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In Iran, nuclear deal brings little economic relief

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TEHRAN — When Iran's leaders signed a preliminary nuclear deal with world powers in November, they promised the six-month agreement would quickly start "melting the iceberg" of Western sanctions, lead to new trade ties and lift the lives of ordinary Iranians.

Opponents of the deal in the United States and the Middle East said much the same thing, warning that it would rapidly erode the international sanctions that have crippled Iran's economy.

It hasn't worked out that way. More than four months into the deal, many Iranians think the interim accord has done little to help them.

"The deal has not brought any economic breakthrough for the common people," said Mohammed Hydari, editor of Khandani, a political and economic journal. The "meager" funds released by world powers each month under the deal, he said, "are not helping the people, but the government."

Dwindling popular support in Iran for the preliminary accord, coupled with perennial resistance to any nuclear compromise from hard-liners, raises doubt about how long Iranian President Hassan Rouhani can push ahead with his effort to reach a final deal.

It also builds pressure on negotiators for Iran and six world powers to complete the complex diplomacy before the July 20 deadline.

Under the Nov. 24 agreement, which took effect Jan. 20, Iran and the six parties — the United States, Britain, France, Germany, Russia and China — must mutually consent to a six-month extension of talks.

But diplomats fear that skepticism in Iran and the West will make it tough to win an extension because both sides may demand a better deal than they got in the first round.

"There are strong pressures on both the Obama and Rouhani administrations to get this done in six months," said Robert Einhorn, a member of President Obama's inner circle of Iran advisors until last May. "But this is going to be a daunting, daunting challenge."

The interim deal gave Iran limited relief from some sanctions in exchange for freezing most uranium enrichment for six months. The goal was to buy time while negotiators worked out a long-term agreement aimed at ensuring that Iran doesn't gain the ability to produce nuclear weapons.

Rouhani portrayed the interim deal as a big win for Iran that would set off a "gold rush" of foreign investment. Many Iranians initially echoed his excitement. Big Iranian companies began discussions with Western corporations eager to return to the country, as smaller merchants tried to figure out how to cash in on any impending boom.

But while foreign business executives have streamed into Tehran, they haven't generated many deals. Most of the sanctions remain in place, and international companies don't want to risk severe U.S. and European penalties by moving too soon.

"Delegations have gone to Iran to explore deals, but you haven't seen deals actually getting done," said Daniel Waltz of the Patton Boggs law firm in Washington, who advises U.S. and foreign companies on sanctions.

Although the interim accord will release an estimated $7 billion into the Iranian economy, the benefits are "not enough to help the general population," said Djavad Salehi-Isfahani, an expert on the Iranian economy at the Virginia Polytechnic Institute. "The result is malaise."

The energy-based economy, long mismanaged, is suffering from other ills. Despite Rouhani's economic reform efforts, prices are rising, the government is running out of cash, and hoped-for growth is nowhere in sight.

Supreme leader Ayatollah Ali Khamenei has said Iranians must be prepared to stand up to the West with a "resistance economy" of self-reliance, a hint that more sacrifice is ahead.

Western diplomats are watching with a wary eye as pressures grow on Rouhani to deliver.

Two rounds of negotiations this year in Vienna have gone reasonably well, diplomats say. The two sides, set to resume talks Tuesday, have agreed on an agenda.

But the diplomats acknowledge it would be a major feat to resolve by July 20 all the decisions they have argued about in a decade of on-again, off-again talks.

If parties decide they need a six-month extension, the Iranian side probably will demand additional concessions, including more substantial easing of sanctions, which the Obama administration and its allies won't want to give for fear of surrendering their greatest leverage.

The White House, in turn, will face competing pressure from Congress, which has threatened to add new sanctions and has sent letters to Obama demanding more concessions from Iran.

Negotiating an extension of the talks "could be just as tough as getting a comprehensive agreement," said Einhorn, now at senior fellow with the Brookings Institution.

A senior U.S. official said the administration would prefer not to seek an extension, "but we will see where we are at the six-month mark."

Another senior U.S. official said after the last round of talks in Vienna that negotiators were working to avoid that choice.

"We are all committed to seeing if we can get this done in the six-month time frame, and there is a commitment by all sides to do so," said the official, who, like the other aide, declined to be identified in speaking about sensitive diplomacy. "That's the goal we are all working very hard towards right now."

paul.richter@latimes.com

Special correspondent Mostaghim reported from Tehran and Times staff writer Richter from Washington.

Copyright © 2014, Los Angeles Times
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