Volume 10, Issue 5, April 30, 2018
President Donald Trump’s unrealistic demands that Congress and Washington’s European partners “fix” the effective 2015 multilateral nuclear agreement with Iran is setting the United States up to violate the deal, jeopardize its future, and undermine U.S. credibility and leverage in the region.
Despite the success of the nuclear deal in verifiably blocking Iran’s potential pathways to a nuclear bomb, Trump has threatened not to renew U.S. sanctions waivers May 12, as required by the nuclear deal, if the E3 (France, Germany, and the United Kingdom) and Washington do not conclude a supplemental agreement designed to address what he terms are “flaws” in the accord.
Although E3 and U.S. negotiators have been meeting since Trump issued his ultimatum in January, it looks increasingly likely that Trump will choose not to renew sanctions waivers May 12, putting the United States in violation of the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA).
While there has been progress in areas outside of the nuclear deal that Trump wants to address, such as on ballistic missiles, his demand that an agreement changing the so-called "sunsets"—those provisions of the deal that expire over time—has proven contentious and may prevent the E3 and the United States from finalizing an arrangement. Trump’s claim—that the deal paves the way to an Iranian nuclear weapon in 10 years—is based on a flawed analysis that discounts the value that the permanent monitoring mechanisms and prohibitions put in place by the deal have as a bulwark against nuclear weapons development.
Trump also disregards the fact that his solution, making permanent some of the limitations that expire in 10-25 years under the threat to reimposing sanctions, would violate the accord. Congress and the E3 have rightly resisted agreeing to make demands that would abrogate, or otherwise recast, the terms of the JCPOA. These fundamental differences make an arrangement between the E3 and the United States that addresses Trump’s areas of concerns without violating the agreement difficult to negotiate.
Additionally, given Trump’s record of hostility toward the accord, his campaign pledge to tear up the deal, and his unpredictability, there is no guarantee that even if an agreement on a supplemental arrangement is reached, Trump will accept it or abide by it.
After meeting with Trump and floating the idea of a new agreement that keeps the 2015 nuclear deal in place and, in separate arrangements, addresses regional issues, ballistic missiles, and options for how to address Iran’s nuclear program after the deal expires, French President Emmanuel Macron predicted April 26 that Trump “will get rid of this deal on his own, for domestic reasons.”
While it behooves the E3 to continue pursuing negotiations with the Trump administration on an arrangement that satisfies Trump without violating the deal, the E3, Russia, China, Iran, and the U.S. Congress should now prepare to pursue “plan B”–implementation of the JCPOA without the United States. That must include denouncing Trump’s failure to renew sanctions for what is a clear violation of the deal —and taking steps to sustain the nuclear accord.
For as EU foreign policy chief Federica Mogherini stated in October, the nuclear agreement is multilateral and it is “not up to a single country to terminate it.”
A Clear Violation of the Deal
Reimposing sanctions is a twofold abrogation of U.S. commitments under the JCPOA and it is critical that members of Congress and Washington’s P5+1 partners recognize it as such. Not only did the United States commit not to reimpose sanctions, Washington also committed not to interfere with the full realization of sanctions relief.
To the first point, Paragraph 26 of the JCPOA clearly states that the United States “acting consistent with the respective roles of the president and Congress, will refrain from reintroducing or reimposing the sanction specified in Annex II that it has ceased applying under this JCPOA.”
Reimposing sanctions lifted by the deal, particularly when even top U.S. officials and critics of the deal admit that Iran is in compliance with its commitments, clearly abrogates U.S. commitments under this paragraph.
Additionally, the reimposition of U.S. sanctions, given the extraterritorial nature of the measures, will interfere with foreign companies and banks conducting legitimate business with Iran that is permitted by the JCPOA.That would directly inhibit Iran from realizing the benefits of sanctions relief.
For instance, the United States also committed in Paragraph 26 to “make best efforts in good faith… to prevent interference with the realization of the full benefit by Iran of the sanctions lifting.” In paragraph 28, the United States committed to “refrain from any policy specifically intended to directly and adversely affect the normalization of trade and economic relations with Iran.”
Even if the administration claims that it is not implementing the sanctions and therefore not violating the deal, failing to renew the waivers will make certain transactions with Iran illegal. Additionally, entities are not going to wait for the Trump administration to start implementing the measures to take actions to comply with the restrictions and avoid being penalized by the United States. The risk of sanctions penalties alone will result in a certain amount of self-enforcement, particularly for the sanctions measures that are due to be renewed May 12.
The Impact of Reimposing Oil Measures
The sanctions that will be reimposed May 12 if Trump does not renew waivers come from the National Defense Authorization Act (NDAA) for Fiscal Year 2012. The sanctions in the NDAA require states purchasing oil from Iran to make significant reductions in imports every 180 days or risk being sanctioned. While “significant reduction” was not defined in the legislation and it is unclear what standard the Trump administration will use, it was understood by the Obama administration to mean an 18 percent decrease in the total price paid for oil purchases every 180 days. If the sanctions are reimposed, compliance would be assessed Nov. 8, 2018. Failure to meet the “significant reduction” standard would result in sanctions on the foreign banks that process the transactions.
Key U.S. allies will be affected if this measure is snapped back. Right now the top five purchasers of Iranian oil include China, Japan, South Korea, India, and the European Union. Some of these states have already begun reducing purchases of Iranian oil in anticipation of the reimposition. South Korea’s purchases of Iranian oil products were down 40 percent in March 2018, when compared to prior year, although that is partially due to a decrease in the supply of certain oil products.
Reimposing these measures will also have a negative impact on support in Iran to maintain the deal, given the central role that oil sales play in Iran’s economy. The increase in oil sales after the JCPOA was implemented constitutes a significant portion of the sanctions relief Iran has experienced under the JCPOA.
In addition to higher sales since the agreement was implemented in 2016, Iran’s production of oil has also rebounded to 4 million barrels per day, up from the approximately 2.6 million barrels per day during the period from 2012-2016 when the EU oil embargo and the U.S. sanctions from the 2012 NDAA were in place. Crude oil sales are up from 1.1 million barrels per day during the negotiations from 2013-2015, when further reductions were capped, to about 2.5 million barrels per day.
Options for Congress
If Trump fails to renew the sanctions waivers, it is critical that members of Congress immediately denounce his action as a clear violation of the nuclear deal and call upon Washington’s partners in the agreement to sustain the accord.
Failure to call out Trump for violating the deal could be interpreted as an implicit endorsement of his approach and, more broadly, a rejection of multilateral efforts to address issues of proliferation concern. For this reason, it is also critical that members of Congress call on the remaining P5+1 to continue to implement the nuclear deal with Iran.
At a time when the overarching nonproliferation and disarmament architecture is under considerable stress, the nuclear deal with Iran was widely viewed in the international community as a nonproliferation success that averted a nuclear crisis and brought Iran back into compliance with the nuclear Nonproliferation Treaty.
Now, with the deal under threat from Trump, Secretary of Iran’s Supreme National Security Council, Ali Shamkhani, opened the door to Iranian withdraw from the NPT in response to a U.S. violation of the JCPOA, an action which would have grave consequences for the treaty and remove the binding legal prohibition on developing or acquiring nuclear weapons. Such an action would not only undermine international security, but it would severely undermine Iran’s own security and standing.
Demonstrating that Trump’s extreme view is outside of the mainstream and the deal still has support from policymakers in the United States may help persuade Tehran from making such a drastic move in response to the U.S. violation.
Members of Congress would also be right to point out that Trump will be responsible for the consequences if the U.S. violation ultimately causes the deal to collapse and the damage that would be done to U.S. credibility.
The International Atomic Energy Agency has reported Iran’s compliance with the accord in 10 consecutive reports and Trump’s own Secretary of State Mike Pompeo, a critic of the Iran deal, testified to Congress that there is no evidence of Iranian noncompliance with the accord, there is no legitimate reason for Trump to violate the agreement. Given Iran’s full implementation of the JCPOA, a decision by Trump to violate the accord and risk the future of the nuclear deal should be denounced by responsible members of Congress.
EU Measures to Sustain the Deal
Washington’s P5+1 partners, particularly the EU, France, Germany, and the United Kingdom, have committed to the continued implementation of the JCPOA, irrespective of U.S. actions. To sustain the deal, however, the E3 and the EU must do more than just denounce U.S. actions as a violation and detrimental to the future of the nuclear deal.
The EU can, and should, take actions to block the application of U.S. secondary sanctions and seek to assure Iran that the rest of the P5+1 remain committed to Iran realizing sanctions relief under the deal.
The EU has experience responding to U.S. extraterritorial sanctions. In the 1990s, the EU issued blocking regulation to protect its banks and businesses from U.S. sanctions targeting Cuba by instructing the entities not to comply with U.S. sanctions. In that case, the EU had an assurance from the United States that Washington would not target EU businesses for violating the sanctions.
While a handshake agreement that the United States will not seek to penalize EU businesses in the Iran case is highly unlikely, the EU should still pursue the blocking regulation. The blocking regulation probably will not provide enough guarantee that banks and businesses will be shielded from U.S. sanctions that business with Iran will continue–the penalty of being cut off from the U.S. financial system is likely too high a risk—but it will send an important political signal to Iran that the EU supports the deal. Equally important, it sends a message to the United States the decision to reimpose sanctions on Iran is unacceptable and the EU will not be pressured into abiding by U.S. measures.
The EU could also consider setting up channels to facilitate business transactions with Iran that do not rely on the U.S. dollar. Isolating such transactions from the U.S. financial system could provide an avenue for doing business with Iran and demonstrate to Tehran that the EU is still serious about implementing the deal.
These actions will be critical to try and continue sanctions relief. Failure to do so might push Iran to resume troublesome nuclear activities halted by the JCPOA, such as enrichment to 20-percent uranium-235, an activity currently prohibited by the deal until 2031.
As Zarif told CBS April 22, if “benefits of the deal for Iran start to diminish, then there is no reason for Iran to remain in the deal.”
The EU also has other channels for supporting the JCPOA. One often overlooked benefit of the nuclear deal is the technical cooperation for nuclear research and assistance in advancing nuclear safety and security. The EU and Iran have conducted several meetings to date and the results over some clear benefits to Iran. Pledging to continue to help Iran realize the full benefit of Annex III of the JCPOA is another way the EU can show its commitment to the deal.
Russia and China have also indicated support for sustaining the JCPOA and denounced Trump’s threats to the deal. At a meeting on the NPT in Geneva, Russia and China circulated a statement affirming their "unwavering support for the comprehensive and effective implementation" of the deal and invited all states present to sign on to the agreement. The Russian envoy to the meeting called upon states “not to remain silent in hopes that this situation will somehow blow over by itself but rather to take serious steps to preserve the JCPOA.”
Washington’s P5+1 partners should also use the dispute resolution mechanism set up by the JCPOA to present a united front in the face of the U.S. violation or support Iran if Tehran chooses this path. While the dispute resolution might push the E3 and the EU into the unattractive position of siding with Russia and China against the United States, it would send a strong signal to the Trump administration that the United States is isolated in its rejection of the deal.
Beyond the P5+1
The world is looking to the E3 to save the multilateral nuclear deal with Iran–but it is not just the responsibility of the other P5+1 states to avert the nonproliferation crisis that would follow if Trump reimposes sanctions. States beyond the P5+1 have an obligation to contribute to efforts to sustain the deal and uphold nonproliferation norms.
The UN Security Council endorsed the JCPOA in a 2015 resolution that “calls upon all Member States” to “take such actions as may be appropriate to support the implementation of the JCPOA” and “refraining from actions that undermine the implementation of commitments” under the deal. The preamble of the Resolution 2231 also emphasizes the importance of a diplomatic resolution to the Iranian nuclear issue “would benefit nuclear-nonproliferation.” The Security Council resolution statements may be nonbinding, but they underscore the global importance of the deal for nonproliferation and the responsibility that all UN member states have toward supporting the agreement.
States like South Korea, Japan, and India also have a stake in the economic consequences of any U.S. decision to violate the deal and reimpose sanctions. Not only would they be subject to restrictions on oil purchases from Iran, but banks and entities in these countries engaged in legitimate trade with Iran risk penalties if they do not cut ties with Tehran.
Like the EU, these states may think about what measures they can take to shield businesses and entities from U.S. sanctions. Pursuing strategies similar to the EU blocking regulation would send a strong signal of support for the Iran deal and demonstrate to Washington that there are consequences for blatantly disregarding multilateral accords.
Conclusion
If Trump fails to renew sanctions waivers May 12 it will be a clear violation of the multilateral nuclear deal with Iran. Withholding waivers would be irresponsible, dangerous, and risk a nuclear agreement that is verifiably restricting Iran’s nuclear activities. Trump’s action may not cause the deal collapse, but it certainly jeopardizes the future of the JCPOA and isolates the United States from key allies.
It is critical that members of Congress, Washington P5+1 partners, and the broader international community denounce Trump for violating the agreement if he fails to renew the sanctions waivers. Collapse of the agreement would have international consequences. Defending the JCPOA must be a global responsibility.—KELSEY DAVENPORT, director for nonproliferation policy