DUBAI, United Arab Emirates (AP) – Iran's rial currency plummeted to near-record lows on Thursday, raising concerns in Tehran that European nations may initiate a process to reimpose United Nations sanctions on the Islamic Republic due to its nuclear program. This development threatens to exacerbate an already ailing economy.
The "snapback" mechanism, established during the 2015 nuclear deal between Iran and world powers, was designed to be resistant to vetoes in the UN Security Council, and it would likely come into effect after a 30-day period. If enforced, this would freeze Iranian assets abroad, halt arms transactions with Tehran, and impose penalties related to any advancements in its ballistic missile program, among other repercussions.
As of Thursday, the rial exchanged at over 1 million to $1. Comparatively, at the time of the 2015 accord, the exchange rate was 32,000 rials to $1, marking a significant decline in the currency's value. The rial had reached its lowest point ever in April, hitting 1,043,000 rials to $1.
On August 8, France, Germany, and the United Kingdom cautioned that Iran could trigger the snapback mechanism by ceasing inspections from the International Atomic Energy Agency (IAEA) in the wake of Israeli military strikes during a 12-day conflict that erupted in June. These Israeli attacks resulted in the deaths of crucial military leaders in Tehran, prompting Supreme Leader Ayatollah Ali Khamenei to retreat into hiding.
The potential invocation of the snapback mechanism threatens to escalate tensions between Iran and the West amid ongoing conflicts in the region, particularly in Gaza. Analysts from the New York-based Soufan Center have stated that the U.S. and its European allies view this action as a method to keep Iran strategically weakened and incapable of restoring its nuclear capabilities, originally diminished by U.S. and Israeli strikes. Conversely, Iranian officials perceive the sanctions snapback as an aim to undermine the Iranian economy indefinitely, potentially provoking internal unrest.
Initially, Iran appeared to underestimate the threat of renewed sanctions, showing little sign of active diplomacy in the weeks following the European warnings. However, in the last few days, there has been a brief diplomatic initiative as internal chaos has enveloped the Iranian government. Foreign Minister Abbas Araghchi highlighted this fatalistic view in a statement, arguing that negotiations alone cannot stave off war, particularly given that conflict erupted just as negotiations with the U.S. were set to resume.
The crux of the issue lies in Iran's nuclear enrichment activities. Before the June conflict, Iran was enriching uranium to 60% purity, a short distance from the 90% required for weapons-grade levels. Iran also developed a stockpile sufficient to produce multiple nuclear weapons if the decision was made. While Iran maintains that its nuclear program is peaceful, Western nations and the IAEA believe Tehran was pursuing an active weapons program until 2003.
The impact of recent Israeli and U.S. military actions on Iran's nuclear capabilities is still uncertain. Under the 2015 nuclear deal, Iran consented to enhanced IAEA access, including the installation of monitoring systems at nuclear sites. However, following the U.S. withdrawal from the nuclear deal in 2018, IAEA inspectors faced increasing restrictions and have since been unable to access vital sites. Reports indicate that Iran has allegedly relocated uranium and nuclear equipment to undisclosed sites, complicating the monitoring of its nuclear activities.
On Wednesday, IAEA inspectors observed a fuel replacement at Iran's Bushehr nuclear reactor, which is supported by Russian technical assistance. The three European nations outlined a deadline in their August 8 correspondence, indicating that they would pursue the snapback process by the end of August unless Iran reached a satisfactory resolution regarding its nuclear activities. This tight timeframe leaves Iran with limited opportunities to negotiate, particularly as skepticism toward Iran has grown amid ongoing unresolved issues related to its nuclear program.
The snapback mechanism is set to expire on October 18, prompting urgency from the European countries to act. If enacted, any party to the deal could initiate sanctions against Iran for noncompliance. Post-expiration, efforts to reinstate sanctions would likely be hindered by potential vetoes from Security Council members China and Russia, who have previously supported Iran and have maintained a distance during the June conflict. Additionally, China's continued purchase of Iranian crude oil may also be impacted if the snapback occurs. Russia has proposed extending the life of the UN resolution granting snapback authority, as it is set to take over the presidency of the UN Security Council in October, potentially adding further pressure on European nations to act promptly.
