The Obama administration is finding itself on the defensive amid rising charges that the U.S. and its allies lowballed the estimate of the billions of dollars Iran will reap from the deal that curbed Tehran’s nuclear programs in exchange for the lifting of punishing economic sanctions.
Iranian President Hassan Rouhani just finished a shopping spree across Europe, and critics fear the nation’s military and hard-line security forces now have the funds to do the same, as Tehran claims to have secured access to “more than $100 billion” from sanctions relief — roughly twice what the Obama administration has long claimed would be the case.
Analysts say the bulk of the cash now freed up for Iran is linked to bank accounts in countries that were Iran’s top oil clients prior to the imposition of sanctions, including India, China, Japan, South Korea and Turkey.
How Iran planned to use its newly freed cash and its ability to cut deals internationally emerged as one of the key sticking points of the Iran deal. Administration officials such as Secretary of State John F. Kerry insisted that the deal’s critics were vastly overstating the boost to Iran’s economy and government coffers, and argued that Tehran would target any influx of cash first to its battered economy and crumbling infrastructure rather than to military hardware or the financing of proxies such as Hamas and Hezbollah abroad.
Political bickering over the exact dollar figure had appeared to fade recently in Washington. But it surged back into the limelight this week when Iranian media quoted Mohammad Bager Nobakht, a government spokesman, as saying the assets frozen by the sanctions “have fully been released and we can use them.”
While Iran’s state-run Press TV said the bulk of the money won’t actually be sent home to domestic banks but used for purchases and investments abroad, the figure cited in the report prompted a wave of hand-wringing in Washington.
By Monday night, sparks were flying between journalists and the Obama administration over just what the correct figures were.
Wall Street Journal reporter Jay Solomon sparked an online back-and-forth when he tweeted: “Iran claims it now has access to [$100 billion] in frozen oil revenues under #IranDeal; @WhiteHouse said it would be $50 billion.”
Less than three minutes later, Marie Harf, a senior adviser to Mr. Kerry, hit back with a tweet of her own: “Important clarification — it was experts at @USTreasury Dept who did the math & determined how much $ Iran would actually get.”
That prompted David Rothkopf, the CEO of the company that publishes Foreign Policy magazine, to jump into the fray, tweeting, “Is that really an important clarification? Isn’t Treasury part of the administration? Weird distinction.”
That’s just the word one U.S. official used when pressed about the situation by The Washington Times. “It was never our intention to be in this weird back and forth over” the exact amount the Iranians would get from sanctions relief, said the official, who spoke on condition of anonymity.
“The bottom line is Iran has resources,” the official said. “We know they’ve spent money to fund terrorism. They’re a state sponsor of terrorism, and no one’s talking about taking them off that list. This talk about the money misses the bigger point, which is about Iran’s nuclear program and how the nuclear deal will prevent them from getting a nuclear weapon.
“This is just a number that our Treasury folks came up with when they looked at this and said, ‘This is what we think what they could realistically have access to under sanctions relief.’”
Publicly, however, the administration has refused to back away from its earlier estimates.
State Department spokesman John Kirby on Tuesday stood by the claim that the grand total Iran would “have access to is just a little bit more than $50 billion,” the same estimate the Obama administration was offering in the weeks after the deal was reached in July. Republicans in Congress and private critics of the deal said at the time that, as oil and other economic and financial sanctions came down, Iran stood to reap up to three times that figure.
Treasury Secretary Jack Lew testified to the House Committee on Foreign Affairs that some $115 billion in frozen Iranian assets would be “theoretically available” under sanctions relief, but that Iran would only have access to $56 billion because most of the money was tied up in unpaid debts around the world.
“Over $20 billion is committed to projects with China where it cannot be spent, and tens of billions in additional funds are in nonperforming loans to Iran’s energy and banking sector,” said Mr. Lew, who called on lawmakers to “be measured and realistic in understanding what sanctions relief will really mean to Iran.”
“I am not going to say $56 billion is not a lot of money, but it’s not $150 billion, and it cannot be all used because they need to keep some foreign reserves to run their economy,” he said. “If you look at the demands in Iran’s economy for the use of that money, we see at least $500 billion of competing demands for that $50 billion.”
Mr. Lew also noted that Iran had managed — even with sanctions in place — to put several million dollars a year to underwrite shady foreign groups.
“We can’t say that there won’t be any more money going toward malign purposes,” he said. “But in order of magnitude, [it] is way, way smaller, and it’s in line with the kinds of spending they have been doing anyway.”
However, neither Mr. Lew nor Mr. Kerry has ever offered a clear explanation of how the $56 billion number got calculated — or what specific “projects with China” and other debts would actually block funds from being released to Tehran.
The numbers debate comes as Mr. Rouhani and his aides are inking new deals or reviving old trading partnership with countries seemingly on a daily basis, with countries from Japan and China to many EU nations making the pilgrimage to Tehran to talk about billion-dollar deals now that sanctions have been lifted.
When Chinese President Xi Jinping visited the Iranian capital last month, for example, the two nations announced the signing of 17 separate accords — including on cooperation in nuclear energy — that President Rouhani declared could increase bilateral trade “to $600 billion in the next 10 years.”
That came just before Mr. Rouhani prepared for a milestone visit of his own to Italy and France, where Iranian officials inked a deal with the European aircraft giant Airbus to buy 114 planes for the state carrier Iran Air, with a potential price tag of over $10 billion.
Italian officials said that Mr. Rouhani’s 120-member trade delegation of government ministers and private businesses was slated to sign deals valued at some $18.4 billion, in sectors ranging from steel and shipbuilding to oil and infrastructure development.
The truck division of the German automaker Daimler has also signed letters of intent to create two joint ventures with Iran Khodro, the biggest car manufacturer in the Middle East, for a “comprehensive re-entry” into the Iranian market.
On a separate front, Iran’s oil minister has said the nation hopes to boost production by at least 500,000 barrels a day in a bid to reclaim export markets that had been blocked by sanctions — with a specific focus on wooing buyers in markets such as India and China through aggressive pricing and more generous buyback terms.
Iranian state media has reported this week that money is now beginning to flow in from banks in those two nations, as well as others that had been blocked by sanctions from wiring payments to Tehran for oil already provided by the Iranians.
“To move the money back home, Iran had to use international banks but they were unable to process Iranian transactions since the country was cut off from the SWIFT financial-transactions system,” the Iranian news agency Press TV reported on Monday.
The report cited Valiollah Seif, the governor of the Central Bank of Iran, as saying that nine more Iranian banks were to have re-connected to the SWIFT as of the beginning of this week.