In an interview with Reuters on Monday ahead of Israeli Prime Minister Benjamin Netanyahu’s speech before a joint session of Congress, President Barack Obama attempted to undermine Israeli Prime Minister Benjamin Netanyahu’s credibility on the Iranian issue by saying that Netanyahu had made inaccurate statements about the outcomes of negotiations. But in the process, Obama himself said things that were, at best, misleading. He told Reuters that:
When we first announced this interim a deal, Prime Minister Netanyahu made all sorts of claims. This was going to be a terrible deal. This was going to result in Iran getting 50 billion dollars worth of relief. Iran would not abide by the agreement. None of that has come true.
Obama’s claim about Iran abiding by the agreement was previously covered in The Tower. In fact, Iran did not follow the agreed-upon conditions of the Joint Plan of Action (JPOA), specifically by making further advances to its uranium enrichment capability.
It isn’t clear where the president got the claim that Netanyahu said that Iran would get “50 billion dollars of relief.”
The New York Times on Tuesday published a rebuttal to Netanyahu’s speech, written by Iran’s ambassador to the United Nations, Gholamali Khoshroo.
When the parties were finalizing the interim agreement in 2013, Mr. Netanyahu claimed that it would involve Iran’s receiving $50 billion in sanctions relief; the actual amount was about $7 billion. And as for his prediction that Iran would never abide by the terms of the accord, Iran has dutifully stood by every commitment — as the International Atomic Energy Agency has reported.
But the hyperlink that Khoshroo used to substantiate his assertion that Netanyahu claimed $50 billion in relief does not actually show Netanyahu making that claim. Instead, it shows a news report citing Obama’s charge to Reuters that Netanyahu was wrong on the numbers, not anything that Netanyahu himself said.
The claim by an Israeli official that comes closest to Obama’s charge is one made by Israeli Minister of Intelligence Yuval Steinitz. Just before the P5+1 nations agreed to the Joint Plan of Action with Iran, The Times of Israel reported:
As a result of the strict sanctions regime imposed on it, Iran is currently hemorrhaging some $100 billion annually, Steinitz said, a figure comprising nearly a quarter of the country’s GDP. The relief in sanctions, discussed in Geneva last week, would directly ameliorate $15 billion-$20 billion worth of damage to Iran’s economy but also erode the international enforcement of the sanctions regime to the tune of $20 billion-$40 billion.
The easing of sanctions, Steinitz noted, would not apply to the two core sanctions against Iran’s banking system and against its oil exports, but would nevertheless be “very significant.”
It is unclear over what time period Steinitz meant that the relief would apply, but it appears he was talking about over the course of a year. But $40 billion wasn’t a definite figure but the upper estimate of how much Iran would benefit for a whole year.
Initially, the administration said that the sanction relief would be “limited, temporary, targeted, and reversible” and worth somewhere between $6 and $7 billion to Iran. As a senior administration official said in a background briefing in November 2013:
Let me just make a few additional comments. First and most importantly, this relief is limited, temporary, targeted, and reversible. It is designed so that the core of our sanctions, the sanctions that have had a tremendous bite — the oil, banking and financial sanctions — all remain in place. So in that very important respect, this deal is limited.
It is temporary in that the relief automatically expires at the end of six months. It is targeted in that it allows Iran access to a set amount of funds in a controlled and controllable manner, and to permit specific additional commercial activity with quite limited upsides to the Iranians. It does not allow any open-ended financial or economic activity.
And it is reversible. If Iran fails to fulfill its commitments, the financial component, which is doled out in increments, can be turned off, and the sanctions that have been suspended can be put right back in place.
Second, the relief that Iran gets under this agreement is insignificant economically. The total maximum value of this deal, as I said, is about $6 billion to $7 billion. Compare that to the economic distress that Iran currently faces. Over the past year, Iran’s economy has contracted by more than 5 percent. It’s currency, the rial, has lost around 60 percent of its value against the dollar since 2011. Inflation is about 40 percent. Iran is in a deep recession. Because of our banking sanctions most of Iran’s major banks, including its central bank, are unable to transact internationally. And because of our financial sanctions, the vast majority of Iran’s $100 billion in foreign exchange holdings are restricted or inaccessible.
The administration’s estimate was for only six months, not a year. Given that over the first six months of the deal Iran did not fulfill its commitments, the relief should have been “turned off.” Instead, this past November, the relief was renewed for another six months.
Despite the administration’s claims of the how limited the sanctions relief would be, Ha’aretz reported in December 2013 that American officials had conceded to their Israeli counterparts that the proposed relief would be closer to $20 billion, a figure closer to Israel’s initial estimate and almost triple the $7 billion stated by the administration in November. (The actual implementation of the deal did not start until January 2014.)
The administration’s claim that it would provide $6 – $7 billion in relief only accounted for the direct relief provided by the relaxing of sanctions, rather than other forms of indirect relief. According to an analysis (.pdf) published by the Foundation for Defense of Democracies (FDD), increased oil sales and access to foreign exchange reserves led to a total relief amount of $11.2 billion.
In addition to the direct relief, the loosening of sanctions led to higher employment, strengthening of the rial, deescalation of sanctions pressure and allowed Iranian authorities to build up reserves against future sanctions should they be reimposed or strengthened in the future. And as Iran’s economy recovers and commerce increases, loopholes that were previously ignored will increasingly be exploited.
The relaxing of sanctions, which actually pre-dated the JPOA, has led to a dynamic that makes Iran less likely to compromise. The FDD paper explained:
The gradual economic improvement, even at well below the current growth trends, provides breathing space for Iran’s leadership to accumulate more reserves and savings via maintaining fiscal spending patterns, thus increasing resilience to withstand future sanctions. This reduces the leverage held by the P5+1 in current and future negotiations. So, while economic conditions may still feel very depressed to many Iranians due to tighter monetary policy and little government stimulus, these overarching trends could influence the calculus of Iran’s leaders to become even more inflexible in negotiations over their nuclear program as the sanctions pressure on Iran’s economy diminishes.
By bringing up an undocumented charge against Netanyahu, President Obama opened up scrutiny of his administration’s approach to sanctions, which has led to Iran hardening its positions in nuclear negotiations.
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