Iran and JCPOA – Nelson Report Article

This is a lightly-edited version of a piece I wrote for the Nelson Report in September 2018.

A few points worth highlighting, I think:    

—It is obvious that US attempts to coerce foreign companies from doing business with Iran via the extraterritorial application of US sanctions may be hampered by the unilateral nature of these sanctions. In my view, though, it’s important to remember that the EU is working at cross-purposes with the United States, rather then merely refraining from participating in sanctioning Iran. That is a new dynamic.

—Since the UNSC adopted UNSCR 2231, there is no legal requirement for foreign governments to sanction Iran. 

— Here’s an important factor which might deter Iran from leaving the JCPOA: if Tehan stops performing its JCPOA commitments, there is a real risk that one of the P4+1 governments could invoke UNSCR 2231’s provisions which would require the re-imposition of UN sanctions. Governments would have a legal obligation to implement those sanctions. 

—Having said that, it’s entirely possible that Iran and the P4+1 can reach some sort of de facto compromise agreement in which Iran will be able to conduct some nuclear activities which are currently prohibited by the JCPOA. Without going into detail, I think both UNSCR 2231 and the JCPOA allow for such an outcome. 

On May 8, [2018]  President Donald J. Trump announced that the United States would no longer fulfill its commitments undertaken pursuant to the July 2015 Joint Cooperative Plan of Action (JCPOA), an agreement between Iran and China, France, Germany, Russia, the United Kingdom, and the United States, (collectively known as the P5+1) that limits Iran’s nuclear program and requires extensive international monitoring of that program. In doing so, the Trump administration has initiated a social science project with a deeply uncertain outcome. 

The volume of U.S.-Iranian trade has long been too limited for U.S. sanctions on Iran to have significant impacts on that country. Consequently, the United States in recent years imposed sanctions on foreign entities for doing business with Iran, but suspended application of these sanctions pursuant to the JCPOA. The Trump administration re-imposed the first tranche of sanctions in early August and is due to reimpose the second in early November. The JCPOA also includes relief from nuclear-related sanctions imposed on Iran by the European Union (EU) and the UN Security Council, although the EU and the United States continued to impose sanctions on Iran for other reasons, such as the country’s poor human rights record. The JCPOA-mandated relief was meant to help improve Iran’s economy after years of struggling under international sanctions. This relief is also an important incentive for Iran to comply with the agreement.  

Iran, as well as the remaining non-Iranian JCPOA parties (the P4+1), have proceeded with implementing their JCPOA obligations and have stated their wish for the agreement to continue. The P4+1 support the agreement’s nuclear constraints because, although Iran had given up its nuclear weapons program in late 2003, Tehran subsequently continued to expand its uranium enrichment program, which can produce explosive material for nuclear weapons, as well as nuclear reactor fuel. The prospect of an Iranian nuclear weapon or a military attack on Tehran’s nuclear facilities had concerned many governments.

The advent of the JCPOA followed years of diplomacy which were themselves preceded by multilateral sanctions, the most prominent of which were imposed by a number of UN Security Council resolutions adopted between 2006 and 2010. During this time, the United States also imposed sanctions on foreign entities for doing business with Iran. These sanctions, combined with sabotage and export restrictions on nuclear-related technology, certainly harmed Iran’s economy and probably slowed its nuclear program. Many experts also credit the sanctions with inducing Iran to negotiate the JCPOA. 

The United States will now need to rely on its own sanctions to dissuade foreign companies and financial institutions from doing significant business with Iran. Trump administration officials, insisting that the United States does not have a policy of regime change in Iran, argue that U.S. sanctions re-imposition will induce Tehran to conclude an agreement with the United States which would include both stricter nuclear constraints and also prohibitions on Iranian activities such as ballistic missile proliferation and support for terrorism. But this approach will need to succeed in circumstances vastly different from those which obtained prior to conclusion of the JCPOA. 

The diplomatic context has undergone the most significant changes. The pre-JCPOA Security Council resolutions did not require Iran to end its enrichment program, but to undertake a series of confidence-building measures and enter into negotiations with the P5+1 about a proposal contained in the resolutions (this diplomacy concerning this proposal was a precursor for the JCPOA negotiations). However, the council repealed the previous sanctions in a July 2015 resolution which endorsed the JCPOA but also included a mechanism for the sanctions’ reinstatement, should Iran violate the JCPOA; EU sanctions contain a similar mechanism.  

In contrast to the previous U.S. approach, the Trump administration is attempting to coerce foreign companies to end and refrain from doing business in Iran in order to compel Tehran’s acceptance of a vaguely-articulated proposal stipulating Iranian commitments well beyond those mandated in the JCPOA. But unlike the pre-JCPOA period, there are no UN-mandated requirements for governments to impose sanctions on Iran. In fact, the P4+1 governments are actively countering the re-imposed U.S. sanctions efforts and devising new incentives for Tehran to remain party to the JCPOA. It is even conceivable that these governments could negotiate a de facto compromise agreement with Iran.

Tehran will need to consider a range of factors as it deliberates whether, on balance, the country will benefit by remaining in the JCPOA. These factors include: the extent to which Iran’s economy benefits; whether the agreement retains support of the relevant Iranian political constituencies; and whether Tehran believes that it can trust the United States to adhere to any future agreement. This latter factor is particularly important; Iranian officials have constantly complained in the past that the US could not be trusted to keep its word and have historically feared that caving into U.S.-led pressure will signal weakness and invite Washington to pocket concessions and try to extract additional ones. 

Iran has an additional incentive to comply with the JCPOA, particularly given the country’s current economic turmoil –  the potential re-imposition of EU and UN sanctions. But even that threat has its limits; Iran will not stay in the JCPOA at any cost. Moreover, the Iranian government may be able to impede sanctions’ effectiveness. Tehran previously managed to avoid economic collapse even when facing the toughest international sanctions; this experience may yet help Tehran cope with future sanctions-induced deprivation. According to Iranian officials, the government has begun to take measures designed for this purpose. One must also consider that, even after several years of UN sanctions on Iran, the country did not comply with the Security Council resolutions. Whatever role one thinks sanctions played in compelling Iran to negotiate the JCPOA, an intensive U.S.-led diplomatic effort was necessary to conclude the agreement. 

Ultimately, the success of the U.S. strategy will be  a function of the degree of economic pain with which Iran is willing and able to withstand, as well as Tehran’s own estimation of its ability to resist sanctions’ effects. Perhaps a combination of U.S. sanctions, threats of military action, and sabotage will induce a quick Iranian capitulation. But such an outcome would be without precedent. Moreover, the current differences between the United States and the P5+4 regarding Iran policy, as well as the  diminished positive and negative incentives for Iran to cooperate could, even if Iran does not choose to develop a nuclear weapon, result in an Iran free of the JCPOA restraints and facing a weaker sanctions regime. In that case, the world will face a return to the previous nervousness surrounding Iran’s pre-JCPOA nuclear program. There is an ongoing debate among experts regarding the utility of U.S. unilateral sanctions. This U.S.-sponsored social science project may soon reveal who is right.

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