Moscow makes last-minute demands as Tehran promises to boost oil production and market shuns Russian crude.
March 5, 2022 11:36 pm
VIENNA — Moscow is throwing up last-minute demands that could scupper an international nuclear deal with Iran — and the timing is unlikely to be coincidental as the Kremlin frets about the growing threat to its critical oil revenue after its invasion of Ukraine.
Hopes had been high that international negotiators from the permanent five members of the U.N. Security Council, Germany and the EU would be able to secure a deal with Tehran on Saturday to put strict limits on Iran’s atomic work in exchange for sanctions relief for the Islamic Republic.
Such a deal would bring significant volumes of Iranian crude oil back to global energy markets in the months ahead, and that could spell trouble for Russian President Vladimir Putin. The return of Iranian supplies would help offset market turmoil and price spikes if the West were to ramp up its sanctions against Moscow over the war in Ukraine and ban Russian crude sales.
Oil sales are critical to Russia’s budget. Although Western countries have not yet directly targeted oil and gas, they have said they are prepared to do so and many oil traders have already started imposing an effective embargo.
At the Iran talks, Russia is demanding guarantees from the U.S. that the sanctions targeting the Kremlin over its invasion of Ukraine would not hinder its trade with Iran.
This fresh demand, which one Western senior official called a potential “trap,” could up-end negotiations aimed at securing a return to a 2015 accord on Iran’s atomic work. It has created yet another twist in a long-running saga that has seen the nuclear talks nearly fall apart over and over.
Russia would play an important role in implementing a renewed Iran agreement, which negotiators say they are close to achieving after 11 months of talks. The plan would be for Moscow to ship excess enriched uranium out of Iran to Russia and support the conversion of Iran’s Fordow nuclear plant into a research facility, among other things.
But with the international community moving to economically sever ties with Russia following its assault on Ukraine, Moscow says it wants assurances that it will still be able to benefit from a revived Iran accord. “We have asked for a written guarantee … that the current process triggered by the United States does not in any way damage our right to free and full trade, economic and investment cooperation and military-technical cooperation with the Islamic Republic,” Russian Foreign Minister Sergey Lavrov said on Saturday.
The question is whether Moscow is actually demanding protection from sanctions in order to fulfill its key role in implementing a restored nuclear deal, or if it’s a ploy to demand broader sanctions relief, officials said. Western officials appeared to still be scrambling to understand which one of the two scenarios was at play.
“If they stretch the domain of sanctions exceptions, we will get a political and not a technical problem, and that could be lethal for the agreement,” the senior official said.
Another senior Western official said that if Russia’s demands went beyond sanctions waivers to fulfill the role in implementing a restored nuclear deal, they could potentially “take hostage the entire agreement and put at risk their relationship with China.” Beijing is already importing significant amounts of Iranian oil and will do even more so under a restored nuclear accord.
The U.S. State Department said sanctions over Ukraine are “unrelated” to the Joint Comprehensive Plan of Action (JCPOA), as the Iran deal is formally known. “The new Russia-related sanctions are unrelated to the JCPOA and should not have any impact on its potential implementation,” a U.S. State Department spokesperson said. “We continue to engage with Russia on a return to full implementation of the JCPOA. Russia shares a common interest in ensuring Iran never acquires a nuclear weapon.”
The threat of additional Ukraine-related sanctions already is having an impact on Russian’s oil revenue. Almost three-quarters of Russian crude trade is frozen in the wake of the Ukraine invasion, Bloomberg reported, citing consultant Energy Aspects. Russia has been exporting about 5 million barrels a day, equal to about 5 percent of global consumption, it said. Iran, meanwhile, has ambitions of supplying well over 2 million barrels per day.
“It’s hard to say whether this is a technical hiccup or a political pivot,” said Ali Vaez, Iran Project Director at the International Crisis Group. “The JCPOA’s collapse is not in Russia’s medium to long-term interest, even if in the short-run it might help keep the global energy prices up as a means of imposing pressure on the West,” Vaez said.
“As soon as nuclear negotiations in Vienna are concluded, we can reach our maximum oil production capacity in less than one or two months,” Iran’s oil minister, Javad Owji, said on Thursday, according to a Reuters report citing SHANA, the official oil ministry news agency. Iran produced 2.4 million barrels per day on average in 2021, and plans to increase that to 3.8 million barrels if restrictions are lifted.
Europe and the U.S. were beginning to worry about soaring oil prices as a result of Russia’s incursion against Ukraine. Iran analyst Henry Rome at the Eurasia Group argues that “the war puts intense pressure on Western policymakers to secure a deal that brings more Iranian oil onto the market to temper high oil prices and potential further sanctions and disruptions.” The calculation is that a revived Iran deal could help to stabilize the energy market, analysts say.
In recent days, Western officials have said negotiators were within reach of an agreement, insisting only a few outstanding issues needed to be resolved. Among the outstanding issues are the scope of sanctions relief, including Iran’s demand that the Islamic Revolutionary Guard Corps be taken off Washington’s terror sanctions list.
“We are very close to an agreement,” said British chief negotiator Stephanie Al-Qaq on Twitter before departing to London for what appeared to be final consultations. “Now we have to take a few final steps.”
Negotiations had advanced to such a stage that preparations to close the deal were even visible outside Palais Coburg, the main venue of the talks in Vienna. Police have begun to erect additional barricades around the luxury hotel in preparation for a meeting of ministers from Russia, China, Iran, Britain, Germany and France. Invitations were even sent out more than a week ago in anticipation of a formal adoption of a restored deal at ministerial level; that meeting is now postponed.
Western negotiators have warned over the past few months that Iran was only weeks away from having enough fissile material for one nuclear weapon. They argued that time was running out for a successful conclusion of the talks as Iran’s nuclear advances were eroding the very basis of the JCPOA.
Underscoring this point, the International Atomic Energy Agency (IAEA) said in its latest confidential quarterly report circulated on March 3 to member states and seen by POLITICO, that Iran had doubled its amount of 60 percent enriched material. That’s “a hair’s breadth away” from weapons grade, Eurasia Group’s Rome wrote in a note.
The Russian invasion of Ukraine also loomed large over the final days of the negotiations with officials emphasizing the need to quickly seal the deal as they were beginning to scramble with the fallout of this aggression on European territory.
While diplomats were able to shield the sensitive talks from global developments during the past eleven months, the recent scale of the Russian aggression in Ukraine made close interaction between Russia’s chief negotiator Mikhail Ulyanov and U.S. Special Envoy for Iran Robert Malley more difficult by the hour.
Meanwhile, Iran agreed to provide the IAEA with documents that will answer questions into its past nuclear weapons program, potentially removing a major hurdle for the restoration of the nuclear deal. That agreement was reached on Saturday during a visit by IAEA Director General Rafael Grossi to Tehran.
In a joint statement, Grossi and Iran’s nuclear chief Mohammad Eslami said they agreed to “accelerate and strengthen their cooperation and dialogue aimed at the resolution of the issues” with the aim of concluding the probe by June, when Grossi will report to the IAEA Board of Governors.
Iran had demanded that the probe into the past nuclear weapons program be closed once and for all as a precondition for Tehran returning to the 2015 nuclear deal. The investigation by the UN nuclear watchdog looks into the origin of decades-old uranium traces found by IAEA inspectors inside Iran at several undeclared sites in 2019 and 2020.
Upon his return from Tehran on Saturday evening, Grossi told reporters at Vienna airport that “there is no artificial deadline, there is no pre-defined outcome,” highlighting that the IAEA would continue to press Iran on those questions also beyond the June deadline should Tehran’s answers be inconclusive.
The IAEA has thought for some time that the undeclared sites could have been active in the early 2000s and insisted that it needed credible answers from Iran on the origin of the traces. The traces were found by inspectors on the ground after the IAEA reviewed intelligence material stolen by Israeli Mossad agents in a high-risk operation inside Iran in 2018.
The Joint Comprehensive Plan of Action was originally agreed upon in Vienna in 2015 by the five permanent members of the U.N. Security Council – the U.S., Britain, France, Russia and China – plus Germany. The European Union acted as mediator and coordinator of the talks.
Former U.S. President Donald Trump withdrew the U.S. from the agreement in 2018 and re-imposed nuclear-related sanctions along with new ones related to terrorism and human-rights abuses. In response, Iran began to incrementally ramp up its nuclear program beyond the limits of the JCPOA. Iran insists that its nuclear program is entirely for peaceful purposes.
Nahal Toosi contributed reporting.