Thread by @yarbatman

1. Hidden in the mechanics of the new Swiss channel for Iran humanitarian trade is an unprecedented sanctions step by @USTreasury that makes a big difference for the prospect for future US-Iran negotiations. I explain why in this piece for @bopinion.
bloomberg.com/opinion/articl…

2. When the Obama administration sought to encourage Europe-Iran trade in the aftermath of JCPOA sanctions relief in 2016, they hit a wall. European companies were ready to reengage Iran, but their banks were not, significantly constraining investment.
bourseandbazaar.com/research-1/201…

3. Banks felt Iran trade was too risky. Some of the largest lenders in Europe had been aggressively targeted by US authorities for violations, paying huge fines. US officials were saying "work with Iran" but the banks wanted more than verbal assurances.
reuters.com/article/us-ira…

4. Bank executives and European officials asked the Treasury Department to consider issuing "comfort letters." It didn't happen.

When the letters were not forthcoming, @JZarif highlighted it as an early failure of U.S. commitments on sanctions relief.
financialtribune.com/articles/natio…

5. Treasury refused because they did not want to set a precedent where they would need to provide written assurances for trade that was clearly permissible under sanctions regulations. They would have no doubt been flooded with requests.

But now, they have issued such a letter.

6. The framework agreed with Swiss authorities enables banks "to seek written confirmation from Treasury that the proposed financial channel will not be exposed to U.S. sanctions.” The bank enabling the initial transaction €2.3m received such a letter.
bourseandbazaar.com/articles/2020/…

7. This matters because the architects of the Trump administration's Iran policy have sought to build a “sanctions wall." Their intention is to heighten the risk perception of banks in order to keep them from doing business with Iran *even if* a new deal is stuck.

8. Iranian stakeholders look at the sanctions wall and the legacy of failed sanctions relief under the JCPOA and rightly conclude that any economic concessions they U.S. may make in new talks are not credible.

But the new use of comfort letters could change their calculations.

9. If sanctions relief is quick and decisive (see @esaravalle's great piece on what this looks like) *and* includes new use of comfort letters to get banks on board, then effective sanctions relief becomes much more likely, even with the "sanctions wall."
foreignpolicy.com/2019/09/10/aft…

10. It would appear that some of the more pragmatic staff in the Treasury Department are already planning how to scale the sanctions wall. The mechanics of the Swiss humanitarian channel can be repurposed for a whole range of sanctions-relief applications, including investment.

11. In this way, the use of comfort letters is conducive to a "reconstruction" approach to sanctions relief in the manner that @njtmulder and I outlined here.

US-Iran talks may be far off, but the pieces need to be put in place. Comfort letters are key.
foreignpolicy.com/2019/04/15/lif…