A path to victory for Trump on Iran

Let’s face it: North Korea and Iran will not be sweet-talked out of their nuclear programs. To autocrats, neither photo opportunities with Western leaders, nor aspirational statements, and not even foreign investment are worth the immunity that nuclear weapons provide. Fortunately, Iran has not acquired nuclear weapons yet, unlike North Korea. But as soon as the time limited restrictions under the Joint Comprehensive Plan of Action (JCPOA) on uranium enrichment and deployment of advanced centrifuges expire, the path toward them will open again.

After the U.S. withdrawal from the JCPOA, the Secretary of State Mike Pompeo offered full normalization of economic and diplomatic relations with Iran in exchange for changes in Iran’s behavior. But the Islamist-ruled Iran will not enter into such a grand bargain. The pain caused by reimposed U.S. sanctions is unlikely to ever reach a sufficient level to change Iran’s survivalist thinking about nuclear weapons. In fact, more pressure might reinforce such a calculus.

{mosads}But there is an alternative. The United States could offer to recommit to the JCPOA and lift general sanctions against Iran, including primary sanctions, in exchange for a resolution by the U.N. Security Council that sets up a U.N. fund as sole recipient of all proceeds of Iran’s oil exports. The fund would have the following characteristics.

First, there would be a limit on weekly repatriation of proceeds from Iran’s oil exports that would be set in a revenue-neutral way. The repatriation rate would offset the estimated positive effect of lifting U.S. sanctions on the revenue of Iran’s government from domestic sources.

As a result, the relief from sanctions would be felt by Iran’s economy at large, but not by Iran’s government. The remaining proceeds, which would include newly generated income from currently undeveloped or underdeveloped oil fields, would be invested in the international capital markets, following investment guidelines used by sovereign wealth funds.

Second, the U.N. fund would act as a deterrent mechanism. The U.N. Security Council would claim the power to suspend the repatriation of funds whenever and for as long as Iran refused to comply with any of its resolutions, whether nuclear related, missile related or otherwise.

Third, the U.N. fund would change the incentives facing Iran’s government. The initially set repatriation rates could be increased by the U.N. Security Council, with the consent of the United States. That would provide the U.S. administration with an additional mechanism to extract concessions from Iran through bilateral negotiations.

The idea is not without precedent in Iran’s own past. In 1951, when Iran nationalized the Anglo-Iranian Petroleum Company, Britain retaliated by imposing a naval blockade, preventing Iran from exporting oil. The World Bank offered to mediate the production and export of Iran’s oil, while sharing the proceeds, until a permanent deal was found.

Unlike the 1951 plan, which was rejected partly because it counted on foreign experts being invited to manage Iran’s oil wells, our proposal would leave control of the industry in Iran’s hands. It would only establish international control over the sale of oil for export markets. Therefore, its implementation would not necessarily require Iran’s consent. It would, however, require compliance by the importers of Iran’s oil.

Our proposed U.S.-U.N. sanction swap would leave much less leeway for Iran to act like a rogue state and defy U.N. resolutions. With a new deterrent that could be used against Iran’s oil-dependent treasury, the U.N. Security Council would be able to ensure that Iran would never come close to having a deliverable nuclear weapon, turning the JCPOA into a de facto permanent arrangement. Moreover, the new balance of power would force a change in the calculus of the Iranian leadership as continuing to be a rogue state would become prohibitively unaffordable.

Would other permanent members of the U.N. Security Council want to strike this deal with the United States? In addition to addressing the question of Iran’s nuclear and non-nuclear threats, the sanction swap would benefit non-U.S. businesses, especially European ones, as the secondary sanctions imposed by the United States would be lifted. It would benefit global consumers of energy, particularly China, as it would significantly increase Iran’s supply of oil to the international markets.

Needless to say, a regime open to business would produce more prosperity for ordinary Iranians and new opportunities for American companies that could resume economic relations with Iran after decades of sanctions. Even if Russia decided to use its veto, the resolution would still be a diplomatic victory for the United States, as it would make the Kremlin directly responsible for the continuing application of current U.S. sanctions, as well as for shortcomings of the existing deal.

The U.N. Security Council has the authority to establish the U.S.-U.N. sanction swap, regardless of Iran’s objections. As a self-professed dealmaker extraordinaire, President Trump can appreciate that this proposal offers him a path to a significantly better solution to the Iran problem than the aspirational deal struck with North Korea.

Reza Ansari is an Iranian economist and director of Reform International. Dalibor Rohac is a research fellow at the American Enterprise Institute.