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We're Not Easing Sanctions on Iran

Tehran will be deeper in the hole six months from now. Here's why.

The intense pressure of international sanctions, led by the United States, brought the Iranian government to the negotiating table in Geneva, where, on Nov. 24, the six major powers and Iran agreed to a Joint Plan of Action on Iran's nuclear program. As the principal U.S. official charged with crafting and enforcing our sanctions program, I am confident that the sanctions pressure on Iran will continue to mount. Iran will be even deeper in the hole six months from now, when the deal expires, than it is today.

Here's why.

To begin with, the relief package in this interim deal is economically insignificant to Iran. The lion's share of the relief comes from granting Iran access, in installments, to $4.2 billion of its own revenues currently trapped outside Iran. In addition, U.S. sanctions on Iran's petrochemical exports and its auto industry will be temporarily suspended.

We estimate that this additional trade could generate about $1.5 billion in revenue over the next six months—but only if Iran is able to find customers to buy its cars and petrochemical products. This will be difficult: There are long-standing problems with Iran's auto sector, and petrochemical importers prefer long-term contracts, which aren't possible given the six-month duration of the deal.

The Joint Plan also suspends sanctions on Iran's ability to buy and sell gold. But because remaining prohibitions preclude Iran from using either its foreign reserves or its own currency to buy gold, this provision is of limited value. Any gold Iran purchases would be offset by the hard currency it would spend to buy it.

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Under strict guidelines, the deal also allows Iran to transfer $400 million of restricted Iranian funds to defray tuition costs for Iranian students studying abroad.

If the Iranians comply with their obligations under the Joint Plan, over the next six months they will stand to receive $6 billion to $7 billion in relief, mostly by gaining access to their own money. Not $1 comes from U.S. taxpayers.

Viewed in light of Iran's struggling economy, this sum is inconsequential. Iran is in a deep recession—its economy contracted last year by more than 5%, and it is on pace to contract again this year. Its annual inflation rate now stands at about 40%. Iran's currency, the rial, has lost around 60% of its value against the dollar since 2011.

The total relief is a small fraction of the roughly $80 billion Iran has lost since early 2012 because of U.S. and European Union oil sanctions, and of the nearly $100 billion in Iran's foreign-exchange holdings that are mostly restricted or inaccessible due to U.S. financial and banking sanctions.

Iran's economy will also continue to suffer because the core architecture of U.S. sanctions—especially our potent oil, financial and banking sanctions—remains firmly in place. The oil sanctions alone cost Iran about $5 billion a month in lost sales, meaning that over the six-month duration of the Joint Plan, Iran will lose about $30 billion in oil revenue. Iran's access to whatever oil revenue it earns, moreover, won't be available for transfer or repatriation.

All of our sanctions against major Iranian financial institutions also remain in place, which means that Iran will remain largely cut off from the international banking system, curbing its ability to move or spend its cash. The sanctions that forbid investment in Iran's energy sector, including helping to develop Iran's oil and natural gas resources, remain in place, as does the long-standing comprehensive ban on U.S. business with Iran.

As President Obama said when he announced the Joint Plan, we are fully committed to vigorous enforcement of these sanctions. We know that sanctions do not implement themselves. To disrupt and disable those facilitating Iran's nuclear and missile programs, we will identify front companies, evaders and malefactors and sanction them. Along with our partners across the U.S. government, my team at Treasury has done so more than 600 times in the last several years. This will continue unabated.

To maintain pressure on Iran's economy, we will continue to present foreign banks with a stark choice: They can either do business with designated Iranian banks and businesses, or they can do business with the U.S.—not both. To keep Iran's oil revenues depressed, we will ensure that Iran will not be able to export one additional barrel beyond the current low levels. And to hold back latent interest in trade with Iran, we will communicate a blunt message to every foreign official, businessperson and banker who thinks now might be a good time to test the waters: We are watching, and we are poised to act against anyone, anywhere, who violates our sanctions.

Sanctions gave Iran a powerful incentive to accept this first-step deal, and they will be key to negotiating the comprehensive resolution that ensures Iran cannot obtain a nuclear weapon. Now is no time to let up—and we won't.

Mr. Cohen is the undersecretary for terrorism and financial intelligence at the Treasury Department.

37 comments
Richard Schroeder
Richard Schroeder subscriber

Complete piffle - this man is only toeing the administration's line in what appears, to me, to be completely against our national interests. He should be ashamed of himself.

Craig Mundo
Craig Mundo subscriber

This guy is full of it. He is brazenly claiming here there is no easing of sanctions and yet the Iranians are out there high fiving and celebrating in the streets and Israel is fuming. Why is that, Mr Cohen?

Where is the discussion on verifying that Iran is not producing a bomb or progressing to it? You know, the very reason why we had to impose sanctions in the first place?

And why is BHO so eager to throw Israel under the bus and gain favor with the ayatollah?

XAVIER L SIMON
XAVIER L SIMON subscriber

If so what was the point to agreeing that they would stop doing things that are not urgent but could continue to build centrifuges and enrich uranium? I am getting a lot of cognitive dissonance about right and wrong, good and bad, so very sorry, but my only bottom line is that the centrifuges continue to spin and grow in number: whoosh, whoosh, whoosh...

ANDREW FORSYTH
ANDREW FORSYTH subscriber

"Not $1 comes from U.S. taxpayers." What does this even mean? Were we going to bail out Iran? Wow, talk about trying to hit the key talking points. Have a little respect for the WSJ readers.

Patrick Meegan
Patrick Meegan subscriber

For argument's sake, let us take Mr. Cohen's words as both fair and accurate. If Iran fails to meet its obligations in the deal, how likely is it that Russia and China will help restore or even tighten sanctions?

The sanctions slowly worked to begin the conversation, but have not, as noted by others, resulted in changed behavior by the Iranians.

Sanctions need not be permanent, but before they are lifted, we should see actions, not just words.

CLIFFORD STEHLE
CLIFFORD STEHLE subscriber

It all comes down to trust. And not of the Iranians (who have demonstrated their lack of truthfulness time and time again). The people who have proven themselves untrustworthy make up the current administration and take their lead from the President. I don't know all of the details of the current budget deal worked out between Paul Ryan and Patty Murray but I trust Paul Ryan not to negotiate the country down the river. The Obama administration holds no such trust and therefore all of the rationalizations in the world serve no purpose other than to cover up lack of clear thought, failure to act decisively, and blurred goals. Very sad indeed especially when it concerns foreign policy and national security.

Jacqueline Reckseit
Jacqueline Reckseit subscriber

It is sad to realize that everything this Administration says has to be picked apart word by word and only when we do that can we find the information they are trying to conceal. Parker O'Brien is correct, as a sop to the new "moderate" president of Iran Obama stopped the "identification and black listing of companies and individuals who attempt to circumvent the economic sanctions" in June.



Further, from the Israel newspaper Haaretz:



"US officials confirmed to Israel that the value of sanctions relief to Iran will be much higher than original $6 billion:



According to the security sources: 'Economics is a matter of expectations. The Iranian stock exchange is already rising significantly and many countries are standing in line to renew economic ties with Iran based on what was already agreed in Geneva.' The sources mentioned China’s desire to renew contracts worth some $9 billion to develop the Iranian oil industry and the interest some German companies are showing for deals with Tehran. 'In any case, it’s about 20 or 25 billion dollars. Even the Americans understand this,' the sources said."



Add this $20-25 billion to the billions in economic activity that will slip through because we are no longer blacklisting companies that circumvent the sanctions on Iran, and we can see that, contrary to Mr. Cohen's claim, Iran WILL benefit substantially from this nuclear deal. Perhaps more important, if Iran does not fulfill its end of the bargain, this economic gain will be impossible to reverse - contracts will be signed and programs begun that cannot be stopped. It took years of cajoling and pressure to get the Security Council to agree to severe sanctions to begin with - all of that will be lost. Does anyone really think that we can get Security Council countries that have started doing business with Iran to vote to reinstate sanctions that will end their business? Further, these "impossible to stop" relationships will give Iran even more clout in negotiating the final Geneva Accord.

JOSHUA BROOKS
JOSHUA BROOKS subscriber

I would like to believe Mr. Cohen, but it's simply not possible to trust anything anyone in this administration says.

Parker O'Brien
Parker O'Brien subscriber

'To disrupt and disable those facilitating Iran's nuclear and missile programs, we will identify front companies, evaders and malefactors and sanction them. Along with our partners across the U.S. government, my team at Treasury has done so more than 600 times in the last several years. This will continue unabated.'

Notice how he couches this language. They will continue to identify groups with military applications, but they have all but stopped on the economic front. Since June, the US has essentially frozen the identification and black listing of companies and individuals who attempt to circumvent the economic sanctions.

Alan Freemond
Alan Freemond subscriber

Cohen doesn't believe this stuff any more than we do. They have invested everything for 30 years in that bomb thing and they are not going to stop unless Netanyahu wipes them out, I'll bet that Cohen was instructed to write this stuff and maybe, they'll make him an ambassador to Israel as a reward and just to irritate Netanyahu,

They can hardly believe their luck that they get to deal with Lurch AND Obama. .

Edward T. Humphreville
Edward T. Humphreville subscriber

How can you trust anyone in this administration?

They are all messaging-big hat, no cattle.

ALLAN BIRD
ALLAN BIRD subscriber

DAVID COHEN.. Remember that name. Remember him as someone employed by the government and who worked to enable Iran's acquisition of nuclear capability, all the time lying to his fellow citizens. Even Democrats know that this deal was a giveaway and are opposed to it. Yet here he is shilling for it.

FRED DOUGHERTY
FRED DOUGHERTY user

In the first paragraph it is stated that "U.S. sanctions on Iran's petrochemical exports and its auto industry will be temporarily suspended". Later it is stated that "the core architecture of U.S. sanctions—especially our potent oil, financial and banking sanctions —remains firmly in place". Can both of these statements be true? Is this just more Administration obfuscation and deception?

Lou Agosta
Lou Agosta subscriber

The sanctions are working. Good work. Keep up the pressure.

Chris Henry
Chris Henry subscriber

"We estimate that this additional trade could generate about $1.5 billion in revenue over the next six months—but only if Iran is able to find customers to buy its cars and petrochemical products."

Iran already has customers for its oil. China and India will be able to send Iran dollars instead of gold for the oil, reducing Iran's transaction costs and increasing liquidity. These two partners will happily buy and increased production the Iranians can pump out and don't think they'll be quick to reverse course in the unlikely event Obama tries to re-apply sanctions after he discovers the Iranians have played him for a fool.

John Hand
John Hand subscriber

With an op ed in the WSJ and an interview on NPR on the same day. It's 100% PR. Credibility was lost a long time ago.

Daniel Clint
Daniel Clint subscriber

Mr. Cohen says that Iran will recieve about 11.7 billion in this deal (while continuing to lose 30 billion in oil sales.
He fails to say what they gave us. They are getting almost 12 billion and we are getting..........? As someone said earlier - what was the point?

Jacob Maczuga
Jacob Maczuga subscriber

Here we have Cohen vainly trying to rationalize Lurch's deal of the century. Any loosening of the sanctions will be used by the mullahs to demonstrate US and the West's weakness dealing with them.

Aaron King
Aaron King

I don't think there is any disagreement with the notion that what sanctions are being loosened, that it will be much of a benefit to Iran. I believe the real argument is, you ease sanctions once, you have opened the door to possible further easing of sanctions. Regardless of whether or not the desired outcomes were achieved.

David Brandt
David Brandt subscriberprofilePrivate

It is scary that the people in Washington both think we are ignorant and actually believe their own esoteric bull---

Charles LaPorta
Charles LaPorta subscriber

My question is if the sanctions are indeed working, then why negotiate? If the sanctions are working, then eventually you will get your way. The economy will fail, the regime will fail, and the race to a nuclear bomb in the hands of a terrorist sponsor will have been averted. You get everything you want. Why would you give up some of that up to help a regime, that regards you as its main global adversary, survive?

James Thomas
James Thomas subscriber

Mr. Cohen thinks the WSJ readership to be fools. He tells us:

"To begin with, the relief package in this interim deal is economically insignificant to Iran."
" In addition, U.S. sanctions on Iran's petrochemical exports and its auto industry will be temporarily suspended."

According the the CIA World Factbook, oil accounts for 80% of Iran's exports. 80%! The rest is pistachios and carpets. This is not a difference of opinion over how the numbers might be read. Mr. Cohen has clearly tried to deceive with an outright, bald-faced, despicable lie.

Messrs. Obama and Kerry have given Iran a big, wet, sloppy kiss and Mr. Cohen is trying to photoshop it to look like a cool, businesslike handshake. If Mr. Cohen had an ounce of integrity he would have resigned before putting his name to garbage like this.

KEVIN BURNS
KEVIN BURNS subscriber

"Mr. Cohen is the undersecretary for terrorism and financial intelligence at the Treasury Department."



Pardon me for being the cynic but why do we need an undersecretary FOR terrorism (shouldn't he be against it)?



Also when has there been evidence of FINANCIAL INTELLIGENCE at the Treasury?

Robert Baxter
Robert Baxter subscriber

Mr. Cohen does not mention the consequences for Iran if they fail to comply with this agreement. Let me guess - another deal.

Tad Schell
Tad Schell subscriber

Sorry Mr. Cohen. The only deal the US should be interested is: 1) Iran completely shuts down it's program to enrich uranium. 2) If they do and we can verify it, then and only then we will consider reducing sanctions. The Mullahs that run Iran believe that Allah has granted them the right of concealment from the infidels. As such, they believe they have no obligation under their belief system to deal truthfully or honorably with us. The Iranian mullahs are playing us for fools.

Charles Sullins
Charles Sullins subscriber

Cohen works for obama, the Great Liar. I am confident that Cohen gets his lies direct from above.

Stuart Scudder
Stuart Scudder subscriber

Serious question:

What makes you so sure that Iran has no alternative to making its own nukes? I have never heard or seen anything that claims that Iran cannot source nukes from its allies (or arms dealers such as Marc Rich). Are you going to be the first to help us out on that issue?

If you are the first, I hope that you can exclude Pakistan, the Taliban and NK from possible sources. If you cannot does it matter whether Iran can make its own nukes?

Stuart Scudder
Stuart Scudder subscriber

Above my pay grade to come up with the specifics of a plan, but what is not above my pay grade is insisting that preventing acquisition of nukes from a 3rd party is just as important as convincing Iran not to build its own.

BRANDON JAMES
BRANDON JAMES subscriber

Iran's centrifuges are working as well. Not so good.

John Yungton
John Yungton subscriber

They don't think, they know and there is nothing you can do about it either, no matter who you vote for.

JOSHUA BROOKS
JOSHUA BROOKS subscriber

The sanctions are working. MISSION ACCOMPLISHED!

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