HJS Report Launch: “Beyond Compliance: Two Years of the Iranian Nuclear Deal”

TIME: 13:00 – 14:00, 13th July 2017

VENUE: The Henry Jackson Society, 26th Floor, Millbank Tower, 21-24 Millbank, London, SW1P 4QP

SPEAKER: Timothy Stafford, Research Director, Henry Jackson Society

CHAIR: James Rogers, Director of the Global Britain Programme, Henry Jackson Society

James Rogers

Ok, good afternoon and welcome to The Henry Jackson Society’s lunchtime event. My name is James Rogers and I am Director of the Global Britain program at the Society which will be rolled out a little bit more in September. Today it is my great pleasure to welcome you all here and to introduce you to our Research Director, Timothy Stafford and he is going to outline for you his latest report, Beyond Compliance: Iran and the JCP of action. He will look into this and also look at options for the UK and how it might proceed in the coming years so without further ado I will hand over to him and he will discuss more with you.

Timothy Stafford

Thank you very much James and thank you all for coming today. This report has actually been quite a long time in the making as a few years ago I was a nuclear analyst at a different Think Tank and I see some of my former colleagues in the crowd so thank you for coming. I was doing a lot of commentary on the negotiations as they were going on and when the deal was finally agreed, two years ago tomorrow, people said to me so now it has finally been agreed what do you think and the only honest answer I could give at the time was I don’t know because it is not an agreement in the sense that all the clauses are finalised it is the beginning of a process. Once you start to look at how the deal unfolds over time it is only then you begin to get a sense of whether the deal is achieving the outcomes which were placed upon it.

Now when I start thinking about the Iranian nuclear agreement I always go back to three years ago, I spent a lot of time in the Balkans and in 2014 I was in Belgrade at the airport there and an Iran Air flight came in to land. First of all this peaked my interest as an Iran expert wondering why Iran is flying to Belgrade it is not exactly the main route for Iran Air and even more so when the plane didn’t come to the terminal it went over to the side of the runway and no passengers got on or off. I thought about this for quite a while why this was happening and then it finally struck me that it was buying oil because at the time Iran was so heavily sanctioned and it couldn’t buy oil in the European Union and although you can fly directly from Tehran to Paris or Vienna, you can’t bring enough fuel with you to fly back and therefore you have to fly to the nearest non EU country, buy some more fuel and fly back home to Iran.

The reason I always think about this is because every time I think about the Iranian nuclear agreement I think about the people on that plane because the nature of the deal is essentially a bargain that Iran will submit to a number of restrictions on its nuclear program for various numbers of years and I detail key ones in the report itself and in that time Iran is afforded sanction relief. It is able to sell oil back to the international market, its citizens can more freely purchase goods from abroad and so on. The point I always want to stress to people whenever I have talked about the agreement itself is the deal itself is not so important in terms of strict compliance, whether the Iranians are in compliance with the restrictions on their nuclear program is not actually the fundamental issue. The fundamental issue is, is the deal achieving what the negotiators hoped it would achieve which is that there would be enough economic integration with the West and there would be enough openness, liberalism and greater ties so that a moderate caucus of political opinion could be built up within Iran so that in 10 and 15 years’ time when the restrictions come off the nuclear program because they are time limited, there is a sufficient body of moderate opinion within Iran that says when the hardliners, when they come back and they inevitably will when the restrictions come off lets go back to nuclear enrichment, that the people who are on that plane say we don’t want to stop in Belgrade every time we fly back and forth to Europe, we don’t want to go back to the bad old days and you have built up enough leverage within the system to resist the hardliners when the deal expires.

So what I wanted to do with this report is go beyond compliance because so many people in this town and the international community point at the negotiated deal and say well Iran is in compliance so everything is fine, it is working. It is not working unless the deal actually brings about the changes that we wanted to see.

The first thing that the report focuses on is the economic integration and the level of integration between the West and Iran in the post sanctions environment and on some level there has been progress, if you look at the amount of oil Iran is now able to sell to the international market, that has returned to almost normal levels before the JCPOA was agreed the United States where sanctioning countries who were purchasing Iran’s oil through secondary sanctions issuing waivers to some of them forcing Iranian oil off the market and also making sure that the money that Iran couldn’t gain access to the money it received for selling the oil. Now oil in Iran in back up to 3.8 million barrels per day that is in agreement with the opec agreement back in November last year, it has begun to get some of the 150 billion dollars that was stuck in these overseas accounts and bring it back into the country. So on that level there is more prosperity than there was.

The other two areas where we have seen huge progress in terms of Iran, the first one is in regards to shipping because the Iranians really want to bring their oil to the international market. So you have seen improvement firstly in terms of insurance, Lloyds of London is now insuring Iranian shipping of oil around the world and also the Iranians have managed to purchase huge new fleets of tankers from Hyundai in South Korea which will guarantee its capacity to export oil to the international market. There is also a political reason for that which is the South Koreans were very keen to break the Iranians off from North Korea and therefore this trade deal was part of the leverage to bust up the North Korean relations. The final area is on aviation where the Iranian airlines have purchased a huge new fleet of air Boeing jets to make up for decades and decades of sanctions where they were trying to find spare parts from different aircrafts and put them in to other ones to keep them going. The flight safety record in Iran was terrible for many years.

But the problem is that these are all purchases. They are purchases of Iranian oil by Western companies, they are purchases of western assets by Iran. What we haven’t seen yet is investment in what I would call non-strategic sectors. Significant foreign direct investment from the West, significant amount of business to business relations and there are a couple of reasons for this.

The first reason for this is the level of interference domestically in Iran, every time President Rouhani gets close to suggesting that there should be greater economic cooperation with the West you see a very quick intervention from the supreme leader who says no the problems with Iran’s economy are not to do with sanctions they are the fact we haven’t built up a protectionist resistance to the economy free of foreign influences, if we did that everything would be fine. So there has been a level of permission from the Iranian government to firstly sell oil on the market for funds and to buy particular assets which are needed to make up for the legacy to make up for years and years of sanctions but in terms of having long term sustained economic interaction the supreme leader and hardliners around him have always found a way to intervene to prevent that.

The second problem is that there hasn’t been huge progress from the Western side either because the way that the deal was structured when it was finally agreed was that it was very easy for any one the P5 plus 1 states to put back in place UN sanctions. The format that was agreed was that any single one of the countries can declare Iran in noncompliance with the agreement which automatically triggers UN sanctions, there is no need to go back to the Security Council to have another vote, there is no need to each cross UN Security Council assistance. If the government here tomorrow said Iran is no longer in compliance with the agreement that is the conclusion that we have reached, eventually it could single handily but the UN sanctions back in place and force the hand of the international community.

So for that reason Western banks and businesses have said what is the incentive for us to invest in such a politically risky environment on the basis knowing that any investment we make is subject to this very short term political decision and we have seen frustration from Iranian officials saying Western governments need to do more to persuade others to a- investment in Iran and b that the investments will be safe. So the economic integration has happened in parts but it has not happened to the same extent that many hoped when the deal was signed.

The second main point that I wanted to focus on is the aim of the agreement was to improve Iran’s sense of security. You would essentially be taking the military from the United States off the table, you would essentially be saying that Iran wanted to move back towards the international community and this is going to provide an opportunity for Iran not to feel so isolated. Actually unfortunately the reverse has happened. There were some at the time who said this is broadly equivalent to when the Nixon administration reached out to China and was able to reintegrate China back into the international community and back into the global economic system. Henry Kissinger makes the point and I site it in the report that China in the 1970s was really with its back to the wall, facing the Soviet Union. The Iranians had the regime in Afghanistan gone, there was a US regime change, the regime in Iraq gone because of regime change and was playing a very extensive role in Iraq and Syria through its proxies and it has ramped that up with the poplar mobilisation units which are the Iranian Shia militias army in Iraq and Syria to fight ISIS but then essentially take over parts of Iraq through capture of the state. The Iranian militias when they first went into Iraq they were there to assist the Iraqi government they are now officially part of the interior ministry, they have been taken into the Iraqi state. So you have seen significant progress on that.

You have also seen the Iranians move very quickly to protect their nuclear program. You would of thought if this was a civilian nuclear program as they said is the first thing you would not do if an arms embargo is lifted is buy ballistic missiles and surround your nuclear site with them which is the very first thing the Iranians did. They had been pursuing the Russian government to sell them the ballistic weapons for many years which they did the moment they were able to purchase them, that is the way they deployed them.

The final aspect of this is the ballistic missile testing which has gotten more and more pronounced, more and more dramatic and now the Iranians are moving towards buying ballistic missiles from overseas, South Africa is the latest area where they are trying to focus on. This is part of the agreement which was most contentious in the final, final days of the negotiations the Iranians said they wanted a lifting of the arms embargo of ballistic missiles and eventually a comprise was worked out where Iran is able to test and develop ballistic missiles but not ballistic missiles that are suitable for a delivery vehicle for a nuclear device. Now firstly there is disagreement over what that means. There is also huge disagreements with regards to sanctions, the Western analysts that you speak to, the more hard-line ones say ballistic missile development and ballistic missile testing is prohibited under the JCPOA and if Iran tests ballistic missiles it is automatically in contravention of the agreement and therefore has subjected itself to more sanctions. Those, I think I would count myself amongst these who are not so close hard-line who say ballistic missiles aren’t part of the deal but therefore because they are not part of the deal, every time Iran tests them it is quite fair game for Western governments to impose sanctions because they are not violating the agreement if they do so because they are no part of the deal.

The Iranians take a hard-line deal the other way which is UN Security Council which I think is 2231 which implements the JCPOA international law explicitly provides us with permission to do this and therefore any sanctions in response to our ballistic missiles are a breach of the JCPOA so they are completely on the other side.

There essentially has been no agreement on this and what has happened is Iran has tested and tested and tested them on a range of missiles, anti-ship missiles, and intermediate missiles, short range missiles and it has brought an area of huge concern on the region, particularly amongst the states of the GCC. This was already a level of concern because of the amount of Iranian Shia militia’s crossing over into Iraq and Syria, this was already a concern. The combination of the two things together have only deepened the Iranian GCC standoff, a lot of points I make in the report is the aim of the agreement was to foster Iran’s sense of security, that it would not feel the need to go back to enrichment at a future point. But if it is carrying on and getting more and more embroiled in a long-term strategic standoff with the Gulf states that only makes it more likely that when these restrictions come off these are only going to provide incentives to the Iranian government to return to enrichment.

Now at the time the agreement was reached I think it was even President Obama himself who said we have to acknowledge that Iran will be able to provide more funding and more support for proxy groups because of the oil wealth that is going to come back into the country but that is a secondary factor, what is more important is that we reach an agreement and Iran fosters a sense of security. Actually Iran is driving its own isolation by the way it has been acting in response in the last 2 years.

The final point I make is this was supposed to be the beginning of a broad political approachment between Iran and the West but particular between Iran and the United States. There was hope, particularly the Obama administration placed huge hope on this that this would be the beginning of a general coming together, at last Iran would not feel so isolated. Now that has not happened for a couple of reasons, the first is most obviously the election of Donald Trump who has been remarkably critical of the agreement from day one, the moment the agreement was reached he was leading a huge political rally on the steps of the congress, this is before he even announced his candidacy for the Presidency, so that is one dimension to it.

The second dimension to it is there was never really large political support within the United States for the kind of approachment that the deal envisages.  The deal only works if it triggers that larger political coming together. The problem was largely due to procedural measures the Obama administration was able to implement the deal without winning support across the United States political system at a time the deal was being negotiated. The Republican led congress said the negotiations aren’t going anywhere we want to hit the Iranians with more sanctions, pressure first brought Iran to the table, more pressure will lead to more concessions. The deal the administration struck was don’t go through with more sanctions and in exchange we will consent to legislation which requires the deal to be viewed by congress once it’s finalised but congress had to reject the deal with a two-thirds majority, not ratify it with a two-thirds majority which meant you only needed one-third of the congress consent in the house to ensure that the deal survived. So although majorities in both houses of congress opposed the deal when it was signed, Obama was still able to wave the sanctions needed to make the deal come into effect.

There was at no stage broad deep support for engagement with Iran, even Hilary Clinton when she commented on the deal was very, very explicit and I site it in the report when she was giving a speech to the Brookings Institution saying do not make the mistake of thinking that this is going to be the beginnings of a new chapter or US-Iranian relations we are still going to disagree on terrorism, we are still going to disagree on human rights, we are still going to disagree on a broad range of issues. My concern at the time was that’s all well and good but the deal is structured on such a way that it only works if you have that broad coming together between the United States and Iran, between the European Union and Iran and we have not seen that.

You are now starting to see some of the consequences of passing a deal with what I would call fairly flimsy support, there is now huge support within the US congress for hitting the Iranians with more sanctions. Firstly in response to its ballistic missile test the congress considered legislation in June which would sanction the IRGC both as a supporter of terrorism but also the real reason they want to hit the IRGC with sanctions is the IRGC maintains the ballistic missile program, it is the IRGC which is heavily involved in the nuclear program. This passed the senate with 98 votes out of 100 and the only reason it got held up for so long was it got congealed with other questions of whether the congress would strengthen the Russia sanctions so Trump couldn’t wave them automatically without congress’s support that is why it got held up. In the House of Representatives legislation has already been passed which will sanction Iran for providing more support to the Shia militia groups in Syria and Iraq. They are pushing in the congress to prevent the Boeing deal from going through at all because they say yes Iran is trying to buy civilian aircraft but it is using the civilian aircraft to send weapons and support to the Shia groups in Syria and therefore these are dual use items and therefore the US can pass legislation to prevent these things from being passed.

On top of all that congress in the legislation that it originally passed which ensured congress would oversee the deal when it came into effect required the administration to report every 90 days that Iran is in agreement. So what naturally happened when the Trump administration came in was it reached the point where it had to certify that Iran was in compliance with the deal it doesn’t support. Tillerson on the day was forced to certify and he said I am certifying but I want to say I think the Iran deal has failed. What the Trump administration has done is going to order a root and branch review of nuclear sanctions, the ones which were waived as part of the JCPOA whether the waiving is in the United States national security interest. Those 90 days are supposed to expire sometime next week and I don’t expect the Trump administration to come out and say we are re-imposing nuclear sanctions which would essentially destroy the JCPOA partly because the Iranians would say (rightly so) the Americans are now non-compliant we are withdrawing from the agreement. But at the same time friends who I speak to say, nobody expected the Trump administration to withdraw from the Paris climate agreement and therefore suddenly it happened very, very quickly.

One of the reasons I wanted to write this report was just to flag up the fact that although all the parties are currently in compliance, underneath the surface this is a highly volatile environment which could collapse at any moment and quickly if that were to happen the Iranian issue would quickly rocket back up the agenda, it would quickly overtake ISIS.

So on to the end then with just come quick recommendations for the UK, where does the UK stand in all of this and what should it be doing. The first point that I make is the current situation is not necessarily sustainable from my perspective that one of two things has to happen. We either have to go down the American view that more pressure is needed, that you adhere to the nuclear sanctions relief that was agreed but on every other area where the Iranians are transgressing you hit them with more sanctions. That’s on ballistic missiles, that’s on support for terrorist groups in Iraq and Syria and you say if you want to have international reproachment from the West you have to behave in a manner that’s more acceptable.

The other is to say much more attention needs to be given, you can go the other way and say there needs to be a much more dovish approach in the only way that this is going to work is if there is broad economic engagement with Iran and there is more we can do. If Western banks are not investing because they think the UK or the US may at any point snap back UN sanctions which means there investments are going to be lost, then some consideration needs to be given to some kind of sanctions insurance that if this happens the losses will not be borne by the companies themselves the government will step in and cover them. You can go in that direction if you think that’s the way but right now what is happening in Iran is finding ways to insulate itself from sanctions. Sanctions on aircraft was a hugely effective sanction and won’t happen again as Iran has just bought a new fleet of aeroplanes and recoup 30 years of cumulative sanctions so if you reapply them you won’t have the same effect. Same with the oil wealth, Iran is now back and providing oil to the international market.

The second point is there is going to be a divergence in the coming years because the United States is going in the direction of more and more sanctions on the non-nuclear level not engaging economically whereas the Europeans are. Therefore you will see a divergence between the Europeans and the United States and then the question for the UK is where does the UK position itself, particularly on the basis that in 2017, 2018, 2019, when Brexit finally happens to the UK will now be able to divert to what it has said previously that our sanctions policy is the European Union’s policy, the UK will have responsibility for its own sanctions policy. You will have British businesses lobbying to say we should be investing more Iran, we should be making exceptions then you have the United States government saying no you should be strengthening sanctions. There won’t be the shield to say well our sanctions are agreed at a European Union level it’s not within our power to do, no the UK now will finally have to focus on this.

The final point I would just say is to give serious consideration to the non-nuclear sanctions, whether that is the way to go because Iran’s ballistic missile testing is something what is going to drive the sense of insecurity. It is what is going to drive the deepening, worsening standoff between Iran and the GCC which could lead to the point in a few years’ time when then ballistic missile sanctions expire, in six years’ time the requirement that the number of centres be limited expires in 8 years’ time, the requirement that Iran not enrich the weapon grade status expires in 13 years’ time, the clock is ticking. We are still no closer to finding a way from discouraging Iranians from returning to enrichment when that clock runs out, so my point is much more needs to be done on this issue and crucially the government here needs to make the case internationally. Simply reverting to the retired formula, Iran is in compliance with the JCPOA is not enough to say the agreement is achieving the outcomes that we hoped for when we set it in place. So that’s eventually my bottom line but I would be very much delighted to hear your thoughts and comments in the questions. Thank you.

James Rogers

Ok Timothy thank you very much for that overview of the situation we now have around 30 minutes or so to engage in discussion so if you have any questions for Timothy or would like to raise any points, by all means please do. All I would ask is if you do have a question please list your name and affiliation so we know who you are and can engage more thoroughly with you so thank you. My I just kindly say that Jonathan Paris reviewed Timothy’s report so he has a few comments to make in relation to it.

Jonathan Paris

I don’t want to talk too much there is a lot of people here who have questions but I am Jonathan Paris, Chertoff Group and long standing supporter of The Henry Jackson Society.

I am focussing on the regional activities particularly in Syria because that is where things are happening on the ground at quite an alarming rate. It is not so much ISIS is the big problem anymore because ISIS is about to be defeated in Raqqa, it has already been defeated in Mosul. So the question is who fills the vacuum? As you pointed out and as the report points out the United States has a record of clearing out enemies of Iran and allowing Iran to benefit from it. They did it against Saddam, they did it against the Taliban and now they are doing it again against the ISIS but I think with the new administration, don’t you think there is a chance that the United States has wised up to this?

In particular I refer to the Russian/Jordanian/US understanding that there will be no Iranian proxies allowed to go with the Syrian regime as they go towards southern Syria which borders Jordan for a long way, all the way to the East and of course go along to Israel. It seems to me that Iran is ignoring whatever Russia is telling them, it is certainly ignoring whatever the United States and Jordan are telling them, they are on a mission here they are on a roll. As the UK Ambassador said to me yesterday, the UK Ambassador to Iran at another event and basically they have 3 objectives. One they want to fight the United States and their allies in Eastern Syria the so called liberated area from ISIS. Two they want a second front on the Golan to increase pressure on the so called resistance front in addition to the Hezbollah front on the Lebanese border. By the way Hezbollah is pretty much synonymous with Iran they are the main proxies in that area and beyond. The third objective is to create a land bridge from Tehran through Iraq through Syria through Lebanon and ultimately the Mediterranean and who knows some day they might get Assad to grant them a sea base on the Mediterranean so you could be swimming in Herzilya and have Iranian submarines nearby.

Exactly what is up here, what is going to happen? Is Russia going to constrain Iran, is Iran going to piggy back on the Syria regime, taking areas with Russian support? Second is the United States going to fight back and third could Israel and Jordan together or separately conceivably go north and create buffer zones as a bargaining chip – we leave the buffer zone when the other foreign troops and advisors in Syria leave, something like that. Thank you.

Timothy Stafford

Thank you Jonathan, too many questions for me to answer but let me try to pick on some of them. I think you have seen a change in Washington particularly if you talked to Gulf officials particularly in the Obama administration there was almost a conspiratorial sense that this is happening on purpose – you have removed the Iraq regime from Saddam and let the Iranians come in, you have allowed Iran to have a nuclear program and not done anything about it. You have withdrawn from Iraq and let the Iranians consolidate their position, you have legitimized Iran’s nuclear program through the negotiations, you have provided them with more funding to enable them to support militias, almost like this had been done on purpose. It was quite hard to explain sometimes that this was simply the product of circumstances and collective decisions.

I think you have definitely seen a change on Trump I think the choices for his first Presidential visit going clearly and standing with the GCC and saying we are going to sell billions and billions of dollars of arms, I know that many of those deals are simply letters of intent at this stage. I think you have definitely seen a sense from the new administration that it is definitely picking sides and it is picking the side of the GCC not the side of the Iranians which is not something that could be said of the previous administration.

On US and Russia from my sense the US is trying its best to convince Russia that whilst it is best to keep the Syria regime in place and whilst it is accepted that is Russia’s interest, it is not in there interest to see the Iranians come in and recreate the Persian empire and stretch all the way to the Mediterranean. Whether Moscow will be receptive of that argument I don’t know that is a decision for them.

In terms of the US fighting back this is one of the other aspects in the general decline in US/Iranian relations that the distance between the previous administrations resistance to involve itself in Syria helped to some extent to underpin this agreement because there was the sense the United States and Iran and not going to find themselves in a military confrontation in the same theatre. Very quickly when Trump responded to the use of chemical weapons the Iranians were spectacularly angry about this and likewise you see the rhetoric has spilt over from there so ISIS now started to attack Tehran a few weeks ago, the Iranian view was that this was an American/Saudi plot. You saw the Iranians for a first time in a decade fire missiles into Syria in response, it is the first time they have used missiles in an offensive capacity in years. There is now an increasing likelihood that the Iranians and Americans will find themselves in a confrontation in the same theatre and therefore again it comes back to that fundamental question, is it possible for an agreement that was originally constrained in such a way to only focus on the nuclear issue.

When the JCPOA negotiations started I think wisely they said we are not going to try and solve every issue on the agenda we are only going to stick to this particular agreement and this particular issue. That made it easier to reach an agreement because you didn’t have to solve every single issue under the sun you only had to solve the nuclear issue. The problem then becomes once you have reached an agreement that agreement becomes subject to the volatility to all the other issues you didn’t solve and they are now starting to come to the floor again particularly in Syria as you mentioned.

Question 1

Thank you very much my name is Masood I am a human rights activist working with a charity in the UK. My objection to the nuclear agreement was from the aspect that human rights was cut out from the deal which was the main thing and of course Iran’s terrorism which has now because of the money which was released it has got momentum and Iran has been able to reverse the events in Syria by injecting a massive amount of money. My suspicion is that the more we delay in imposing the sanctions on Iran on human rights and its terrorism the more important the runners would be to the point that it would be too late to avoid a further very disastrous war in the region. One aspect of course of that whole thing because at the end of the day if you remember the Obama administration from day 1 Obama ignored the 2009 uprising in Iran, he was held then to make a deal with Iran and he said he didn’t want a nuclear bomb under my watch. He postponed the Iranians making a bomb under someone else’s watch. That is of course the main flaw in the agreement event though Iran was so desperate to make a deal because if other sanctions were working and ignoring the Iranian element, in my view Iran is like a volcano ready for eruption, the owners have been keeping the eruption from happening with massive repression implemented to their revolutionary guards which is now the target of the new US sanctions.  Revolutionary guards are a terrorist entity they are not part of the Iran army they are created to spread terror and goes against the people of Iran and all of the Middle East.

In 1982 when they formed, Hezbollah in Lebanon as an external branch of the revolutionary guard. So focussing on further sanctions I think is quicker because the nuclear deal shows that sanctions work and they are desperate for funds and the funds are not being used for the improvement in life of the Iranian people. Teachers in Iran are being paid below the poverty line and you probably have been seeing also the demonstrations every day by people who have put their money in the banks associated with the revolutionary guards and all of that has been plundered. So the people in Iran are not benefitting from any of the release of the sanctions. The sanctions where working because Iran had less money to support its expansionist policies in the Middle East. When it comes to the negotiating table they came on their knees and Obama gave them everything they wanted because his time was running out and he wanted to finish his deal before his day was over and therefore they more or less got away from it.

Imposing new sanctions is a much quicker way of getting the situation changed because it will empower the people of Iran to bring about the change that would benefit the whole of the Middle East. Especially focussing on the revolutionary guards because they need to be cut off if you want to stop terrorism in the Middle East we must stop funding them.

Timothy Stafford

So some quick points in response to that. You mentioned sanctions there is a hesitancy when it comes to sanctions now because there is this concern if more sanctions are put against Iran on non-nuclear issues what will it do to Iran’s level of compliance with the nuclear agreement. This is always one of the problems whenever you engage in negotiations that you quickly become a hostage to the agreement that it binds your hands and we have seen this in the UK over a British journalist who has been put in prison in Iran, the Iranians now have leverage within the diplomatic relationship.

Just on your point I take your point about sanctions, I am at the same time somewhat cautious and hesitant in the sense that I have never taken the view that Iran can be sanctioned into submission in regards to its nuclear program, in the sense of even at its worst when the sanctions were at their height in 2014/2015 the economic pain being inflicted upon that country was still dramatically less than what the country endured in the Iran/Iraq war and it didn’t submit then. So I don’t take the view that you can force the Iranians not to have any nuclear program within their country purely through sanctions alone. I think there is a role for sanctions to play but at the same time one of the arguments when the agreement was being negotiated Iran wanted a right to enrich on its territory and if you recognise that right, even on a small and symbolic level and therefore enable it to claim that its rights where being respected but not to the extent that it was able to develop enough nuclear material for Iranians to build and construct a nuclear device then they would say our rights have been respected that has all we ever claimed. Now I at the time thought the agreement was the way to go because you would test that assumption but although that assumption has been tested, I don’t yet see that there has been enough evidence of movement across the board to say that things are moving in the right direction.

Question 2

Thank you Timothy for a really excellent analysis and presentation. I have a question that follows up to both previous speakers, about one of the assumptions in the deal is the old liberal view that if you increase economic liberalisation it leads to political liberalisation. Of course Obama ignored the green movement when it happened which was at the time very inconvenient for American diplomacy. I haven’t seen any indication that the two are linked in any way on the one hand you have wonderful economic engagement with the West, using the wealth created to increase regional oppression and so do you believe the assumptions of linking the economic and political, which direction is that going and how is it going to be tested? If the linking fails what is the plan B?

Timothy Stafford

Well I think one of my concerns about the agreement was there wasn’t much of a plan B when it was agreed this was going to be it. In terms of the economic liberalisation I come back to the point if you look at the nature of the economic engagements the Iranians have permitted and that which they have prevented it has always been economic engagement which either benefits the state or benefits major, major assets which helps the state not that filters its way through and down to the population, that’s the first point.

As to your broader point yes there is this argument being made in regards to China two decades ago that there would be economic engagement with China that would eventually flow to a more free political system and it’s not worked out that way and you can see this in all kinds of other examples as well. I take your broader point but in terms of what to do about it I think to one extent try harder would be my point to the British and foreign governments because we have made this plan, this is the only plan essentially that can succeed short of force so if you want to avoid that outcome you have to knuckle down. Right now the government comes out and says it is doing as much as it can but the Iranians don’t think so and I don’t think so in terms of having the kind of effect we hoped the agreement would have when it was agreed.

Question 3

Just to follow up because pinning hope on change from the above which is how this discussion goes because we are hoping that there is a moderate coming to hold and taking position in Iran which is not realistic given the demographics. There is a massive population which is restless for change don’t you think it would pay off quicker to focus on empowering the people of Iran to bring about the change rather than waiting. Also the economic incentives the money which is being used for terrorising their whole region, giving the money to them instead and empowering the people of Iran to bring about the change don’t you think that that would be faster?

Timothy Stafford

Well one of the arguments which was made by the supporters of the agreement was just that which was yes the restrictions on Iran’s program do expire in a number of years but they expire over such a significant period of time that the younger population and generation will be a much more active force Iranian politics. If you buy yourself 10-15 years that is a huge possibility for extending the role of what more moderate forces can play in the country. So like I said I don’t want to take the view that it’s all doom and gloom this is only a 2 year progress report and I may need to come out with another one every year from now to keep going and assessing where we are. My view from the initial look at the situation is it is not too good and if I could maybe just make one point I didn’t make in the presentation. If you take the incredibly sceptical view that the only reason the Iranians entered the negotiations was to A – rid themselves of the most crippling sanctions in the short term, B – improve their economic position and consolidate their geopolitical position with a view to C – returning to enrichment when the National community is less well placed to sanction them and apply pressure. If you take that view nothing the Iranian authorities have done in the first 2 years contradicts how you would have expected Iran to have pursued and preceded had that been there policy and there strategy. Therefore I’m concerned because until you see movement on other areas whether it is allowing for economic trade in non-strategic areas or whether it is for ramping down the aggression and assertiveness in the region because there is a greater sense of security or improved relations with Washington, until we actually start to see some of those steps, I don’t take the view that the things are going in the right direction.

Question 4

Ameil Downes from RUSI, great to see you again Timothy, congratulations on your role. I have got a quick question I think you are absolutely right that economic reintegration for Iran it is critical to the deal and Iran feels like they are getting something out of the deal that they struck almost 2 years ago. You talk quite a lot about the role of the US government and relations between the US and Iran, I wonder to what extent you can explore the European Union. For me the European Union is firmly committed to the deal, will not walk away from the deal and even if the US walks away from the deal, the EU has made it very clear that the US will stand alone in that decision. How much does that matter and do we run the risk of overestimating the role played by the US when we have such commitment in Brussels to the deal?

Timothy Stafford

You will know far more about sanctions than I do Ameil but I take your point the EU has come up many, many times and said it is committed to the deal and if the US goes its own way then you can go your own way. I think it is particularly significant because there is more trade between Europe and Iran than the US and Iran. I think it is only half the story it is a mixed bag for two reasons. One the Iranians know full well and rightly so that it is only the Americans who can deploy a military option against them and therefore for the United States to turn against the deal that is back on the table and therefore what incentive does it have to cooperate rather than from an Iranian perspective would you rather carry on restricting yourself with enrichment in order to have economic trade and benefits with Europe knowing that the United States might use the military option against you with the Trump administration, that would put the Iranians in an awkward positon.

The second point I would say don’t underestimate now the extent to which Asia is a factor in this. Although China was part of the agreement when the United States was clamping down on Iranian sale of oil, the way it did so was to sanction essentially any country around the world that did business with Iran in terms of oil and then it issued waivers. So it said no country can have Iranian oil imports with the exception of China which can have 400,000 barrels and with the exception of Japan, Singapore and South Korea. So a lot of freedom for Asia and that is becoming more and more of an import of Iranian oil, I have the statistics I will find them during the next question and tell you, therefore the United States has quite a significant amount of leverage it can play. It depends if the United States and Trump turn against the deal what that looks like in practice we will have to see what the review comes out. I suspect the review will come out with strong administration support for non-nuclear sanctions which have been tabled in congress, partly they need to pass anyway whether the administration would support them or not they will pass with a veto proof majority so there is no point in opposing them because there is nothing the Trump administration can do. I don’t expect them to go full throttle on the nuclear sanctions, I don’t think they will impose those but were it to do so then yes Europe is a positive factor because it has said it will stick to the agreement no matter what. If the United State imposes sanctions on South Korea and says you can’t have any more Iranian oil imports the South Koreans will buckle. So the United States has a lot of leverage to pull other countries in its width particularly because of the financial system but you make a good point about the European Union.

Question 5

Do you think that the younger generation in Iran is going to become more moderately effective or are they very much under the eye of their elders? What can be expected of the other Arab countries if Iran becomes more of a threat, Saudi Arabia, what other action or defence is likely to be taken against them? Just one more thing the revolutionary guards, they are clearly a terrorist organisation how can you not put them on the terrorist list?

Timothy Stafford

Well the senate is on its way to doing this, I expect this will happen fairly soon in the US. In terms of the GCC and the Gulf States and Arab states and what they are going to do and I think crucially they are looking for relief from Washington which they didn’t feel they had with the previous administration. I don’t want to read too much into this because I am not a Gulf expert but the fact that the Gulf 5 minus Qatar turned on Qatar soon after Trumps visit I think was a testament that ok the United States are back in our camp now we don’t feel quite so isolated we can move on to some of the secondary issues we have put on the backburner because we felt we all had to hang together. So I think in terms of what they can do the primary thing is going to be arms sales. You will see this in terms of the Gulf States buying huge amounts of weaponry to try and defend themselves against the Iranians because from their perspective they see a tidal wave of Iranian movement westwards through Shia militia groups, through the support of Syria, as Jonathan was saying the importance of having the Shia presence. There are actually two Shia presence one is going through northern Iraq into Syria and then into Southern Lebanon with Hezbollah, the second one sweeps south through some of the proxy groups in Bahrain, Kuwait and all the way to Yemen. So I think that it something they are trying to resist and arms purchases they will respond to that.

Ameil, I mentioned Asia – India, China, South Korea and Japan each of which has more than doubled its oil imports over the course of 2016. So there oil imports are a significant factor particularly if the United States was to apply secondary sanctions.

James Rogers

Ok if I could take two questions together now.

Question 6

Mark Rogers I am from the UK Ministry of Defence. My question is do you think with the growing ballistic missile threat do you think that Israel will remain patient?

Timothy Stafford

I think it will in the sense that the Israelis feel that the administration in the US is back on their side more. I was speaking to a very highly ranked Israeli official earlier this year who said we recognise that Trump is an unpredictable figure but would rather have Trumps unpredictability than Obamas predictability. I don’t think there is any scope in the discussion right now for military action from the Israeli side what you do see is huge concern about Hezbollah. That Iran is moving weapons to Hezbollah through Syria, you see this with Israel stepping up air strikes in southern Syria to try and prevent some of their defences being moved into southern Lebanon.

In terms of the military action no but I think the Israelis are still highly concerned about this and they see it all as a spectrum. The thing that concerns them overall is that you have an enormous collation focussed on ISIS and they feel themselves isolated in a group about Iran that they are the only ones worrying about what comes next after ISIS has been defeated, it has gone to the Iranians. That is what will happen and they are worried about for the very first time having Iranian forces on their border so I think you will see more military-esq discussions in Israel about how to deal with this problem which I think will fall short of striking Iranian nuclear sites because I think they know if they took that action they would scupper the agreement entirely and there would be hell to pay but in terms of more limited action I think they are definitely mulling over their actions.

Question 7

Ian Walker, Wilmslow Energy Group. One question one comment. On the energy question, energy is key to Iran’s economic future and they are still only producing two-thirds in the sanctions. We have had some discussions with the Iranian energy companies and it is still the same people doing the deals in Iran and they are still asking for tough conditions. Energy companies are worried about the dollar blow back if they put any big money in there so is there any realistic chance of getting back to the 6 number rather than the 400,000 it is at the moment?

My second is a broader comment really you talk about the GCC I think most of this is the GCC is just breaking up, it is falling apart into different fractions and certainly concerned about threats from Iran is seen in some of the small Gulf states but it is very visceral. For example of the Doha issue there has been a tax and Saudi have been told to go home and of course you get conspiracy theories and the conspiracy theory about Doha was Saudi was ready to roll across with the UAE with Bahrain backing to topple the regime and the Americans had a military exercise to stop it happening so that is why we are in part where we are, that is the few from Riyadh.

Timothy Stafford

I will take the second part first about the GCC. When the Qatar issue started part of it is about its relationship with Iran and part of it is also about hosting dissidents from the other five countries. If you are a dissident in one of those countries and it doesn’t seem to be working out you flee to Doha and you find a place to base yourself and this is why Hamas is there as it seems to be a cross roads for some state groups who find it too difficult to stay in their own areas and this I think was a driver in a lot of this from the GCC. Although like I said I had originally seen this so I can understand that Doha was the black sheep of the family.

In the last 24 hours the Iranians have been engaged in discussions in security cooperation with Iran so you are now starting to see the Iranians saying great there is blood in the water now let’s try to get in there and divide and rule and break up and cause problems. So I think one to watch is Iran’s efforts to break out of the isolation which partly it has brought upon itself but it is certainly trying to end this isolation.

Now on the energy question they are laying the foundation anywhere that they can to improve I mentioned the purchasing of new shipping vessels there was discussions about trying to connect pipelines to Iraq. Essentially for now the Iranians to the surprise of many are stuck because when they came back to sell the oil onto the international market they of course found there selves in a very difficult position because not only had they not been selling oil for quite a significant number of years but also the prices were tremendously low because the Saudis had been producing so much any effort to drive the shale oil producers in the United States out of business, the prices were so low. So part of the reason I don’t think you are going to see more is because of the opec agreement which was struck in November it runs up to about 3.8 now. I think the latest in the report was it was approaching 3.9. 3.9 is the cap they have agreed to in the agreement. I think it was happier to strike an agreement and raise prices than it was to have freedom of action to sell internationally. One of the things they wanted to do was to lock in the value because that is certainly what matters it is not about the number it is about the dollar value of the exports. So they have essentially played their hand in that regard so until there is an opec re-visitation on this issue I don’t think that will change.

Question 8

Thank you so much my name is David Diamond I am a member of the leadership of AIPAC which is an American/Israel public affairs committee. I spent several years of my life lobbying against these types of agreements, human rights in Iran, financial controls. The American people were not in favour with President Obama on this, the United State senate was not in favour of this, this was pure power politics to get this passed. President Obama made it very clear to members of the United States senate who are democrats that they would be politically destroyed if they challenged him. A lot of these democratic senators who voted for the deal now have tremendous remorse and are looking at a way to try and recalibrate the situation.

The talk about trying to tear up the deal is done. There is no political appetite for the United States going at it alone particularly in respect to what we are doing right now with the Paris Climate Deal where we stand alone. So what is going to happen is more and more of what you are discussing Mr Stafford which is trying to ramp up the non-nuclear sanctions. It is really the only pragmatic way to go in now what is thought to be a horrible deal. The release of 150 billion dollars to repress democracy, to go and kill American servicemen, to kill Jews in Israel there is tremendous anger. But the question how to proceed now I think your analysis is correct that it is going to go through a non-nuclear option.

Timothy Stafford

I think your right, I don’t rule out Trump tearing it up on the basis that he said he would do this in his campaign and he is proving himself to be quite unpredictable, this could happen if an incident sets off a desire to do this. I think you are right in regards to the non-nuclear sanctions and just on the domestic politics yes you are right when the deal was finalised Obama made a huge effort to go to the purple states where democratic senators where elected and campaign on this issue. I think at the time that there were not too many other options available they didn’t want to labour the point that it is all bad news in terms of the alternative. The Iranians had a huge amount of enriched material at the time they were continuing to enrich with more sites and the threshold to break out was shrinking and shrinking and shrinking so short of resorting to military action by the state I think this was the only way to go.

What I try to convey in this report which I have titled beyond compliance it is just not enough to say everyone is sticking to them now in terms of agreement therefore the issue is resolved. There was a quote two years ago when Iran’s President and Foreign Minister said this issue is now resolved. The issue is not resolved, the issue it still very much in play. It is just in play within the inner structure that is defined by this agreement and the fact that that structure remains in place shouldn’t be confused with thinking that within that structure which is imposed by this agreement that there are lots of issues still to be discussed.

David Diamond

I think your comment from the Ministry of Defence was exactly correct as well. I just returned from Israel a few days ago, there is a little breathing room there, Trump is a wildcard but the Israelis will hold back somewhat because they feel protected. He is erratic but I think your comment to the Ministry of Defence if our target.

Audience member

Can I just say something the sanctions were weakening the Iranian regime and this could have made it possible for the people to rise up and that shouldn’t be ignored as a possibility now.

Timothy Stafford

I think that is possible. Firstly the sanctions have weakened dramatically since then I don’t think there is any prospect of that and I think if there is an uprising I think we place too much emphasis on the notion that sanctions is what causes this. The United States had sanctions on Cuba for decades and it didn’t bring about anything like the kind of uprising that many thought that it would so it is always possible but these things always happen when one least expects it. In 2009 we didn’t expect it and the sanctions got significantly more intense in the years after 2009, significantly more intense and yet there was no sign of political change. So I don’t buy the view that there is a direct line to be drawn between sanctions and promoting political change. There may be in terms of weakening them and therefore bringing about trade and commerce as I said to the gentleman behind you that hasn’t necessarily resolved it either therefore some thought has to be given when the restrictions in the JCPOA expire what we want the situation to look like if we proceed on the basis that Iran’s political leadership will look exactly like it does right now and that needs to be a discussion what is had.

James Rogers

Thank you everyone for coming to see us today on this rather cloudy afternoon and I wish you with that a good afternoon. Thank you.


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