Policy Brief on U.S. Diplomacy with Iran

News reports are proliferating about ongoing indirect talks between the United States and Iran, brokered by American partners in the Middle East, such as Oman. The diplomatic arrangement being contemplated would, importantly, not be a revived Joint Comprehensive Plan of Action (JCPOA) of 2015. Attempts to resuscitate that accord failed after nearly two years of negotiations, while Iran continued the relentless escalation of its nuclear program.

This paper analyzes the current state of play in these indirect discussions, while identifying the weaknesses of the process and the potential pitfalls ahead.

What Product Is Being Negotiated? What Are Its Risks?

Hostages and Iraqi Debts

The broad contours of the diplomacy underway involves a release of the U.S. hostages in Iran, in exchange for Washington greenlighting the release of $7 billion in Iranian assets trapped in South Korean banks and releasing an unknown number of Iranians in U.S. prisons. Three American citizens are currently in prison in Iran: Emad Sharghi, Siamak Namazi, and Morad Tahbaz. A fourth U.S. permanent resident, Shahab Dalili, is also being held. Considering the demands of the Iranian establishment, U.S. negotiators would be wise to insist that all four men be released. Then there is the need to free European nationals as well. According to some estimates by European officials, more than 30 European citizens continue to languish in Iranian jails.

Iranian assets released by Korean banks would reportedly be reserved for humanitarian purposes only. According to the Washington Post, that would be structured via “an arrangement initially authorized by the Trump administration that allowed for purchases of Iranian oil, as long as payments were deposited in banks to which Iran had no access.” The potential transactions could utilize the Swiss Humanitarian Trade Arrangement.

Such a mechanism is likely being contemplated due to the precedent established in 2016, when American hostages were released from Tehran and $400 million in cash was flown to their Iranian captors, the first installment of a $1.7 billion settlement the Obama Administration reached with Iran over a payment for military parts dating back to the Pahlavi monarchy. The U.S. government is also likely eyeing the deal Iran reached with Britain over the release of Nazanin Zaghari-Ratcliffe and Anoosheh Ashoori, which conditioned repayment of the IMS debt (one over arms to pre-revolutionary Iran) as long as it was “ring-fenced solely for the purchase of humanitarian goods.”

The Biden administration will argue that the deal will deter Iran from taking more hostages. Earmarking the funds solely for humanitarian purposes will prevent the Iranian security establishment from profiting—differentiating it from the 2016 deal. However, questions remain over the safeguards necessary to prevent Iranian diversion, not to mention the impression this type of exchange makes on Tehran. In 2016, the Islamic Republic released four Americans in exchange for a $1.7 billion debt settlement, with a fifth American separately freed. Fast forward to 2023, and Iran would be poised to release three Americans—and potentially four if Dalili or another unknown hostage is included—in exchange for $7 billion in unfrozen assets. The amount of money being released represents a huge increase in the demands made by Iran for the freedom of American hostages, irrespective of the humanitarian conditions attached. That risks emboldening Tehran to take more U.S. hostages. There is a precedent for releasing U.S. hostages from Iran without releasing Iranian funds. That happened during the Trump administration when Xiyue Wang and Michael White were freed from Iran as a part of a prisoner swap.

As a part of this process, there has already been a generous U.S. sanctions waiver issued to allow Iraq, to pay $2.7 billion for Iranian electricity and gas. It is true that the U.S. government has issued such waivers over the course of Democratic and Republican administrations and that the money is technically reserved for basic goods, Haj pilgrims, and partially for repayment of a debt to Turkmenistan. However, the most recent waiver had unusual features, including being paid in Euros, not local currencies as was the case in the past. Also, the amount transferred was much larger than previous iterations. For example, in March 2023, the sanctions waiver was worth $500 million. Additionally, entities that may be involved in the sanctions waivers have checkered histories and links to the Islamic Revolutionary Guard Corps (IRGC), like the Commercial Bank of Iraq. That is why understanding whether the Biden administration, before issuing the sanctions waiver, conducted an interagency examination as to the risk of diversion of such debts to the IRGC is important.

Nuclear and Non-Nuclear

The U.S. government likely views the release of American hostages as an opening gambit for further “de-escalation.” The leaks from the indirect negotiations outline an arrangement where Iran would cap its nuclear enrichment at 60 percent purity, which would then be down-blended to at least 20 percent purity to prevent any accumulation; halt any further installation and operation of advanced centrifuges; enhance cooperation with the International Atomic Energy Agency (IAEA); pause lethal attacks on U.S. forces in Iraq and Syria; and agree not to transfer ballistic missiles to Russia, although some reports indicate the arrangement includes drones as well.

In return, Iran expects the unfreezing of billions more dollars of Iranian assets, which would be officially ring-fenced for humanitarian purposes; Washington to refrain from tightening sanctions and seizing oil tankers; and not pursuing nuclear-related resolutions against the Islamic Republic at the United Nations and the IAEA.

It is important to underscore that this understanding is not the JCPOA. It appears to incorporate some lessons learned from that failed diplomatic endeavor and notably includes both nuclear and non-nuclear elements. For years, the central thesis of U.S. negotiators was that putting Iran’s nuclear program in a box would make it easier to tackle the panoply of non-nuclear threats the Islamic Republic posed to the international community. The fact that the current negotiation is not strictly focused on the nuclear file is an admission that it is impossible to have a durable diplomatic agreement with Iran without addressing non-nuclear concerns—hence the inclusion of issues like Iran’s arming of Russia and strikes on American forces in the Middle East.  United Against Nuclear Iran (UANI) has been preaching this reality for years and, if the negotiations reporting is accurate, it represents a paradigm shift in U.S. diplomatic strategy.

Nevertheless, the terms raise many concerns. First, Iranian decision-makers have witnessed the slow-motion collapse of the international negotiating position on the Islamic Republic’s nuclear program. Before 2013, U.S. and Europe insisted on zero enrichment. In fact, it was enshrined in U.N. Security Council resolutions. Specifically, U.N. Security Council Resolution 1696 (2006) “demands…that Iran shall suspend all enrichment-related and reprocessing activities, including research and development.” Fast forward to 2023, and U.S. diplomats are considering an agreement that risks legitimizing 60 percent enrichment, despite Iran having no credible civilian need for enrichment at this level. The E3 has called it “unprecedented and extremely grave.” But there is a risk that Tehran interprets these warnings as hollow, thus undermining deterrence and the non-proliferation regime.

Second, questions also surround the non-nuclear elements of this understanding.  For example, what happens if the Islamic Republic disclaims responsibility for an attack by one of its proxies or partners on U.S. forces in Iraq and Syria? Also, will attacks on U.S. persons be deemed acceptable in countries other than Iraq and Syria? What about the attempted assassinations of American citizens on U.S. soil? Moreover, is the U.S. government confident that diplomacy with Iran’s deputy foreign minister in Oman, who has no authority over Tehran’s regional policies, will be binding on the IRGC and has the supreme leader assented to this provision? How will it be policed? Lastly, how will Iran’s arms transfers to Moscow be monitored, and is it only limited to missiles or drones as well? What about the ammunition and technical expertise Tehran has been providing Moscow?

Some observers may argue that the sultan of Oman’s visit to Tehran, where he met with the supreme leader, indicates that these diplomatic elements have his blessing. However, this assumption is made without the IRGC playing a visible role in these discussions. Tehran will certainly continue to escalate and push the envelope in other theaters not nominally covered by any understanding, while Washington appears anxious to de-escalate. This dynamic could be seen when the Islamic Republic’s naval forces recently attempted to seize two tankers and fired on one managed by U.S. oil company Chevron.

Third, U.S. officials appear quite concerned about releasing assets to Iran without any strings attached. The JCPOA included billions of dollars-worth of sanctions relief without controls on how those funds could be spent. These provisions were subject to immense bipartisan criticism, which ultimately led to the JCPOA’s unraveling. The 2023 diplomacy is attempting to install some safeguards. That should be welcome news. But money is fungible, and the relief provided to the Islamic Republic for humanitarian transactions may free up other assets for furthering its defense and repressive security apparatus. U.S. policymakers should be made to explain the U.S. strategy and how the protections built into this arrangement will ensure that any released assets will not be diverted to the IRGC or other problematic actors.

Fourth, reports about Iran’s demands in these negotiations have been vague. There are suggestions that Iran expects the U.S. to refrain from tightening sanctions but it is not clear if this refers to nuclear or non-nuclear sanctions. Clarity on these points is essential, especially given current efforts to counter Iran’s ongoing human rights abuses and the use of economic sanctions to further the goals of the Woman, Life, Freedom movement. There is also the risk that if the United States does not aggressively enforce sanctions, then the understanding being developed will quickly become a permanent, rather than an interim, step. The Iranians have already grown complacent due to lax American sanctions enforcement. Tehran may calculate that it can keep its nuclear infrastructure and advancements, while benefitting from U.S. risk-aversion and self-deterrence in this case. Further advancements in its nuclear program and the hardening of its nuclear infrastructure will also make a credible military option more challenging, especially for Israel if Russia transfers the S-400 air defense system to Iran as compensation for Iranian assistance in Ukraine.

Likewise, an American agreement not to pursue resolutions against Tehran at the United Nations and the IAEA are problematic if true. This is an urgent issue, as arms restrictions on Iran are shrinking quickly. U.N. Security Council Resolution 2231, which endorsed the JCPOA, included an arms embargo on Iran that expired in October 2020. Restrictions on the regime’s missile program will lapse next in October 2023. The United States and especially Europe are attempting to ensure their respective national authorities are primed for the expiration of these provisions, but China and Russia will likely interpret it as providing legal cover to assist Iran in developing its missile program. While press reports suggest Tehran may not send missiles to Russia as a part of this pending agreement, that does not necessarily stop Russia from helping Iran advance its missile program—including via materials, equipment, technology, and training that could contribute to the development of nuclear weapon delivery systems—which would have been barred under international law if Resolution 2231’s limitations remained in place.

U.S. Domestic Politics

One of the reasons the JCPOA was not long for this world was its lack of bipartisan support. This underscores the need for Washington to engage in the hard work of alleviating the concerns of U.S. lawmakers and its allies and partners—in addition to its Iranian negotiating counterparts.

The need for congressional buy-in is why the Iran Nuclear Agreement Review Act (INARA) of 2015 was signed into law. The Biden Administration has been too clever by half in public by denying an “agreement” or “deal” with Iran is in the offing to avoid INARA review. However, INARA defines “agreement” quite broadly. The text specifies that it applies to one “regardless of the form it takes.” The Act can capture “understandings”—whether informal or formal—as well as ones that may not be written, although it would be hard to believe that diplomacy of this nature would not be in writing.

The Biden administration risks inflaming an already deeply partisan conversation over Iran policy by not engaging with legislators. Lawmakers have appeared blindsided in public, despite an all-Senators briefing by the U.S. deputy secretary of state in May. Other questions surround the White House decision to task the National Security Council—as opposed to the U.S. State Department—with the nuts and bolts of diplomacy with Iran. Perhaps it is because oversight of the NSC is more difficult for legislators than the U.S. State Department. This could be an attempt to insulate whatever understanding is being developed from scrutiny, which would be a mistake. If the Biden Administration is confident in its negotiating product, it should not be afraid to sell it to key constituencies.

Congress has a role to play as well. Oversight of the executive branch has been severely lacking as it relates to Iran. The House Foreign Affairs Committee has not held a single public oversight committee hearing specifically focused on Iran policy since 2020. The Senate Foreign Relations Committee has a slightly better record, having held one in 2022. Significant developments have occurred inside Iran, and there should be commensurate public conversations on the policy responses and ramifications.

This is especially true given that U.S. Special Envoy for Iran Robert Malley’s security clearance has been suspended over an investigation into his mishandling of classified information. Malley’s appointment was controversial from the beginning and multiple members of the U.S. negotiating team resigned during his tenure. Now he has been placed on unpaid leave. Congress and the American public deserve explanations.

But to date, there has been more silence than substance coming from the administration on its Iran policy. It refuses to declare the JCPOA of 2015 officially dead despite negotiations to revive it having effectively ended; it denies reports of “agreements” or “deals,” which belie regular press reports about ongoing indirect diplomacy; and most recently, it dodges questions about the U.S. special envoy’s status. The president himself has a visible discomfort when speaking about Iran and is rarely asked about it by the media. Nevertheless, avoiding confronting Iran to concentrate on China and Ukraine—what the U.S. government considers its more pressing priorities—should not be the organizing principle of U.S. foreign policy.

Jason M. Brodsky is the policy director of United Against Nuclear Iran (UANI) and a non-resident scholar in the Middle East Institute’s Iran Program. He is on Twitter @JasonMBrodsky.