The Tehran Tower stands illuminated beyond residential and commercial properties on the city skyline in Tehran, Iran. (Photographer: Simon Dawson/Bloomberg)

Iran Sets 60-Day Nuclear Countdown Unless Europe Delivers Trade

(Bloomberg) -- Iran threatened to abandon limits on uranium enrichment unless Europe throws it an economic lifeline within 60 days, setting an ultimatum for the survival of a shaky 2015 accord meant to prevent the Islamic Republic from developing a nuclear bomb.

The move is likely to inflame tensions with President Donald Trump’s administration, which walked away from the landmark nuclear deal a year ago and imposed strict sanctions that squeezed Iran’s economy, triggered a currency collapse and ushered in shortages of consumer goods.

Iran’s appeal was addressed to European signatories to the agreement, which are struggling to reconcile Trump’s hardline stance on Iran with their promise to continue trading and engaging with the energy-rich nation.

U.S. Secretary of State Mike Pompeo responded cautiously to Iran’s announcement. “I’ve seen the letter that’s been sent, I think it was intentionally ambiguous. We’ll have to wait and see what Iran’s actions actually are,” he said during a press conference in the U.K.

Germany and Britain have said they’ll continue working to salvage the multilateral agreement that succeeded in limiting Iran’s nuclear program, but urged Tehran to stick to its commitments and avoid escalation. The U.K. said it was not considering imposing sanctions at this stage.

“There will of course be consequences” if Iran breaks its commitments, U.K. Foreign Secretary Jeremy Hunt said, standing alongside Pompeo. “As long as Iran keeps its commitments, so will the U.K.”

German trade with Iran was worth 3.4 billion euros ($3.8 billion) in 2017 and 1.5 billion euros in the first half of 2018. Trade with France totaled 2.42 billion euros last year. But secondary U.S. sanctions, which punish non-American companies and financial institutions doing business with Iran, mean major European companies are already staying away.

The U.S. stepped up economic pressure early this month by allowing the expiration of waivers that permitted eight governments to import Iranian oil, in a drive to cut Iran’s oil exports to zero and force Tehran to end support for militant groups around the Middle East.

No Commitment

In a letter to other signatories, Iran’s Supreme National Security Council said it was no longer committed to restrictions on the storage of enriched uranium and heavy water stocks, and could stop observing limits on uranium enrichment at a later stage.

The level of nuclear enrichment Iran is allowed to pursue is at the heart of the nuclear agreement, because material enriched at a sufficiently high concentration could be used to produce a bomb.

If European partners meet pledges to facilitate Iran’s access to banking and oil markets, however, it will restore full compliance with the agreement, known formally as the Joint Comprehensive Plan of Action, or JCPOA.

“Whenever our demands are met, we will equally resume fulfilling commitments, otherwise the Islamic Republic will halt other commitments step by step,” the statement said.

Oil futures traded little changed in London. Prices have already jumped 29 percent this year, in part because of U.S. efforts to tighten sanctions on Iranian oil exports.

U.S. Strike Force

As some of the signatories seek a way to keep the deal alive, the U.S. is preparing for other options. On Sunday, the administration said it was deploying an aircraft carrier to the Gulf in an “unmistakable message” to Iran that it would meet any aggression with “unrelenting force.” And on Tuesday, it said B-52 bombers were also heading for the Middle East, where confronting Tehran has become a cornerstone of U.S. policy.

Israeli Prime Minister Benjamin Netanyahu has already warned his country would confront any Iranian move to develop a weapon.

”On the way here, I heard that Iran intends to continue its nuclear program," Netanyahu said at a Memorial Day event in Jerusalem. “We will not allow Iran to have nuclear weapons."

Iran has repeatedly denied it was pursuing an atomic weapon.

“By leaving the JCPOA, the U.S. wanted Iran to exit the following day so it would take the file to the Security Council. Iran didn’t fall into that trap,” Iranian President Hassan Rouhani said in a televised address. We “know how important the JCPOA is and its crumbling will have a negative impact on the region and the world,” he said. “ We don’t want to leave.”

European signatories, including the European Union, have devised a special mechanism to facilitate trade with Iran. But Instex, as the vehicle is known, isn’t yet operational and would likely offer only limited relief.

For months, Iranian officials have signaled they’re losing patience because they’re sticking to an agreement that curbs their nuclear activities but is providing few of the promised benefits.

A significant loss of oil revenues would hit state coffers hard and present a challenge for Rouhani, who championed the nuclear deal and won two elections on a promise to end Iran’s isolation and revive its economy.

“The Europeans would be put in a difficult spot if the Iranians re-attach some centrifuges or restart some questionable centrifuge research that may have dual uses,” said Paul Sullivan, a Middle East expert at Georgetown University’s Center for Security Studies.

©2019 Bloomberg L.P.