February 16th, 2016

CSG: 2/16 – Prospects for Economic Engagement in Iran

Photos from this event are available on our Flickr page. Narrative summary below.

The Congressional Study Groups are pleased to collaborate for a special joint roundtable discussion:

CSG: 2/16 - Prospects for Economic Engagement in IranProspects for Economic Engagement in Iran
Tuesday, February 16, 2016 | 12:30 – 2:00 PM

Featured Discussants

  • Christopher Backemeyer
    Principal Deputy Coordinator for Sanctions Policy, US Department of State
  • Stuart E. Eizenstat
    Senior Counsel at Covington & Burling | Former US Public Servant
  • Former Congressman Cliff Stearns
    Board of Directors, US Association of Former Members of Congress | APCO Worldwide

Participation is by invitation only. Contact ATerai (at) usafmc [dot] org if you have any questions.

About the Discussants

Mr. Christopher Backemeyer
Deputy Coordinator for Sanctions Policy, U.S. Department of State

Chris Backemeyer is the Deputy Coordinator for Sanctions Policy at the U.S. Department of State, a position he has held since January 2015. In this role, Mr. Backemeyer is responsible for coordinating the Department’s sanctions policy in order to most effectively use the tool to advance U.S. foreign policy interests.  Mr. Backemeyer represented the United States in the P5+1 negotiations with Iran over its nuclear program, where he served as the lead sanctions expert.

From 2012 to 2014, Mr. Backemeyer served as the Director for Iran on the National Security Council staff at the White House.  In this role, he was responsible for advising the President, National Security Advisor, and other White House officials on strategic priorities for Iran during a period of burgeoning diplomatic discussions over its nuclear program.  Prior to his time at the White House, Mr. Backemeyer served as the Deputy Director of the Office of Sanctions Policy and Implementation at the State Department, where he was responsible for effectively implementing U.S. sanctions in a variety of areas.  During his tenure at State, he has also served at the U.S. Mission to the United Nations as well as the U.S. Embassy in Caracas, Venezuela.

Prior to his service in government, Mr. Backemeyer worked in the banking sector where he focused on commercial financing of corporate and real estate transactions.  Mr. Backemeyer is a Chartered Financial Analyst (CFA).  He also holds a Master’s degree in International Affairs from the School of International Relations and Pacific Studies at the University of California San Diego and Bachelor’s degrees in Finance and Political Science from Arizona State University.

 

Mr. Stuart E. Eizenstat
Senior Counsel, Covington & Burling | Former US Public Servant

Ambassador Eizenstat currently heads the Covington & Burling’s international practice.  His work at Covington focuses on resolving international trade problems and business disputes with the US and foreign governments, and international business transactions and regulations on behalf of US companies and others around the world.

During a decade and a half of public service in three US administrations, Ambassador Eizenstat has held a number of key senior positions, including chief White House domestic policy adviser to President Jimmy Carter (1977-1981); U.S. Ambassador to the European Union, Under Secretary of Commerce for International Trade, Under Secretary of State for Economic, Business and Agricultural Affairs, and Deputy Secretary of the Treasury in the Clinton Administration (1993-2001).

The Hon. Cliff Stearns (US Congress, 1989-2013)
Board of Directors, US Association of Former Members of Congress

Cliff Stearns is an executive director based in APCO Worldwide’s Washington, D.C., office and serves as a member of APCO’s International Advisory Council. He is a former Member of Congress for Florida’s 6th district, where he gained extensive experience in telecommunications, technology, cybersecurity and international trade during his 24 years of service. He currently serves as a board member of the US Association of Former Members of Congress.

Congressman Stearns served as the Republican leader on the Communications, Technology and Internet Subcommittee and was chairman of the Subcommittee on Commerce, Manufacturing and Trade, where he enacted consumer privacy and data security legislation. Congressman Stearns was chair of the Oversight and Investigations Subcommittee, a member of the Committee on Energy and Commerce, and a member of the Veterans’ Affairs Committee. As chairman of the Transatlantic Dialogue for the European Union, he was appointed primary liaison between the U.S. House of Representatives and elected members of the European Parliament.

Prior to his election to the United States Congress, Congressman Stearns worked for CBS, Inc. and Kotula advertising company in Greenwich, Connecticut. He then started his own company as president and chief operating officer of Stearns House, Inc. Earlier, he was a captain in the United States Air Force and served four years as an aerospace project engineer. He was awarded the Air Force Commendation Medal for distinguished service and meritorious achievement and later received the Air Force Association W. Stuart Symington Award, the highest honor presented to a civilian in the field of national security.

Congressman Stearns earned a Bachelor of Science in electrical engineering from The George Washington University in Washington, D.C. He took courses with Harbridge House Inc. Los Angeles on Advanced Problems in Defense Contracting and with the University of California Engineering Extension at UCLA on space communications.


 

Narrative Summary

On January 16th, 2016 the United States and Iran reached a milestone for the Joint Comprehensive Plan of Action (JCPOA). Iran dismantled integral parts of its nuclear program by relocating its stockpiles of enriched uranium to Russia, deactivating the Arak facility’s heavy water reactor and decreasing its number of centrifuges by two-thirds. What this means, is that Iran’s supply of enriched uranium is currently a mere two percent of what is was prior to JCPOA. Following an inspection from the United Nations’ International Atomic Energy Agency, it was verified that Iran had met its requirements under JCPOA and that international sanctions against Iran could be lifted.

On the one month anniversary of implementation, The Congressional Study Groups hosted a luncheon discussion at the Cosmos Club to discuss the recent lifting of economic sanctions and what impacts they would have on economic engagement with Iran. The luncheon featured Mr. Christopher Backemeyer, the Principal Deputy Coordinator for Sanctions Policy at the State Department; Mr. Stuart E. Eizenstat, Senior Counsel at Covington & Burling; Members of Congress, members of the Business Advisory Council and senior Congressional staff. The discussion was moderated by Cliff Stearns, Board of Directors at the US Association of Former Members of Congress.

The US government, as well as its EU allies, had formed a coalition to implement economic sanction in an attempt to steer the Iranian government from taking actions that were considered incompatible with the coalition’s values. These incompatibilities include the support of terrorist organizations, human rights violations and the development of its nuclear program. While primary sanctions remain in place, secondary, nuclear-related sanctions have been lifted. In other words, non-US persons can now conduct business with certain Iranian economic sectors, including energy, the automotive industry, financial services, mining and shipping.

American economic sanctions sought to change the actions of the Iranian government, as opposed to punishing Iranian citizens. For nearly four years, members of the EU denied themselves the import of Iranian oil, froze Swiss bank accounts linked to Iran and had to overcome obstacles when engaging in businesses linked to Iran.   Implemented in July 2012, American economic sanctions, backed by a coalition with the EU, were effective in bringing Iran to the negotiating table to discuss their nuclear program. If anything, implementation day can serve as a symbol for the effectiveness of nonviolent economic sanctions, when implemented with a coalition, as well as the cooperation of the international community.

While many remain enthusiastic about the opening of economic and diplomatic relations with Iran, most expected the easing of secondary sanctions to occur during the spring, as opposed to mid-January. The early arrival of implementation day is likely the result of the upcoming elections this month. Iran’s Guardian Council is currently determining which candidates are eligible to run in the parliamentary elections and has history of favoring non-reformist candidates—a trend that continues today. Nevertheless, current Iranian President, Hassan Rouhani, was approved by the Guardian Council, yet has played an indispensable role with JCPOA.

For Iran, with its high voter turnout in both parliamentary and presidential elections, JCPOA and its outcomes will be important issues in the parliamentary elections this month, as well as for the presidential elections next year. The resulting increase in Iranian economic activity will be a selling point for reformist candidates this month, as well as for Rouhani, should he run for reelection in 2017. Iran’s increased economic openness and new diplomatic ties may provide Rouhani with proof of his commitment to the Iranian people. Conversely, JCPOA may well be utilized against Rouhani, by more conservative candidates who see him as too Western-oriented.

Nevertheless, implementation day has introduced a large degree of growth economically and diplomatically for Iran. Following implementation day, some 50-100 million USD of frozen assets were opened and non-US businesses were free to invest in Iran. The latter, though, remains completely dependent on exactly how business-friendly Iran will be with foreign firms. Its bureaucracy, restrictions on the movement of money and licensing will all impact how and whether foreign firms are likely to do business with Iran.

What JCPOA’s implementation during a Presidential election year means for the United States remains a different question entirely. What the upcoming change in administration means for JCPOA varies among candidates, yet what remains paramount is that JCPOA is not a treaty and is not bound by international law. Questions the next American President will have to ask themselves include whether or not they want to walk away from a deal with Iran. Will they want Iran to have a breakout time of 2-3 months, as they did prior to JCPOA, or the one year breakout time present today?

While President Obama and Secretary of State John Kerry remain committed to JCPOA, some presidential candidates have expressed disapproval for JCPOA, as well as desires to back away from the deal, even after its implementation. Such an action would not only destabilize Iran, but the fragile region of the Persian Gulf and Middle East, as well. Furthermore, EU member states from the coalition that had sanctioned Iran for nearly four years would be less than thrilled. Not only would backing away from such a deal undo years of diplomatic efforts by both the United States and its allies, but would require businesses to cancel or backtrack on economic plans set with Iran.

Should sanctions ever be reinstated with Iran by Washington, it is unlikely that EU member states would follow suit. In the meantime, an increasing number of American and foreign companies are looking forward to investing in and working with Iran. Despite this enthusiasm, these firms remain tentative, unsure of how to maneuver through primary sanctions. Primary sanctions are still in place for American nationals and companies in engaging in business and secondary sanctions prevent non-US nationals or firms from working with parent companies, as well as subsidiaries that are 50 percent owned by the Iranian state.

Out of fear of reputational risks of working with non-transparent companies and their subsidiaries, many firms remain cautious. Ultimately, when doing business with Iran, a firm must mitigate the risks of working with Iranian state-owned companies, as well as remain conscientious of American laws and regulations. While we are still in the honeymoon phase of JCPOA and implementation day, American firms, citizens and politicians alike must bear in mind that this deal with Iran is far from a destination, but rather, part of a larger journey in American-Iranian interstate relations.

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