France dangles $15 billion bailout for Iran in effort to save nuclear deal

September 3, 2019

A senior Iranian delegation arrived in Paris on Monday to work out the details of a financial bailout package that France’s president, Emmanuel Macron, intends to use to compensate Iran for oil sales lost to American sanctions. In return for the money, Iran would agree to return to compliance with a 2015 nuclear accord, The New York Times reported on Monday.

Iranian press reports and a senior American official say that the core of the package is a $15 billion letter of credit that would allow Iran to receive hard currency, at a time when most of the cash it makes from selling oil is frozen in banks around the world. That would account for about half the revenue Iran normally would expect to earn from oil exports in a year.

Macron’s government has declined to provide any details of its negotiations with the Iranians, though it was the subject of discussion between the French president and U.S. President Donald Trump at the Group of 7 summit last weekend.

While Macron and Trump gave no hint of their differences in public comments, administration officials say the French effort, which other European nations appear to support, is undermining the administration’s effort to exert what Trump calls “maximum pressure” on Tehran.

And it is far from clear that Trump would go along with any bailout: His national security adviser, John R. Bolton, has made it clear that he opposes such an agreement. So does Prime Minister Benjamin Netanyahu of Israel, who opposed the 2015 deal and pressed Trump to make good on his campaign promises to abandon it.

“This is precisely the wrong timing to hold talks with Iran,” Netanyahu said last week.

Without Trump administration support for the deal, it is not clear whether European banks would risk American sanctions by extending credit to Tehran or whether the credit might be extended by the European Central Bank, or France’s central bank, which would be more difficult for Washington to sanction.

Expert says if France pushes forward with proposal, it’s likely to want not just a freeze on further enrichment from Iran but full compliance with the JCPOA, and the opening of talks on regional issues.

If the talks, which French and Iranian officials began in Paris on Monday, are successful, Iran would return to the restrictions negotiated with the Obama administration four years ago. Trump abandoned that agreement in 2018, and the Iranians have stepped up pressure on Europe by gradually discarding the nuclear-production restrictions to which it had agreed.

“It was pretty much a technical discussion, and it went pretty well, on the whole,” a spokeswoman for the French Foreign Ministry said on Monday. But she gave no details and would not confirm that the centerpiece of the negotiation was the $15 billion letter of credit.

Iran has said that if the talks fail, it will escalate its nuclear activity starting Friday.

While it has not said what actions it might take, Iranian officials have hinted they are planning to raise their enrichment of uranium to 20 percent purity. 

The country may also install next-generation nuclear centrifuges that can produce fuel far more quickly than the older models that were running when Iran agreed in 2015 to sharply limit its production in return for a lifting of international oil sanctions.

After complying with the agreement for a year after Trump pulled out of the accord and resumed sanctions, Iran has said it would no longer be bound by an agreement that Washington is no longer respecting.

The letter of credit proposed by President Macron is part of a broader effort by the French, with help from Germany and other European powers, to save the 2015 agreement, even after Trump renounced it as “a disaster.” No issue has more clearly illustrated the foreign policy chasm between the Trump administration and its European allies.

As the administration complains of European sanctions-busting, Macron is trying to engineer a meeting at the United Nations later this month between Trump and President Hassan Rouhani of Iran.

Macron, American officials say, is betting that once Trump is engaged in a negotiation of his own with Iran, he will sense a chance to reach an agreement before the 2020 American elections.

A similar effort to set up a meeting between Trump and Rouhani, at the United Nations in 2017, collapsed.

But the dynamics now are different, and Trump administration officials have often said they would meet the Iranians without preconditions.

Trump even seemed open to the idea of a financial bridge for the Iranians when he told reporters at the Group of 7 meeting that Iran may need a “short-term letter of credit or loan” that would “get them over a very rough patch.” His aides later said the president was envisioning such a financial package only after a new agreement was reached.

The Iranians have said that the United States would first have to return to compliance with the 2015 agreement before a new accord could be negotiated.

The deal Macron is exploring would provide Iran with the $15 billion line of credit in return for full compliance with the 2015 agreement and a return to normality in the Persian Gulf.

Ellie Geranmayeh, an Iran expert with the European Council on Foreign Relations, noted in an interview that “If France indeed pushes forward with this proposal, it’s likely to want not just a freeze on further enrichment from Iran but full compliance with the nuclear deal, and the opening of talks on regional issues.”

On Friday the International Atomic Energy Agency confirmed that Iran has been enriching uranium up to a purity of 4.35 percent, just above the 3.67 percent allowed under the deal, known as the Joint Comprehensive Plan of Action.

That enrichment level is still well within the ordinary limits for producing fuel for nuclear power plants. Iran’s stockpile of fuel now also exceeds the 300 kilograms, or 661 pounds, allowed under the accord, according to the energy agency.

But all of those steps are easily reversible, Iranian officials say, and are intended to demonstrate that Iran will not stay within the agreement if the United States violates its commitments.

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