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The Dollar Value of the Proposed Sanctions Relief at Geneva

Mark Dubowitz
9th November 2013 - FDD Policy Brief

The P5+1 is negotiating an interim nuclear deal with Iran to freeze in place its illicit nuclear program. Based on open source reporting, and an analysis by the Foundation for Defense of Democracies, the proposed sanctions relief could yield Iran $20 billion or more through the repatriation of frozen Iranian assets, gold transfers to Iran in exchange for its oil and natural gas sales, petrochemicals exports, and the lifting of sanctions on the Iranian auto sector.

Financial Relief: The Obama administration has offered what it has described as “very limited, temporary, reversible sanctions relief.” This is a one-time repatriation of Iranian assets that have been trapped overseas as a result of financial sanctions. Reportedly, the proposed Geneva deal could include an offer to release $3 billion of these assets back to Iran. Other non-public sources indicated that the P5+1 is contemplating the release of trapped oil funds valued at over $50 billion, through installment payments that could add significantly to this amount.

Gold Sanctions Relief: The deal on the table reportedly affords Iran the ability to resume the export of precious metals. Based on trade data compiled by Foundation for Defense of Democracies and Roubini Global Economics, gold imports from Turkey to Iran in 2012 reached as high as $1.6 billion per month. Using this figure as a guide, if gold sanctions relief is given for six months in the period leading up a possible final nuclear agreement, Iran has the potential to pocket at least $9.6 billion in gold sales.

Petrochemical Sanctions Relief: According to a recent Business Monitor International report, Iran exported $11.2 billion last year in petrochemical products exports and projects an increase of another $1 billion next year. If petrochemical sanctions relief is provided, using these numbers as a guide, Iran could enjoy a windfall of $5-6 billion over six months.

Automotive Sanctions Relief: Under U.S. sanctions since June 2013, Iran’s auto sector is inextricably linked to Iran's nuclear program because of its involvement with the Islamic Revolutionary Guard Corps and Iran’s procurement networks and sanctions evasion. Iranian industry minister Mohammadreza Nematzadeh has said that Iran seeks to produce 900,000 cars this Iranian calendar year. If Iran were able to produce and sell only half of their desired annual total, they would generate approximately $1.4 billion in revenue, not including the indirect economic benefits from what has been Iran's second-largest employer after the energy sector and, which before sanctions, accounted for about 10 percent of Iran's GDP. 

Conclusion: Iran currently has approximately $80 billion in foreign exchange reserves. Of those funds, $10 billion is frozen, $20 billion is fully accessible, and $50 billion is only semi-accessible for barter trade in escrow accounts in China, India, Japan, South Korea, and Turkey.  A deal that offers $3 billion in cash, plus another $16-17 billion, totaling $20 billion in sanctions relief, would give a staggering 25 percent boost to Iran’s total foreign exchange reserves, bringing that number up to $100 billion. It would also constitute a doubling of the amount of fully accessible foreign exchange reserves currently available, from $20 to $40 billion. If the P5+1 went further and released trapped oil funds valued at over $50 billion, through installment payments, this would increase Iran’s fully accessible reserves from $20 billion to $70 billion.

A massive sanctions relief windfall of $20 billion or even more, granted in exchange for reversible nuclear concessions that do little to dismantle Iran’s military-nuclear infrastructure, is exactly what Iran would need to relieve the pressure from sanctions and enhance its negotiating leverage in the run up to any final agreement.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies.

Tags

iran, sanctions