The United States could more successfully steer Iran’s behavior in a cooperative direction if both countries agreed to move their battleground away from the flow of Iran’s oil to the global markets. Foreign Policy proposed a way to do this in an article "The Road to Tehran Runs Through Oslo", Norway’s successful experience in translating its natural oil wealth into high standards of living for its people by means of a sovereign wealth fund, which shields politics against the corrupting effects of state control over concentrated oil income and protects the economy against the “Dutch disease”—the appreciation of the national currency to the detriment of domestic production of tradable goods in nonenergy sectors—is viewed with envy by Iranians across the political spectrum.
Oman has had friendly relations with Iran, both before and after the Islamic revolution, and has mediated on multiple occasions between Iran and the United States. Given Iran’s military superiority, neighboring Oman could never afford to betray Iran’s trust with its national wealth. If Washington wishes to defuse the current standoff, the United States could request that Oman and Norway play the role of independent third and fourth parties in a negotiated agreement with Iran.
Iran would be invited to negotiate the replacement of U.S. oil sanctions with equivalent constraints on the allocation of income from oil exports—both crude oil and natural gas—for domestic expenditure. A national Iranian oil fund could be established as the sole point of sale of Iranian oil for export markets. The oil fund could then be incorporated as a blind trust in Switzerland, with Iran being the beneficiary and Oman being the trustee. The management of the oil fund would be shared by Oman and Norway. Oman would take charge of brokering the sale of Iranian oil to the highest bidder, while Norway would put its global sovereign wealth fund in charge of investing Iran’s surplus oil income in international capital markets. The operational cost would be covered by Iran’s oil income according to a schedule, mutually set by Iran, Oman, and Norway.
The United States could then lift its sanctions against investment in Iran’s energy sector and issue a general license, exempting the sale of Iranian oil via the oil fund from its new sanctions. The United States and Iran could negotiate a repatriation cap as the amount of income from oil exports that Oman would return to Iran on a regular basis, sending the remainder to the oil fund’s account with the Norwegian sovereign wealth fund.
Washington and Tehran could further agree to engage in future bilateral negotiations to trade increases of the repatriation cap as well as the removal of the rest of U.S. sanctions for behavioral changes by Iran. As a designated terrorist organization, the Islamic Revolutionary Guard Corps (IRGC) would continue to be subject to U.S. sanctions. The agreement would further require Iran to end commercial activities of the IRGC in the oil business before the implementation of the agreement.
Iran would accept the authority of a Norwegian court to enforce a system of financial penalties, payable from the reserves of the oil fund to the United States, against any Iranian violation of the agreement. The United States and Norway would give Iran the guarantee that the reserves of the oil fund would be entirely immune against seizure for any reasons other than Iran’s violation of the agreement.
To further assure Iran, the agreement would give Oman the power and the responsibility to terminate the oil fund’s contract with the Norwegian sovereign wealth fund and return all sale proceeds to Iran if the Norwegian court failed to secure that guarantee. Iran would have the freedom to transform the oil fund from a blind trust into an independent fund under its sovereign control if and when the U.S.-Iranian dispute is resolved with a grand bargain.
The state-owned National Iranian Oil Company and its sister companies earn income both from the external and internal sale of oil. The income is then divided into two parts. One part is kept by the oil company to finance the maintenance and upgrade of existing oil wells and the exploration and development of new oil fields. The other part is paid to the treasury both as royalty and taxes.
Freeing Iran’s oil industry from sanctions would increase the oil income from internal sales. That increase would be offset by the repatriation cap, restricting Iran’s access to the oil income from external sales. Thus, the total oil income available for public spending and reinvesting in the oil business would remain at the pre-oil fund level.
