The Economist Iran’s $6bn hostage deal is part of a broader diplomatic strategy But inside the country, tensions are running high

 The Economist

Iran’s $6bn hostage deal is part of a broader diplomatic strategy

But inside the country, tensions are running high

Americans Siamak Namazi and Morad Tahbaz, released in a swap deal between the U.S. and Iran arrive in Dohaimage: reuters

Sep 18th 2023

Few iranian acts outrage its enemies more than its taking of hostages. Foreigners are offered official visas to visit Iran and then seized on departure by the Islamic Revolutionary Guard Corps (known as the Pasdaran), Iran’s strongest force. Iran then uses them as bargaining chips for prisoner swaps and cash, among other things. “The Islamic republic isn’t a banana republic, but…it still behaves like a mafia state,” says a Western diplomat, previously based in Iran.

On September 18th Iran and America each exchanged five prisoners in a deal sweetened by America’s unfreezing of $6bn of Iranian assets—primarily oil revenues—held in South Korea. The released hostages include Siamak Namazi, an Iranian-American businessman held since 2015 (his father was detained a year later when he travelled to Iran to secure Siamak’s release and held until 2022) and Morad Tahbaz, an Iranian-American environmentalist who also holds British citizenship. But perhaps a dozen Westerners and several dozen more dual nationals remain behind bars as leverage for future deals. And on September 16th Iran arrested another dual national in Karaj, a city west of the capital, Tehran.

Iranian officials claim they have no choice but to take prisoners since their adversaries also flout international law. Their ire has been stoked by America’s imposition of sanctions and by the unloading last month of Iranian oil from a tanker America had seized and taken to Texas.

Over the longer run such hostage-taking cripples Iran’s hopes of developing a tourism industry and hampers foreign investment and trade. But the short-term cash it generates is tempting for a regime that faces discontent amid soaring inflation and a currency that earlier this year fell to a record low (before rebounding on hopes of a prisoner-for-cash deal). As the prisoners departed Imam Khomeini International airport under the watch of the Qatari ambassador in Tehran who helped negotiate the deal, two Korean banks transferred $6bn of Iranian funds via Switzerland to the Qatari capital, Doha. According to a mediator, the Gulf state further sweetened the deal by compensating Iran for the loss of interest worth several hundred million dollars. Under the deal America’s Treasury will monitor spending to ensure that funds are used by Iran only for humanitarian purposes. But, says Norman Roule, a former American spy in the region, the deal could free up cash for Iran’s military programmes, too. Iran could also gain a sanctions-waiver mechanism that could be reused in other financial transactions. “This could be a learning moment for future diplomacy over sanctions relief,” says Esfandyar Batmanghelidj, an Iranian-American economist heading a think-tank in London.

The deal could lower tensions abroad. Iran’s president, Ebrahim Raisi, has just arrived in New York to address the un General Assembly in the coming days. Further talks are planned between the Iranians and their erstwhile regional foe, Saudi Arabia, together with the other five Arab states of the Gulf Co-operation Council on the sidelines of the un meetings. There is talk of Mr Raisi addressing the Council on Foreign Relations, an American think-tank in New York, while he is there. And to coincide with the prisoner release, a mediator says senior Iranian officials and their American counterparts are also holding direct talks during Mr Raisi’s visit. Subjects on the agenda are said to include Iran’s nuclear enrichment programme, the supply of Iranian combat drones to Russia and Iranian threats against the Kurdish administration in northern Iraq.

Few observers see this as the first step towards a broader deal on reviving the jcpoa, an agreement signed in 2015 that was intended to prevent Iran from enriching uranium to a level that would have put it on the “threshold” of acquiring nuclear weapons. The Trump administration subsequently withdrew from the deal in 2018, prompting Iran to ignore its key restrictions. “Iran is already a threshold state so that horse has bolted,” says a mediator. In protest at Iran’s enrichment of uranium beyond civilian levels of 60%, Britain, France and Germany all announced earlier this month that they were enshrining un sanctions in national law before they expired under the terms of the jcpoa.

Still, the hostage deal continues a remarkable diplomatic offensive under Mr Raisi, a supposed clerical hardliner in a historically xenophobic regime. In recent months his administration has restored diplomatic relations with its regional competitor, Saudi Arabia, begun talks on joining the brics, a club of big emerging markets, and finally joined the Shanghai Co-operation Council of Eurasian countries. Even Iran’s most vocal adversary, the Israeli prime minister, Binyamin Netanyahu, has muted his criticism, apparently for fear of exacerbating tensions with the Biden administration and spoiling his own hopes of establishing diplomatic ties with Saudi Arabia.

Driving the outreach is the regime’s need to shore up international support as the Islamic Republic grapples with plans for the succession of its 84-year-old supreme leader, Ayatollah Ali Khamenei, and tackling its greatest threat—its disgruntled population. At home and abroad in Iran the ayatollahs’ opponents have criticised the deal as a slap in the face by America, particularly since it coincides with the first anniversary of the death of Mahsa Amini, an Iranian woman detained for showing her hair. More than 500 Iranians were killed in the months of protests that followed. In Iran, riot police and bully boys on motorbikes are roaming the streets to prevent demonstrations. Ms Amini’s father is under house arrest and recently cafés across the country were closed to prevent young people from congregating. “It felt like martial law,” says a café-goer.

For now the regime has the upper hand. The few small protests that have occurred in the capital, Tehran, have been dispersed within minutes. In the province of Kurdistan, where Ms Amini lived, the security forces reportedly used live ammunition. But Iranians speak of mounting tension. Many have resorted to civil disobedience. Women continue to doff their mandatory headscarves and refuse to pay fines, or cash-for-hijabs as Iranians call them, for violating the dress code. And as the gap between the regime and its people grows, security personnel wear balaclavas to hide their identities. While international opinion may be mollified, at least temporarily, in Tehran, popular anger remains unassuaged.