How to Kick-Start Nuclear Negotiations With Iran (Again)

A single administrative act could put the Trump administration on a path toward a new nuclear deal with Tehran.

Iranian President Hassan Rouhani awards Foreign Minister Mohammad Javad Zarif with the Medal of Honour for his role in the implementation of a nuclear deal with world powers, on Feb. 8, 2016, in Tehran.
Iranian President Hassan Rouhani awards Foreign Minister Mohammad Javad Zarif with the Medal of Honour for his role in the implementation of a nuclear deal with world powers, on Feb. 8, 2016, in Tehran. ATTA KENARE/AFP/Getty Images

In a speech last week, Iranian President Hassan Rouhani declared Iran’s willingness to engage in talks with the United States, so long as the Trump administration showed some movement on sanctions first: “We have always believed in talks … if they lift sanctions, end the imposed economic pressure and return to the deal, we are ready to hold talks with America today, right now and anywhere.” Over the past few months, U.S. President Donald Trump has repeatedly insisted that he too is ready for talks, though members of his administration have sought to place conditions on the offer.

With drones being shot down, tankers being seized, and spy rings being exposed, the calls for diplomacy are more urgent than at any point since Trump’s decertification of the Iran nuclear deal in October 2017. Trump is facing down a war he likely does not want. If he is serious about getting a new deal, his offer for talks should begin a single administrative act—restoring the significant reduction exemption (SRE) oil waivers his administration revoked in May of this year.

While far from the reentry to the Joint Comprehensive Plan of Action (JCPOA) that Iranians have demanded as a precondition for new talks, the move to restore sanctions waivers that permit purchases of Iranian oil could prove the meaningful yet measured gesture that gets both sides to the negotiating table while also removing the key justification for Iran’s moves to assert control over tanker traffic in the Strait of Hormuz. The SRE waivers could be restored for a period of three months and made subject to further renewal on the condition that Iran enters into formal negotiations with the United States within a declared time frame.

While the Trump administration will be wary of appearing weak prior to new talks, restoring the waivers would not constitute a major concession. By design, the SRE waivers, which had been provided to eight of Iran’s oil customers when oil sanctions were reimposed in November 2018, place significant limitations on Iran’s access and use of oil revenues. Payments for oil sales are deposited in tightly controlled escrow accounts usually at a single nominated bank in each country. Those funds can be used only for bilateral trade in sanctions-exempt goods, meaning that proceeds are mostly used to pay for imports of food and medicine. Under this system, Iran cannot repatriate its foreign exchange earnings to fund government expenditures. In short, restoring the waivers would result in no immediate economic benefit for Iran.

However, Iran would likely welcome the gesture despite the minimal economic reward. The restoration of the waivers would help Iran retain its vital share of the global oil market. The longer that Iran’s fails to export any oil to long-standing customers like India, Turkey, and South Korea, the less likely it is that those countries will resume imports at former levels if sanctions are eventually lifted as part of a new deal with the Trump administration. Restoring the waivers therefore preserves an important future incentive that can be realized only through successful negotiations.

Of course, incentives are only as attractive as they are credible. Iranian and European officials harbor doubts about the Trump administration’s ability to provide sanctions relief in the context of new negotiations. There is a perception that the institutional machinery in Washington is deeply invested in the maximum pressure campaign, even if Trump’s instinct is to strike a deal. Indeed, some sanctions proponents have called for Trump to erect a “sanctions wall” that would “deter foreign financial institutions and companies from returning to the Iranian market by weaponizing both fear and doubt,” even in the aftermath of a new deal.

Restoring the oil waivers would allow those figures in the Trump administration genuinely interested in forging a new deal to prove that they retain the institutional capacity to act on the president’s instincts for diplomacy and roll back the maximum pressure campaign. Political leaders in Europe and Iran have been closely following reports of internal debates between government agencies about the wisdom of some of the recent sanctions designations, such as the designation of the Islamic Revolutionary Guard Corps as a terrorist organization and the revocation of key waivers for civil nuclear cooperation mandated by the JCPOA. Concerningly, the pragmatists who wish to ensure that sanctions are tied to clear policy goals and not merely used to add pressure for its own sake have consistently lost these debates.

In the context of these debates, Abbas Araghchi, Iran’s deputy foreign minister, and Emmanuel Bonne, a foreign-policy advisor to French President Emmanuel Macron, recently discussed the importance of a cease-fire in the Trump administration’s economic war on Iran during a meeting in Tehran. Helpfully, Iranian officials have suggested that a first phase of such a cease-fire could focus on enabling Iran to resume its oil exports. Restoring the oil waivers would help demonstrate that the pragmatists in the Trump administration are capable of providing sanctions relief, giving Iranians greater confidence that their concessions will be reciprocated in the course of any negotiations.

Finally, the restoration of the oil waivers would also help the Trump administration win back the trust and cooperation of the international community. While any new negotiations will necessarily focus on the U.S.-Iran relationship, it would nonetheless behoove the Trump administration to signal a renewed commitment to multilateralism as it seeks to address insecurity in the Middle East. For example, by issuing oil waivers, the Trump administration would alleviate the rising tensions in the Persian Gulf—which have threatened to spill over into a conflict with global consequences. Iran is seizing tankers because it feels that all of its own tankers have been captured by the net of U.S. oil sanctions.

The Trump administration has sought to create a multilateral force to escort tankers through the strait. But unless matched with some accommodation to enable Iran to resume its own exports at meaningful volumes, such a deployment would essentially act as a military blockade, significantly increasing tensions in the Persian Gulf even further. The United States is much more likely to get its European allies on board with such a plan to restore security in the strait if Iran is also allowed to sell its oil as permitted under EU and international law.

Restoring the waivers would also have the added benefit of bringing China, which has continued importing Iranian oil, back in line with U.S. policy. Trump administration officials have reportedly weighed whether issuing a waiver would be preferable to China’s overt defiance of U.S. sanctions.

Iran has talked about reentry into the JCPOA as a requirement for new negotiations. But the dynamics of the Trump administration are such that deal supporters in both Europe and Iran are best positioned to make the case for the basic sufficiency of the nuclear deal in the context of direct negotiations between the United States and Iran. The pageantry of talks can be used to play into Trump’s desire to put his name on a new deal, even if it looks a lot like the JCPOA. A little movement on oil sales could be all it takes to give diplomacy a second chance.

Esfandyar Batmanghelidj is the founder of the economic think tank Bourse & Bazaar. Twitter: @yarbatman