U.S. Moves to Tighten Iran Sanctions Enforcement as Nuclear Talks Stall

The Biden administration is moving to tighten enforcement of sanctions against Iran, according to senior U.S. officials, the first sign of Washington increasing economic pressure on Tehran as diplomatic efforts to restore the 2015 nuclear deal falter.

According to senior State and Treasury Department officials, the U.S. will send a top-level delegation, including the head of Treasury’s Office of Foreign Assets Control, Andrea Gacki, next week to the United Arab Emirates. The U.A.E. is a top U.S. ally but also Iran’s second-largest trade partner and a conduit for Iran’s trade and financial transactions with other countries.

The U.S. officials will meet with petrochemicals companies and other private firms and banks in the U.A.E. doing billions of dollars of trade with Iran. They will warn that the U.S. has “visibility on transactions that are not compliant with sanctions,“ one of the senior officials said. ”Those banks and firms face extreme risk if this continues.”

The visit could be followed by sanctions against Emirati and other firms, the officials said.

The U.S. move comes as the prospects of restoring the 2015 nuclear deal appear increasingly gloomy. Negotiations to revive the agreement continue in Vienna on Thursday among Iran, Russia, China, Britain, France and Germany, although the U.S. delegation will only travel to Vienna at the weekend. Iran refuses to negotiate directly with the U.S.

After a five-month hiatus imposed by Iran’s new hard-line government, talks resumed last week but stalled, with U.S. and European officials accusing Iran of walking back compromises agreed with Iran’s previous government in the spring.

U.S. officials say if there is no progress in the nuclear talks, the delegation to the U.A.E. could be the first of several visits to other countries to tighten the economic pressure on Iran by squeezing its ability to evade the U.S. sanctions imposed by the Trump administration.

That could include efforts to tighten sanctions compliance by firms in Malaysia, Turkey and China, Iran’s leading trade partner.

The U.S. is also working closely with financial firms in Japan and South Korea to track illicit Iranian trade, the officials said.

President Biden set restoring the nuclear deal as a top foreign policy goal, with U.S. officials making clear they would dismantle many of the U.S. sanctions reimposed on Iran when President Trump took the U.S. out of the deal in May 2018.

However in recent weeks, U.S. and European officials have warned repeatedly that Iran’s expanding nuclear work was endangering the possibility of restoring the 2015 deal, which had lifted most international sanctions on Tehran in return for tight but temporary restraints on Iran’s nuclear work.

Iran in recent months has started producing highly enriched uranium, restricted the access of United Nations atomic agency inspectors to Iranian nuclear sites and started producing uranium metal, a material that can be used in the core of a nuclear weapon. It has also advanced its work on centrifuges, allowing it to produce nuclear fuel far more quickly.

This work could make it impossible to restore the centerpiece of the 2015 accord: keeping Iran at least 12 months away from producing enough nuclear fuel for a bomb.

With efforts to restore the nuclear deal on the brink of failing, U.S. officials have said that while they will keep a diplomatic track open, they would look to increase economic and political pressure on Iran.

U.S. officials have coordinated the delegation’s visit next week with the U.A.E. government, which Washington has consulted closely with on Iran policy. The U.A.E. is also in discussions with Tehran on regional tensions and the Emirates’ top security official was in Iran earlier this week for talks. U.S. officials say they are supportive of that outreach.

The decision to start ratcheting up enforcement pressure in the U.A.E. partly reflects the role Emirati companies play in Iran trade and is partly aimed at averting a clash with China, Iran’s top trade partner and oil importer.

Western officials want to work with Beijing at the talks to press Iran to compromise and, for now, are using diplomatic efforts to persuade China to stem Iranian oil imports.

Iranian customs officials have said that during the calendar year that ended in March, the U.A.E. was the second-biggest non-oil exporter to Iran, at $9.6 billion, and the third-largest non-oil importer of Iranian goods, purchasing goods worth $4.6 billion.

U.S. officials say Emirati firms have played a major role as a conduit for financial transactions, oil sales and other commerce that Iran is conducting with other countries, including China. The U.A.E. is a major transshipment hub in the region.

Emirati firms make up “a very important portion of Iran’s continued commerce flows,” said one of the senior U.S. officials.

According to Esfandyar Batmanghelidj, founder of the Bourse & Bazaar Foundation, an economic think tank focused on Iran, China’s average monthly exports of oil from the UAE were 31% higher in the first nine months of 2021 than they were in the six months before the Trump administration ended oil import quotas for China and other countries in May 2019. Much of that comes from Iran, he wrote.

“Leaders in the United Arab Emirates are eyeing an economic windfall should the Biden administration succeed” in its effort to return to the nuclear deal, Mr. Batmanghelidj wrote in October. “But they have not waited for the lifting of sanctions to begin earning billions from Iran.”