Treasury Secretary Jacob Lew testifies on Capitol Hill in Washington. The Obama administration will almost certainly have to backtrack on a promise to suspend only nuclear-related economic sanctions against Iran as part of an emerging nuclear deal, as it wends its way through a briar patch of interwoven economic penalties against the Islamic Republic, officials and others involved in the process tell The Associated Press. Image Credit: AP

Washington: The Obama administration may have to backtrack on its promise that it will suspend only nuclear-related economic sanctions on Iran as part of an emerging nuclear agreement, officials and others involved in the process tell The Associated Press. The problem derives from what was once a strong point of the broad US sanctions effort that many credit with bringing Iran to the negotiating table in the first place.

Under the sanctions developed over decades, hundreds of companies and individuals have been penalized not only for their role in the country’s nuclear programme but also for ballistic missile research, terrorism, human rights violations and money laundering.

Now the administration is wending its way through that briar patch of interwoven economic sanctions.

The penalties are significant. Sanctioned foreign governments, companies or individuals are generally barred from doing business with US citizens and businesses, or with foreign entities operating in the American financial system. The restrictions are usually accompanied by asset and property freezes as well as visa bans.

Negotiators hope to conclude a final nuclear deal by June 30. According to a framework reached in April, the US will be required to lift sanctions that are related to Iran’s nuclear programme but could leave others in place. President Barack Obama can suspend almost all US measures against Iran, though only Congress can revoke them permanently.

“Iran knows that our array of sanctions focused on its efforts to support terrorism and destabilize the region will continue after any nuclear agreement,” Treasury Secretary Jack Lew said. US officials will “aggressively target the finances of Iranian-backed terrorist groups and the Iranian entities that support them,” he said, including the Lebanese militant group Hezbollah and Iran’s Quds Force.

But that’s easier said than done.

The Treasury Department’s sanctions point man, Adam Szubin, has been tasked with sorting out the mess, according to US officials, though no clear plan has yet been finalized.

After years of negotiations, US officials believe a deal is within reach that for a decade would keep Iran at least a year from being able to build a nuclear weapon.

In return the US would grant billions of dollars in relief from sanctions that have crippled Iran’s economy. But the whole package risks unraveling if the US cannot provide the relief without scrapping sanctions unrelated to Iran’s nuclear programme.

Administration officials say they’re examining a range of options that include suspending both nuclear and some non-nuclear sanctions, a step that would face substantial opposition in Congress and elsewhere. Under one scenario, the US could end non-nuclear restrictions on some entities, then slap them back on for another reason. But Iran could then plausibly accuse the US of cheating on its commitments.

Obama has spoken about Iran potentially recouping up to $150 billion in assets trapped overseas. The process for how that would take place is still being worked through, said officials.

The officials who provided information for this story spoke only on condition of anonymity because they weren’t authorized to speak publicly on the private discussions.

The Iranian Central Bank may prove the most glaring example of the administration’s dilemma.

The bank underpins Iran’s entire economy, and for years the US avoided hitting it with sanctions, fearing such action would spread financial instability and spike oil prices. By late 2011, with Iran’s nuclear programme advancing rapidly, Obama and Congress did order penalties, declaring the bank a “primary money laundering concern” and linking its activity to ballistic missile research, terror financing and support for Syrian President Bashar Al Assad.

The effects were far-reaching. Petroleum exports fell by 60 percent, Iran suffered runaway inflation, cash reserves dried up and industrial output in several sectors plummeted. And Iran agreed to talk about its nuclear programme with the United States and five other world powers.

Now that the nuclear agreement is so close, Iran wants these sanctions lifted. And it is unclear how the United States and other Western powers could feasibly provide the economic benefits they’ve promised without easing conditions on the central bank.

Lew said that a nuclear accord would include the suspension of all “secondary” oil, trade and banking restrictions - those that apply to US and non-US banks, as well as foreign governments.

But many of these measures overlap with American sanctions tied to Iran’s nuclear programme, and that has officials considering new sanctions to keep certain Iranian institutions under pressure.

Eliminating the secondary sanctions across the board could have wide-ranging implications, making it easier for Iran’s Revolutionary Guard Corps and its police, intelligence services and paramilitary groups to do business.

That possibility has Iran’s rivals in the region, including Israel and the Sunni countries of the Middle East, gravely worried.

“I share their concern,” Gen. Martin Dempsey, the Joint Chiefs of Staff chairman, said Tuesday in Occupied Jerusalem.

“If the deal is reached and results in sanctions relief, which results in more economic power and more purchasing power for the Iranian regime, it’s my expectation that it’s not all going to flow into the economy to improve the lot of the average Iranian citizen,” he said. “I think they will invest in their surrogates. I think they will invest in additional military capability.”

The Revolutionary Guard is under US sanctions because of its proliferation of weapons of mass destruction. But because the US views the Corps as so pernicious, the administration is considering new measures to help block it from meddling in the internal conflicts of Iraq, Lebanon, Syria and Yemen.

Of the 24 Iranian banks currently under US sanctions, only one - Bank Saderat, cited for terrorism links - is subject to clear non-nuclear sanctions. The rest are designated because of nuclear and ballistic missile related financing, while several are believed to be controlled by the Revolutionary Guard.

Will they be cleared for business with the world? US officials still can’t say one way or another. Congress, too, hasn’t received a list of banks and institutions that would be released from sanctions under the deal.

If the United States cannot deliver on its promises, it could take the blame for a collapse of the yearslong negotiations toward a nuclear deal, putting the world - in the words of Obama and other US officials - on a path toward military confrontation. At the same time, an Iran unburdened by sanctions could redouble efforts toward nuclear weapons capacity, while international unity and the global sanctions architecture on Tehran frayed.