Trump-Rouhani meeting or rapid Iran-US escalation? - Analysis

Iran fights with IAEA, FATF, France offers deal

U.S. President Donald Trump (L) and Iranian President Hassan Rouhani (R) (photo credit: REUTERS)
U.S. President Donald Trump (L) and Iranian President Hassan Rouhani (R)
(photo credit: REUTERS)
What is going to happen on Thursday?
Will France or the US announce the start of new negotiations with Iran that could lead to a new and improved nuclear deal and a meeting between US President Donald Trump and Iranian President Hassan Rouhani?
Or will the Islamic Republic escalate its violations of the 2015 nuclear deal, as previously promised, ushering in a new era of the clock winding down to an Iranian nuclear weapon and a potential preemptive strike by Israel.
There very well may be surprises, but recent history and the mixed signals suggest that Tehran will not go solely in one direction, but will continue to try to walk a tightrope keeping all options open.
This is what Iran did for its May and July deadlines.
It started to violate the 2015 nuclear deal a bit more, but not in a way that would move it rapidly closer to obtaining a nuclear bomb and potentially force Israel’s hand to strike.
Simultaneously, it kept diplomatic channels open for a deal.
The Islamic Republic also sent mixed messages in the past about what it would settle for.
What may be different this time is that this is the first time since the 2015 nuclear deal, Iran is openly saying it may ignore requests from both the IAEA and the FATF (the Financial Action Task Force).
Already on July 11, it was reported that the IAEA was sitting on evidence that Iran had hidden radioactive materials from the IAEA at the nuclear site Turquzabad, but that it had not cleaned up well enough and left traces which IAEA inspectors caught.
Late Monday, The Wall Street Journal reported that Iran is ignoring requests from the IAEA to clarify the discrepancy and seeming cover-up of radioactive material.
In contrast, until now some critics have said that the IAEA was too lenient with its inspections of Iran, but the Islamic Republic had always at least paid lip service to the idea that it was trying its hardest to comply with IAEA inspections.
On Sunday, an Iranian spokesman publicly repudiated FATF demands that Tehran pass certain laws to come into compliance with international standards for combating money-laundering and terror-financing.
In June, FATF, a powerful financial oversight group which can limit a country’s access to the international banking system, gave Iran an October deadline to carry out a list of compliance actions.
While until now, Iran had continued to move forward gradually with some compliance actions, even if it did not do all of them, Sunday was the first time that Iran outright said it did not care about FATF deadlines.
This would seem to suggest that Iran is on the verge of a rapid escalation of the nuclear standoff with the US and Israel, except recent developments with France.
In a flurry of diplomacy, France has put the first specific proposal on the table to end the deadlock.
According to the proposal, the EU would extend Iran a $15b. line of credit, the US would at least temporarily restore select waivers to its oil sanctions, while not removing the sanctions completely, and Iran would return to compliance with the 2015 nuclear deal.
Even as Rouhani has said that Iran will not negotiate a new deal without all sanctions first being removed, other voices in his government seem to be hinting to a middle ground.
Simply returning to compliance with the 2015 nuclear deal would not constitute negotiations on a new deal.
So the US could temporarily allow Iran a lifeline from sanctions, while maintaining broader sanctions and an easy ability to snapback the rest, while Iran could temporarily return to compliance.
This would end the escalation.
Perhaps at that point there might be unofficial negotiations about what a new deal might look like and if a new deal were reached, there could be a signed commitment to remove sanctions sequenced with Iran signing on to wider concessions regarding its nuclear program, ballistic missiles and regional destabilizing behavior.
Until then, Iran is likely to take another limited escalation.
One idea it has thrown out is activating more IR-6 and IR-8 advanced centrifuges.
While this sounds ominous, former deputy director-general for Safeguards at the International Atomic Energy Agency, Olli Heinonen, has told The Jerusalem Post that Iran does not have sufficient numbers of these designs to make a major difference.
Rather, much bigger threats and violations would be enriching uranium to the 20% level, up from around 5%, or reinstalling a large number of IR-2m centrifuges.
Unlike the IR-6 and IR-8, Iran could install 1,000 new IR-2m centrifuges in a short time, jumping to 20% Iranian enrichment, and radically shortening the time to nuclear breakout.
If Iran does not escalate or chooses a light escalation, it is a signal that the diplomatic route is still open, no matter how threatening some of Tehran’s statements may be.