Crisis in Ukraine

07.18.14

Putin Poised to Retaliate Against Obama by Trashing Iran Deal

Now that the U.S.-Russia relationship has broken down, Moscow could throw a wrench into the teetering nuclear negotiations with Iran.

The escalating tensions between Washington and Moscow, brought to fever by the MH17 airliner disaster, are finally to the point where they threaten to spoil the number one item on President Obama’s foreign policy agenda: the nuclear talks with Iran. The man doing the threatening is Russian President Vladimir Putin.

Earlier this week, Putin promised to retaliate against the United States for new sanctions targeting his friends and business associates, as well as large Russian defense, energy, and financial firms. On Thursday, Putin called President Obama to alert him a civilian jetliner had crashed over Eastern Ukraine, a tragedy the U.S. says was caused by a missile shot from a Russian-made SA-11 mobile surface to air missile system located in a separatist-held area.

Putin’s next call was to none other than the President of Iran, Hassan Rouhani.

“Mr. Putin and Mr. Rouhani exchanged views on the state of talks on Iran’s nuclear program,” stated the Kremlin readout of the call. “The two leaders also examined bilateral cooperation matters of mutual interest, including joint projects in the oil and gas sector and in peaceful nuclear energy.”

“An extension is the only thing the Iranians need to complete their bomb work. The whole point of the sanctions was to make sure that time is not on the side of the Iranians.”

U.S. officials, lawmakers, and experts, have been watching and waiting for Putin to use the Iran negotiations as a way to mess with Obama ever since the tit-for-tat sanctions began in March.

Moscow and Tehran have been negotiating a $1.5 billion oil-for-goods exchange, which could undermine international pressure on Iran to make a deal with the West. But overall, Moscow has continued to be a reasonably constructive part of the international coalition pressing Iran to roll back its nuclear program.

The Obama administration on Friday announced a four-month extension to the talks, which would constitute perhaps the last chance Iran has to land a deal. “This will give us a short amount of additional time to continue working to conclude a comprehensive agreement, which we believe is warranted by the progress we’ve made and the path forward we can envision,” Kerry said in a statement.

But if Putin decides that retaliating against the U.S. and ruining Obama’s foreign policy legacy is more important than sealing a pact with Iran, the whole thing could unravel.

The shooting down of MH17 has escalated the diplomatic war between Washington and Moscow and made that scenario more likely because it could result in more sanctions and legal action against the Russian government.

“Right now, as the U.S. should move legally against Russia, Russia will begin to see its overseas portfolios start to really become encumbered and therefore they might decide to be less helpful on Iran,” Sen. Mark Kirk told The Daily Beast. “Then, the big goose egg that the administration is going to get from Iran will more obviously be a zip.”

Kirk is part of a chorus of GOP senators calling for the administration to impose more sanctions on Russia in the wake of the MH17 disaster. That includes measures like the Russian Aggression Prevention Act, which would cut all senior Russian officials, their companies, and their supporters off from the world’s financial system; target any Russian entities owned by the Russian government or sanctioned individuals across the arms, defense, energy, financial services, metals, or mining sectors in Russia; and ban all Russian banks from the U.S. financial system.

The Obama administration Wednesday imposed limited sanctions on many key players in those sectors, saying that broader sectoral sanctions were still on the table.

“Once we realize that [top State Department negotiator] Wendy Sherman got squat in Geneva, I think the Republican leadership will be highly supportive of any legislation on Iran,” Kirk said, referring to the latest round of negotiations.

Lawmakers in both parties are also set to push for new sanctions on Iran this year to be passed into law during the four month extension but not put into force until negotiations fail outright. One Democratic lawmaker who met with Secretary of State John Kerry Thursday at the State Department told The Daily Beast that Kerry said he was open to that idea. The State Department press shop denied Kerry made such remarks.

“An extension is the only thing the Iranians need to complete their bomb work,” said Kirk. “The whole point of the sanctions was to make sure that time is not on the side of the Iranians.”

Even top Democrats in Congress are worried that the MH17 disaster and its effect on U.S.-Russian relations will harm the effort to strike a nuclear deal with Iran.

The incident was “a serious act of terror, and if there was Russian complicity in it, that makes it even worse,” said Elliott Engel, the top Democrat on the House Foreign Affairs Committee. “Considering that we are doing the P5+1 [world power negotiations with Iran] and Russia’s part of that, there are all kinds of intertwining complications involving that.”

Until now, Moscow has retaliated to U.S. financial pressure with sanctions of their own against U.S. officials, lawmakers, and even donors to President Obama who are linked to the gay advocacy community. Putin hasn’t always made the retaliatory sanctions public, but his government sought to respond proportionally and kept other issues out of the dispute.

“A few things that had gone on between the U.S. and Russia despite the sanctions have been the P5+1 talks, the effort to rid Syria of its chemical weapons, and the implantation of treaties like New START,” said Sam Charap, senior fellow at the Institute for Strategic and International Studies.

But Russian can’t punish American banks and energy firms the same way the U.S. punishes Russian entities. American businesses rarely depend on access to the Russian financial system and U.S. officials don’t have assets in Russia.

“If it’s true that the Russians are now diverging from the rest of the P5+1 in the Iran negotiations, that would be a clear sign that they have retaliated for the sanctions,” Charap said.

By cutting off leading Russian oil and gas firms from the American finance system, including Gazprombank and Rosneft, Washington is imposing some of the same sanctions on Russian that it has levied on Iranian entities. This incentivises Putin to seek energy deals with countries including Iran and China. Russia and China inked a $400 billion energy deal only last month, another Russian response to U.S, sanctions.

Also, Russian officials note the irony of American asking Russia to enforce sanctions on Iran's oil sector while the U.S. goes after Russian oil interests. For the Kremlin, that's seen as Washington putting Moscow and Tehran in the same boat, so they conclude Russia and Iran might as well work together to subvert what they see as unfair trade practices.