TEHRAN – Removing sanctions will be central to reviving the nuclear deal, Foreign Policy magazine suggests.

If the Biden administration wants a lasting solution, it must involve Iran’s central bank governor, the magazine said in a commentary on Feb. 25. 

“If and when the United States and Iran sit across from one another again, there is a key figure who ought to be present—Abdolnaser Hemmati, the governor of Iran’s central bank,” the article argues.
 
The United States and Iran may soon be sitting at the negotiating table once again. In just the last week, the Biden administration has offered to restart negotiations, and Iran has concluded a deal with the International Atomic Energy Agency (IAEA) to limit inspections of its nuclear program. A window of opportunity has emerged for the two sides to talk, likely in a format facilitated by the European Union. 

In many respects, Iran’s central bank was the primary target of former U.S. President Donald Trump’s economic sanctions on Iran. Much of the economic hardship that Iran has experienced due to the reimposition of secondary sanctions can be attributed to the Trump administration’s success in limiting the central bank’s access to its foreign exchange reserves.

Foreign Policy pointed to the Iranian assets in foreign banks and writes, “Iran retains access to just $8.8 billion of readily available foreign currency, roughly one-tenth of its total reserves. Without access to its reserves held in countries like Iraq, South Korea, Japan, and Germany, the central bank has struggled to forestall the weakening of Iran’s currency, which is today worth less than one-fifth of its value prior to Trump’s withdrawal from the nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). This deep depreciation made imported goods more expensive, contributing to annual inflation rates of nearly 50 percent.”

The American magazine praised the skills of Hemmati and underlined, “He was appointed as central bank governor in July 2018. He has performed remarkably well in difficult circumstances. Iran’s currency was regaining value for most of 2019, a trend disrupted by the COVID-19 crisis, which hit the country’s economy hard, throwing trade into disarray.”

Since reaching a historic low in October 2020 of just over 320,000 rials to the dollar on the free market, the currency has since stabilized at around 250,000 rials to the dollar—with this stability helping to undergird Iran’s slow economic recovery. Along the way, Hemmati has proved an adept communicator, using his Instagram account, the central bank’s website, and even select interviews with international media to outline his priorities and reassure the Iranian public about the bank’s capacity to defend the rial from hyperinflation.
Foreign Policy acknowledges Iran has not faced a full-blown economic meltdown, despite the efforts of Trump’s administration. “But the country finds itself in a painful period of economic stagnation, and sanctions relief will be needed should any government wish to deliver on promises of prosperity. However, Trump sought to make sanctions relief more difficult.”

In September 2019, the Trump administration designated Iran’s central bank under a terrorism authority, a move that jeopardized long-standing exemptions permitting the bank to play a crucial role in facilitating the purchase of humanitarian goods such as food and medicine.

The Biden administration is willing to remove this designation to bring the bank back to its original status under the JCPOA — but removing a designation tied to Iran’s purported support for terrorism may have a political risk, Foreign Policy argues. 

Pointing to the fact that “lifting sanctions was difficult even before the Trump administration’s cynical moves,” Foreign Policy says, “Iran’s experience of sanctions relief following the implementation of the JCPOA was disappointing. International banks remained hesitant to process Iran-related transactions, citing unclear guidance on how to conduct business in a compliant manner and the risks of punitive fines if the remaining sanctions were inadvertently violated.”

Maintaining maximum pressure to inflict more pain won’t bring Tehran back to the negotiating table or halt Iran’s nuclear ambitions, the magazine acknowledges. 

This limited the rebound in trade and, particularly, investment in Iran, it says. 

While there had been some technical exchanges on banking during the JCPOA negotiations, including working-level exchanges with Iran’s central bank, these were largely focused on the unfreezing of Iran’s assets—the challenges Tehran faced in mundane banking blindsided the JCPOA parties, the Foreign Policy writes.

Foreign Policy argues, “The JCPOA parties cannot rely on diplomats to untangle the complex knots that have constricted Iran’s banking ties for so long,” adding, “To ensure sanctions relief succeeds, Hemmati ought to be in the room as part of a high-level technical dialogue, which could eventually include top officials such as U.S. Treasury Secretary Janet Yellen and French Finance Minister Bruno Le Maire.”

Understandably, Iranian leaders are keen to get sanctions relief right this time around. In a recent speech, Iran’s Supreme Leader, Ayatollah Ali Khamenei, insisted that any sanctions relief offered by the United States must take place “in practice” and not just “on paper.” Moreover, the efficacy of that sanctions relief will need to be “verified.”

There are a few reasons why a dialogue on sanctions relief, which would be similar in structure to the pre-JCPOA exchanges on nuclear issues between then-U.S. Energy Secretary Ernest Moniz and Ali Akbar Salehi, the head of Iran’s Atomic Energy Organization, ought to center on Hemmati.

Foreign Policy explains why Hemmati has to participate in the talks between Iran and 5+1 group and writes, “First, Hemmati is a key figure of Iran’s economic diplomacy. In the last two years, he has made trips to Iraq, Oman, South Korea, and China to ensure Iran retained financial channels with key trade partners. Second, Hemmati’s stewardship will be critical for the implementation of sanctions relief measures. Whether it is the easing of access to foreign reserves or the granting of Iran’s COVID-19 IMF loan or the consideration of new economic incentives such as reauthorization of the ‘dollar U-turn,’ an exemption revoked in 2008 that allowed U.S. banks to process Iran-related transactions in cases where a payment is being made between two non-Iranian foreign banks, effective implementation depends on Iran’s central bank.” 

“Finally, Hemmati would bring some technocratic continuity to the economic implementation of a restored JCPOA. There is considerable concern that the possible arrival of a new Iranian president in August could leave any diplomatic agreement vulnerable to changing politics in Tehran,” the American magazine concludes. 

EE/PA