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Saturday May 23rd, 2015 11:02AM

Russia oil talks pose new hurdle to Iran nuke pact

By The Associated Press
WASHINGTON (AP) -- The United States could impose economic sanctions if Iran and Russia move forward with a reported oil-for-goods contract, Secretary of State John Kerry said Tuesday, discussing with a Senate panel an emerging threat to talks designed to finalize a nuclear deal with Iran.

The Russian business daily Kommersant has reported Russia plans to buy 500,000 barrels of Iranian oil a day, shattering an export limit defined by an interim nuclear agreement world powers and Iran reached last year. The oil-for-goods exchange is still far from finalized, the newspaper said, but its potential challenges Western efforts to secure a comprehensive agreement.

While nuclear negotiators met in Vienna, Kerry told the Senate Foreign Relations Committee that the Obama administration has warned Iran and Russia about moving forward with the oil contract. It would violate the interim agreement reached in November in Geneva, he told the Senate panel, "and, yes, it could trigger U.S. sanctions."

However, America's top diplomat stopped short of saying a Russian-Iranian deal would automatically trigger U.S. economic penalties on Iran. The Obama administration has avoided giving a clear ultimatum because fresh U.S. sanctions on Iran would likely derail diplomatic efforts over its nuclear program.

Critics of the administration's outreach to Iran are seeking a clear marker.

In a letter to the president Monday, Congress' leading sanctions advocates said the U.S. must re-impose all penalties on Iran suspended under the interim pact if Moscow and Tehran move forward. "We urge you to put Iran on notice," said Sens. Bob Menendez, D-N.J., and Mark Kirk, R-Ill.

Tennessee Sen. Bob Corker, the Senate Foreign Relations Committee's top Republican, said the two countries were testing America's resolve. "The administration must be prepared to restore all sanctions if Iran cheats," he said.

The six-month interim agreement, which went into effect in January and expires in July, allows Iran to continue exporting a total of 1 million barrels a day of oil to six countries: China, India, Japan, South Korea, Taiwan and Turkey. Washington pledged no financial penalties against them as long as they weren't boosting purchases.

But the promise didn't apply to Russia, which wasn't an existing customer of Iran's petroleum industry. And the administration has been raising its concern with Moscow for months about any moves that would lessen the economic pressure on Iran, including in discussions between Kerry and Russian Foreign Minister Sergey Lavrov.

Concrete progress on the oil-for-goods proposal would put President Barack Obama in a bind.

If he publicly threatens too forceful a response, he risks opening up a new rift with Russia at a time when the two countries are trying to maintain cooperation on nuclear and other matters even as they go through one of the worst crises in decades related to Russia's takeover of Ukraine's Crimean Peninsula. And unblocking suspended U.S. sanctions against Iran would likely prompt its negotiators to abandon the nuclear talks.

But if the president and his administration fail to dissuade Russia and Iran from moving forward, the interim agreement that forms the basis of America's ongoing diplomacy with Iran would be undermined. The U.S. and the United Nations say Iran is living up to its commitments thus far, and officials have expressed increased belief a final deal may be taking shape, averting the possibility of a future military confrontation.

In Austria's capital, Iranian Foreign Minister Mohamad Javad Zarif said this week's talks are designed to start work on drafting the text of a new agreement. Still, he told Iran's state-run television: "The differences will be lots."

The Russian-Iranian oil deal could provide Tehran with billions of dollars, according to experts, softening the blow of years of U.S. and international sanctions that have crippled Iran's economy and helped end more than a decade of deadlock in nuclear negotiations. Iran insists its program is solely for peaceful power production.

Mark Dubowitz, a leading sanctions proponent with the Washington-based Foundation for Defense of Democracies, said his understanding was that Russian President Vladimir Putin agreed earlier this year not to move on the deal until August, after the interim agreement would in theory be replaced by a final accord. But he said Putin's assurance came before the Crimean crisis and may no longer hold.

Citing unidentified sources close to the Russian government, Kommersant said a Russian-registered oil trader without an international presence would be tasked with purchasing the Iranian oil. The objective would be to limit Russia's exposure to U.S. economic pressure that could be applied to a global player like state-controlled oil giant Rosneft.

Still, it would be difficult for Russia to gain immediate access to the petroleum since most Iranian oilfields are far from the Caspian Sea through which the oil could be shipped, and lack the infrastructure to ensure deliveries.
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