ANALYSIS: Iran Prepares for New Round of Talks with The West

20 Dec 2020

ANALYSIS: Iran Prepares for New Round of Talks with The West

By Ahmad Rafat

December 20, 2020

https://kayhanlife.com/special-reports/analysis-iran-prepares-for-new-round-of-talks-with-the-west/

Iran’s Supreme Leader Ayatollah Ali Khamenei has instructed the Expediency Council to revisit the principal components of the Financial Action Task Force (FATF) Recommendations, in an apparent effort to pave the way for Iran to rejoin an international system of banking transactions from which it is currently excluded. The FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering and terrorism financing. The two components are the Palermo Convention and Countering the Financing of Terrorism (CFT) and Anti-Money Laundering (AML). To restart its economy, Iran must be able to access the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a system used for banking transactions, which is only possible if the FATF removes the country from its blacklist.


Iran’s Supreme Leader Ayatollah Ali Khamenei has instructed the Expediency Council to revisit the principal components of the Financial Action Task Force (FATF) Recommendations, in an apparent effort to pave the way for Iran to rejoin an international system of banking transactions from which it is currently excluded.

The FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering and terrorism financing. The two components are the Palermo Convention and Countering the Financing of Terrorism (CFT) and Anti-Money Laundering (AML).

To restart its economy, Iran must be able to access the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a system used for banking transactions, which is only possible if the FATF removes the country from its blacklist.

Therefore, the Islamic Republic could not jumpstart its economy even if the U.S. rejoined the Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal. U.S. President Donald Trump withdrew from the agreement in May 2018, unilaterally.

The FATF operates under the auspices of the Organization for Economic Cooperation and Development (OECD), an intergovernmental economic organization with 36 member countries, founded in 1961 to stimulate economic progress and world trade.

The United Nations Convention against Transnational Organized Crime (UNTOC, also called the Palermo Convention) is a 2000 UN-sponsored multilateral treaty against transnational organized crime.

Although the Majlis (Iranian Parliament) passed the CFT and Palermo Convention proposals in October 2018, the Expediency Council rejected them both a month later.

On Feb. 21, the FATF blacklisted Iran after it failed to meet the deadline for enacting the Palermo Convention, the CFT, and AML.

Those who oppose enacting the two FATF Recommendations argue that the CFT and Palermo Convention will prevent Iran from funding Palestinian Hamas, Lebanese Hezbollah, and the Islamic Jihad in the Gaza Strip. They also fear that AML will hinder Iran’s efforts to bypass sanctions.

In the Islamic Republic, the Majlis must pass a bill and send it to the Guardian Council for ratification before it becomes law. The council may send the bill back to the Majlis for clarifications and amendments. If the Majlis and the Guardian Council reach a deadlock, the bill can end up in the Expediency Council for a final decision.

The Expediency Council had closed the FATF case in January, but reopened it, following Khamenei’s directive.

Iranian President Hassan Rouhani’s 2021-22 government budget, which projects the oil production to increase to 2.3 billion barrels, factors in an overly optimistic assumption that the incoming U.S. administration will rejoin the JCPOA by the next Iranian new year (Mar. 21, 2021), and offer sanction relief.

There are indications that Tehran may reconsider its position on talks with Washington.

In his first public appearance in weeks, following rumors about his failing health, Mr. Khamenei told a gathering of senior government and military officials on Dec. 16 that the country “should not waste even an hour if there is even a slight chance of lifting sanctions.”

Khamenei’s remarks could signal a change in the country’s foreign policy, given his previous comments that sanctions had “no serious effects” and that they had allowed Iran to become “self-sufficient.”

In comments reported by the Tasnim News Agency on Dec. 14, Iran’s Vice President for Legal Affairs Laya Joneydi said: “The esteemed leader has directed the Expediency Council to revisit the FATF’s Recommendations.”

Khamenei’s new stance undoubtedly stems from the hope that the U.S. President-elect Joe Biden will rejoin the JCPOA, as he has said repeatedly in the past, and lift the crippling economic sanctions that Trump has imposed on Iran in the past two years.

Lifting of sanctions and removing the Islamic Republic from the FATF’s blacklist will give Iran access to SWIFT and $80 billion of its frozen assets in foreign banks. Iran and North Korea are the only countries blacklisted by the FATF currently.

However, no one expects the Expediency Council to ratify the FATF’s Recommendations immediately. The council’s decision will ultimately depend on the outcome of the talks between Washington and Tehran. It will vote to enact the FATF articles only after Tehran is convinced that Biden will lift the sanctions. Tehran can then conduct financial transactions with foreign banks through SWIFT and access its frozen assets.

President Rouhani’s government hopes the U.S. will return to the negotiation table right after Biden is sworn in as the new president on Jan. 20, 2021.

Meanwhile, Mr. Rouhani’s opponents are pushing for talks with the U.S. to resume after the Iranian presidential elections in June 2021. This is a transparent attempt to deny Rouhani and his government, particularly Foreign Minister Mohammad Javad Zarif, any opportunity to start any talk with the U.S. that may lead to reviving the JCPOA and the lifting of sanctions.

The factional infighting did not stop Rouhani from submitting his draft state budget of close to $33.7 billion to the Majlis on Nov. 30.

Iran has only exported around 400,000 barrels of oil per day (bpd) for the past two years, but the government budget for next year factors in an unrealistic assumption that the country will export 2.3 million bpd at $40 a barrel.

However, experts have warned that the 2021-22 fiscal year’s budget deficit will be massive.

Meanwhile, U.S. President-elect Biden has hinted that future discussions with Iran will be difficult. An increasing number of countries have joined the U.S. demanding that fresh nuclear talks must include Iran’s regional activities and ballistic missile program.

UN Secretary-General Antonio Guterres has also urged “Iran to address concerns raised about its nuclear and ballistic missile programs and return to ‘full implementation’ of its 2015 nuclear deal with major powers,” Associated Press (AP) reported on Dec. 9.

The three principal European signatories to the JCPOA, namely Britain, Germany, and France, have insisted that Iran must curb its ballistic missile program and regional activities.

In comments reported by the Reuters news agency recently, Rafael Mariano Grossi, the International Atomic Energy Agency (IAEA) director-general, said it was impossible to revive the 2015 JCPOA in its original form.

“I cannot imagine that they are going simply to say, ‘we are back to square one’ because square one is no longer there,” Grossi said. “There is more [nuclear] material, more activity, and more centrifuges, and more are being announced. So, what happens with all this? This is the question for them at the political level to decide.”

On Nov. 9, the IAEA released a report that said Iran’s stockpile of low-enriched uranium had reached 2,442.9 kilograms (5,385.6 pounds), or nearly 12 times the amount permitted under the JCPOA.

Besides increasing the stockpile of its enriched uranium and installing a new generation of centrifuges at its Natanz Enrichment Plant, Iran has reportedly built new facilities at the Fordo Fuel Enrichment Plant (FEP).

“Iran has begun construction on a site at its underground nuclear facility at Fordo amid tensions with the U.S. over its atomic program,” the Associated Press (AP) reported on Dec. 18, citing satellite photos it had got. “Iran has not publicly acknowledged any new construction at Fordo, whose discovery by the West in 2009 came in an earlier round of brinkmanship before world powers struck the 2015 nuclear deal with Tehran.”

Under the terms of the JCPOA, Iran had agreed to halt all activities at the Fordo Fuel Enrichment Plant.

It is unlikely that Tehran-Washington relations will change soon, given that Iran has scaled back its commitments to the JCPOA in the last two years significantly, and President-elect Biden has repeatedly said that the Islamic Republic must curb its regional activities and ballistic missile program before talks can resume.

U.S. sanctions and Trump’s policy of “maximum pressure” have crippled the Iranian economy. Studies have shown that sanctions have pushed 60 percent of the country’s population into poverty.

The Islamic Republic will have to either make significant concessions to the West to resolve the current crisis or face a much more serious problem than economic meltdown.

This article was translated and adapted from Persian by Fardine Hamidi.