American officials are hailing the election of an Iranian president who vows to seek relief from international sanctions as the first tangible evidence that the U.S. strategy is influencing Iran's nuclear policy.
The draconian sanctions have wreaked havoc on the Iranian economy and weighed heavily in the June 14 vote for Hasan Rowhani, a candidate who openly criticized how his country's leadership has handled the nuclear file.
His election has opened up a debate in the U.S.on whether it's time to pull back on the throttle and see whether Tehran shifts away from what the U.S. believes is the pursuit of a nuclear weapon. It also has set off intense discussions among government agencies on how to proceed with Iran, according to U.S. officials who spoke on condition of anonymity because they were not authorized to speak publicly on the issue.
"I think that the administration should ease off on sanctions and pressure Congress to slow the train because President-elect Rowhani has painted a picture of a more forthcoming, more flexible Iranian nuclear policy," said analyst Cliff Kupchan, director for Middle East at Eurasia Group.
Rowhani's election will have no bearing on the next round of new U.S. nuclear sanctions, set to take effect on July 1.
The U.S. officials said there will be no lifting or easing of sanctions at this time unless Iran offers something concrete in return. Washington is well aware that hard-line Supreme Leader Ayatollah Ali Khamenei and Iran's ruling clerics - not the president - call all the shots in policymaking and make every major decision on the nuclear program and dealings with the West.
However, the Americans could offer other concessions to the Iranians at the so-called P5+1 nuclear talks with Iran, which include the five permanent U.N. Security Council members plus Germany.
"The question is whether the administration offers a preliminary olive branch, or they say: 'You put down the first piece of silver on the table," said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. "I would think the administration would be wise to take the signs at face value and offer an olive branch. Olive branches are cheap and we've got a lot of them in the quiver."
Iran has long insisted its nuclear ambitions are purely peaceful - for generating power and medical research.
The U.S. and its international partners are deeply skeptical, however, and some in Congress have begun to push new legislation that would impose the harshest sanctions yet. If passed, the law would move the U.S. closer to a full oil and trade embargo than it has ever been. It is by far the biggest sanctions threat hanging over Iran now.
Kupchan said he believes Rowhani's election has dimmed the prospects for that legislation passing anytime this year. And trying to cut back more on Iran's oil exports would be complicated by the fact that the U.S.would have to persuade China and India to reduce their imports further - a tough sell.
The sanctions starting next month target the local currency, the rial. But the rial has lost about two-thirds of its value over the past two years and analysts say there is little room left on the downside.
This round also aims to stop all transfers of gold to the government or ordinary citizens - something that sanctions opponents cite as an example of sanctions that punish the population more than its leaders. Another measure hits at Iran's auto industry while the U.S. will also tighten up existing sanctions on shipping and energy.
Round after round of sanctions by the U.S. and its international allies have wrought serious damage on Iran's economy. On top of the rial's devaluation, inflation has spiked to about 30 percent, food prices have shot up, and critical oil exports have been cut in half. International banking transactions have been virtually paralyzed.
The rial and Iran's stock market rebounded a bit after the presidential election on optimism that tensions with West may ease and Rowhani might take other measures to stabilize the economy. Managing the domestic economy is one of the main roles of Iran's president.
Despite the economic pain of sanctions, Iran has continued to defy Western demands to halt uranium enrichment, a process to produce nuclear fuel that can be used either for electricity generation or weapons production. Iran has even ratcheted it up over the past few years, as sanctions have mounted.
At a hearing early this month on sanctions, before Rowhani's election, senators grilled administration officials on why the intense economic pressure Iran is feeling has not translated into a change in what they called Iran's "nuclear calculus" or policy.
The policymakers pointed to an Iranian request at the last P5+1 talks for sanctions relief, but seemed hard-pressed to come up with evidence of any other policy effects.
Now, Rowhani's election is being touted by U.S.officials as the "smoking gun."
"The accumulated weight of the sanctions has woken them up from their sleep," said Iran analyst Mehrzad Boroujerdi, director of the Middle East Studies program at Syracuse University.
Conservative lawmakers in Congress, who take a harder line on sanctions than the Obama administration, have made clear they see no cause to let up on sanctions now.
"We need to take our sanctions to maximum levels to prevent Iran from acquiring a nuclear weapons breakout capability," Republican Senator Mark Kirk of Illinois told The Associated Press in a statement. Kirk and other conservative politicians have dismissed the notion that Rowhani is a moderate reformer, saying he was hand-picked by Khamenei.
The administration has spoken in somewhat softer language about the election's outcome.
"I see it as a potentially hopeful sign," White House Chief of Staff Denis McDonough told the American CBS TV network.
Rowhani, a former nuclear negotiator, is considered a moderate in the mold of others who wage selective battles against the Islamic establishment but manage to keep posts within the ruling hierarchy. He spoke during his campaign of the suffering sanctions have brought and vowed to seek relief.
Boroujerdi said Rowhani could try to negotiate with Khamenei and other hard-liners to be more transparent on the nuclear program, for example allowing international inspections, as well on halting uranium enrichment to 20 percent - a key demand of the U.S. and its partners. Russia's foreign minister was quoted this week as saying Iran was willing to halt 20-percent enrichment and Iran did not deny it.
Ultimately, the stakes of Iranian inaction are about as high as they can be.
"What Rowhani has given us is a new trajectory for diplomacy but not necessarily a lot more time," said Kupchan. "This time next year, we will be talking about strikes on Iran."
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