In July 2015, the P5+1 and the Islamic Republic of Iran inked a landmark deal, the Joint Comprehensive Plan of Action (JCPOA), which distanced Iran from pursuing nuclear weapons and ushered in key economic opportunities for both Iran and the world’s economic powers. Under the Trump administration, however, the deal is now at risk of being “ripped up.” Not only should the deal be upheld, but the United States should also remove barriers preventing private businesses from capitalizing on Iran’s re-entry into the global marketplace. Successfully implementing the deal will bolster the U.S. economy with significant export revenue and job opportunities, help normalize relations with Iran, and cultivate the prerequisites needed to cooperate in the political and security realms.
The United States has already forfeited $97 billion in export revenue since the deal’s signing, translating into 72,000-97,000 lost job opportunities every year. The World Bank estimates that Iran’s economy will grow at an annual average rate of 4.6% in the next two years and is poised to become the biggest market outside of the G20. Iran’s oil deals with Europe already exceed what they were pre-JCPOA, having reclaimed 80% of its previous market share. Failure to uphold the deal or remove business barriers will allow European and Asian economic rivals to step in to fill market and industry gaps. Upending a multilateral deal would reduce U.S. credibility and create tension between the United States and the world. The longer the United States delays building an economic relationship with Iran, the greater the opportunity for China, Russia, and other major powers to use Iran’s burgeoning economy to increase their influence in the region.
To best facilitate U.S. business in Iran, the Department of Treasury should undertake four key measures. First, the Treasury should work closely with Iran to establish a timeframe to release the $100 billion in Iranian assets sitting in escrow. This is particularly important to prevent galvanizing Iranian hardliners who insist that the United States is not honoring its commitments under the JCPOA. Failing to communicate and commit to a clear timeframe will intensify the divisions between Iran’s moderates and hardliners over the efficacy of the deal ahead of Iran’s May 2017 presidential election.
Second, although the Treasury recently granted export licenses allowing both Boeing and Airbus to sell 200 aircrafts to Iran Air, deals worth $18 billion and $25 billion respectively, the long review drove Iran to purchase two-dozen planes from Japan’s Mitsubishi conglomerate in a $500 million deal. In order to prevent further lost business for American firms, the Treasury must accelerate the mandated reviews needed for the licensing of entities seeking to sell passenger planes, parts, and services to Iran.
Third, to assuage JCPOA critics, the Treasury’s Office of Foreign Assets Control (OFAC) must work in parallel with the State Department’s Office of Economic Sanctions Policy and Implementation to ensure that sanctions relief and investment do not reach Iranian businesses with ties to the Islamic Revolutionary Guard Corps (IRGC). OFAC should also recognize that facilitating competition in Iran’s market, of which the IRGC holds a large share, could actually weaken the group as they lose revenue. Lastly, the Treasury must reassure companies of the permissibility of investing in Iran by reevaluating the ban on dollar transactions preventing U.S. financial institutions from engaging with Iran.
Ultimately, impeding U.S. investment in Iran will jeopardize the deal, particularly if Iran decides that the JCPOA is not producing the incentives that originally changed Iran’s calculus and led to it abandoning its nuclear program. The deal’s failure would energize hardliners, who will then blame both Iran’s moderates and the U.S. government. Increased economic gains in Iran, however, could push the country toward a more democratic, pluralistic society in line with U.S. interests. The reality is that once the United States engages Iran economically, it will not only reap enormous benefits in the form of export revenue and job opportunities, but it will also have more political influence in Iran. Once firmly established as a major player in Iran’s market, the United States’ presence, influence, and investment will be impossible for Iran to ignore.
*This briefing was presented as my position statement for my masters comprehensive exam, for which I was awarded distinction.