June 25, 2012

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TSG IntelBrief: Iran Nuclear Talks: Taking Stock After Three Rounds of Negotiations

As of late June 2012, Iran and the six party negotiating group ("P5+1": United States, Russia, China, France, Britain, and Germany) have completed three rounds of talks since April 2012, with each round having been held in countries considered to be understanding of Iran's arguments and positions (the first round took place in Istanbul in April and the second in Baghdad in late May). The third and latest round, held June 18-19 in Moscow, delved deeply into the substance of each side's positions. At the conclusion of this latest gathering, the parties announced that technical teams would further discuss the parties' respective positions in Istanbul on July 3rd. The announcement also added that, following the technical talks, Catherine Ashton, EU chief negotiator, and Seyed Jalilli, the lead negotiator representing Tehran, would assess whether enough progress was made to justify a fourth round of high-level talks.

Although the three rounds have failed to reach agreement on even a bare bones framework to resolve the dispute over Iran's nuclear program, the most pessimistic assessments of the talks are likely overstated. First and foremost, the negotiating process is continuing. Those who expected a quick, comprehensive deal on an issue that has consumed the international community for nearly ten years were, by most accounts, wildly optimistic. More sober analysts forecast a slow-moving process that, given the stakes and Iran's unquestionably frustrating negotiating style, would take many months and involve numerous setbacks along the way. The Moscow outcome, in many ways, fits that forecast.

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Status of the Process

At the conclusion of the Moscow round, EU chief negotiator Ashton summarized the three rounds of talks by stating that "…it remains clear that there are significant gaps between the substance of the two positions."" The P5+1 have boiled their demands down to a three-word phrase: Stop, Shut, and Ship.

• "Stop" alludes to the demand for Iran to stop enriching uranium to 20% purity.
• "Shut" refers to a shut down the Fordow enrichment facility, where Iran is enriching some uranium to 20%. The facility is tunneled into the mountains near Qom and has concerned Israel as being invulnerable from aerial attack.
• "Ship" is a reference to the P5+1 plan to have the approximately 300 pounds of 20% enriched uranium Iran has already produced shipped out of the country.

According to the accounts of many observers during the three rounds of talks, Iran has indicated a willingness, in principle, to stop enriching uranium to 20% as part of an agreement. In contrast, it has refused to shut down the Fordow facility, even though in a presentation delivered during this last round of talks Iran suggested an acceptance of a greater degree of inspections at Fordow or other technical means to confirm that it is not enriching to 20% at the site. It is unclear whether Iran has yet agreed to ship out its existing stockpile of 20% enriched uranium, although most observers believe Iran has accepted this point in principle.

All accounts from the Moscow talks indicate the P5+1 held fast to their earlier offer of providing — in exchange for Iran's compliance with the above points — technical safety assistance for Iran's civilian nuclear reactors, medical isotopes (which Iran claims it is using the 20% enriched uranium to produce), and spare parts for civilian passenger planes. It is unclear, however, if the P5+1 also indicated a willingness to suspend an EU directive, which takes effect July 1st, that prohibits insurance for any ships carrying Iranian oil. EU-based firms provide insurance for a majority of the world's shipping capacity, and this directive would thus further cripple Iran's ability to export oil. Even if that was offered, it would not have met Iran's most crucial demand — a suspension or outright revocation of the EU embargo on purchases of Iranian oil — also scheduled to take full effect July 1st. Nor were the P5+1 willing to affirm Iran's "inalienable right" to enrich uranium, another core Iranian demand during the first three rounds of talks.

Tehran argues that the Moscow talks failed to yield a breakthrough because the P5+1 were unwilling to meet its core demands for sanctions relief. In turn, the P5+1 allege that Iran is in violation of several U.N. Security Council resolutions and is obligated to prove that its nuclear program is for purely peaceful purposes before achieving any major sanctions relief.

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Way Forward          

Analysts who tend toward the pessimistic end of the spectrum argue that the Moscow agreement to continue talks at the technical level constituted a face-saving measure that avoided declaring the talks an overarching failure, and that the process will nonetheless inevitably lead to that result in short order. The more optimistic interpretation, and one that is more likely, is that the technical talks will set lower expectations for the process over the next few months. Iran's agreement to hold technical talks suggests that its rationale for entering this process remains valid: Iran needs an agreement not only to avoid Israeli or U.S. military action, but also to obtain relief from the ever increasing and progressively damaging international sanctions. Further, the parameters of an eventual deal seem clear as well: in exchange for an end to the EU oil embargo, Iran must halt all 20% enrichment, ship out its existing 20% stockpile, and allow for the close monitoring of the Fordow facility. Still, despite clarity over the required framework, the two sides have thus far been unable to negotiate an agreement on these key points after three rounds of talks.

It is likely that both sides are engaging in brinkmanship. In refusing to accept the P5+1 offers in Moscow, Iran is calculating it can withstand the full brunt of the impending EU oil embargo that takes effect July 1st — two days before the round of technical talks in Istanbul. Iran anticipates that if it can at least temporarily withstand the impact of the embargo, the P5+1 position will demand less of Iran in the coming months than it now does. The P5+1, for its part, is anticipating that the EU oil embargo — when combined with the reduced purchases agreed to by Japan, South Korea, India, Turkey, and other Asian buyers (with the exception of China) — will so devastate Iran's financial standing that Tehran will be forced to return to the bargaining table with a more flexible negotiating position. This latter result is the most likely outcome, because Iran is increasingly being forced to choose between its nuclear program, as it is, and a functional and viable economy. Despite Iranian President Mahmoud Ahmadinejad's assertions to the contrary, Iran's economy cannot indefinitely withstand such an enormous loss of oil exports (already about 40% lower than 2011 rates).

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