part, on how much money he gives Tehran. “Money is a big part of this. It’s a key to any compromise from Iran’s point of view,” Alex Vatanka, a senior fellow and Iran expert at the Middle East Institute in Washington, DC, told Middle East Eye. Some US and Arab officials tell MEE that Trump’s unwillingness to loosen the purse strings is the real reason talks between the two sides are deadlocked and potentially doomed to fail. Iran has reportedly floated a proposal for the two sides to bypass the issue of its nuclear programme and enriched uranium in order to end the war and reopen the Strait of Hormuz, but the nuclear issue is not the biggest sticking point, some people familiar with the talks say. “Everyone has ideas about a compromise on enrichment [of uranium], but the hardest circle to square for Trump is lifting sanctions. My understanding is that this is more sensitive than the nuclear file,” a former US official who has spoken with Gulf and US officials following the talks, told MEE. It’s not hard to see why. Trump built his Iran policy over a decade by waging economic warfare on the country, using the power of the US financial system. “Trump hasn’t helped himself,” Vatanka, at the Middle East Institute, said. “The way he misrepresented the JCPOA from the get-go has made life harder for him now, because anything he does will be measured by what he criticised Obama for,” he added, referring to the 2015 nuclear deal by its official name, the Joint Comprehensive Plan of Action. 'This is economic statecraft' The JCPOA granted Iran sanctions relief in return for capping its nuclear enrichment to 3.67 percent and opening the country’s facilities up to stringent United Nations inspections. Trump unilaterally exited the deal and imposed crippling sanctions on Iran. He has shown no appetite to stop using the power of the US financial system against Iran, even amid the ceasefire. Trump administration pitching US companies to rebuild Gulf infrastructure hit by Iran Read More » On Friday, hours before the two sides were supposed to meet in Pakistan, the US rolled out new sanctions against a Chinese oil refinery and dozens of shipping firms and vessels that transport Iranian oil. The Islamabad talks fell through. If the war ends with Iran in a better financial position than it started, this would be an embarrassment for the Trump administration, some diplomats say. Barely a month before the US and Israel attacked Iran, US Treasury Secretary Scott Bessent took a victory lap at the Davos Economic Forum, recounting how sanctions sent Iran’s currency, the rial, “into free fall” and the Iranian people “out on the streets”. “This is economic statecraft - no shots fired. And things are moving in a very positive way here,” he said. Just as Trump is boxed into waging financial warfare, Iran’s leadership desperately needs cash, experts say. Iran has benefited from its control of the Strait of Hormuz by selling oil at higher prices amid the war. The US blockade is impacting oil sales, but in the short term, Iran can still sell the crude it has stored on ships in East Asia. But taking a broader view, any gain from oil sales has to be measured against the roughly 300bn in economic damages wrought by Israeli and US air strikes on the Islamic Republic. An Iranian business newspaper reported in April that reconstruction would take at least 12 years. 'The nuclear issue is Betamax' “The nuclear issue is honestly Betamax now,” Alan Eyre, a former member of the US team that negotiated the Iran nuclear deal, told MEE, referring to the now obsolete 1975 video cassette player. “Everyone is talking about what the Iranians are willing to give up. But that is largely a function of what they are willing to get,” he added. What the Iranians want is money. 'Efforts are underway to bypass Hormuz in the future' - Arab diplomat Eyre said there are four ways Iran can be compensated for a deal that reopens the Strait of Hormuz and ends with an agreement on its nuclear programme: reparations, tolling, unblocking frozen assets, and sanctions relief. Of the four, he believes a toll in the Strait of Hormuz is the likeliest path for a deal. By some estimates, Iran has 100bn in frozen assets; a sum equal to almost a quarter of its GDP. But the numbers are murky. Some cash is held in escrow accounts, like 6bn in Qatar, while revenue from oil sales is held in South Korea, Japan and Europe. Axios reported in April that the US offered to unfreeze 20bn in exchange for Iran giving up its stockpile of enriched uranium. However, Eyre said Trump is unlikely to release a tranche of frozen funds to Iran ahead of the November 2026 midterm elections, given his complaints about the 2015 nuclear deal and “plane loads of cash. While Iran wants sanctions relief, it might be cautious of any deal Trump offers. Iran was burned by Trump when he unilaterally withdrew from the 2015 nuclear deal. Western and Asian firms afraid of secondary US sanctions bolted out of the country, leaving Iranian companies with worthless contracts. Opposition to Hormuz toll “The bad thing about sanctions relief for the Iranians is that it’s reversible. That is what they are scared about - giving away the family jewels for something that can be taken away,” he said. The Trump administration has sent mixed signals regarding a toll on the Strait of Hormuz. At first, Trump suggested the two countries could share in the proceeds, but the administration has since backed away from that position. Secretary of State Marco Rubio told Fox News that the US would not allow Iran to retain control of the Strait of Hormuz. “They cannot normalise - nor can we tolerate them trying to normalise - a system in which the Iranians decide who gets to use an international waterway and how much you have to pay them to use it,” he said. One senior Arab diplomat told MEE that Washington’s initial openness to a toll faced fierce pushback from Arab Gulf states, particularly the UAE, Bahrain and Kuwait, which are loath to see Iran recognised as the waterway's gatekeeper. The diplomat, whose country exported the bulk of its oil through Hormuz before the war, also said that Iran is aware its neighbours will eventually build pipelines to bypass Hormuz regardless of how the war ends. For example, Iraq is already sending oil by truck to Syria’s coastline and boosting the capacity of its pipeline with Turkey. “Iran knows that a toll is unpalatable with practically all of its neighbours. There would be constant friction, and efforts are underway to bypass Hormuz in the future,” the diplomat said. 'Sanctions have to be lifted' Trita Parsi, the executive vice president of the Quincy Institute, told MEE that Iran is using the idea of a toll as a bargaining chip for sanctions relief. “I don’t think the money from tolling is anywhere near the amount of money that sanctions relief will provide them,” Parsi told MEE. “The Iranians are approaching these talks as an attempt to get a final deal with the US, and that means all sanctions have to be lifted.” 'Game on’: How Iran can exact a toll in the Strait of Hormuz Read More » Djavad Salehi-Isfahani, an expert on Iran’s economy at Virginia Tech, told MEE that the financial aspects of a deal are critical to Iran as it looks to consolidate support after the war. “Inside Iran, the image of this government has actually improved in people’s eyes because of the war. But the sacrifices made have to lead to something better for people when this ends,” Isfahani said. “Iran doesn’t just need to have the ability to export oil, but buy and sell on the international market. They need to create manufacturing jobs. The war needs to end with Iran becoming a normal economy,” he said. Some officials watching the talks say that the sense of normality vis-a-vis the economy is too sensitive for Trump to deliver. Parsi said it could be framed as a win. Trump himself has boasted about how a deal could revive Iran's economy. Parsi said he believes Trump could sell sanctions relief as a win to his base, noting the opportunities for US companies. “This would be the biggest market opened up to the US since the Soviet Union,” but he added that it is an uphill battle. “This will be the biggest fight Trump has had with the Israelis, who oppose any sanctions relief. They will do everything they can to stop it, he said. War on Iran Washington News Post Date Override 0 Update Date Mon, 05/04/2020 - 21:19 Update Date Override 0