The west risks breaching the landmark nuclear agreement if it fails to give Iran proper access to the international financial system, a former British ambassador to Iran has argued.

Sir Richard Dalton, who served in Tehran between 2003 and 2006, said in a report published this week in the journal of the Royal Society of Asian Affairs in London that the US and its allies had made “some potentially significant mistakes” in respect to reconnecting Iran to global banks after the deal.

Hassan Rouhani, under pressure to show tangible benefits of the lifting of sanctions to Iranians before the next presidential vote in 2017, complained at the UN in September that the US was failing to fulfil its obligations.

The Iranian president’s comments were echoed by the head of the country’s Atomic Energy Organisation, Ali Akbar Salehi, who told the Guardian last monththat “there are hints to do away [with] or to rewrite the deal, and on the other hand to unilaterally impose excessive oversighting and overcompliance to the point of Iran’s discouragement and ultimate submission.”


Dalton’s article, published on the first anniversary of the nuclear deal coming into effect, stated that the nuclear deal was the product of diplomacy.

Noting that the nuclear agreement would only endure “if everyone works at it”, Dalton wrote that “common sense suggests that, if the situation is not appreciably better later in the year, it will be impossible for the US and its partners to argue credibly that they are not in breach of” the nuclear deal, which is known in Iran by the acronym Barjam.

According to Dalton, the US and its partners have notably failed to re-authorise Iran’s access to U-turn transactions [used by Iranian banks to avoid US sanctions] in dollars, or to reassure non-US banks on handling Iranian payments, or to give general licences allowing non-US entities to use US software in their businesses dealings in Iran. Banks have remained reluctant to enter Iran despite attempts by the US secretary of state, John Kerry, and his European counterparts.

Among other impediments are “unwillingness [by the west], apparently, to use governmental influence with state-owned banks to get them to help carry out government policy” such as “providing clearing facilities in London”, Dalton said.

The ongoing banking difficulties have prevented Iran from capitalising on interest shown by western businesses in returning to the country, or finalising lucrative deals with the west, such as the purchase of planes from Airbus and Boeing. Iran is also partly to blame because it does not have adequate regulations on transparency, anti-corruption and money laundering.

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Esfandyar Batmanghelidj, founder of the Europe-Iran Forum business conference series, said the mood in Tehran was mixed. “On one hand, major multinationals like Siemens, Peugeot, Unilever and Vodafone have signalled ambitious plans for Iran, generating optimism in Iran’s business community,” he told the Guardian. “On the other hand, there are frustrating gaps in the US Office of Foreign Assets Control’s licensing policy. OFAC has issued so-called ‘general licences’ to help open the door for non-US companies to trade with Iran, but these provisions use broad language and do not fully account for the complexity of trade and investment by multinational companies.”

Dalton served in the British Foreign Office for more than 35 years and was among a group of former western ambassadors to Tehran who co-penned an article in 2011 saying there was “no evidence that the country is building nuclear weapons” and urging dialogue. He is currently an associate fellow at the London thinktank Chatham House.

Dalton predicted that the nuclear agreement would last “provided that mutual benefit is delivered in practice” and that the US “uses its power wisely”. Iran would not be the first to renege, he argued, saying that “the overwhelming interest of Iran is to comply”.

“The nuclear deal will stick, subject to US policy. And even if a Republican wins in the US, it is not a foregone conclusion that a candidates’ hostility to perceived past ‘concessions’ to Iran would translate into active sabotage of the deal – it is too obviously a good agreement for US, regional and world security against the spread of nuclear weapons.” A Donald Trump presidency would be unlikely to change that, he said.

With Iran’s own elections scheduled for May, the moderate Rouhani faces a tough time ahead. “High expectations in Iran of economic progress have not been realised. Disappointment has set in and criticism of the limited benefits that have accrued to Iran by the supreme leader and by President Rouhani’s opponents is rising in intensity; 2017 will see a presidential election in Iran and the right scent Rouhani’s blood.”

Economically, Dalton viewed Iran as an emerging Bric country, alongside newly advanced economies such as Brazil and India. “They have a $1.4tn diversified economy, growing at some 4-5%, with a backlog of investment in all sectors, a reforming government (for the next year at least) and a well-educated population (total 80 million) striving to take advantage of the country’s improved prospects,” he observed. “Crude production will soon go above 4m barrels per day. The oil minister projects a production capacity of 4.8m barrels per day within five years.”

On the regional context, Dalton wrote that “we should compare [Iran] not with post-Ottoman, post-imperial Egypt or Saudi Arabia, but with Russia and other Asian powers.”



This article was written by Saeed Kamali Dehghan for The Guardian on Oct 27, 2016. Saeed Kamali Dehghan is Iran correspondent.