TACTICAL RETREAT

In the beginning of August, the US and Iran reached another agreement thanks to mediation from Qatar and Oman. This time it is not about nuclear issues at all.

Washington agreed to lift a ban on $6 billion (in South Korean won) worth of Iranian assets seized in South Korean banks in exchange for Tehran's release of five Iranian-born US citizens.

According to Arab and Iranian journalists, right after the agreement was reached, the US citizens were released from the Evin prison and placed in a hotel in Tehran. However, their departure from the country is not likely to take place until September 2023, when Iran can expect the full transfer of its funds from South Korean banks to its own accounts.

First the money, then the prisoners

Probably the most difficult stage of this deal is the safe transfer of the promised amount from Korea to Iran. It is known that this is the money for Iranian oil sold to South Korea in 2019. But it is now got stuck in Seoul's banks due to sanctions imposed on Iran by the Trump administration. Under the current arrangement, South Korean wons will be converted into US dollars or euros at the current exchange rate at Iran's request and then transferred to the Qatar Central Bank. After that, Tehran will only be able to spend the money to buy medicines, food and other humanitarian goods. However, given the possible risks to the South Korean financial system due to the conversion of such a huge amount into dollars, the process will likely be implemented in stages.

According to Iranian media, the parties also agreed on the mutual release of four US and Iranian citizens from each side. At the same time, Washington has yet to confirm the Iranian government's statement on the release of imprisoned Iranian citizens in the US. Secretary of State Anthony Blinken said he had no information about any Iranian citizen being held in a US prison.

In fact, this is not the first case of a prisoner exchange between the US and Iran. Since the Islamic Revolution in Iran, there have been several occasions of mutual exchanges between the two countries. The last time it was in 2020, when Tehran released a former government official in exchange for an Iranian scientist arrested in the US. Therefore, the current agreement between the US and Iran cannot be called a diplomatic breakthrough. Yet, it has some interesting points.

Progress amid confrontation

Remarkably, the recent US and Iran agreement has been reached amid another phase of tension in the Persian Gulf. In July, Washington sent additional warships and aircraft to the region to prevent attacks on commercial vessels. Tehran said it would arrest Western ships to ensure the safety of its own vessels arrested under the sanctions. Moreover, Iran has taken a number of practical steps in this direction. But then, unexpectedly to everyone, Tehran and Washington agreed on a prisoner exchange.

The situation with Iran is clear, as Tehran is trying to recover its confiscated funds amid the deteriorating financial situation in the country. Washington interprets the new agreement differently though. The US authorities consider any contacts with Tehran as a step towards the resumption of negotiations on the nuclear deal. In this context, the US agreement to unfreeze $6b of Iranian funds in Korea after the return of $3b seized in Iraq can be interpreted as an attempt to bring Tehran back to the negotiating table.

There are a number of reasons explaining the Biden administration's interest in the negotiations with Iran at such a difficult time. One of them is Washington's well-known desire to ensure international control over Iran's nuclear programme and to reduce threats against Israel.

In other words, Washington is not seeking to restore the 2015 nuclear agreement, but is only trying to negotiate with Tehran on specific issues, trying, among other things, not to completely sever ties with Iran. Finally, Washington have to negotiate because of the ineffectiveness of sanctions against Tehran.

The US withdrawal from the agreement signed between Iran and the six countries (the US, the UK, France, Germany, Russia and China), as well as the tough sanctions imposed on Iran over the past five years, have not actually brought the expected outcome. It is true that Tehran has found itself in a noticeably difficult social, political and economical situation, with the devaluating national currency, worsening social situation, as well as the social and political demands of the opposition accompanied by major riots in many settlements throughout the country in 2018 and 2022. However, in recent years Iran has increased oil production, developed its military industry, and expanded trade and economic relations with countries such as India, China and Russia.

Finally, Tehran has been able to develop its nuclear programme despite the sanctions. Especially after the adoption of yet another package of sanctions by the Trump administration, when Tehran reneged on its commitment to process uranium only to 3.67 per cent, as agreed in the 2015 nuclear deal. It is believed that Iran has already hit the 60 per cent enrichment mark, meaning it is now closer than ever to having its own nuclear weapons.

That is why the Biden administration prefers to return to the negotiating table, considering it the only alternative to war in the Middle East. Firstly, the war can significantly weaken the authority and power of the United States. Secondly, Biden is running out of time because of the presidential elections slated for next year.

At the same time, it makes no sense to restore the 2015 deal under the current conditions. What matters now is ensuring control over Iran's nuclear programme and ballistic missile production (Tehran has already announced the production of missiles and drones with a range of 2,000 km), as well as ensuring Israel's security, which is a priority for Washington. To make this happen, the US should start doing something.

Iran is ready for peace, but...

During discussions that began in June in Oman and Qatar, Tehran demonstrated that it was inclined to continue nuclear talks with Washington. Earlier, Iran's Supreme Leader Ayatollah Khamenei gave the green light to continue the talks. As the main condition, Iran proposes to lift the international embargo on its oil exports. In exchange, it will agree to stop uranium enrichment at 60 per cent and to establish closer cooperation with inspectors of the International Atomic Energy Agency.

Apparently, the first stage of this process (the return of confiscated Iranian funds in exchange for the release of US citizens ) is over. In the next stage, which can take place pretty soon, it is likely that the parties hold negotiations on international control over Iran's uranium enrichment in exchange for the lifting of Iran's oil export embargo.