Humpty-Dumpty is falling-off the Wall: President Trump refuses to Certify Iran Nuclear Deal

Humpty Dumpty_The Cagle Post


I’ve been rather busy of late, so I’m coming a little late on this issue. As we all know, on 13 October, President Trump announced a strategic review on the U.S.’s relations with Iran, whereby he refused to certify the Iran Nuclear Deal (Joint Comprehensive Plan of Action – JCPOA), as required under the Iran Nuclear Agreement Review Act (INARA) 2015

The big question is whether President Trump’s decision not to re-certify the JCPOA is a fatal decision for the Iran nuclear deal, i.e. a fall that Humpty-Dumpty cannot recover from. If president Trump were to decide to end U.S. participation in the JCPOA, it could revoke waivers, decline to renew waivers, or trigger a provision of the INARA under which the U.S. Congress might act on legislation to reimpose sanctions.

In his quest for “America First,” policy, if he manages to scuttle the JCPOA, this policy might turn into “America Alone,” policy. 

Summary of President Trump's Iran Strategic Review
Based on the strategic review, in regard to the JCPOA, President Trump stated that he “cannot and will not,” continue to make at least one of the periodic JCPOA certifications as required under the INARA.

Given that President Trump has repeatedly described the JCPOA as the worst deal ever, the decision not to certify the JCPOA, which was accompanied by a White House fact sheet, should not come as a surprise.

The core elements of President Trump’s new Iran strategy are:

  • focusing on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants;
  • revitalizing U.S. traditional alliances and regional partnerships as bulwarks against Iranian subversion and restore a more stable balance of power in the region;
  • a policy of denial concerning the Iranian regime – and especially the Islamic Revolutionary Guard Corps (IRGC) – funding for its malign activities, and oppose IRGC activities that extort the wealth of the Iranian people;
  •  countering threats to the United States and our allies from ballistic missiles and other asymmetric weapons;
  • rallying the international community to condemn the IRGC’s gross violations of human rights and its unjust detention of American citizens and other foreigners on specious charges; and
  • denying the Iranian regime all paths to a nuclear weapon.

Although President Trump’s announcement does not automatically signal the end to the JCPOA, it can have significant ramifications to the nuclear deal (in particular the ongoing U.S. sanctions relief under the JCPOA). As I reported earlier, the strategic review of the U.S.’s policy towards Iran was long in the make. Whether this strategic review is the trigger that will kill the nuclear deal remains to be seen.

Unlike the other JCPOA participating countries (so-called “P5+1” – China, Britain, France, Germany, Russia and the U.S.), the U.S. President has to submit JCPOA compliance reports (every 90 days) and certify Iran’s compliance with the deal (as mandated by the INARA – which in essence is an amendment to Section 135(d)(6) of the Atomic Energy Act of 1954 (42 U.S.C. 2160(e)). Note that the afore-mentioned certification requirements are not part of the JCPOA – they are a requirement under U.S. law. Under the nuclear accord, the International Atomic Energy Agency (IAEA) is the sole authority for verifying Iran’s compliance.

The INARA compliance reports cover four conditions regarding Iran’s JCPOA compliance: 

  1. Iran is verifiably and fully implementing the JCPOA;
  2. Iran has not committed an uncured material breach;
  3. Iran has not taken any covert action that could advance a nuclear weapons program; and
  4. continued suspension of sanctions (including issuance of waivers of applicable sanctions laws) is vital to the national security interests of the United States.

Summary of the INARA
Text of the INARA

Summary is an extract from CRS Report RS20871/ Iran Sanctions (13-10-2017)

The INARA provides for a 30- or 60-day congressional review period after which Congress could pass legislation to approve or to disapprove of the JCPOA, or do nothing. There are several certification and reporting requirements under INARA:

  • Material Breach Report. The President must report a potentially significant Iranian breach of the agreement within 10 days of acquiring credible information
    of such. Within another 30 days, the President must determine whether this is a material breach and whether Iran has cured the breach.  
  • Certification Report. The President is required to certify, every 90 days, that Iran is “transparently, verifiably, and fully implementing” the agreement, and that Iran has not taken any action to advance a nuclear weapons program. The latest certification was submitted on July 17, 2017 and another one was due on October
    15, 2017 
  • If a breach is reported, or if the President does not certify compliance, Congress may initiate within 60 days “expedited consideration” of legislation that would reimpose any Iran sanctions that the President had suspended through use of waiver or other authority. 
  • Semiannual Report. INARA also requires an Administration report every 180 days on Iran’s nuclear program, including not only Iran’s compliance with its
    nuclear commitments but also whether Iranian banks are involved in terrorism financing; Iran’s ballistic missile advances; and whether Iran continues to support

(6) COMPLIANCE CERTIFICATION.—After the review period provided in subsection (b), the President shall, not less than every 90 calendar days—
(A) determine whether the President is able to certify that—

  • (i) Iran is transparently, verifiably, and fully implementing the agreement, including all related technical or additional agreements; 
  • (ii) Iran has not committed a material breach with respect to the agreement or, if Iran has committed a material breach, Iran has cured the material breach; 
  • (iii) Iran has not taken any action, including covert activities, that could significantly advance its nuclear weapons program; and 
  • (iv) suspension of sanctions related to Iran pursuant to the agreement is—
    (I) appropriate and proportionate to the specific and verifiable measures taken by Iran with respect to terminating its illicit nuclear program; and
    (II) vital to the national security interests of the United States;

Under the INARA, a material breach is defined as: 

MATERIAL BREACH.—The term ‘material breach’ means, with respect to an agreement described in subsection (a), any breach of the agreement, or in the case of non-binding commitments, any failure to perform those commitments, that substantially—

‘‘(A) benefits Iran’s nuclear program;
‘‘(B) decreases the amount of time required by Iran to achieve a nuclear weapon; or
‘‘(C) deviates from or undermines the purposes of such agreement.

The key issue is where do we now go? Although the refusal to certify the JCPOA is not fatal, clearly, the accord is on life-support. It’s foolish to think that the nuclear accord will survive in its current form. I hope that I’m proved wrong, but in its current form, the JCPOA has had a good run.

Gerelateerde afbeeldingIt was a fools errand to think that the accord could have survived with President Trump in the White House.   

For those compliance professionals struggling to understand the consequences of the JCPOA, President Trump’s refusal to certify the nuclear accord should come as no surprise. This possibility was always lurking in the shadows.

President Trump was always opposed to the deal, and Iran’s wisdom to continue with provocative ballistic missile testing and supplying arms to an array of groups in the Middle East, not to mention it’s support to President Assad, has not helped their cause. 

However, as I’ve stated earlier, the JCPOA is not the best deal, although a bad deal is better than no deal. The ramifications of President Trump’s refusal to certify Iranian JCPOA compliance obligations are not yet clear. Its now up to the U.S. Congress to decide on the next move. Congress could decide not to re-impose sanctions, only legislate new sanctions which fall outside the JCPOA or re-impose those uplifted U.S. sanctions that would most certainly prod Iran claiming that the U.S. violated the JCPOA (see paragraphs viii and 29 JCPOA  – which commits the U.S. (and EU) to implement the JCPOA in good faith and not to re-introduce policies or sanctions which undermine the implementation of the JCPOA).

However, whether this would doom the JCPOA remains unclear. For instance, instead of re-imposing outright the already waived or suspended U.S. sanctions,the U.S. Congress could place further conditions on the (re-)imposition of U.S. sanctions, e.g. sanctions would be imposed only after re-negotiations with Iran have failed. Possible amendments of the JCPOA could placing specific limitations on the testing of ballistic missiles or extending the sunset clauses in UN Security Council Resolution 2231 (see below JCPOA Timelines).

Back to Basics: What’s the JCPOA again?

On 14 July 2015, the Iran Nuclear Deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), was concluded between Iran and the members of the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States).

The deal is a complex web of technical arrangements and voluntary measures between the partners, in which they finalized a “plan of action,” placing limitations on the development of Iran’s nuclear program.

JCPOA Timelines
Timeline for Implementing the JCPOA

The JCPOA outlines steps, as follows:

  • Finalization Day: July 14, 2015. Iran and the P5+1 countries, along with the High Representative of the European Union for Foreign Affairs and Security
    Policy (Frederica Mogherini), endorsed the JCPOA. A U.N. Security Council Resolution to endorse the JCPOA was submitted for adoption.
  • Adoption Day/New U.N. Security Council Resolution. The JCPOA formally came into effect 90 days after endorsement of JCPOA by U.N. Security Council,
    or earlier by mutual consent. Resolution 2231 was adopted for that purpose on July 20, 2015, placing Adoption Day at October 18, 2015. The U.S. Government asserted that the 90-day time frame allowed for review of the JCPOA by the U.S. Congress and by any other legislature of Iran or the other P5+1 states. On Adoption Day, the United States issued the provisional presidential waivers required to implement U.S. sanctions relief, with the waivers to formally take
    effect on Implementation Day. 
  • Implementation Day. This day was defined in the JCPOA as the day the IAEA verified that Iran has completed the several stipulated nuclear related measures
    (e.g., reducing centrifuges, removing the core of the Arak reactor) and the United States, the U.N., and the EU cease application of specific sanctions. The U.N. Security Council terminated the provisions of its resolutions on Iran: 1696 (2006), 1737 (2006), 1747 (2007), 1803 (2008), 1835 (2008), 1929 (2010), and 2224 (2015); and Resolution 2231 became the sole operative U.N. Security Council resolution on Iran. Implementation Day was declared on January 16, 2016, after the IAEA made the required certification of Iran’s completion of the stipulated tasks. 
  • Transition Day. Represents initial stages of Iran’s emergence from U.N. Security Council scrutiny. Transition Day is eight years from Adoption Day (October 18, 2023)—or upon “Broader Conclusion” report from the IAEA Director General to the IAEA Board of Governors and U.N. Security Council—whichever is earlier. As of Transition Day, additional EU entities are to be removed from sanctions, the United States is required to remove from designation specified additional Iranian entities subjected to sanctions, and the Administration is required to seek legislative termination of sanctions that were suspended on Implementation Day. 
  • UNSCR Termination Day. Ten years from Adoption Day (October 18, 2025). Provisions and measures imposed in U.N. Security Council Resolution endorsing JCPOA would terminate and the Security Council would not be involved in the Iran nuclear issue. However, the JCPOA itself and its remaining provisions do not terminate on this day. The JCPOA states that, following successful implementation of the final steps of the JCPOA, Iran’s nuclear program “will be treated in the same manner as that of any non-nuclear weapon state party to the NPT.” Iran’s IAEA safeguards obligations last for an indefinite duration. Potential nuclear-related exports to Iran remain subject to the Nuclear Suppliers Group’s export guidelines.

Simply put, the JCPOA can be boiled down to one basic transaction:

  1. Iran agrees to very strict restrictions regarding its controversial nuclear program (promise not to develop a nuclear weapons program), for which in exchange,
  2. Iran would get extensive sanctions relief (sanctions imposed by a coalition of mainly Western countries for Iran’s non-compliance with its safe-guards obligations under the Non-Proliferation Treaty), as the imposed U.S. and EU sanctions were virtually crippling its economy.

The JCPOA was not signed by any party, nor does it contain any provisions for ratification, withdrawal (although this might be triggered through the JCPOA dispute settlement mechanism) or entry into force, although most of the promised sanctions relief came into force on the so-called “Implementation Day,” (16 January 2016). In this context, previous UN Security Council resolutions targeting Iran’s nuclear program were terminated. Since then, the UN’s nuclear watchdog, the IAEA, has repeatedly certified Iran’s compliance with the JCPOA.

Instead, the JCPOA was endorsed by United Nations Security Council Resolution 2231. Subsequently, on “Implementation Day,” the U.S. and the EU lifted most of their respective sanctions imposed in connection with Iran’s nuclear program, on the condition that the IAEA verified Iran’s compliance with the JCPOA. 

The UN sanctions which have remained in place relate to Iran’s development of nuclear-capable ballistic missiles and its importation or exportation of arms. One should wonder the added value of the sanctions which have remained in place. Note that prior to Resolution 2231, UN Security Resolutions were unable to curb Iran’s ability to develop its nuclear and missile programs and supply arms to pro-Iranian regional groups and governments.   

Summary of JCPOA Sanctions Relief Commitments

  • United Nations Security Council sanctions – all sanctions as well as all multilateral and national sanctions related to Iran’s nuclear program have been terminated ( Security Council resolutions 1696 (2006)1737 (2006)1747 (2007), 1803 (2008)1835 (2008)1929 (2010) and 2224 (2015)). With the exception of the U.S., this amounted to an unwinding of most of the Iran sanctions put in place by the members of the P5+1. China and Russia completely dismantled their Iran sanctions regimes as they had only implemented UN sanctions. The EU has also dismantled most of it’s restrictive measures – except for the arms embargo, sales on missile technology, other proliferation-sensitive items, and items which facilitate human rights violations.
  • Given the sour bi-lateral relations between Iran and the U.S., the latter was less charitable in relaxing its sanctions against Iran. It made two distinctions, which vex non-U.S. companies attempting to enter the Iranian market. First, the U.S. was only prepared to lift it’s secondary sanctions, i.e. measures that aim to discourage non­-U.S. parties from doing business with Iran under threat of being denied access to the United States market. Secondly, the U.S. primary sanctions, i.e. prohibiting economic activity involving U.S. persons or goods, with Iran continue to be enforce. As a result, all sanctions lifted by the JCPOA continue to apply in full force to U.S. persons, with the exception of three limited exceptions:
    1. sale of commercial passenger aircraft and related parts and services to Iran,
    2. the importation into the U.S. of Iranian-origin carpets and foodstuffs, including pistachios and caviar, and
    3. authorized activities under the JCPOA by U.S. foreign subsidiaries or entities controlled by U.S. companies/persons.

Thus, the general trade and investment embargo imposed under E.O. 12959 and codified in the IFSA continues to prohibit U.S. persons from transacting with Iranian entities.

  • The U.S. commitment to only lift “nuclear-related” secondary sanctions (on non-U.S. persons). By design, this commitment casts the net rather wide – instead of outlining a clear path through the minefield of U.S. related Iran sanctions. The suspension of secondary sanctions does not clearly dissect nuclear and non-nuclear related U.S. Iran sanctions.  A possible reason for this could be that the U.S. Iran sanctions regime has become a convoluted web of overlapping restrictive measures which targets the different dimensions of Iran’s nuclear program or financial and economic sectors underpinning Iran’s nuclear program. As a result, the U.S. has removed a significant amount of Iranian entities blacklisted under the SDN list. According to the U.S. Government, non-U.S. companies are now in a position to enter the Iranian market and engage in numerous commercial activities.

Why has President Trump refused to certify the JCPOA?

Well some cynics argue that President Trump has refused to certify the JCPOA because it’s a deal that his predecessor concluded. Well possibly, but it probably has more to do with the overall objectives of U.S. related Iran sanctions.

President Trump has made his dislike of the JCPOA no secret. As a Presidential candidate, Mr. Trump threatened to withdraw the U.S. from the nuclear deal or attempt to renegotiate it. As U.S. President, his Administration claims that the JCPOA does not address key U.S. concerns regarding  Iran’s continuing “malign activities,” in the region and it ballistic missile program, and might not be serving U.S. interests. Subsequently, he has claimed that the JCPOA was the “worst deal ever,” although as President he certified, several times, Iran’s compliance with the JCPOA.

During his speech at the UN, after condemning North Korea, President  Trump, he called the Iran nuclear deal “an embarrassment” that is “one of the worst and most one-sided transactions the United States has ever entered into.” Until the Trump Administration announced the contours of its strategic review, it had not articulated an aspiration to translate the JCPOA into a broader improvement in U.S.-Iran relations, asserting instead that it will assertively counter Iranian actions such as continued ballistic missile testing and “malign” regional activities.

Overall Objectives of U.S. Iran Sanctions 

Sanctions regimes have dominated the U.S.’ relationship with Iran for several decades. Since the 1980s, the U.S. has attempted, through the imposition of domestic, multilateral and international sanctions, to compel Iran to stop supporting acts of terrorism and to limit Iran’s strategic power in the Middle East. 

Only since 2005, U.S. sanctions have focused on Iran’s controversial nuclear program, which arguably, since 2010, have been supported by the UN and close U.S. allies. Therefore, President Trump’s opposition to the JCPOA should be seen in this context, given that U.S. Iran related sanctions have multiple objectives and address multiple perceived threats from Iran simultaneously.

Architecture of U.S. Iran related Sanctions
Text is based on the article Sahand MoarefyPartially Unwinding Sanctions: The Problematic Construct of Sanctions Relief in the JCPOAHarvard Law School: National Security Journal, 15-07-2016. 

From a legal perspective, U.S. Iran sanctions are primarily based on three pillars: (1) Congressional statutes, (2) Executive Orders, and (3) Office of Foreign Assets Control (OFAC) regulations and designations.

  1. Congressional statutes require the U.S. President to impose specific types of sanctions or, more frequently, list a “menu” of possible sanctions from which the President can pick and choose. Statutory sanctions are statutes that specifically target Iran – e.g. the Iran Freedom Support Act (“IFCA”) and Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”), while others are included as part of the annual defense budget through the National Defense Authorization Act and defense appropriations bills.
    • To permanently unwind these sanctions, Congress must generally take affirmative action. However, sanctions under some statutes, like CISADA, cease to be effective when the President removes Iran’s designation as a state sponsor of terror (Article 6 (j) EAA). Almost all statutory sanctions provide the President authority to temporarily waive sanctions under certain conditions, which typically include a determination by the President that such a waiver is in the “national interest.”
  2. Iran sanctions implemented through Executive Orders (EO’s). Various U.S. President’s have issued EO’s that target Iran. These are based on specific statutory authorities that empower the President to impose sanctions, in this case Iran, e.g. the International Emergency Economic Powers Act (“IEEPA”) which authorize the President to impose sanctions in the event of “national emergencies.” The orders define the the nature of blacklisting, i.e. designation, of Iranian targets and which U.S. governmental agencies are responsible to execute the EO’s, i.e. delegated authorities.
  3. OFAC administers Iran sanctions through two sets of implementing regulations—the Iranian Transactions and Sanctions Regulations (“ITSR”) and the Iranian Financial Sanctions Regulations (“IFSR”). 
    • The ITSR implements the trade and transaction sanctions and prohibitions concerning Iran and its government, while the IFSR imposes restriction on certain activities by U.S. financial institutions’ non-U.S. subsidiaries and implements secondary economic sanctions against non-U.S. financial institutions.
    • OFAC has blacklisted targets and added them to the Specially Designated Nationals and Blocked Persons List (“SDN List”). OFAC prohibits U.S. persons from taking part in most commercial transactions with SDN’s. The SDN list also serves as notice to U.S. persons of their obligation to block any property or interests in property belonging to blocked persons that may come into their possession. Violations can result in both civil and criminal penalties.

Unwinding U.S. Iran related sanctions is a complex exercise. EO’s can be unilaterally revoked, modified or superseded by a sitting President. This doesn’t apply to sanctions imposed through statutes. This unilateral power can be limited by the U.S. Congress, if and when the latter attaches waiver conditions. 

Further, the U.S. has also imposed Iran related sanctions based on Section 6(j) of the Export Administration Act of 1979, which designates Iran as a state sponsor of acts of international terrorism. This status has significant implications as it prohibits foreign aid, financing, and trade to Iran. Generally speaking, the President can remove Iran’s designation by certifying to Congress that Iran no longer supports acts of terrorism. 

Finally, the Financial Crimes Enforcement Network (“FinCEN”), housed within the U.S. Treasury Department, has blacklisted Iran as a jurisdiction of primary money laundering concern (authority is based under the U.S. Patriot Act). Pursuant to this section, FinCEN has required U.S. financial institutions and financial agencies to take certain special measures to guard against the possibility of facilitating business activity involving Iran. While FinCEN can remove Iran’s status as a primary laundering concern, the U.S. Congress has codified Iran’s blacklisting in the National Defense Authorization Act in 2012.

President Trump, addressing the General Assembly, called the Iran nuclear deal “an embarrassment.” Credit Doug Mills/The New York Times

U.S. Implementation of JCPOA

From a U.S. perspective, as cited earlier, the U.S. did not lift all of its sanctions regimes against Iran. Remaining in place are the so-called “Secondary Sanctions,” i.e. sanctions on non-U.S. companies.

These sanctions have been imposed in view of of Iran’s support for terrorism, its human rights abuses, its interference in specified countries in the region, and its missile and advanced conventional weapons programs, as well as sanctions on the Islamic Revolutionary Guard Corps (IRGC) and its affiliates.

Given the sour relations between Iran and the U.S., former President Obama concluded the JCPOA in the face of stiff Congressional opposition. He stated that he did not need Congressional approval to conclude the JCPOA or for that matter for the U.S. to honor its obligations. In this context, former President Obama described the JCPOA as a non-binding political arrangement (which is also asserted by President Trump). This point of view is supported by both academic commentators and the then Legal Advisor to the U.S. Department of State (see page 123) 

To implement his vision, former President Obama used an array of Presidential powers which gives the U.S. President discretionary authority to apply U.S. Iran related sanctions, i.e. to either waive sanctions or rescind Executive Orders. Note that, the flip-side of this argument, is that President Trump does not require Congressional approval to renew the waivers applied by former President Obama or reinstate sanctions through Executive Orders. 

U.S. Iran Sanctions suspended under under the JCPOA
Sanctions Easing Under the JCPOA 
Under the JCPOA, the great bulk of sanctions relief occurred at Implementation Day—the day (January 16, 2016) when the IAEA certified that Iran had completed stipulated core nuclear tasks. The sanctions lifted or suspended were mostly those imposed since U.N. Security Council Resolution 1929 was enacted in June 2010, and which identified Iran’s energy sector as a potential contributor to Iran’s “proliferation-sensitive nuclear activities.”

  • Sectors Receiving Sanctions Relief. The U.S. sanctions suspended were those that sanction foreign entities and countries for conducting specified transactions with Iran (so-called “secondary sanctions”), including U.S. sanctions on non-U.S. firms
    • (1) that are involved in Iran’s energy sector, including Iran’s production of and exportation of oil, or that sell Iran gasoline and energy sector equipment;
    • (2) that conduct transactions with most major Iranian banks; and
    • (3) that are involved in Iran’s automobile production sector and trading in the rial.

The United States revoked the designations made under various Executive Orders of numerous specified Iranian economic entities and personalities listed in Attachment III of Annex II of the JCPOA. That step enabled non-U.S. companies to resume transactions with these entities without risking being penalized by the United States. The JCPOA also committed the United States to minor modifications to the direct ban on U.S. trade with Iran. 

Type of Sanctions Removed or Suspended

The sanctions suspended were mostly those imposed since U.N. Security Council Resolution 1929 of June 2010 and which targeted Iran’s civilian economic sectors. U.S. sanctions targeting non-U.S. firms’ involvement in those sectors were waived or terminated, but sanctions on direct U.S.-Iran trade, with selected exceptions discussed above, were retained. The sanctions eased include

  1. energy sanctions, including those that limit Iran’s exportation of oil and sanction foreign sales to Iran of gasoline and energy sector equipment, and which limit foreign investment in Iran’s energy sector;
  2. financial sector sanctions; 
  3. sanctions on Iran’s auto sector and trading in the rial; 
  4. the EU ban on purchases of oil and gas from Iran; uplifting of sanctions against entities blacklisted in Annex II/Attachment 1 of the JCPOA; and 
  5. the ban on Iran’s use of the SWIFT electronic payments system that facilitates the movement of funds outside of Iran to the Iranian Central Bank or Iranian commercial banks.

Ban on Reimposing those Sanctions that are Lifted or Suspended.

The JCPOA requires the parties to the agreement to refrain from reimposing the sanctions that are lifted or suspended, as long as Iran is complying. The agreement states that if U.S. sanctions are reimposed (other than on the grounds of Iranian noncompliance), Iran would not be bound by its nuclear commitments. An Iranian letter to the President of the U.N. Security Council, dated July 20,
interprets the provision to bar the re-imposition of lifted sanctions under “nonnuclear” justifications such as Iranian support for terrorism or armed factions in the Middle East, or for human rights violations.

U.S. Laws Waived and Executive Orders Terminated.

The suspension of U.S. sanctions required issuing waivers of the laws below. The relevant waivers were issued on January 16, 2016, and the Obama Administration renewed all waivers on January 18, 2017, for the maximum time period of waiver allowed under each law. (For example, if one of the laws below allows a 180 day waiver period, the waiver would be applicable for 180 days from January 16, 2017.) The sanctions waived are as follows:

  • the blanket energy/economic-related provisions of the Iran Sanctions Act (ISA – Section 4(c)(1)(A) of P.L. 104-172, as amended). These constitute the overwhelming bulk of the act’s provisions. The one WMD-related provision of ISA was not waived. The existing six-month waiver of ISA was to expire on July 19, 2017, and was renewed on July 17, 2017. The existing waiver is to expire on January 17, 2018.
  • Section 1245(d) of the National Defense Authorization Act for FY2012 (P.L. 112-81) that imposes sanctions on countries that do not reduce Iran oil imports. A 120-day waiver was issued by the Trump Administration on May 18, 2017, and the next one was due on September 15, 2017. The Administration renewed the waiver on September 14. The next waiver will be due by January 13, 2018. 
  • Sections 212 and 213 (the economy-related provisions) of Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158) provisions, but not the human rights-related provisions. The existing six-month waiver period was to expire on July 19, 2017, and was renewed on July 17, 2017. This waiver is to expire on January 17, 2018. 
  • Sections 1244, 1245, 1246, and 1247 of the Iran Freedom and Counter Proliferation Act (Subtitle D of P.L. 112-239). The latest 180-day waiver period was due to expire on July 17, 2017, and was renewed. This waiver is to expire on January 14, 2018. 
  • The core provision of CISADA (P.L. 111-195) that sanctions foreign banks was not waived, but most Iranian banks have been “de-listed” under various U.S. Executive Orders (13224 and 13382), thereby reopening many entities to the international financial system. Banks sanctioned for terrorism funding, including Bank Saderat, Ansar Bank, and Mehr Bank, were not de-listed;
  • Executive Orders: 13574, 13590, 13622, 13645, and Sections 5-7 and 15 of Executive Order 13628 were revoked outright by Executive Order 13716.
  • The United States “de-listed” for sanctions the specified Iranian economic entities and personalities listed in Attachment III of the JCPOA, including the National Iranian Oil Company (NIOC), various Iranian banks, and many energy and shipping-related institutions. That step enabled non-U.S. companies/banks to resume transactions with those entities without risking being penalized by the United States. 

Request for Congress to Lift Sanctions Outright

The JCPOA requires the U.S. Administration, by “Transition Day,” to request that Congress lift virtually all of the sanctions that will be suspended under the JCPOA. No outcome of such a request is mandated. The JCPOA requires all U.N. sanctions to terminate after 10 years of adoption (“Termination Day”).

  • U.N. Sanctions on Arms Sales and Ballistic Missiles to Be Terminated After Several Years. One issue that arose during final negotiations on the JCPOA was the suspension of U.N. sanctions on Iran’s development of nuclear-capable ballistic missiles and on Iran’s importation or exportation of conventional weaponry. The JCPOA does not impose any specific requirements on Iran on these issues, but Resolution 2231, which endorsed the JCPOA, “calls on” Iran not to develop ballistic missiles “designed to be capable” of delivering a nuclear weapon for a maximum of eight years from Adoption Day (October 18, 2015). 
  • The Resolution bans Iran’s exportation of arms without Security Council approval for a maximum of five years and makes sales of major combat systems to Iran subject to Security Council approval for a maximum of five years. Since Implementation Day, the Administration has sanctioned additional entities, under Executive Order 13382, for involvement in Iran’s continuing tests of ballistic missiles.

U.S. Sanctions that Remain in Place
The JCPOA does not commit the United States to suspend U.S. sanctions on Iran for terrorism or human rights abuses, on foreign arms sales to Iran or sales of proliferation-sensitive technology such as ballistic missile technology, or on U.S.-Iran direct trade (with the selected exceptions of the latter discussed above). The sanctions that were not lifter or waived include the following:

  • E.O. 12959, the ban on U.S. trade with and investment in Iran; 
  • E.O. 13224 sanctioning terrorism entities, any sanctions related to Iran’s designation as a state sponsor or terrorism, and any other terrorism-related  sanctions. The JCPOA does not commit the United States to revoke Iran’s placement on the terrorism list; 
  • E.O. 13382 sanctioning entities for proliferation; 
  • the Iran-Iraq Arms Non-Proliferation Act
  • the Iran-North Korea-Syria Non-Proliferation Act (INKSNA); 
  • the section of ISA that sanctions provision to Iran of WMD-and arms related technology to Iran; 
  • Executive Orders 13438 on Iran’s interference in Iraq and 13572 on repression in Syria; 
  • Executive Orders (E.O. 13606 and 13628) and the provisions of CISADAITRSHRA, and IFCA that pertain to human rights or democratic change in Iran; 
  • sanctions under various executive orders on the Islamic Revolutionary Guard Corps (IRGC), military, proliferation relatedand human rights– and terrorism-related entities, which were not “de-listed” from sanctions;
  • Treasury Department regulations barring Iran from access to the U.S. financial system. Foreign banks can pay Iran in dollars out of their existing dollar supply, and the Treasury Department revised its guidance in October 2016 to stress that such transactions are permitted.
  • Iran’s designation as a state sponsor of terrorism. The United States has not pledged in the JCPOA to remove or to reconsider this designation, which triggers numerous U.S. sanctions, including a ban on any U.S. foreign aid to Iran and on U.S. exportation to Iran of controlled goods and services, and a prohibition on U.S. support for international lending to Iran. Further, those Iranian entities involved in most forms of proliferation activity and in Iran’s foreign policy remain designated for sanctions under various Executive Orders. These entities include
    the IRGC, the IRGC-Qods Force, various IRGC commanders, and IRGC-affiliated entities
  • U.N. Sanctions on Arms Sales and Ballistic Missiles to Be Terminated After  Several Years, and Missile Restriction only Voluntary ( regarding the status of U.N. sanctions on Iran’s
    development of nuclear-capable ballistic missiles and on Iran’s importation or exportation of conventional weaponry). The JPA (April 2 2015) framework accord initially indicated  that these sanctions would remain in place, but the JCPOA itself does not contain any commitments pertaining to ballistic missiles or arms transfers to or from Iran. Resolution 2231 addresses ballistic missiles but only “calls upon” (a voluntary formulation) Iran to refrain from developing (including testing) ballistic missiles “designed to be capable of delivering a nuclear weapon.” And,
    this missile restriction expires eight years from Adoption Day (by October 2023). Resolution 2231 requires Security Council approval for any conventional arms transfers to or from Iran for five years from Adoption Day (by October 2020). U.S. sanctions on foreign entities that sell arms to Iran remain in place, as do specific U.N. Security Council Resolutions that prohibit weapons shipments to Lebanon and to Yemen.

Rohani’s tour in Europe in cartoons – Paresh (India)

Schizophrenic U.S. Attitude towards the JCPOA

Since the implementation of the JCPOA, the U.S. has adopted a two-track policy vis-à-vis Iran. It has simultaneously honored its JCPOA obligations, including renewing waivers of domestic sanctions laws suspended in accordance with the JCPOA; and gone on to impose additional sanctions on Iran entities – e.g. under the Countering America’s Adversaries through Sanctions Act, which also targets Russia and North Korea.

A general ban on U.S. trade with and investment in Iran, including regulations barring transactions between U.S. and Iranian banks, remains in place. The Trump Administration asserts that these additional sanctions do not conflict with U.S. JCPOA commitments.  

The U.S. dual-track attitude towards the JCPOA can be largely explained by the earlier cited overall objectives of U.S. Iran policy. Right or wrong, the JCPOA specifically only focuses on nuclear-related Iran sanctions. That was the deal. Although segments of the accord mention the aspiration to address broader security issues, this was not formally negotiated. 

Former President Obama Administration and other JCPOA participating countries assert that the nuclear accord is the most effective means to ensure that Iran does not acquire a nuclear weapon. According to these, Tehran can’t obtain a nuclear weapon and that all U.S. options to prevent Iran from developing a nuclear weapon remain available.  The nuclear deal contains provisions for UN sanctions to be reimposed if Iran violates its JCPOA commitments (the so-called built-in “snap-back” mechanisms). Further, the U.S. can also re-impose restrictive measures even after the key nuclear restrictions of the JCPOA expire. Finally,  supporters of the JCPOA also argue the positive security spin-offs for the region; at least it has reduced any near term threat of a nuclear armed Iran. 

Cartoon by Paresh Nath/Cagle Cartoons

Opponents of the JCPOA, especially in the U.S., argue that the nuclear deal does not address the full range of potential Iranian threats to the U.S. They cite Iran’s controversial involvement in regional conflicts, poor human rights record, and support for terrorist organizations. These arguments, although compelling, are to some extent spilled milk. As cited earlier, these issues are formally not part of the JCPOA. 

Straight-off the bat, critics of the JCPOA expressed concerns that sanctions relief provided under the accord gives Iran additional resources to extend its influence in the region and that that the accord does not contain any restrictions on Iran’s development of nuclear-capable ballistic missiles.

Despite UNSC Resolution 2231 prohibitions on arms transfers to or from Iran and on the development of ballistic missiles, opponents of the accord argue that the sunset clauses of these restrictions, respectively 5 and 8 years, sets the stage for Iran to emerge as a key regional actor. Furthermore, to add injure to insult, the prohibition on the development of ballistic missiles are only a voluntary restriction. 

These criticisms have ultimately led to the earlier cited Iran strategic policy review and the refusal to certify the nuclear accord under the INARA. In this context, the Trump Administration has announced its desire to either amend the JCPOA or seek a separate agreement that addresses U.S. concerns.

US President Donald Trump addresses the 72nd Annual UN General Assembly in New York on September 19, 2017. (AFP Photo/Brendan Smialowski)

Specifically, President Trump has called the U.S. Congress and U.S. allies to work together to address what he calls “weaknesses of the JCPOA.” This lastly, might entail extending the JCPOA’s sunset clauses on Tehran’s nuclear restrictions, development on ballistic missiles, and address what U.S. officials call Iran’s malign activities in the Middle East. 

The question is, given President Trump’s threat to withdraw from the JCPOA, whether Iranian leaders are open to discuss new limits on Iran’s nuclear and/or ballistic missile programs. 

The Reactions of other JCPOA Participating Countries 

The refusal to certify the JCPOA by President Trump, which is not supported by all senior members of the Trump Administration, has triggered some reactions. Iran has rejected any renegotiation of the JCPOA’s terms. However, given that Tehran stands to lose a lot if the JCPOA collapses, I wouldn’t be surprised if it did agree to some amendments. 

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The Cartoon Movement The Nuclear Agreement Handshake

Both the IAEA and European JCPOA participating partners, agree that Iran is complying with the nuclear deal. Further, the EU also considers that the JCPOA is contributing to international peace and security – in particular the international non-proliferation architecture.

Further, the EU also believes, following its 1990’s policy of critical dialogue with Iran, that the nuclear accord is a means to strengthen co-operation and allows for continuous dialogue with Iran.

On 13 October 2017, the EU High Representative/Vice-President Federica Mogherini stated that:

[the JCPOA] is not a bilateral agreement, it does not belong to any single country and it is not up to any single country to terminate it. It is a multilateral agreement that was unanimously endorsed by the United Nations Security Council Resolution 2231. It is a robust deal  that provides guarantees and a strong monitoring mechanism that Iran nuclear programme is and will remain exclusively for civilian purposes only.

The EU also stresses that the IAEA has verified 8 times that Iran is implementing all its nuclear-related commitments following a comprehensive and strict monitoring system. The EU’s support for the nuclear accord is also based, on no small measure, to the increased trade with Iran since the adoption of the JCPOA. 

On 16 October 2017, the EU reiterated its commitment to the JCPOA and urged President Trump not to withdraw from the JCPOA. They view the refusal to certify Iran’s compliance with the JCPOA as an U.S. internal matter. For that matter, the EU also has its concerns regarding Iran’s ballistic missiles and it’s role in the increasing  tensions in the region. However, the Union prefers to address it’s concerns outside the context of the JCPOA.

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Iran Political Cartoons US News_

On the other hand, the Trump Administration counters that Tehran is not living up to the spirit of the accord, which they see as de facto non-compliance.  

Secretary of State Rex Tillerson and others have said that Iran has not positively contributed to regional and international peace and security, an “expectation” embedded in the deal’s preamble.

They noted that Iran still supports militant groups such as Hezbollah and Hamas and backs militias in Syria and Yemen. Iran has also continued to test ballistic missiles, although not part of the JCPOA – thus not constituting a material breach of the JCPOA, something that annoys the U.S. 

Further, the U.S. also cites Iran’s refusal to allow IAEA inspectors to review military sites, although not offering any evidence, as part of Tehran’s perfidy, i.e. non-compliance with the JCPOA.

According to IAEA officials and signatories to the deal, under the JCPOA, the UN nuclear watchdog, has the authority to request access to any facilities in Iran, including military ones. This authority is based on credible indications that banned nuclear activities are taking place. “We’re not going to visit a military site like Parchin just to send a political signal,” an IAEA official said, mentioning a military site often cited by opponents of the deal including Israel and many U.S. Republicans.

Thus, given his opposition to the JCPOA, it would appear that President Trump, through his threat to withdraw from the accord, is trying to garner support to renegotiate the parameters of the nuclear deal.

The vague definition of what falls under the “spirit of the JCPOA,” is unclear and makes it difficult to ignore the U.S. Administration’s arguments – given that the identified concerns of the U.S. are compelling.

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Security Council adopts resolution 2231 (2015) (UN photo)

For instance, one can question Tehran’s wisdom to continue with its ballistic missile testing, whereby both Obama and Trump Administration officials (not to mention other JCPOA participants) have termed the tests as “defiant of,” and “inconsistent with,” UN Security Council Resolution 2231 – although stop short of classifying them outright breaches (excluding the 27-07-2017 space launch – which was termed as a violation).

Furthermore, Iran continues to openly supply governments and warring factions in the Middle East region with arms, appearing to violate Resolution 2231. Also see Third report of the Secretary-General on the implementation of Security Council resolution 2231 (2015) which summarizes Iran’s factual (non-)implementation of the JCPOA. Until now the UN Security Council has not been able to reach consensus whether Iran is in violation of Resolution 2231. 

These developments are in no small measure unwelcoming; it only shreds more uncertainty on an already highly charged issue. In this context, Tehran is certainly pushing its luck, as not only the U.S. can take issue with Iran’s attitude. In the face of these breaches, its no wonder, as reported earlier, why the U.S. has sanctioned the Iranian Islamic Revolutionary Guard Corps (IRGC). 

The IRGC has been repeatedly sanctioned, also by the Trump Administration – most recently on 13 October 2017. The U.S. Department of the Treasury’s sanctions watchdog – Office of Foreign Assets Control (OFAC) designated, i.e. blacklisted, the IRGC under Executive Order (EO) 13224 (the terrorism sanctions executive order) for its support of the IRGC-Quds Force, which supports a number of terrorist groups, including Hezbollah, Hamas, and the Taliban.

Afbeeldingsresultaat voor pictures of Iranian IRGC

Members of Iran’s Revolutionary Guards at an annual military parade in front of the mausoleum of the late Ayatollah Khomeini just outside Tehran, Iran, on September 22, 2014. AP/Ebrahim Noroozi

The practical implications of this blacklisting, is little, given that the IRGC is already blacklisted as a Specially Designated National (SDN), Executive Orders 13382 (relating to WMD proliferation), 13553 (Iranian human rights abuses), and 13606 (Iranian and Syrian human rights abuses via information technology). 

As a SDN, all IRGC assets subject to the jurisdiction of the U.S. are blocked, U.S. persons are generally forbidden from dealing with the IRGC (and blacklisted affiliates, agents, and any entity owned 50% or more by the IRGC); and non-US persons can be subject to secondary sanctions restrictions if and when they engage in transactions with the IRGC. OFAC has recently stated that even humanitarian donations can fall foul of U.S. sanctions. 

However, President Trump did not go as far as to blacklist the IRGC as a Foreign Terrorist Organization (FTO). See overview of FTO’s. As I’ve reported earlier, the FTO statute claims worldwide criminal jurisdiction under U.S. law against anyone who provides “material support” to FTO’s.

In the context of the JCPOA, a U.S. FTO blacklisting of the IRGC might have probably crippled the deal. Not only would the compliance risks for non-U.S. companies become even more complicated, but it might have triggered Iran from walking away from the deal. Iran has made it clear that blacklisting of Iranian governmental branches and/or organizations is totally unacceptable. Further, a FTO blacklisting would have been detrimental to certain U.S. national security objectives – given that IRGC backed militias have contributed to the anti-IS (Islamic State) coalition.  

Further, if the refusal to re-certify the JCPOA could also have implications at the UN. Its unclear to what extent UN Security Council Resolution 2231 imposes legal obligations on the U.S.

Note that European diplomats and the Security Council itself view the JCPOA as a binding commitment under the UN Charter, e.g. article 25 and measures which are explicitly adopted under article 41. Thus, it’s questionable whether the U.S.’s point of view that the JCPOA only imposes political obligations, holds water. 

For instance, the termination of prior UN Security Council resolutions and the JCPOA dispute resolution mechanisms and the possible imposition of “snap-back,” sanctions were both adopted under article 41. From a legal perspective, it would seem that no JCPOA participating country can unilaterally deviate from these decisions, at least not without the approval of the Security Council. This is separate of the political fall-out which would ensue following an unilateral U.S. withdrawal from the JCPOA.

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US News & World Report_Editorial cartoon on Iran deal

Now What? Options for the U.S. to stop implementing the JCPOA

On the basis of the JCPOA, there are two options that the U.S. could adopt to either amend or stop implementing it’s JCPOA commitments.  

The first option is to apply existing JCPOA provisions – paragraphs 36 & 37 Dispute Mechanism. 

The dispute mechanism is a set of complex procedures (see below) that could ultimately lead to one of the parties ceasing its JCPOA obligations if “it deems an unresolved issue to constitute significant non-performance.” Note that Iran has stated that it might cease implementing it’s JCPOA commitments if any sanctions were reimposed. If this avenue was to be pursued, any Permanent UN Security Council Member, i.e. the U.S., could veto any Council decision to continue uplifting sanctions. This could trigger the earlier cited snap-back sanctions. In this event, the JCPOA states that sanctions would not be applied retroactively to contracts, consistent with the JCPOA, concluded with Iran. 

This option would be particularly difficult for the U.S.

  1. the burden of proof would lie on the U.S. to justify stopping it’s JCPOA commitments. As cited earlier, the IAEA and other JCPOA participating countries have confirmed Iran’s compliance with the JCPOA.
  2. the JCPOA dispute mechanism only focuses on JCPOA related disputes, and therefore, does not allow JCPOA participants to raise any other grievances. Thus, the U.S. would find it extremely difficult to use the JCPOA dispute mechanism to accuse Iran of violating non-nuclear related aspects of the JCPOA.
  3. Finally, it would be interesting to see how snap-back sanctions would be implemented. As stated above, snap-back sanctions cannot be retroactively applied to contracts concluded with Iranian entities before these entered into force. In its JCPOA FAQ’s, OFAC has stated that retroactive sanctions would not be imposed for JCPOA authorized contracts and that a wind-period would most probably be introduced to allow companies to disengage from Iran.  

JCPOA Dispute Mechanism
Text of JCPOA 

36. If Iran believed that any or all of the E3/EU+3 [China, France, Germany, the Russian Federation, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policywere not meeting their commitments under this JCPOA, Iran could refer the issue to the Joint Commission for resolution; similarly, if any of the E3/EU+3  believed that Iran was not meeting its commitments under this JCPOA, any of the E3/EU+3 could do the same.

  • The Joint Commission would have 15 days to resolve the issue, unless the time period was extended by consensus. After Joint Commission consideration, any participant could refer the issue to Ministers of Foreign Affairs, if it believed the compliance issue had not been resolved.
  • Ministers would have 15 days to resolve the issue, unless the time period was extended by consensus. After Joint Commission consideration – in parallel with (or in lieu of) review at the Ministerial level – either the complaining participant or the participant whose performance is in question could request that the issue be considered by an Advisory Board, which would consist of three members (one each appointed by the participants in the dispute and a third independent member).
  • The Advisory Board should provide a non-binding opinion on the compliance issue within 15 days. If, after this 30-day process the issue is not resolved, the Joint Commission would consider the opinion of the Advisory Board for no more than 5 days in order to resolve the issue.
  • If the issue still has not been resolved to the satisfaction of the complaining participant, and if the complaining participant deems the issue to constitute significant non-performance, then that participant could treat the unresolved issue as grounds to cease performing its commitments under this JCPOA in whole or in part and/or notify the UN Security Council that it believes the issue constitutes significant non-performance.

37. Upon receipt of the notification from the complaining participant, as described above, including a description of the good-faith efforts the participant made to exhaust the dispute resolution process specified in this JCPOA, the UN Security Council, in accordance with its procedures, shall vote on a resolution to continue the sanctions lifting.

  • If the resolution described above has not been adopted within 30 days of the notification, then the provisions of the old UN Security Council resolutions would be re-imposed, unless the UN Security Council decides otherwise. 
  • In such event, these provisions would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities prior to the date of application, provided that the activities contemplated under and execution of such contracts are consistent with this JCPOA and the previous and current UN Security Council resolutions. The UN Security Council, expressing its intention to prevent the reapplication of the provisions if the issue giving rise to the notification is resolved within this period, intends to take into account the views of the States involved in the issue and any opinion on the issue of the Advisory Board.
  • Iran has stated that if sanctions are reinstated in whole or in part, Iran will treat that as grounds to cease performing its commitments under this JCPOA in whole or in part.
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Top Iran Nuke Deal

The second option is that the U.S. apply INARA provisions to stop it’s JCPOA commitments or attempt to revise the nuclear accord

Option 1: Re-imposition of U.S. sanctions on the basis of a JCPOA Material Breach 

Under the INARA, President Trump could assert that a so-called “material breach,” has taken place and Iran has been unable  to cure this, i.e. resolve the breach.

The Administration would then have to provide the U.S. Congress with credible information that Tehran has incurred a material breach and that it has not been able to cure this. This in turn might trigger a set of fast-track Congressional procedures that could result in the re-imposition of suspended sanctions waived under the U.S.’ implementation of the JCPOA and the prevention of further waivers.  

This option would be difficult to operationalize given that the U.S. has until now certified Iran’s compliance with the JCPOA and has not been provided by the IAEA with any such evidence. For that matter, it has not provided the UN watchdog  or other JCPOA participating countries with any such evidence.  

Option 2: Options under the refusal to Certify Compliance Report

As cited earlier, see above INARA Compliance Certification Requirement & Definition of a Material Breach, under the INARA, every 90 days, President Trump has to certify that Iran is complying with the following: 

  1. Iran is verifiably and fully implementing the JCPOA;
  2. Iran has not committed an uncured material breach;
  3. Iran has not taken any action that could advance a nuclear weapons program; and
  4. continued suspension of sanctions (including issuance of waivers of applicable sanctions laws) is 
    • appropriate and proportionate to the specific and verifiable measures taken by Iran with respect to terminating its illicit nuclear program and
    • vital to the national security interests of the United States.

Under the listed provisions, there are a couple of scenario’s possible. 

Firstly, the most obvious, is that the certification is renewed and the waived U.S. Iran related sanctions under the JCPOA are renewed. The last time the waivers were renewed was 17 July 2017. They are up for renewal in January 2018. 

INARA Key Provisions & Time lines of Waivers under U.S. Iran Sanctions Regimes

  1. The bill requires the president to submit to Congress the agreement and all related documents, including specifics on verification and compliance. This ensures Congress will get to see the entire deal and make an independent judgment on its merits.
  2. The bill prohibits the president from waiving statutory sanctions while Congress reviews the agreement. If the agreement and all related documents are submitted prior to July 10, Congress has up to 52 days to review the deal and may vote on the agreement in the first 30 days; the president then has 12 days to veto the bill, followed by 10 days for Congress to override such a veto. If the deal is submitted in the lead up to or during the August recess (from July 10 to September 7) Congress has an additional 30 days of review for a total of up to 82 days.
  3. The bill gives Congress the opportunity to enact a joint resolution of disapproval that would permanently prevent the president from waiving or suspending the congressional sanctions. The bill enhances Congress’s authority over statutory sanctions, and goes further by explicitly making clear it does not revoke or permanently lift sanctions, which requires a separate vote.
  4. The legislation holds Iran accountable by requiring the president to certify to Congress every 90 days that Iran is complying with the agreement. If Iran violates the terms of the deal, the legislation provides an expedited process for Congress to rapidly restore its sanctions.
  5. The bill also includes unprecedented reporting requirements on Iran’s direct and indirect support for terrorism, human rights violations, and ballistic missile testing.

Waivers under several Iran sanctions statutes authorize the U.S. President to waive sanctions – if he determines that it is “vital to the national security interests of the United States” to do so:

  • National Defense Authorization Act for FY 2012 (NDAA 2012): Every 120 days (Section 1245 (d)) 
  • Iran Sanctions Act (ISA), as amended: Every six months
  • Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA): Every six months (Sections 212(d)(1) and 213(b)(1))
  • Iran Freedom and Counter-Proliferation Act (IFCA): Every 180 days

The NDAA 2012 waiver could be up for renewal as early as this month, although if the Obama Administration held off on issuing the previous waiver until January, then the renewal date would be sometime in May.  The ISA, ITRSHRA, and IFCA waivers are up for renewal in June or July.

Trump & Iran deal

Pitch Trump & Iran Deal_05 February 2017_Cartoon Movement

A second possibility, is that the U.S. re-imposes some or all suspended or waived sanctions. In his speech, President Trump is not so clear which sanctions will be re-imposed. 

In his scathing critique on both the JCPOA and Iran, President Trump signals that he cannot certify “that the suspension of sanctions under the deal is “appropriate and proportionate,” to measure — and other measures taken by Iran to terminate its illicit nuclear program.” He believes that a continued certification will lead to a “path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout.”

On this basis, as cited above, President Trump has directed his government to work closely the U.S. Congress and U.S. allies to address the JCPOA’s many serious flaws so that the “Iranian regime can never threaten the world with nuclear weapons.”

Further, President Trump, states that he will support legislation to amend the INARA that would amend the Act to strengthen enforcement, prevent Iran from developing an intercontinental ballistic missile, and make all restrictions on Iran’s nuclear activity permanent under U.S. law. Finally, President Trump also cites that, given Iran’s continued policies to destabilize the security of the Middle East, the JCPOA has not brought about the desired effect to increase regional security, whereby, Iran has not lived up to the spirit of the nuclear accord. As a consequence, President Trump is clear that “in the event [U.S. is] not able to reach a solution working with Congress and our allies, then the agreement will be terminated.” 

Under Paragraph 26 of the JCPOA, Iran has claimed that it could stop performing it’s JCPOA commitments if and when U.S. nuclear related sanctions would be re-imposed. Iran’s ultimate reaction will probably depend on which U.S. sanctions are re-imposed, how other JCPOA participating countries react to this, and the effect of re-imposition of U.S. sanctions to the investment climate in Iran and the effects on the Iranian economy. 

A third possibility, is that the U.S. re-blacklists, i.e. re-designates, Iranian entities under the OFAC Specially Designated National List (SDN) that under the JCPOA have been waived or revoked. The Iranian parties un-blacklisted are mainly civilian parties linked to Iran’s economy, e.g. companies in the financial/ insurance sectors, manufacturers, and energy-related entities. 

As a consequence, the re-blacklisting could trigger the re-imposition of certain U.S. secondary sanctions to those entities, e.g. the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (which shuts the door to the U.S. financial sector to those parties that conduct transactions with Iran-related SDN’s). Iran’s reaction, and that of U.S. allies, would depend on which Iranian parties are re-blacklisted and their importance to the Iranian economy. 

Third Option: Continue refusal to certify Iran’s compliance with JCPOA, but impose no new sanctions 

Another option would be that the U.S. continues it’s refusal to certify Iran’s compliance with the nuclear deal, but not re-impose any sanctions.  In this scenario, the U.S. Congress could decide not to re-impose sanctions under the INARA. Note that the INARA does not require President Trump to re-impose sanctions in the face of no certification of the JCPOA.

Thus, President Trump might decide not re-impose sanctions and continue the already issued waivers – even if U.S. Congress would legislate new restrictions under the INARA. This would keep the U.S. in the JCPOA and probably guarantee Iran’s continued commitment to the deal. However, this option seems unlikely given Iran’s statement that it is not prepared to re-negotiate the JCPOA and President Trump’s earlier cited speech in which he desires to amend key weaknesses in the current JCPOA.

Thus, if Iran and for that matter other JCPOA participating countries, do not accommodate President Trump and the desire of the U.S. Congress to amend the nuclear accord, chances are high that the U.S. will re-impose some or all suspended or waived sanctions, not to mention abandon the JCPOA.

The wise, but impossible option: rationalizing U.S. Iran sanctions 

As cited earlier, a weakness of the JCPOA, is that the U.S. sanctions relief of only suspending U.S. nuclear related secondary sanctions, doesn’t work. Without a clear framework to resolve the underlying issues which provoked the international community, i.e. the U.S., to impose sanctions in the first place, there is in my opinion, no fertile ground to move forward.

The art of politics is making the impossible possible, and sometimes the impossible necessary. Policy-makers have focused too much on the anti-proliferation issues, while ignoring the fact that international firms, without clearly untangling all the Iran-related sanctions regimes, would not enter and/or invest in the Iranian market. Furthermore, the JCPOA contains no real measures to assist Iran to transform its economy so that it can meaningfully rejoin the modern global economy. Although Iran obviously needs sanctions relief to stop the hemorrhaging of its economy created by international sanctions, in the long run, it needs to modernize its economy in order to attract sustained international investors. For one thing, it will need to address corruption, nepotism and stop allowing its financial institutions to finance terrorists. For another thing, as a signature of the Paris Climate Agreement, it will also have to start thinking how modernize its energy market.

From a global trade perspective, by only lifting secondary sanctions, and emphasizing that these can be re-imposed through a snap-back mechanisms, the U.S. on purpose makes it impossible for a meaningful distinction between U.S. non-nuclear and nuclear sanctions.

For one thing, Iranian blacklisted entities are subject to both U.S. nuclear related sanctions covered by the JCPOA and by non-JCPOA sanction regimes, e.g. human rights violations and the sponsoring of terrorism (e.g. the Iranian Islamic Revolutionary Guard Corps (IRGC)). This is caused by the fact that U.S. Iran sanctions regimes pursue multiple objectives that traverse both nuclear and non-nuclear sanctions whereby the distinction between these types of U.S. sanctions becomes unworkable. Without untangling the web of sanctions, trading with Iran for international firms will remain a risky activity.  

For another thing, the structure and opaqueness of the Iranian economy does not contribute to the lifting of sanctions. This is because key segments of the Iranian economy are either state-owned or under the control of blacklisted Iranian state organs. This lastly makes the distinction between U.S. nuclear and non-nuclear sanctions in practice even more meaningless. As a consequence, international firms wishing to enter the Iranian market with (significant) ties to the U.S. market or financial system are extremely apprehensive to do so – at least if they wish to steer clear of U.S. enforcement actions. This in itself is probably the biggest weakness of the nuclear accord. Even the supporters of the JCPOA can’t deny this weakness. The fact that this weakness even exists speaks volumes. It illustrates the distrust between Iran and her JCPOA negotiating partners.


Possible Ramifications following President Trump’s Refusal to Certify the JCPOA

Cartoon: “I actually prefer it when he focuses on america first” #g7summit # trump –

In most probability, the ramifications of President Trump’s refusal to re-certify the JCPOA will be played out along fault-lines already established by supporters and opponents of the JCPOA. Those wishing to continue with the implementation of the JCPOA; and those wishing to either amend or outright abandon the nuclear accord.

No Plan B:…. 

The main problem here is that both camps have no Plan B, i.e. have not published viable alternatives to the accord. Under such circumstances, I would argue to keep the JCPOA alive. A bad deal is better than no deal, as in the latter case, the collapse of the JCPOA would certainly increase the security risks to the U.S. and it’s allies. 

The biggest challenge for policy-makers will be attempting to amend or renegotiate the JCPOA. As cited earlier, the U.S. wishes to specifically amend the established sunset clauses regarding Iran’s nuclear restrictions,  it’s ballistic missile program, and Tehran’s support for regional armed groups. 

Note that only the first issue is directly addressed in the JCPOA. The other two only indirectly, given that these activities are subject to UN Security Resolution 2231.

  • The trade in ballistic missile related items and technologies are subject to Security Council approvals until 2023. Note that paragraph 3 of Annex B of Resolution 2231 only calls, but does not require, upon Iran not to undertake any activity related to ballistic missiles designed to be capable of delivering nuclear weapons, including launches using such ballistic missile technology. These restrictions could end, earlier than the maximum sunset date, upon an IAEA “Broader Conclusion,” that all nuclear material in Iran remains in peaceful activities. 
  • Paragraphs 5 and Paragraph 6 (b) of Annex B of Resolution 2231 require that until 2020 any Iranian importation of specified weapons systems (those falling under the United Nations Register of Conventional Arms) requires explicit approval of the Security Council; and exportation of any arms from Iran is banned.  Note that in December 2007, Russia agreed to sell five batteries of the highly capable S-300 air defense system at an estimated cost of $800 million. Sale of the system did not technically violate U.N. Resolution 1929, because the system is not covered in the U.N. Registry on Conventional Arms, but Russia refused to deliver the system as long as that sanctions regime remained in place. After the April 2, 2015, framework nuclear accord, Russian officials indicated they would proceed with the S-300 delivery, and delivery proceeded in 2016. Iran reportedly also seeks to buy the S-400 anti-aircraft system from Russia. 

12 political cartoons on North Korea and the White House leaks_ Brittany Binowski

However, given the cited concerns raised by the Trump Administration regarding Iran’s ballistic missile testing and supply of arms to countries and non-state groups, the fact of the matter is that Iran, also prior to the JCPOA, is not fully complying with UN Security Council resolutionsTherefore, the question is whether amending the JCPOA and Resolution 2231 would have any effect on Tehran.

If the Security Council is unable to address the raised U.S. concerns, it might provoke President Trump from going it alone. To prevent this, the Security Council, including the U.S., and Iran must be prepared to compromise. Given the bombastic approach of the Trump Administration to international diplomacy, the question is whether President Trump is up to the task. 

Moreover, it’s questionable whether Iran and other JCPOA participating states would be open to amending the nuclear accord. One possibility would be that Iran accepts possible restrictions on the range of it’s ballistic missiles.

Furthermore, its questionable whether it would be wise to link Iran’s foreign and defense policies to the possible amendment of the JCPOA, given the complexities of the issues involved. It’s also unclear, as critics of the JCPOA argue, whether the influx of monies following the relaxation of sanctions has caused Iran’s regional influence to expand – instead of exploiting the opportunities provided by the ensuing regional conflicts. As a consequence, the EU has wisely stated that security concerns arising from Iran’s ballistic missile program and it’s weapons supplies should be addressed separately. In this context, a wise course for the U.S. would be to re-introduce legislation that would sanction Iran (and possible facilitators of sanctionable activities) after the above-mentioned sunset deadlines under Resolution 2231 have lapsed. This path could be a compromise and keep the JCPOA alive. 

 If U.S. reimposes sanctions 

In regard to the re-introduction of U.S. sanctions, especially secondary sanctions, the possible ramifications would depend on which sanctions are re-introduced.

This would determine how Iran and other JCPOA participating countries would react. Key to keep Iran complying with the JCPOA, is that sanctions do not revert back to pre-JCPOA era, i.e. sanctions disproportionally hit the Iranian economy. Further, although China, the EU and Russia have stated that they would continue to implement the JCPOA in the event of the U.S. either reintroducing sanctions or withdrawing from the nuclear accord. It’s unclear whether the JCPOA can survive without the U.S.

  • If only non-essential economic parties were re-blacklisted, i.e. re-designated, under U.S. sanctions, the JCPOA could be further implemented without the U.S. if and when Iran would accept this. However, re-blacklisting Iranian parties crucial to the Iranian economy, e.g. Central Bank of Iran, the Islamic Republic of Iran Shipping Lines (IRISL), Iran Air, or the National Iranian Oil Company (NIOC), could lead to Iran claiming that the U.S. has breached the JCPOA. 
  • Note that for the JCPOA to work without the U.S., Iran would take an enormous risk to restart its uranium enrichment program in violation of the nuclear deal parameters. In such a scenario, it might violate its NPT Safety Agreement with the IAEA (which it must implement on the basis of it’s NPT obligations separate from the JCPOA) which would make it very difficult for the other JCPOA participating countries to honor their commitments to the nuclear accord. 
  • If the U.S. re-introduced secondary sanctions that (potentially) targeted international firms/multinationals, this might precipitate these leaving the Iranian economy or trigger their divestments from Iran – especially if these firms are active in the U.S.  When threatened with U.S. penalties or being shut out of the U.S. market, this might cause a run on Iran’s economy to resume its pre-JCPOA deterioration. In this scenario, Iranian leaders might argue that Iran is no longer benefiting from complying with the JCPOA, and then resume those nuclear activities that are restricted under the accord. 

More importantly, the re-introduction of secondary sanctions on international firms might also impact the policy objectives of the U.S. Iran sanctions regime. This might isolate the U.S. and make it even harder to find solutions for U.S. (and EU) security concerns. In particular, it might threaten the EU and U.S. common approach towards Iran and their synchronized sanctions regimes.

Gerelateerde afbeeldingThe unilateral re-imposition of U.S. (secondary) sanctions might lead to a Siberian Pipeline type-clash, which in turn might also harm the interests of U.S. industry (a series of WTO complaints). A possible consequence of the political fall-out could be that if the U.S. would re-introduce secondary sanctions and penalize non-U.S. companies, then the EU and other countries could adopt blocking laws to protect the interests of their companies

It’s questionable what the effects of blocking laws would be, given that the Iranian market remains an ultra high-risk for many international firms and financial institutions.

Further, what triggered the WTO case following the 1982 Siberian Pipeline case, is whether the Trump Administration would and could introduce retroactive restrictive measures. Section 6 (p) of the Export Administration Act 1979 (as updated) prohibits President Trump from introducing retroactive export controls, unless he certifies to the U.S. Congress that retroactive controls are required, to override existing contracts and authorized licenses. This could be justified if President Trump informs Congress that there is a breach of the peace, whereby such controls are required to protect vital U.S. interests. This would be a hard sell, especially to the other JCPOA participating countries (the EU), not to mention Iran, given that there is consensus that the JCPOA is delivering. 

Afbeeldingsresultaat voor Iran nuclear deal cartoonsBrave new sanctions world: rationalize the architecture of U.S. Iran Sanctions

Another ramification, could be that policy makers use this situation as an opportunity to rethink the sanctions architecture against Iran. 

The JCPOA is an opportunity to defuse a situation which was clearly spiraling out of control. In my opinion, killing the deal  would not only be a step backwards, given the increased adrenaline levels in the region, but would undoubtedly increase the security risks, if Iran would choose to restart it’s controversial nuclear program. For one thing, it be interesting to see how Israel and Saudi Arabia will react in such a scenario. Furthermore, the ramifications of President Trump’s decision might have broader  implications for the U.S.’s standing in the world – e.g. brokering a deal with North Korea.

A major flaw in the nuclear deal is the tapestry of the promised sanctions relief under the JCPOA, especially from an U.S. perspective, which from the start should be considered a ticking-bomb, no pun intended. 

The sanctions-relief under the JCPOA is not well suited to the structure of U.S. Iran sanctions.  As cited earlier, the distinction between nuclear and non-nuclear sanctions is only one dimension of U.S. Iran  sanctions. Only uplifting the nuclear sanctions is insufficient given that the panoply of U.S. sanctions aims to stop Iran supporting terrorism and its influence in the region. In this context, U.S. sanctions haven’t entirely worked; for that matter comprehensive sanctions against Cuba and North Korea haven’t worked either. A more effective approach would be to adopt sectoral sanctions, such as the EU and U.S. sanctions against Russia. 

Given the entrenched positions between Iran and U.S., it’s unlikely that a solution will be found here. Furthermore, killing the deal and reimposing sanctions is also not a solution. Unclear is if this would advance U.S. policy objectives and whether U.S. allies would follow another round of sanctions. Furthermore, this path would not give the desired economic relief which Iran is seeking.

A more creative approach is to redesign the JCPOA so that U.S. concerns are met, while giving Iran sufficient economic incentives to comply with the JCPOA. 

For instance, demand that Iran open its economy and financial system; make it more transparent. Reduce the role of the state in Iran’s economy – whereby the role of Iranian state, and in particular those segments which are currently blacklisted by the U.S., is diminished.

Further, the U.S. with its allies could demand that Iran start to clean up its financial system, e.g. introduce measures that reduce the risk of corruption, money-laundering, and terrorist-financing. This could be done through the Financial Action Task Force (FATF)), which already advises financial institutions to apply enhanced due diligence in connection to Iran. This approach would probably be more acceptable to U.S. allies than the re-imposition of sanctions. It’s also a proportional approach for the U.S. to achieve its policy objectives vis-à-vis Iran. 

However, it’s questionable whether Iran would accept this. It would mean relinquishing its ability to give financial support to groups in the Middle East which are blacklisted by the U.S. and its allies. It could also mean, if and when Iran would implement such measures in good faith, that it could finally start to seriously shake-off its pariah status. In the long run, Tehran’s aim should be that it is no longer deemed to be a state sponsor of terrorism. This in itself triggers a multitude of international sanctions, in particular in the U.S. which are also rigorously enforced  through U.S. secondary sanctions.  Ultimately, Tehran should also understand that if it continues to defy UN Security Council resolutions and provoke the U.S., it wouldn’t get a better deal than it has now. If pre-JCPOA sanctions are re-imposed, in the long-term this might even risk the survival of the Iran regime.

For the U.S., it must not abandon the JCPOA so quickly. The possible ripple effects of killing the nuclear deal could be felt beyond the JCPOA increasing the security risks – e.g. the stand-offs between the U.S. and Russia regarding Ukraine and North Korea. Why would these countries be willing to enter into agreements with the U.S. if these can be rescinded further down the line?

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