The US-Iran prisoner deal is a diplomatic breakthrough, but the bad blood persists

Analysis by Nadeen Ebrahim, CNN

(CNN) — Five American prisoners were freed by Iran on Monday in a Qatar-mediated deal that also included the transfer of some $6 billion in frozen Iranian funds and the release of five Iranian prisoners in the United States.

The carefully choreographed agreement was years in the making and is being seen as a major diplomatic breakthrough for the two foes.

But in a sign that the pact is no indication of a wider thaw in relations, a senior Biden administration official said the deal “has not changed our relationship with Iran in any way.” Soon after the American prisoners took off from Iran, the Biden administration slapped new sanctions on the regime.

The prisoner deal is, however, an example of a new method of unwritten arrangements between Washington and Tehran, analysts say, where smaller mutual concessions are exchanged in the absence of a wider, formal agreement like the one reached in 2015 and abandoned by the Trump administration in 2018.

A new, wide-ranging agreement may be difficult for both sides to achieve as the US heads to presidential elections in November 2024. Such a pact would likely face resistance from Congress, whose approval it would need. And from Iran’s perspective, efforts to forge a new pact with a US administration that could potentially be ousted in those elections would be futile if the next president abandons it.

The Biden administration is unlikely to engage in “meaningful revival” of the 2015 nuclear deal, said Sanam Vakil, director of the Middle East and North Africa program at the Chatham House think tank in London.

“Instead, it has already agreed on an understanding that is unwritten, where Iran is rolling back (uranium) enrichment,” she said. “In exchange, the Biden administration is looking away and allowing Iran to increase its oil sales.”

The deal comes amid a significant dialing back of tensions between Iran and the US in recent months. Attacks by Iran and its proxies on US interests in the Middle East have almost ceased, and Iran’s oil exports have risen despite Western sanctions on its oil industry. Meanwhile, Iran’s uranium enrichment under its nuclear program has reportedly slowed.

Ali Vaez, Iran Project Director at the International Crisis Group think tank, said a de-escalatory understanding between Washington and Tehran has created a more stable context for progress, calling it a “no deal, no crisis status quo.”

Iran has been slowing down the pace at which it is enriching its uranium to weapons-grade levels, several US news outlets reported last week, citing a confidential report by the UN nuclear energy watchdog, the International Atomic Energy Agency (IAEA).

At the same time, Iran has been boasting higher oil output and exports despite Western sanctions. Iran’s Minister of Petroleum Javad Owji on Sunday said that Western sanctions are gradually losing their effectiveness.

Last month, he said that oil production was on course to reach 3.4 million barrels per day (bpd) by the end of the summer. Production is the highest it’s been since 2018, when Trump withdrew from the 2015 nuclear deal and reimposed sanctions on Iran.

The Islamic Republic’s oil exports have also increased, averaging 1.9 million bpd in August, Reuters reported, citing shipping firm TankerTrackers.com. That’s not far from pre-sanctions figures, when exports averaged more than 2.5 million bpd in 2017, according to the US Energy Information Administration’s estimates.

Ali Ahmadi, a Tehran-based executive fellow at the Geneva Centre for Security Policy, said there’s little Washington can do to stop Iranian oil exports, given that most of its buyers are beyond the scope of US sanctions.

“Those claiming that Biden is ignoring Iran’s exports are assuming that Biden can just shut down Iran’s exports through sanctions,” he said. “The Biden administration still regularly sanctions Iran’s business partners, but the actors left dealing with Iranian oil are ones with extremely limited exposure to the US dollar and financial services community and, therefore, will not be affected by US sanctions.”

He said a surge in Iranian oil exports to China is attributed to demand from small, independent “teapot” refineries there.

A lack of trust

Even an unwritten arrangement can prove delicate, analysts say, given the ongoing disputes between the two nations that could undermine the recent reduction in tensions. Trust between the two sides appears to be weak too.

Western frustration with Iran has mounted over the past year. The Islamic Republic has sold drones to Russia amid its war on Ukraine, and has violently crushed protests at home against the mandatory hijab law, drawing Western ire.

Tehran has also informed the IAEA that it will bar several agency inspectors tasked with conducting verification activities in Iran, IAEA Director General Rafael Mariano Grossi said Saturday, strongly condemning Iran’s decision.

Iranian foreign ministry spokesman Nasser Kanaani on Sunday said his country would continue its cooperation with the nuclear watchdog within the framework of the signed agreements, without providing further details.

Under Monday’s agreement, which has already prompted criticism from the US Republican Party, Iran can only use the released funds for humanitarian purposes. Biden administration officials have stressed that the funds, which have been transferred to accounts in Qatar, will only be able to be used by Iran for humanitarian purchases and that each transaction will be monitored by the US Treasury Department.

But in an interview with NBC last week, Iranian President Ebrahim Raisi said his government would decide how and where to spend the $6 billion.

Asked if the funds would be used for humanitarian purposes, including food and medicine, Raisi said that “humanitarian means whatever the Iranian people needs.”

“So, this money will be budgeted for those needs and the needs of the Iranian people will be decided and determined by the Iranian government,” Raisi said.

Trita Parsi, executive vice-president of the Quincy Institute in Washington, DC, said Qatar’s involvement in managing the released Iranian funds acts as a guarantee that it will be used for humanitarian purposes. “The Iranians will not be able to access that money,” he said. “It’s the Qataris that will be holding the money.”

When the Iranians request the money to purchase food and medicine, for example, approval will have to be sought from the US before the purchases go through, he said, adding that the terms of the agreement are so strict on Iran that they are “humiliating.”

“The biggest thing this (US) administration fears is to be accused of being soft on Iran,” said Parsi. “In order to balance the fact that they made a deal to secure the release of Americans, they are imposing new sanctions and doing things that make them look really tough.”

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