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Iran's Deal of the Century

A deal that undermines sanctions and doesn't stop a future with Iranian nuclear weapons

Sunday, Nov 10, 2013

A deal that undermines sanctions and doesn't stop a future with Iranian nuclear weapons is the deal of the century for Iran.

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According to multiple news reports, the P5+1 offered the following sanctions relief to Iran during the latest round of negotiations: repatriation of $3 billion in Iranian assets trapped in accounts overseas, in addition to the suspension of current sanctions with respect to precious metals (like gold), Iran’s petrochemical and car industries, and aviation parts.

From an analysis conducted by the non-partisan Foundation for Defense of Democracies:

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. During a seven-month period in 2012, before the sanctions were imposed, Iran exported approximately $1.4 billion from its auto industry. Thus, if the administration provides automotive sanctions relief, this could be worth approximately $1.3 billion over a six-month period.

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.

According to multiple news reports, the proposal offered in Geneva would allow Iran to continue manufacturing centrifuges, allow Iran to continue working on the Arak heavy water reactor, and limit Iranian uranium enrichment to 3.5% utilizing 9,000 centrifuges. News reports indicate the Arak heavy water reactor is not scheduled to come online until mid-2014 at the earliest. In addition, the following data was provided by the non-partisan Institute for Science and International Security:

The Enrichment of Uranium: Based on Iran’s current rate of production, 9,000 IR-1 centrifuges would produce 1,380kg of 3.5% enriched uranium over a six-month period. Roughly 1,500kg of 3.5% enriched uranium is needed to produce one nuclear weapon.

The Centrifuges: If Iran manufactures IR-1 centrifuges at its current installation rate of 500 centrifuges per month, Iran would manufacture 3,000 centrifuges over a six-month period. If Iran adds 3,000 centrifuges to the 19,000 already installed, Iran’s nuclear breakout timeline would shorten by 16%.

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