Iran will be allowed to buy gold but not take it as payment for oil

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Restricting gold's monetary function is as important to the United States as restricting nuclear weapons.

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Iran Agrees to Deal With Powers to Curb Nuclear Work

By Jonathan Tirone, Indira A.R. Lakshmanan, and Kambiz Foroohar
Bloomberg News
Sunday, November 24, 2013

http://www.bloomberg.com/news/2013-11-24/iran-agrees-to-historic-deal-wi...

GENEVA, Switzerland -- Iran and world powers struck an initial accord that broke a decade-long diplomatic stalemate, setting limits on the country's nuclear program in exchange for about $7 billion in relief from sanctions over six months.

Iran agreed to curtail its nuclear activities and in return won an easing of "certain sanctions" on oil, auto parts, gold, and precious metals. The deal, which is reversible, was announced today after five days of talks in Geneva. It releases some of Iran's oil assets and allows it to keep exporting crude at current levels.

The accord is the first major crack in the deadlock over Iran's nuclear program since 2003, when Hassan Rouhani, now the president of the Islamic republic, was its top negotiator. Since then, the dispute over the purpose of the program has helped deepen sectarian rifts in the Middle East, sparked threats of military action by the U.S. and Israel, and raised concerns that the oil-rich region was heading for a nuclear arms race.

... Dispatch continues below ...



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The deal also marks a breakthrough in relations between the U.S. and Iran 34 years after the Islamic revolution fractured ties. Backed by President Barack Obama and Rouhani, the pact faces opposition from Israel, with Prime Minister Benjamin Netanyahu calling it a "historic mistake." Critics in the U.S. and Iran may also hamper efforts for further detente.

"Everything that had happened since 1979 is a deterioration of relations between Iran and the West," said Ghanem Nuseibeh, the London-based founder of Cornerstone Global Associates, which advises clients on risk in the Middle East. "This is the first major reversal of that deterioration."

The agreement was announced by diplomats including Iranian Foreign Minister Mohammad Javad Zarif and U.S. Secretary of State John Kerry in the early hours of today. The two sides now aim to conclude a comprehensive accord within six months.

Diplomacy has "opened up a new path toward a world that is more secure," Obama said. The agreement halts Iran's nuclear progress and "key parts of the program will be rolled back," he said. "These are substantial limitations which will help prevent Iran from building a nuclear weapon."

Rouhani, who announced the news in a televised address, may also be strengthened at the expense of Iranian hardliners who rejected any compromise with Western powers.

"Constructive interaction is the motto of this government and it can be achieved through trust, the initial steps of which have been taken," Rouhani said.

The agreement comes less than six months after Rouhani won a surprise first-round election, campaigning on pledges to resolve the nuclear dispute and help the economy.

Western nations have accused Iran of harboring nuclear-weapons ambitions, a charge it denies. The U.S. and Israel have said they are willing to use force if needed to prevent Iran obtaining an atomic arsenal.

"I have serious concerns that this agreement does not meet the standards necessary to protect the United States and our allies," House Foreign Affairs Chairman Ed Royce, a Republican, said. "Instead of rolling back Iran's program, Tehran would be able to keep the key elements of its nuclear weapons-making capability."

Eric Cantor, the second-ranking House Republican, said the U.S. "must remain vigilant and respond immediately and severely to any cheating or wrongdoing by Iran. And we must rebuild our alliances in the region and stand firmly with our closest partners against Iranian aggression."

Under the deal, Iran must improve cooperation with United Nations monitors, commit to eliminate its stockpile of uranium enriched to 20 percent levels, and halt advanced centrifuge installation, the White House said in a statement. Iran also won't commission its Arak heavy water reactor, which, if it became operational, could produce plutonium and give the country a second path to nuclear weapons.

In return, Iran will be able to repatriate $4.2 billion in frozen assets, the Obama administration said. The accord will "suspend certain sanctions on gold and precious metals, Iran's auto sector, and Iran's petrochemical exports, potentially providing Iran approximately $1.5 billion in revenue," the administration said.

The accord also provides $400 million in tuition payments to schools for Iranian students studying abroad and will allow access to civilian aircraft parts.

Some curbs on gold trading also will be removed. While Iran will be allowed to buy and sell precious metals, including gold, it will be barred from accepting them as payment for oil or any other sanctioned transaction, according to the officials. Iran sits on the world's fourth-largest proven oil reserves.

The accord was reached after foreign ministers from the U.S., Europe, China, and Russia made unscheduled trips to Geneva to push the third round of talks in six weeks to a conclusion.

The deal compels Iran to clarify work that has been the focus of International Atomic Energy Agency inspectors. The agency, which convenes a quarterly meeting to discuss Iran this week, two years ago published a list of people and places that may have been involved with atomic-weapons work.

While the agreement fell short of demanding a visit to a military site south of Tehran where Iran is alleged to have tested nuclear-bomb triggers, it forms a commission with international monitors "to facilitate resolution of past and present concerns with respect to Iran's nuclear program, including the possible military dimension of Iran's nuclear program and Iran's activities at Parchin."

The agreement will probably have a "somewhat muted" effect on oil prices, according to analysts including Mark Keenan, cross-commodity research strategist at Societe Generale in Singapore. "We can, however, expect some price weakness as the market adjusts to the future prospect that Iranian exports will resume," he said by e-mail.

Brent crude for January settlement rose 97 cents, or 0.9 percent, to $111.05 a barrel on the London-based ICE Futures Europe exchange on Nov. 22, the highest closing price since Oct. 11.

Israel and Saudi Arabia, both longtime U.S. allies, have opposed any deal that allows Iran to retain sensitive nuclear technologies. Israel has signaled it's ready to take unilateral military action against Iran to halt a nuclear program.

"What was achieved last night in Geneva is not historic; it is a historic mistake," said Netanyahu. "Today the world has become a much more dangerous place," he said in comments broadcast on Israel Radio. "Israel is not bound by this agreement."

Opponents of a thaw with Iran have support in the U.S. Congress, where legislators from both parties have pledged to seek tighter sanctions. It's not clear whether they will abandon or escalate those efforts after the Geneva accord.

"If five years from now a nuclear suitcase explodes in Madrid and New York it will be because of the agreement signed this morning," Israeli Economy Minister Naftali Bennett said in an e-mailed statement.

The United Arab Emirates, another U.S. ally in the region, welcomed the agreement, describing it as a first step toward a permanent accord, the state-run WAM news agency reported.

Business between Iran and the U.A.E. declined 83 percent to $4 billion because of sanctions against the Islamic republic, Kerry said Nov. 11.

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