Up until explosions hit two Gulf oil tankers on Thursday, June 13, substantial progress was made in the secret US-Iranian track towards partly easing the Trump administration’s sanctions on Tehran’s oil exports, DEBKA Weekly’s intelligence sources report exclusively. Those talks at a secret venue in Baghdad grew out of the initiative first revealed in DEBKA Weekly 848 on May 24 (US Seeks Talks with Tehran While Clueless about Khamenei’s Enigmatic Game). The go-betweens who have meanwhile broken new ground were also identified as Arnold Henninger, a senior member of the Swiss foreign service, and Iraq’s President Braham Salim.
Neither track touched on the substantive disputes at issue between Washington and Tehran: the US demand to renegotiate the 2015 nuclear accord and halt Iran’s regional belligerence. The talks are confined at this early stage to the most mundane practical level: Trump administration is offering some sanctions relief, on certain conditions, for cash-strapped Iran to acquire basic commodities for its population and possibly open the door to future negotiations. According to World Bank’s new reports, the Iranian economy grew in 2018 by 3 percent. The estimate for 2019 is minus 5 percent.
For now, they are discussing an American proposal for Tehran to submit to the two parallel mediators a list of essential items, such as foods, medicines and raw materials for industry, that are beyond its power to acquire – whether for lack of currency or because the suppliers fear exposure to US sanctions. A special US committee is proposed for checking through this list, ticking the items it deems essential, fixing quantities and calculating how much Iranian oil must be sold to pay for these purchases. The transactions will be handled by an Iraqi bank in Baghdad, subject to Washington’s endorsement, and the goods shipped over to Iran via Iraqi ports.
Indicating that the US-Iranian talks were going well, Iran’s Minister for Economic Affairs and Finance Farhad Dejpasand, recently turned up in Moscow and Beijing to show government officials there the substance of the deal developing with the US and obtain their approval. Part of the deal would be for Russia and China to be allowed to buy a certain quantity of Iranian oil in payment for the essential items on the US-approved list.
Although this agreement in principle should count as a breakthrough in the crisis-ridden US-Iranian relationship, key details remain to be ironed out it before it ripens into a final accord. Still to be decided is the quantity of oil Iran will be permitted to sell – or even if this decision is to be left solely to Washington. Tehran is holding out for a US-Iranian-Swiss-Iraqi panel to be set up as a court of appeal on US decisions – whether on the quantity of oil to be released or even on Iran’s list of essential items. The US negotiators, for their part, insist on running a separate monitoring mechanism to ascertain that the essential items purchased through sanctions relief, including medicines, reach the general public and are not directed to privileged members of the regime and its prop, the Revolutionary Guards.
Still undecided too are which customers will be permitted to acquire the Iranian oil released under this arrangement. Will Washington hold veto power over the client list? And who will set the prices, keeping in mind the exercise’s possible shock effect of released Iranian oil on world markets.
The Trump administration has not meanwhile softened its “maximum pressure” tactics – both to squeeze the Iranians to stop quibbling over every detail and to deter them from further low-key strikes against America’s allies in the region. (See a separate article.)
Therefore, on Friday, June 7, Washington hit Iran’s Persian Gulf Petrochemical Industries Company with economic sanctions because of large sums it diverts to the Revolutionary Guards. The US Treasury statement explained that this move aimed to choke off this lifeline to the IRGC from Iran’s most profitable petrochemical group, which holds 40 percent of Iran’s total petrochemical production capacity and is responsible for 50 percent of the country’s petrochemical exports. The sanctions extend also to the petrochemical giant’s 39 subsidiaries and foreign based sales agents, including the UK-based NPC International and Philippines-based NPC Alliance Corporation.
US Treasury Secretary Steven Mnuchin, who runs the administration’s sanctions regime, indicated this action was a warning that holding groups and companies in the petrochemical sector and elsewhere that provide financial lifelines to the Revolutionary Guards would continue to be targeted by Washington.
Iran’s Deputy Oil Minister Amir Hossein Zamaninia responded to the new sanctions with more defiance. He said that, as soon as Washington cancelled all sanctions waivers last month, his country had mobilized its resources to start selling oil on a “grey market.” Iran’s Oil Minister Bijan Namdar Zanganeh went further by saying that Iran had been selling oil through “unofficial channels” from the moment that the Trump administration had slapped sanctions on oil sales last November. He declined to divulge information on those channels. If those unofficial or “unconventional sales” became known, he said, “America would immediately stop them.”. Nevertheless, behind their show of defiance, Iran’s top officials are fully aware of their country’s dire predicament under tough US sanctions: This week, Iran’s oil sales plummeted to an all-time low of 400,000 bpd, leaving the Islamic regime with few options other than to accept the US proposition.