Iran reacted angrily on Friday to a new US blacklisting of companies and individuals linked to Iran’s nuclear program, saying the measures jeopardize the nuclear agreement reached in Geneva with six world powers last month.
“The [US] move is against the spirit of the Geneva deal,” Abbas Araghchi, Iran’s deputy foreign minister, told Iranian media today. “We are evaluating the situation and Iran will react accordingly to the new sanctions imposed on 19 companies and individuals.”
Both the US and Iran have appeared to interpret the Geneva agreement in different ways, each boosting its own benefits and downplaying its compromises amid skepticism from hard-line constituencies back home.
The deal – an interim breakthrough that came 100 days into the term of Iran’s centrist President Hassan Rouhani – halts advances on Iran’s nuclear program in exchange for six months of modest sanctions relief.
Within hours of the Nov. 24 signing, top US officials said existing sanctions would be more “vigorously enforced” and that “Iran is not open for business.” That didn’t prevent a surge of hope in Iran, however, that the Geneva deal will yield the first step in a far broader, eventual easing of sanctions that have hurt the economy in recent years.
The impact at the auto factory
Sanctions are to be lifted on the auto industry and airplane parts, as well as petrochemical and precious metal deals, with a total value of $7 billion, while sanctions against oil exports and financial transactions that have most damaged Iran’s economy will remain untouched.
At an auto industry conference in Tehran just days after the Geneva deal, for example, European carmakers expressed optimism about swiftly helping Iran reverse a steep decline in auto production since 2011.
That optimism has spread to the factory floor at Iran Khodro Company (IKCO), one of the largest carmakers in the Middle East and North Africa, which has seen production slump to half capacity.
Sanctions and other economic issues have “affected our exports, and our communications with leading auto companies in the world,” says Hossein Najjari, the managing director for IKCO’s automotive parts supply wing, SAPCO. Iran has been able to make the simple parts it once imported, but not the most advanced ones.
“Of course in the past two years we expedited the localization rate, but it’s not enough,” says Mr. Najjari, in an interview at IKCO’s main plant west of Tehran, where the robots on the largely automated production lines never stop. “We need to update ourselves with the world. With the new situation we are trying to compensate.”
Besides sanctions, Iran's auto industry has also been hit by government mismanagement and lack of official support. Company documents show that after a decade of steadily increasing production, IKCO's peak of 773,000 vehicles in 2011 fell to 448,000 in 2012, despite a capacity of 850,000 vehicles.
Though IKCO officials say their company has not made any sanctions-related layoffs, the Associated Press reports that 100,000 workers have been laid off nationwide due to sanctions, in an industry that produced a total of 1.6 million cars in 2011.
But market improvements also require reversing steep losses in value of the Iranian currency, the rial, as well as the high “wave” of inflation,” says Saeed Laylaz, an economic and political analyst and former Khodro employee.
“For sure, removing the [auto] sanctions has a positive impact psychologically…. But it doesn’t change the situation in a strategic way,” says Mr. Laylaz.
Plenty of hurdles to come
There will still be hurdles, even for European companies like Renault and Peugeot with longstanding ties to Iran, until rules about banking transactions are clarified in coming weeks.
“Recently [European companies] gave a green light, ‘We are ready to cooperate again,’ but some of them are waiting to receive very clear feedback from this Geneva agreement,” says director Najjari. “They are very interested to cooperate, but they are very conservative about these sanctions issues.”
The US Treasury Department designations announced Thursday are part of the Obama administration’s promise to vigorously enforce existing sanctions, to help it convince the US Congress not to impose new sanctions that Iran has said would kill the deal altogether.
There were signs yesterday at a hearing of the Senate Banking Committee, which oversees sanctions legislation, that the White House message was gaining traction.
“We should not do anything counterproductive that might shatter Western unity on this issue,” said Sen. Tim Johnson (D-South Dakota), the committee chairman. “We should make sure that if the talks fail, it was Iran that caused their failure. We should not give Iran, the P5+1 countries, or other nations a pretext to lay responsibility for their collapse on us.”
“Today’s actions should be a stark reminder to businesses, bank, and brokers everywhere that we will continue relentlessly to enforce our sanctions, even as we explore the possibility of a long-term, comprehensive resolution to our concerns with Iran’s nuclear program,” David Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence, told the hearing.
He said the Treasury Department was “very actively dissuading” foreign oil companies and others “who think that now may be a good time to test the waters in Iran.”
Expert-level talks about how to implement the Geneva deal broke up in Vienna today, after Iran and the six negotiators agreed to consult with their capitals.
“After four days of lengthy and detailed talks, reflecting the complexity of the technical issues discussed, it became clear that further work is needed,” said Michael Mann, spokesman for EU foreign policy chief Catherine Ashton.
Iran’s Foreign Minister Mohammad Javad Zarif this week told Time magazine that “the entire deal is dead” if Congress imposes new sanctions. Iran says it rejects nuclear weapons, but requires peaceful nuclear power as its “right.”
Responding to earlier statements by Mr. Obama that the US maintains “all options,” including military ones, to deal with Iran’s nuclear efforts, Mr. Araghchi issued a warning yesterday.
“The US’s harsh statements will create problems for the process of negotiations in the next round,” said Araghchi, who is a top member of Iran’s nuclear negotiating team. “Harsh and extreme remarks” about the military option “is not constructive,” he said, according to Iran’s state-run PressTV.
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