US suspends Iran oil sanctions, says nuclear inspectors to return amid optimism after first talks

THE US issued a 60-day licence allowing Iran to sell oil on the international market, giving Teheran an economic lifeline as the two adversaries continued talks for a permanent peace deal.

US Vice-President JD Vance, attending the discussions in Switzerland, described the first round of negotiations as “very very good” and said Iran had agreed to allow nuclear inspectors back into the country – a claim later backed up by US President Donald Trump. But Iranian officials, who also cited progress, challenged that claim, saying Vance’s assertion was “false and does not reflect reality.”

The discrepancy underscored the challenges that remain ahead as the two sides look to fulfill a memorandum of understanding signed on Jun 17 to halt their conflict and pave the way for a long-term deal. That agreement left key issues unresolved while also aiming to give Iran immediate financial benefit, a dynamic that drew fierce criticism from Trump’s Republican allies.

Hanging over the delicate discussions is the status of the Strait of Hormuz and the continued fighting in Lebanon, where Israel is waging a campaign against Iran-backed Hizbollah militants. 

Iran hailed the waiver to allow energy sales after years of punitive sanctions and the promise of a reconstruction and development fund. Still, Teheran signalled it would not relent on using leverage over Hormuz if Israel continues fighting in Lebanon.

When asked by reporters on Monday (Jun 21) about the sanctions waiver for Iran to sell oil, Trump appeared to conflate the issue with the potential future release of the country’s frozen funds held abroad. When pressed further about how he could ensure Teheran would not use oil profits to rebuild its military, the president said “they’re not supposed to be doing that.”

“They’re supposed to use money to buy food for their people, because right now their people are very hungry,” Trump said at the White House.

“If Iran doesn’t live up to their agreement, or if they’re not behaving, I will do what I have to do,” he added.

Markets have been eager for any signs the US and Iran are making progress in talks. Global benchmark Brent traded near US$77 a barrel on Monday as a potential flood of Iranian oil fuelled expectations for a near-term glut of energy supplies. Iran has ramped up oil exports in recent days thanks to the US lifting a naval blockade that was squeezing the Islamic Republic’s economy.

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Breakthrough on nuclear inspections

The administration has pushed back over criticism of the interim deal, insisting it would bring relief to Americans in the form of lower energy prices and that the US will have safeguards to ensure Iran does not develop nuclear weapons, a key aim of the Trump administration.

“Everybody is fully aware that Iran will agree to have Major Weapons Inspections in order to ensure ‘Nuclear Honesty’ long into the future,” Trump said Monday on social media.

The claims of a breakthrough on nuclear inspections face scepticism. Iran said earlier no nuclear issues were discussed and that Tehran would engage with the IAEA under existing procedures, state-run IRIB reported, citing a foreign ministry spokesman. 

Vance also said Teheran would buy American soy, wheat and corn with unfrozen funds as part of the deal. There was no indication from the Iranian side that they were ready to make those purchases, and the memorandum of understanding Iran signed with the US on Jun 17 states that the Iranian central bank will be able to designate the beneficiaries of unfrozen funds.

The fraught nature of the talks was evident, with the discussions almost derailed over the weekend after Trump made fresh threats and the Iranian delegation said they were prepared to walk.

Discussions are set to continue this week at the Swiss resort of Burgenstock. Vance was joined by Jared Kushner, Trump’s son-in-law, and Steve Witkoff, a special envoy. Lower-level delegates are set to remain to discuss technical matters, with Vance and Iran parliament speaker Mohammad Bagher Ghalibaf leaving.

Israel conundrum

Vance later on Monday said negotiators had “set up the mechanism” to ensure the Strait of Hormuz remains open. When speaking earlier to reporters, he did not answer directly when asked if the US wanted Israel to withdraw troops from southern Lebanon.

On Monday, Iranian Foreign Minister Abbas Araghchi said mediators had managed to ease some of the tensions over Lebanon. He added Iran was beginning to see financial benefits from last week’s agreement. The US Treasury’s sanctions waivers for some Iranian oil and petroleum products were a condition of the MOU. 

Mediators Pakistan and Qatar said Iran and the US agreed to establish a “high level committee” to oversee the talks and working groups dealing with nuclear issues and sanctions. There will also be a “de-confliction cell” to help ensure military operations in Lebanon end. Iran and the US also established a communication line to “avoid incidents” related to maritime traffic through Hormuz.

Trump has been under significant pressure to end the war as a surge in energy prices has accelerated inflation globally and dented his Republican Party’s popularity ahead of November elections. Israel and Iran hawks, though, say the MOU gives far too much financial relief without curbing Teheran’s ballistic missile program or support for militant groups in the region.

Israel is not party to the Swiss talks and has balked at the idea of its forces leaving southern Lebanon until Hizbollah no longer threatens its northern communities. BLOOMBERG, REUTERS