Published for, May 17, 2012

Washington is abuzz with speculation about a possible interim deal that might help defuse the brewing crisis over Iran’s nuclear program. Color me skeptical.

That said, one thing seems clear. Iran’s increased interest in negotiations has been driven almost entirely by its search for relief from harsh Western sanctions imposed in the last six months.

A top official from the Obama administration recently told me that “from what we are seeing, the threat of an Israeli strike hardly figures right now in Iranian calculations. On the contrary, everything indicates that what really worries Iran’s leaders is the impact of sanctions and the danger that they could spark domestic unrest.” Senior Israeli intelligence analysts have reached a similar conclusion, noting in conversations that, “at the moment, Iran doesn’t think Israel will attack [without endorsement from the U.S.] . . . . The need for sanctions relief is the reason they’re back at the table.”

Of course, the centerpiece of the sanctions campaign has been the U.S. decision at long last to target the Central Bank of Iran (CBI). Foreign financial institutions that continue dealing with the CBI to make payments for Iranian oil now risk being cut off from the U.S. banking system. Only countries that show significant reductions in purchases by late June will qualify for exemptions.

In response, the European Union has agreed to end all imports of Iranian oil as of July 1. Japan — Iran’s second largest customer — has already secured a U.S. waiver for its efforts to slash imports. Other major purchasers of Iranian crude, including South Korea, India, South Africa, and Turkey, are scrambling to follow suit. There are even signs that China, Iran’s biggest buyer, may be reluctantly cutting back, or at least taking advantage of the shrinking demand for Iranian product to negotiate significant price reductions.

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