P5+1: Interim deal and final status

Interim Deal (November 2013).

On 24th November, 2013, Iran and the six world powers (China, France, Germany, Russia, the United Kingdom, and the United States), known as the P5+1were successful in removing the stagnation in course of negotiations over Tehran’s controversial nuclear program when the parties reached a first-phase agreement on a six-month deal that will halt Iran’s most sensitive nuclear activities and increase international monitoring of its nuclear program in exchange for some relief from sanctions that affected adversely Iran’s economy.

The deal was signed in Geneva, wherein the right to enrichment of “right to enrichment,” of Iran was recognized. This deal could serve as a basis for further negotiations. EU foreign policy chief Catherine Ashton led the negotiating team for the P5+1. 

The agreement makes the following stipulations on the Iranian nuclear program:

• All uranium enriched beyond 5% will either be diluted or converted to uranium oxide. No new uranium at the 3.5% enrichment level will be added to Iran's current stock.

• No new centrifuges will be installed or prepared for installation.

• 50% of the centrifuges at the Natanz enrichment facility and 75% at the Fordow enrichment facility will be left inoperable. Iran will not use its advanced IR-2 centrifuges for enrichment.

• Iran will not develop any new uranium enrichment or nuclear reprocessing facilities.

• No fuel will be produced, tested, or transferred to the Arak nuclear power plant. In addition, Iran will share design details of the reactor.

• The IAEA will be granted daily access to Natanz and Fordow, with certain sites monitored by 24-hour cameras. The IAEA will also have access to Iran's uranium mines and centrifuge production facilities.

• Iran will address IAEA questions related to possible military dimensions of the nuclear program and provide data expected as part of an Additional Protocol.

Additional Protocol. In 1993 a program was initiated to strengthen and extend the classical safeguards system under IAEA and a model protocol was agreed by the IAEA Board of Governors 1997. The measures boosted the IAEA's ability to detect undeclared nuclear activities, including those with no connection to the civil fuel cycle. Its key elements were: 

• The IAEA is to be given considerably more information on nuclear and nuclear-related activities, including R & D, production of uranium and thorium (regardless of whether it is traded), and nuclear-related imports and exports.

• IAEA inspectors will have greater rights of access. This will include any suspect location, it can be at short notice (e.g., two hours), and the IAEA can deploy environmental sampling and remote monitoring techniques to detect illicit activities.

• States must streamline administrative procedures so that IAEA inspectors get automatic visa renewal and can communicate more readily with IAEA headquarters.

• Further evolution of safeguards is towards evaluation of each state, taking account of its particular situation and the kind of nuclear materials it has. This will involve greater judgement on the part of IAEA and the development of effective methodologies which reassure NPT States.

Right to Enrichment.

Iran maintains that it has the right to uranium enrichment under Article IV of the nuclear Nonproliferation Treaty (NPT), which guarantees states-parties access to nuclear technology as long as they adhere to their treaty obligations. Article IV does not specifically mention uranium enrichment. U.S. policy does not interpret access to enrichment technology as a right under Article IV.

The first-phase agreement allows Iran to continue enriching uranium to a level suitable for use in a power reactor.

Current Status.

Implementation of the November 2013 agreement began 20 January 2014 as confirmed by the IAEA interim report confirmed that Iran had begun scaling back major nuclear activities, the first steps to implement the interim deal. The report followed by the partial lifting of sanctions by the United States and the EU. Senior officials of the P5+1 and Iran met February 18–20 in Vienna and agreed on a framework for future negotiations. 

Indian Stake.

After the negotiations, India is the first of Iran’s four main buyers to say it is looking to buy more oil from Iran after the agreement in Geneva. India will investigate purchasing additional oil from Iran over the coming six months covering the Geneva agreement, as well as explore the possibility of joint ventures in Iran’s oil sector. Although the agreement does not allow Iran to increase its oil sales for six months, India has room to boost its imports after they fell roughly 40 percent this year to below even what was permitted by sanctions. As a result, earlier this year Iran slipped to third position behind Saudi Arabia and Iraq as India’s supplier of oil imports. Despite this, India and China have remained the top two destinations for Iran’s oil.

Underwriting New Delhi’s rising interest in Iran’s energy sector, India is now the world’s fourth largest energy consumer after the United States, China, and Russian Federation. The U.S. government’s Energy Information Administration projects that India and China will account for the biggest share of Asian energy demand growth through 2035. Accordingly, the primary focus of India’s energy policy is securing energy sources to meet the needs of its growing economy, as India’s primary energy consumption more than doubled between 1990 and 2011.

What is not in doubt is that Iran is eager to boost its oil sales to India, which pays 45 percent of its oil payments to Iran in rupees, a valuable source of foreign revenue in light of the increasing pressure from sanctions. The sanctions have increasingly hobbled Iran’s economy. Iran, a member of the Organization of the Petroleum Exporting Countries, ranks among the world’s top four holders of both proven oil and natural gas reserves, but since 2012, Iran saw unprecedented drops in its oil exports as U.S. and European Union sanctions were tightened, targeting Iranian oil export revenues. Preliminary data compiled by the EIA placed Iran in fifth rank in terms of crude oil and condensate exports, which was in contrast to its third position in 2011.

The sanctions have also precluded the substantial development of Iran’s natural gas reserves, the world’s second largest. As the sector is unable under sanctions to raise substantial foreign investment, the country’s natural gas reserves remain largely underdeveloped and output is used mostly to meet domestic demand, with natural gas accounting for about 59 percent of Iran’s total domestic energy consumption in 2010.

It is reported that India would buy up to an average 220,000 barrels per day of Iranian oil for the Iranian calendar year ending  March 31. India would also then be looking to increase imports in the 2014/15 financial year, depending on any further easing of the sanctions, commenting, “Iran is a great source of oil… and once the problems that have been faced by Iran are resolved then we will have more oil available in the market.” Three days later the U.S. State Department extended six-month Iran sanctions waivers to India, China, South Korea and other countries in exchange for their reducing purchases of Iranian crude oil earlier this year.

As a corollary of Indian interest in Iranian oil, New Delhi is also seeking to help Iran develop its Persian Gulf port of Chabahar for oil exports, which for India would have the added benefit of outflanking Pakistan’s Gwadar port, which they are currently developing with Chinese assistance. Chabahar would also benefit the post-Soviet Central Asian states by giving them a port outlet once railways in Iran are expanded and upgraded.

While considerable Western skepticism remains over Iran’s nuclear transparency, there is no doubt that Tehran intends to force open the sanctions door as wide as possible, and that the first foreign customer waiting on the other side is already India.