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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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The Final Obstacle To A New Iran Nuclear Deal

  • U.S. is “seriously considering removing the ‘Foreign Terrorist Organisation’ [FTO] designation from the IRGC.
  • The FTO removal is seen as one of the very last obstacles in the Iran nuclear deal negotiations.
  • The IRGC has been allowed access to every layer of Iran’s business and financial networks to the point where now it is inextricably ingrained throughout the entire fabric of Iran’s economy.

According to several sources close to the negotiations to resuscitate the Joint Comprehensive Plan of Action (JCPOA) – including a highly-placed source who works closely with Iran’s Petroleum Ministry spoken to exclusively by OilPrice.com last week – the U.S. is “seriously considering removing the ‘Foreign Terrorist Organisation’ [FTO] designation from the IRGC [Islamic revolutionary Guard Corps].” If this is done, he added: “It will remove the last key sticking point from Iran to agreeing to the new [JCPOA] deal, and allow it to pledge adherence to the FATF [Financial Action Task Force], which has been the last key sticking point for the U.S. and the remainder of the P5 [U.S., U.K., France, China, Russia] and Germany to reach a new deal since Washington unilaterally withdrew from the original one in [May] 2018.”  

The FTO designation of the IRGC in 2019 has been a red line for the various Iranian negotiating teams since it was placed on the Corps during U.S. President Donald Trump’s term in office. For Tehran, not only does the IRGC function as the guardian of the spirit of the country’s Islamic Revolution in 1979 but it is also the principal mechanism through which Iran can spread its own particular brand of Islamic faith across the world by whatever methods it deems necessary. These means, however, almost always require money and for this reason the IRGC has been allowed access to every layer of Iran’s business and financial networks to the point where now it is inextricably ingrained throughout the entire fabric of Iran’s economy, as analysed in depth in my new book on the global oil markets.

According to sources in Washington and London, current estimates are that the IRGC has placed top commanders at the heart of more than 200 Iranian companies and even back at the beginning of 2016 – around the same time as Implementation Day of the first JCPOA - Emanuele Ottolenghi, a senior fellow with the foundation for Defense of Democracies testified before a sub-committee of the U.S.’s House Committee on Foreign Affairs that the IRGC had significant ownership shares in 27 companies that are publicly traded on the TSE. This constituted a minimum 22 percent of its total value, at US$15.8 billion between them. According to Ottolenghi in 2016, the IRGC was active in the Iranian oil, gas, petrochemical, automotive, transportation, telecommunications, construction, and metals and mining sectors, among others. Additionally, the U.S. Department of Treasury, Office of Foreign Assets Control, in September 2012, described the NIOC itself as an “agent or affiliate” of the IRGC and therefore subject to sanctions under ‘Iran Threat Reduction Act’.  

Since the IRGC’s designation as an FTO in 2019, however, this inextricable link between it and Iran’s economy has led to serious negative financial fallout for both. Only a few months ago, OilPrice.com was exclusively told by a highly-placed source close to Iran’s Finance Ministry that: “The key economic problem facing Iran is that the foreign currency reserves now stand at around US$10 billion only [compared to about US$114 billion just before the U.S. withdrew from the JCPOA in May 2018], and the gold reserves are also now insignificant,” he said. “This means that the Guards [the IRGC] are facing a crunch point when it comes to funding the international network [of proxies used to project Iranian influence], including in Yemen, Lebanon, and Syria payment is made in either [U.S.] dollars or gold,” he added. 

Therefore, Iran since 2019 has needed an ‘out’ in the JCPOA negotiations: on the one hand it is not practically possible for the government to remove the IRGC from its business and financial networks, even if it wanted to; but on the other it cannot commit to the FATF if the IRGC is still designated as an FTO with all the external monitoring ramifications that this brings with it. As it stands, Iran is one of just two countries – the other being North Korea – on the FATF’s blacklist, with a particular failure on Iran’s part noted by the FATF in its inability or unwillingness to address its deficiencies even after the Implementation Day of the first JCPOA on 16 January 2016. 

According to the FATF: “Iran’s [2016] action plan expired in January 2018…[and] In February 2020, the FATF noted Iran has not completed the action plan.” The FATF added – and this is where we are now: “Iran will remain on the FATF statement on [High Risk Jurisdictions Subject to a Call for Action] until the full Action Plan has been completed. If Iran ratifies the Palermo and Terrorist Financing Conventions, in line with the FATF standards, the FATF will decide on next steps, including whether to suspend countermeasures.” Consequently, by removing the FTO designation of the IRGC – although it could, and most likely will, remain on various other terrorist organisation monitoring lists held by the U.S. and others – Iran can pledge adherence to the FATF. Whether it will abide by all or any of its rules and regulations remains to be seen.

From the U.S.’s side, the basic negotiating premise since Trump left office has essentially been a variation of the ‘keep your friends close but your enemies closer still’ adage and that cutting Iran loose of all compliance and monitoring constraints since 2018 has been counterproductive to the interests of Washington and its allies. Superficially the U.S. has been committed to the restoration of all of the original hard-line clauses that were to have been part of the 2015 JCPOA agreement - fully listed and analysed by OilPrice.com at the beginning of negotiations by President Joe Biden’s team. Both former President, Barack Obama, and his Secretary of State, John Kerry, wanted them included in the original JCPOA but were persuaded to drop them by France and Germany, according to the Tehran source. Under the surface, though, the key clauses that really mattered to the U.S. (and to the U.K., France, and Germany) were those especially designed to guard against Iran’s development of longer-range missiles that could hit either Europe or the U.S. directly. 

In this context, a notable piece of diplomatic theatre was acted out at a crucial juncture in the JCPOA talks, with the creation of a false conflict narrative from the Iranian Parliament Speaker’s Special Aide for the International Affairs, Hossein Amir-Abdollahian, stating that Biden “should not include regional or missile issues in the JCPOA.” The key to this comment, the Iran source told OilPrice.com was that it conflated two separate issues – missiles in general and regional missiles – with the Iranians always prepared to agree to curbs on their longer-range missiles (if not to rigidly stick by their promises on this issue) but always wanting to retain their shorter-range ballistic missiles. “Iran has a major defence deficit in its conventional air capabilities, so it regards the shorter range missiles as essential to its ability to deter an air force-led attack by a neighbour, such as Saudi Arabia,” said the Iran source. “In addition, having such missiles and even the suggestion of access to nuclear resources from its own generation capabilities or North Korea or China allows Iran to act as a major power in the region,” he added. 

The U.S. for its part, said the source, has long been pragmatically accepting of Iran having these shorter-range ballistic missiles, provided they do not threaten Israel. “Washington thinks that the threat of an Iran having very short-range missiles will keep the Saudis more dependent on the U.S. for protection than it would be otherwise and will also continue to generate hundreds of billions of dollars of defence contracts for Washington,” said the Iran source. “Therefore, this statement on regional and missile issues was designed by Iran to be able to claim to its people that the U.S. gave in on Iran keeping its regional missile program, although in reality the U.S. never cared about it, provided that there is no threat to Israel,” he added. 

“This removed one of the major blocks to the re-engagement of the U.S. with a new version of the JCPOA, as Washington had already tentatively agreed to the removal of key sanctions in the oil, gas, petrochemicals and automotive sectors, plus some of those on Iran’s banking sector, provided that clauses relating to Iran’s medium- and long-range ballistic missile program are included in it,” he added. “The removal of the FTO designation on the IRGC and Iran’s ability, therefore, to commit to the FATF, were the last remaining hurdles to the new JCPOA being done, and millions of extra barrels coming into the oil market over time from Iran, which is what Biden desperately needs right now, so the new JCPOA deal should be announced imminently,” he concluded. 

By Simon Watkins for Oilprice.com

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Leave a comment
  • Gary on March 21 2022 said:
    When is the US Senate going to approve the new Iran deal per constitutional law, that Obama circumvented?
  • Mamdouh Salameh on March 21 2022 said:
    Since the start of the Iran nuclear negotiations in Vienna last year, I have been saying time and again that a lifting of US sanctions against Iran will never see the light of day soon or ever unless a new deal on Iran’s own terms is reached.

    The only deal Iran is prepared to accept is one on its own terms meaning a total lifting of sanctions first with no new limitations on its nuclear and ballistic missile development programmes. This the United States egged by Israel can’t accept.

    Iranian negotiators sense that the US is in a hurry to reach a deal so as to focus all its energies on China and the evolving Ukraine conflict and also to get some of Iran’s oil. That is why they are deliberately dragging their feet so as to extract major concessions from the US not only removing the ‘Foreign Terrorist Organisation’ [FTO] designation from the IRGC [Islamic revolutionary Guard Corps but also signing a binding treaty that the United States won’t renege again on the deal.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment




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