A staff member removes the Iranian flag from the stage after a group picture with foreign ministers and representatives of the P5+1 and Iran during the Iran nuclear talks in Vienna, Austria, 14 July 2015. REUTERS/Carlos Barria
Report 173 / Middle East & North Africa

Implementing the Iran Nuclear Deal: A Status Report

The one-year-old Iran nuclear deal has succeeded in its goal of blocking nuclear proliferation and opening the door to Iranian economic recovery. But it remains in jeopardy unless both Washington and Tehran defend and extend the spirit as well as the letter of the accord.

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Executive Summary

One year since its “implementation day”, 16 January 2016, the July 2015 nuclear agreement between Iran and the five permanent members of the UN Security Council plus Germany (the P5+1) – the Joint Comprehensive Plan of Action (JCPOA) – is both a success and in jeopardy. It has delivered so far on its narrow objective: effectively and verifiably blocking all potential pathways for Iran to race toward nuclear weapons, while opening the door to the country’s international rehabilitation and economic recovery. But in its transactional nature lies the accord’s vulnerability: it has not begun to transform the enmity between Iran and the U.S., leaving it exposed to an unstable political environment. If Iran still deems the deal in its national interest, it should not only adhere to its letter and spirit, but also move away from regional zero-sum pursuits. The Trump administration will face a starker choice. It could scuttle the deal, deliberately or by neglect; it should seek to make it stronger for all by a better-for-better bargain.

Over the past year, internal polarisation in Tehran and Washington about the accord’s merits often overshadowed what really matters: that it is working and delivering concrete results. It has put Iran’s nuclear program under the most stringent inspection mechanism ever implemented, while lengthening the breakout time to produce weapons-grade uranium from a few weeks to more than a year. Since January 2016, the International Atomic Energy Agency (IAEA) has verified six times that Iran has fulfilled its JCPOA obligations. The relaxation of U.S., European Union (EU) and UN nuclear-related sanctions has allowed Iran to regain oil market share, recover billions in frozen assets and attract foreign direct investment, turning its once shrinking economy into the region’s fastest growing.

Yet, implementation, as with any complex technical agreement, has not been flawless. Iran committed several technical violations, none, alone or together, material. Paradoxically, they proved the accord’s efficacy: the IAEA quickly detected each and Iran remedied it. There have been more serious problems with sanctions relief. Iran still lacks normal international banking ties, as major financial institutions remain circumspect, hampering its reintegration into the global economy and dashing inflated public expectations of rapid economic recovery.

The most consequential political wildcard remains the U.S. Congress, where hostility toward Iran runs deep, and new sanctions are being considered.

This is because of concerns over Iran’s regional resurgence and ballistic-missile tests, but the accord could not have been negotiated successfully if those issues had been on the table. Today they constitute the primary threat to its successful implementation. This, in turn, is because the JCPOA’s transformational potential has not yet materialised in the face of powerful stakeholders who moved to ensure it was a ceiling on, not a foundation for, détente between Iran, its neighbours and the U.S. The conundrum is that without addressing the broader political antagonism that pits Iran against its neighbours and the West, the JCPOA at best will remain fragile and its implementation halting, but without full implementation, resolving the underlying political antagonism may prove impossible. 

The most troubling uncertainty is the new U.S. administration’s approach. During the campaign, Donald Trump condemned the JCPOA as “the worst deal ever negotiated”. As president, he can repudiate it or refrain from the steps necessary to sustain it. But killing the accord or allowing it to die when Iran is in compliance would lead the other signatories – representing a near international consensus – to blame Washington squarely and likely destroy the broad coalition critical for sanctions enforcement that provided leverage for negotiating the accord in the first place.

Alternatively, Trump could rigorously police implementation while pushing back firmly against Iran’s regional policies, which have helped further inflame Middle Eastern conflicts, frightened U.S. allies and angered the U.S. political establishment. But scrupulous enforcement cuts both ways: lacklustre U.S. implementation would adversely affect Iran’s ability to reap the benefits the U.S. has committed to deliver under the deal. The risk of an overly militarised response to Iran’s regional manoeuvres is that the JCPOA could become collateral damage in a destructive tit-for-tat.

Trump could also try renegotiation to strengthen some of the deal’s nuclear provisions or add non-nuclear ones. But this, as viewed by many in his entourage, would require new non-nuclear sanctions to augment coercive pressure and/or a military threat to induce Iran to return to the table. Iran would almost certainly demand more relief for more concessions, not accept less for more.

Iran has options for responding to attempts to undermine the deal. It could play victim, blame Washington and hope to erode sanctions by trying to drive a wedge between the U.S. and its partners. But this would require restraint in the face of U.S. JCPOA violations or provocations. Or it could ramp up its nuclear program and reduce IAEA access or target U.S. assets in theatres across Iraq and Syria, any of which risks a U.S. (or Israeli) military response. Even a softer, calibrated response would reignite the nuclear standoff and complicate future negotiations.

Trump is the first U.S. president in more than two decades who enters office not needing to worry about Iran crossing the threshold to nuclear weaponisation undetected.

All these scenarios are troubling. Yet, there is another way: a good-faith, consensual, mutually beneficial effort to renegotiate aspects of the accord might achieve a better-for-better arrangement and a more stable outcome. A Republican president backed by a Republican-controlled Congress would have more credibility in offering incentives to Iran than President Barack Obama ever did.

Improving the JCPOA while enforcing it would require a quiet dialogue in which both sides recognised one another’s security concerns and core interests and communicated their nuclear and regional red lines. One outcome might be an addendum strengthening some JCPOA nuclear provisions or adding non-nuclear ones in return for rolling back the U.S. primary embargo. If that is not attainable, the U.S. might focus on non-Iran-specific arrangements, including regionalising or even universalising some of the JCPOA’s restrictions or transparency measures.

On a practical level, Washington should keep communication channels with Tehran open and give its treasury department more resources to unwind sanctions. Iran should strictly adhere to the JCPOA and stop using nuclear or regional brinksmanship as leverage. Other P5+1 members should discourage it from overreacting to a possible change in U.S. tone and approach but also clearly tell Washington that if it unjustifiably walks away from the accord, it will do so alone.

Trump is the first U.S. president in more than two decades who enters office not needing to worry about Iran crossing the threshold to nuclear weaponisation undetected. If he tries to adjust the JCPOA unilaterally through coercion, the accord may not survive, reigniting the nuclear crisis and compounding regional instability. But he also has a chance to succeed on all fronts: a functioning and more stable accord, a framework for managing differences with Iran and perhaps even less bloodshed in the Middle East.

Washington/Brussels, 16 January 2017

I. Introduction

The prolonged process that led to the 14 July 2015 Joint Comprehensive Plan of Action (JCPOA) was tortuous. It took more than a decade of diplomatic fits and starts and a perilous sanctions-vs-centrifuges race for Iran and the P5+1/E3+3 (the UN Security Council’s five permanent members plus Germany) to agree to a core compromise that Crisis Group had advocated from the outset and contributed to: acceptance of a limited and tightly monitored uranium enrichment program on Iran’s soil in return for reintegration into the global economy.[fn]See Crisis Group Middle East Reports N°s 18, Dealing with Iran’s Nuclear Program, 27 October 2003; 51, Iran: Is There a Way Out of the Nuclear Impasse?, 23 February 2006; 116, In Heavy Waters: Iran’s Nuclear Program, the Risk of War and Lessons from Turkey, 23 February 2012; 152, Iran and the P5+1: Solving the Nuclear Rubik’s Cube, 9 May 2014; and Briefings N°s 34, The P5+1, Iran and the Perils of Nuclear Brinkmanship, 15 June 2012; 40, Iran and the P5+1: Getting to “Yes”, 27 August 2014; and 43, Iran Nuclear Talks: The Fog Recedes, 10 December 2014.Hide Footnote

More than two years of gruelling multilateral diplomacy culminated in a meticulously parsed 159-page accord that received unanimous Security Council endorsement on 20 July 2015.[fn]UN Security Council Resolution 2231, 20 July 2015.Hide Footnote The agreement then went through a trial by fire in the U.S. Congress and the Iranian parliament. Once it emerged unscathed, it entered into force on 18 October 2015 – designated as Adoption Day per the JCPOA’s calendar. This triggered the start of Iran’s rollback of its nuclear program and cooperation in resolving the International Atomic Energy Agency’s (IAEA) longstanding questions about its past nuclear activities.

Implementation Day occurred on 16 January 2016, after the IAEA certified that Iran had fulfilled its key commitments under the agreement, prompting sanctions relief. The quick progress surprised most observers and dismayed accord critics. Its Iranian detractors were concerned that President Hassan Rouhani’s eagerness for sanctions relief had led him to hasten rolling back the nuclear infrastructure, irreversibly damaging it and depriving Tehran of leverage to ensure that the West delivered its end of the bargain.[fn]The just under three-month time span between Adoption and Implementation Days was significantly less than the P5+1’s six-to-nine month estimates. Crisis Group interviews, U.S. and European officials, New York, September 2015. A letter to Rouhani by parliamentarians charging that the pace of centrifuge deactivation exceeded the supreme leader’s directive (which conditioned implementation on the IAEA settling allegations on Iran’s past nuclear activities) caused the government to temporarily stop the process. “Iran stops dismantling nuclear centrifuges under pressure from hardliners”, Reuters, 10 November 2015. The government justified the rush, implicitly confirming the accusation, by reiterating the $100 million daily cost of sanctions’ continuation for Iran. “ضرر تاخیر اجرای برجام” [“Damage of the JCPOA’s delayed implementation”], ISNA.ir, 21 September 2015. The February 2016 parliamentary election was also part of the calculus. Crisis Group Middle East Report N°166, Iran After the Nuclear Deal, 15 December 2015.Hide Footnote U.S. opponents were deeply dissatisfied with how the IAEA closed the file on allegations of the program’s past military dimensions, saying the JCPOA Joint Commission (the seven negotiating parties, coordinated by the EU) had made exemptions allowing Iran to skirt some obligations.[fn]See “Final Assessment on Past and Present Outstanding Issues regarding Iran’s Nuclear Program”, IAEA, GOV/2015/68, 2 December 2015, and the related Board of Governors resolution, GOV/2015/72, 15 December 2015. Leaks about the Joint Commission’s confidential decisions gave credence to these suspicions. David Albright and Andrea Stricker, “JCPOA Exemptions Revealed”, Institute for Science and International Security, 1 September 2016. The decisions exempted liquid, solid and sludge wastes, particularly those in pipes of Isfahan’s Enriched UO2 Powder Plant (EUPP), and irradiated uranium enriched to below 3.67 per cent, from the 300kg threshold the JCPOA set; near-20 per cent enriched uranium in unrecoverable “lab contaminant”; and nineteen “hot cells” (radiation containment chambers for handling radioactive material) that are larger than the deal permitted. “Decision of the Joint Commission”, EU External Action Service, 6 and 16 January, and 18 December 2016.Hide Footnote

The criticism missed the bigger picture. Speeding implementation accelerated the core trade-off that motivated the deal: unshackling Iran’s economy from sanctions while closing all potential pathways for weaponising its nuclear know-how. The decisions to grant exemptions, known as memorialisations, are standard for implementing a technically complex agreement; none impinged on the constraints that render nuclear weaponisation virtually impossible.[fn]For instance, plutonium produced in hot cells is neither sufficient nor usable for nuclear weapons without a reprocessing facility Iran lacks and is banned from constructing. The same applies to weaponising waste contaminated with low-enriched uranium needing further processing to highly-enriched uranium prohibited under the JCPOA. Julian Borger, “Obama administration denies secret loopholes in Iran nuclear agreement”, The Guardian, 1 September 2016.Hide Footnote Their confidential nature – likewise hardly exceptional in the non-proliferation field – was the result of the procedural requirement that all eight Joint Commission members approve publication of internal documents. Several refused: some out of concern for a political backlash over details of what critics on both sides viewed as additional concessions, and others not wishing to politicise the IAEA’s work.[fn]A senior U.S. official said, “the U.S. and the EU are for more transparency, but our hands are tied as Iran, Russia and China oppose publication of memorialisations”. Crisis Group interview, Washington, 13 September 2016. The documents are at https://eeas.europa.eu/headquarters/headquarters-homepage/2281/iran-and-eu_en. Tim Mak, “Trump team wants you to see the Iran nuke documents Obama’s kept from view”, The Daily Beast, 5 December 2016.Hide Footnote

Events have shown it was naïve to believe the JCPOA was secure and could be sustained routinely from that point. It remained as fragile as forces against it were formidable; implementing its technical requirements was taxing, especially where its language left room for diverging interpretations and disagreement; and restructuring a multi-dimensional sanctions regime that reached deep into global commerce proved a herculean challenge. This report analyses the one-year record of implementation, draws lessons and offers suggestions for improving and sustaining an accord that remains a net positive for non-proliferation.

II. So Far, so Good?

Controversy and concerns over issues outside the nuclear accord, mainly Iran’s growing regional posture and ballistic-missile tests, have often overshadowed that the JCPOA’s two key components – restricting and rigorously monitoring Iran’s nuclear program and sanctions relief – are working and delivering concrete results. The accord could not have been reached if those issues had been on the table, but today they are the primary threat to its successful implementation.

A. Nuclear Commitments

Since January 2016, the IAEA has verified on six separate occasions that Iran is fulfilling its JCPOA obligations.[fn]See “Verification and Monitoring in the Islamic Republic of Iran in light of United Nations Security Council Resolution 2231 (2015)”, GOV/INF/2016/1, 16 January 2016; GOV/2016/8, 26 February 2016; GOV/2016/23, 27 May 2016; GOV/2016/46, 8 September 2016; GOV/2016/55, 9 November 2016; and GOV/2017/1, 16 January 2017.Hide Footnote The agency has had no problem reaching sites to which Iran had previously blocked access; is using live, online enrichment monitoring systems; and is surveilling the nuclear fuel chain in real time. Noting that Iran’s is the most monitored nuclear program in the world, an IAEA inspector said, “one thing is indisputable; post-JCPOA we have more rigorous inspection of a program that has become much smaller”.[fn]According to IAEA officials, every month between six and sixteen UN nuclear inspectors are on the ground in Iran. Crisis Group interviews, Vienna, November 2016. The IAEA’s human resources dedicated to Iran increased by 120 per cent, while days on the ground grew by 100 per cent and surveillance images received per day increased by 90 per cent. IAEA fact sheet available at www.iaea.org/sites/default/files/jcpoa-iaea-and-iran-infographic.pdf.Hide Footnote That said, implementation has not been without imperfections, but these are attributable largely to the predictable difficulties such a technically complex effort faces in a highly charged political environment.

There have been numerous objections to the IAEA’s positive reports, but none amounts to proof of a violation of the deal.[fn]A former U.S. nuclear negotiator referred to these objections as “technical quibbles”. Crisis Group interview, New York, 27 September 2016.Hide Footnote One has to do not with what they contain but what they omit: details on Iran’s low-enriched uranium stockpiles and advanced-centrifuge research. The IAEA, however, has no mandate for publicly reporting on these issues. (The P5+1, however, receive a detailed, confidential report that covers these issues.) An agency official explained: “Before the JCPOA, six UN Security Council resolutions required the agency to provide that much detail, but these have been overridden by a new resolution that has no such requirement, and there is no basis for breaching confidentiality”.[fn]Crisis Group interview, IAEA official, Vienna, November 2016. Critics contend that lack of data made it impossible to determine Iran’s compliance independently. David Albright, Serena Kelleher-Vergantini, and Andrea Stricker, “IAEA’s First Post-Implementation Day Report: Key Information Missing”, Institute for Science and International Security, 26 February 2016. Iranians see the generalised format as a stepping stone towards normalising their nuclear program. Crisis Group interview, Iranian official, Vienna, November 2016.Hide Footnote

There were also several technical infringements. Iran’s heavy-water production exceeded the JCPOA’s 130-metric-ton cap twice – by 0.9 and 0.1 tons in February and November 2016 respectively. Iranian officials, trumpeting their country’s change of stature from pariah to nuclear materials supplier, contend that overproduction resulted from improved efficiency and did not violate the JCPOA, since it neither sets a rigid threshold – it estimates Iran’s needs at around 130 tons – nor a timetable for exporting the excess for sale.[fn]An Iranian official boasted of the high quality of Iran’s heavy water and its ability to take over 70 per cent of the international market. Crisis Group interview, Vienna, November 2016. The JCPOA’s language is quite vague; paragraph 14, Annex I, “estimates” Iran’s heavy-water needs to be 130 metric tons and requires all excess material to “be made available for export to the international market … and delivered to the international buyer for 15 years”Hide Footnote U.S. officials, however, say they saw it as a signal by Iran that it could retaliate against what it perceived as U.S. Treasury foot dragging on sanctions relief. Europeans agreed, but blamed Washington for encouraging the behaviour by being first to purchase Iran’s excess heavy water. In Jerusalem, this and other infringements were seen as attempts to test the deal’s boundaries.[fn]A European official said, “the U.S. committed the original sin by buying 32 tons of Iran’s heavy water at the price of $8.6 million, whetting their appetite”. Crisis Group interview, Brussels, November 2016. A senior U.S. official said, “we sought to destigmatise the issue so that others would buy as well”. Crisis Group interview, Washington, 13 September 2016. Iran also sold heavy water to Russia. “Iran sold 70 tons of heavy water to Russia, US”, Tass, 27 September 2016. An Israeli diplomat said, “the Iranians are testing the boundaries and will continue to do so. It’s a decision to defy”. Crisis Group interview, 4 January 2017.Hide Footnote

Paradoxically, these infringements are a testament to the agreement’s efficacy: in each case, excess heavy water was shipped to Oman within days, despite not posing a proliferation threat since Iran no longer has a functional heavy-water reactor. One should expect further episodes of this nature – not necessarily because of nefarious intent in Tehran or spurious accusations from Washington, but because the JCPOA’s language is not always clear. There are also ambiguities, for instance, around the definition of recoverable low-enriched uranium and procurement of material for manufacturing rotors used in advanced centrifuges. In the past year, these caused tension and lengthy negotiations among the parties.[fn]The issue of what should or not be counted toward Iran’s 300-kg low-enriched uranium has been contentious because, as an IAEA official put it, “unlike ‘inventory’ that includes everything, the word ‘stockpile’ used in the JCPOA needs definition of what is and is not counted”. Crisis Group interview, Vienna, November 2016. Iran’s demand to procure a large amount of carbon fibre used to manufacture centrifuges was equally contentious. The P5+1 indicated it preferred Iran do so in smaller instalments. Crisis Group interview, European officials, London, December 2016. “EU demands Iran disclose details of nuclear parts making”, Associated Press, 16 September 2016. Supreme Leader Ayatollah Ali Khamenei forbade Iranian negotiators from yielding on either issue. Khamenei.ir, 15 June 2016.Hide Footnote

Likewise, other aspects of the agreement, for instance foreign cooperation to advance Iran’s nuclear technology, have been more drawn out than Tehran had hoped. Yet here, too, there is no violation. Transformation of the bunkered Fordow enrichment plant into an international physics centre with Russian help, where 358 centrifuges will produce stable medical isotopes, has been slow; so has modernisation of the heavy-water reactor in Arak, a project China and the U.S. co-chair.[fn]Crisis Group interviews, Iranian and European officials, New York, September 2016.Hide Footnote While Iranian scientists have regained access to the IAEA’s nuclear safety and security workshops, nuclear cooperation with other countries has lagged, except for nuclear fusion with France, particle accelerators with Spain and Italy and nuclear safety with the EU.[fn]Nuclear cooperation, as outlined in JCPOA Annex III, is a key component of the accord. Richard Stone, “Iranian Sun”, Science, vol. 353, no. 6304 (2016), pp. 1083-1087. Iran has reached agreements with other countries, but they have yet to bear fruit. “Iran, Switzerland sign agreement on nuclear safety”, Press TV, 28 September 2016; “Iran, Czech Republic sign nuclear cooperation document”, Tehran Times, 14 December 2016.Hide Footnote

The JCPOA’s procurement channel for Iran to access dual-use material and equipment was activated in January 2016. The channel is unprecedented, complementing existing export control arrangements while largely delegating the UN Security Council’s authority to the Joint Commission’s procurement working group. In its first six months, it received only one application, but in the second half of 2016, after Iran established its internal procedural framework for end-use certification, it received and processed nearly a dozen.[fn]Barbara Slavin, “Channel to monitor Iranian procurement awaits real test”, Al-Monitor, 14 July 2016. States seeking to export dual-use items to Iran submit proposals to the Security Council, which forwards them to the Joint Commission’s procurement working group (all seven negotiating parties, coordinated by the EU) for review; the latter provides recommendations to the Security Council within twenty working days (up to 45 in case of disagreements), which has five days to reject the Commission’s verdict or it is deemed approved. An Iranian official noted: “After years of encouraging murkiness to skirt sanctions, it took time to put procedures in place for transparency”. Crisis Group interview, Vienna, November 2016. A German intelligence report on Tehran’s procurement gave ammunition to critics, though the activities occurred in 2015 and pre-dated JCPOA implementation. “Germany says Iran kept trying to get nuclear equipment after deal”, The Wall Street Journal, 8 July 2016. U.S. and European officials said they had no information on continued procurement efforts outside permitted channels in 2016. Crisis Group interviews, Washington, Berlin, London, August-December 2016.Hide Footnote

The biggest threat to smooth implementation and to the procurement channel in particular is the continuation of Iran’s ballistic missile program – a particularly sensitive issue that the JCPOA does not address. Iran deems missile research and development a sovereign right and legitimate form of defence, but the P5+1’s Western members do not. Security Council Resolution 2231, which endorsed the JCPOA, “calls upon” Iran not to undertake until 2023 any activity related to ballistic missiles “designed to be capable of delivering nuclear weapons”. However, the language is non-binding, and lack of an internationally-agreed definition of nuclear-capable missiles invites diverging views on the Iranian program.[fn]See paragraph 3 of Security Council Resolution 2231‘s Annex B. Louis Charbonneau, “U.S. vows to push for U.N. action on Iran despite Russian opposition”, Reuters, 14 March 2016. “Iran statement following UNSC Resolution 2231 endorsing JCPOA”, foreign ministry, 20 July 2015. According to the Missile Technology Control Regime (MTCR), missiles able to carry a 500kg payload at least 300km could carry weapons of mass destruction.Hide Footnote

B. Sanctions Relief Commitments

A vast array of U.S., EU and UN nuclear-related sanctions on Iran were relaxed on Implementation Day. In the ensuing months, the impact on Iran’s economic performance become increasingly tangible: oil production and exports returned to pre-sanction levels of 3.85 million barrels per day, of which around two million are exported; the country absorbed more than $11 billion of foreign direct investment – the highest annual level in nearly two decades; trade with the EU increased by 42 per cent; Iran regained access to $55 billion of previously frozen assets; inflation dropped from a peak of 45 per cent in 2013 to less than 8 per cent in December 2016; Iranian companies signed contracts worth $150 billion with major European, Asian and even U.S. firms. The International Monetary Fund (IMF) forecasts that the economy will grow 4.5 per cent during the 2016-2017 fiscal period, up from 0.5 per cent the previous year.[fn]Annex II, JCPOA; U.S. Executive Order 13716, 16 January 2016; Council Decision (CFSP) 2015/1863, 18 October 2015; Council Regulation (EU) 2015/1861, 18 October 2015; and UNSC Resolution 2231. “Iran oil exports hit pre-sanctions high on run-up in condensate shipments”, Reuters, 3 October 2016; “میزان سرمایه‌گذاری خارجی اعلام شد” [“Amount of foreign investment was announced”], ISNA.ir, 3 December 2016; “Inflation rate drops to 7.2% in Iran”, Tehran Times, 23 December 2016; Crisis Group interviews, Iranian entrepreneurs, Frankfurt, 16 November 2017. Regional Economic Outlook: Middle East and Central Asia”, IMF, October 2016.

Still, sanctions relief has yet to reach its potential. Perhaps most important, Iran still lacks normal international banking relations. While some second and third-tier international banks have resumed providing financial services, first-tier banks have not.[fn]Crisis Group interview, New York, September 2016. “Iran’s Supreme Leader says U.S. lifted sanctions only on paper”, Reuters, 27 April 2016; “Iran’s President Rouhani slams US ‘lack of compliance’ with nuclear deal”, CNN, 22 September 2016.Hide Footnote This has hampered reintegration into the global economy, which, along with low oil prices, has dashed highly-inflated public expectations of a rapid recovery. Each side has blamed the other. Iranian Foreign Minister Javad Zarif complained:

[The U.S. Treasury] goes out and tells people that “it’s OK to do business with Iran, but”… and then there are five pages of ifs and buts. So at the end of the day, the banks say, “we’ll take the safe road” … As far as the U.S. government is concerned … it took [it] seven months to issue licenses for seventeen out of the 118 planes Airbus plans to sell [to Iran].[fn]“A Conversation with Javad Zarif”, event at Council on Foreign Relations, New York, 23 September 2016. A senior U.S. official explained that preparing the licenses – given the technology’s complexity and legal requirements of ensuring they do not violate lingering UN restrictions on Iran – took a long time, as did Iran’s negotiations with Boeing and Airbus. Crisis Group interview, Washington, September 2016.Hide Footnote

This, as another senior Iranian official put it, is not a material breach of the deal, but “at best procrastination, at worst deliberate harassment” and has deepened mistrust. He added: “The JCPOA is moderately healthy, but Iranian confidence in dealing with the U.S. has been bruised and is ailing and failing”.[fn]“A Conversation with Javad Zarif”, event at Council on Foreign Relations, New York, 23 September 2016. A senior U.S. official explained that preparing the licenses – given the technology’s complexity and legal requirements of ensuring they do not violate lingering UN restrictions on Iran – took a long time, as did Iran’s negotiations with Boeing and Airbus. Crisis Group interview, Washington, September 2016.Hide Footnote

U.S. officials point to the unprecedented complexity of untangling the sanctions and to their extensive efforts, from publishing hundreds of pages of guidelines, to dozens of multi-agency trips to explain sanctions relief to Iran’s trading partners, to U.S. Secretary of State John Kerry’s efforts, including personally encouraging European banks to engage Iran.[fn]Crisis Group interviews, U.S. officials, Washington, September-December 2016. “Kerry: Businesses using US sanctions as excuse to avoid Iran”, Associated Press, 10 May 2016. For a critical take on Kerry’s initiative, see Stuart Levy, “Kerry’s peculiar message about Iran for European banks”, The Wall Street Journal, 12 May 2016. A senior Iranian official said, “the reality is that a junior officer at the U.S. Treasury Department could erect more obstacles for legitimate business with Iran than Kerry can remove”. Crisis Group interview, New York, 24 September 2016.Hide Footnote A senior U.S. official said:

Never before has the U.S. had to repeal its sanctions and demonstrate results in a short period of time. And, of course, unanticipated complexities abounded. Who would have thought converting billions of Iran’s unfrozen oil revenue from an uncommon currency like the Omani rial to euros would be so complicated without disrupting their economy and access to the U.S. dollar?[fn]Crisis Group interview, Washington, September 2016.Hide Footnote

The Europeans blame both sides. An EU official said:

U.S. Treasury officials are often as uncompromising as Iranians are unrealistic. The JCPOA isn’t a trade and investment agreement. Our commitment was to repeal sanctions and provide clarity, not to make commercial decisions for private-sector actors.[fn]Crisis Group interview, EU officials, Brussels, 15 November 2016.Hide Footnote

Finger-pointing notwithstanding, both sides have tried to resolve the remaining obstacles by frequent communication and consultation.[fn]Crisis Group interviews, Iranian, European, U.S. officials, New York, September 2016. The Joint Commission has met once at the ministerial level and six times at the deputy level.Hide Footnote Yet, reality is more nuanced than either likes to admit; the causes of sluggish relief are manifold.

The primary U.S. embargo, which since the 1980s has broadly prohibited U.S. persons from engaging in transactions with Iran, is still in force with a few exceptions, such as for civilian aviation, food and humanitarian goods, Iranian caviar, pistachios and carpets; so are secondary U.S. sanctions related to Iran’s regional policies, ballistic missiles program and human rights record.[fn]For more background, see Crisis Group Middle East Report N°138, Spider Web: The Making and Unmaking of Iran Sanctions, 25 February 2013. One of the most arduous elements of U.S. primary sanctions has proven to be their requirement that multinational companies wall off their U.S. staff and board members from business with Iran. Crisis Group interviews, European entrepreneurs, Zürich, Frankfurt, London, September-November 2016. “BP ring-fences CEO Dudley from Iran decision-making”, Reuters, 21 November 2016.Hide Footnote Moreover, 32 U.S. states and the District of Columbia maintain their own sanctions against Iran that target contracting, public trust and insurance divestment and banking.[fn]These have not been affected by the JCPOA, since as an executive agreement – unlike a ratified treaty – it is not binding for U.S states. Eli Lake, “Obama administration urges states to lift sanctions on Iran”, Bloomberg, 18 April 2016.Hide Footnote There are also sanctions of individuals and entities: of the 600 sanctioned pre-JCPOA, more than 200, including ones with links to the economically omnipresent Islamic Revolutionary Guard Corps, remain blacklisted by the treasury department’s Office of Foreign Assets Control (OFAC).

Navigating this complex web of residual sanctions within Iran’s opaque economy is difficult. Due diligence is costly and cumbersome, and its standard is ill-defined, adversely affecting businesses’ risk-reward calculus of trying to comply while operating within the Iranian economy’s opaque ownership structure. The costs are not theoretical: since 2004, the U.S. has levied more than $15 billion in fines for violations.[fn]Businesses often find OFAC guidelines legalistic and vague. In October 2016, it issued one noting that business dealing with an entity not blacklisted but “minority owned, or controlled in whole or in part” by a blacklisted Iranian “is not necessarily sanctionable for a non-U.S. person”. See M.10 in “Frequently asked questions relating to the lifting of certain U.S. sanctions under the JCPOA”, U.S. treasury department, 12 October 2016. John Smith, OFAC’s acting director, said, “we will not be playing ‘gotcha’ for companies that conducted the appropriate due diligence, collected the documentation, but unwittingly found themselves dealing with a Revolutionary Guards front company”. Atlantic Council, Washington, 16 June 2016.Hide Footnote  

One of the most challenging sanctions bans access to the U.S. financial system. There have been various work-around attempts: OFAC clarifications (as abstruse as the restriction is severe); Iran’s efforts to circumvent by denominating its trade in other currencies; symbolically significant deals like Boeing’s sale of 80 civilian aircrafts – the largest Iran-U.S. contract in 37 years that both sides hoped would have a snowball effect. None did much to resolve the problem.[fn]A senior U.S. official said, “no one wants to be the first to take a leap of faith, but many are keen to be the second or third big bank to return to Iran”. Crisis Group interview, Washington, September 2016. Both Boeing and Airbus agreements, however, are financed by a consortium of large financial institutions and denominated in euros. Crisis Group interviews, European officials, Berlin, London, November 2016. “Boeing-Iran deal for $16.6 Billion of jets is first since 1979”, Bloomberg, 11 December 2016. “Total to finance Iran project with euros to avoid U.S. sanctions”, The Wall Street Journal, 8 November 2016. Republican opposition prevented the Obama administration from easing this restriction during and after the negotiations. “Rubio, Kirk introduce bill to block Iran’s access to US money”, The Hill, 6 April 2016. In October, OFAC explained that non-U.S. financial institutions may process dollar transactions provided they “do not involve, directly or indirectly, the U.S. financial system”. This implies banks can only use dollars at hand, ruling out financing for large development and infrastructure projects.Hide Footnote

No less chilling for investment – particularly since Donald Trump won the U.S. presidential election — is the threat of reimposition of sanctions suspended under the JCPOA. Unilateral U.S. sanctions can be resumed by executive order; a snapback mechanism embedded in the accord can reinstate UN sanctions if one party contends that Iran has reneged on its commitments. These would not be reapplied retroactively, but the eventuality increases the risk and potential reputational costs of doing business with Iran.[fn]Per JCPOA paragraphs 36-37, any agreement participant can complain to the Joint Commission, which has fifteen days to resolve the issue; an unresolved issue is referred to the foreign ministers, who have another fifteen days. The Joint Commission then has another five days to resolve the issue. If, after this 35-day process, the complaining party is still unsatisfied, it can refer the issue as significant non-performance to the Security Council, which within 30 days must vote on a resolution to continue suspension of sanctions – a resolution the complaining party can veto (except Germany, not a permanent Council member), thus snapping back the sanctions. European officials complained OFAC remains inflexible on extending the standard 180-day grace period for foreign firms to wind down business in Iran in case of snapback. A U.S. official said, “whoever needs more time has to explain it to OFAC, and it will consider it”. Crisis Group interviews, Berlin, Washington, November-December 2016.Hide Footnote

The Iranian government, for its part, failed to pave the institutional ground adequately for the economic opening, while raising unrealistic expectations about the deal’s potential payoff in order to build support for it. With rampant corruption, lack of transparency, poor infrastructure and a cumbersome legal and regulatory environment, Iran remains a difficult place to do business.[fn]Iran is 130th of 168 countries in Transparency International‘s corruption perceptions index, 120th of 190 in the World Bank‘s 2016 ease of doing business index, and 76th of 138 in the World Economic Forum‘s Global Competitiveness Report 2016–17. In its first quarterly report to parliament on JCPOA implementation, Iran’s foreign ministry admitted to these problems impeding trade. “گزارش وزارت امور خارجه به مجلس درباره اجرای برجام” [“Foreign Ministry’s report to the Parliament”], MFA.ir, Fars News, 17 April 2016. A European oil executive said, “many developing countries are plagued with similar problems, but in the case of Iran perception is worse than reality”. Crisis Group interview, London, August 2016.Hide Footnote The banking sector, saddled with many non-performing loans, is considered high-risk by the international Financial Action Task Force (FATF), which sets anti-money laundering and counter-terrorist financing standards for financial institutions worldwide.[fn]FATF has suspended countermeasures against Iran until June 2017 to allow time to update financial regulations, comply with modern banking standards and address strategic deficiencies. FATF Public Statement, 24 June 2016. An Iranian Central Bank official complained that “the West isolated Iranian banks for a decade and now asks why we aren’t up to date. If they can’t take our hand, they should at least unchain our feet”. Crisis Group interview, Washington, October 2016. Cooperation with FATF became highly politicised inside Iran, as JCPOA opponents saw it as yet another concession to the West. Saheb Sadeghi, “Financial watchdog worries Iranian hard-liners”, Al-Monitor, 28 September 2016.Hide Footnote

Volatile politics in Washington and Tehran add to business unease. The election of Trump, a vocal JCPOA critic, and doubts, given the sluggish economic recovery and death of his mentor, former President Akbar Hashemi Rafsanjani, about Rouhani’s ability to obtain a second mandate in Iran’s May 2017 presidential poll deepen uncertainties. Infighting in Tehran over economic priorities and vested interests has complicated and slowed economic reform.[fn]The quarrel over a new contract for oil-sector investments, the Iran Petroleum Contract (IPC), is a case in point. It was delayed more than two years, until the first was awarded to state-affiliated entrenched interests. Yeganeh Torbati, “Iran signs key oil contract with Khamenei-linked firm”, Reuters, 4 October 2016; “Shell signs provisional oil and gas deal with Iran”, Financial Times, 7 December 2016.Hide Footnote The most consequential political wildcard remains the U.S. Congress, which continues to try to impose new sanctions.[fn]In 2016, Congress considered more than two dozen bills that could potentially undermine the accord. Among the first bills introduced in the 115th Congress, sworn in on 3 January 2017, were two on Iran: to authorise the president to use military force against it; and to levy sanctions against its missile program. Per JCPOA paragraph 26, “the U.S. Administration, acting consistent with the respective roles of the President and the Congress, will refrain from re-introducing or re-imposing the sanctions specified in Annex II that it has ceased applying under this JCPOA, without prejudice to the dispute resolution process provided for under this JCPOA … and will refrain from imposing new nuclear-related sanctions”.Hide Footnote Tehran’s response has been what a senior Iranian official called a “zero-tolerance policy” toward any new measures.

Tensions reached their height with the ten-year renewal of the Iran Sanctions Act (ISA), the bedrock of U.S. sanctions architecture, in November. Iran deemed it a “gross violation” of the JCPOA; the Obama administration viewed it as unnecessary, since re-imposing sanctions in case of violations does not require the ISA to be in force, but Congress acted with an overwhelming majority. President Obama allowed the legislation to take effect without his signature on 15 December, though his rare procedural protest did not win him points in Tehran.[fn]The administration blocked efforts to add poison pills. The renewal passed 99-0 in the Senate and 419-1 in the House of Representatives. This was the first time in 27 years that a bill was enacted without the president’s signature. Carole Morello, “Iran sanctions extended, but without Obama’s signature”, The Washington Post, 15 December 2015. As during the 2014-2015 negotiations, when the parties could not agree on the ISA extension, they agreed to mitigate the issue once it arose. Crisis Group interviews, Iranian and U.S. officials, Vienna, June 2015.Hide Footnote Rouhani in response ordered planning for design and construction of a nuclear propeller for marine transportation. That was carefully calibrated to satisfy domestic politics and signal discontent to Washington, while remaining within the bounds of the accord, which permits such research if it remains on the drawing board.[fn]“Blasting U.S. nuke-deal ‘violations’, Iran vows new nuclear project”, Associated Press, 13 December 2016. An official from Iran’s atomic energy organisation said that developing nuclear propellers would take years and is uneconomic. Quoted in “برگزاری کمیسون برجام 21 دی” [“Joint Commission will meet on 10 January”], ISNA.ir, 20 December 2016.Hide Footnote

Posturing aside, the ISA extension leaves the status quo unaltered as long as the president continues to waive the provisions the JCPOA suspended. Still, a series of tit-for-tats could lead to mutual escalation that spirals out of control.[fn]Addressing Zarif’s complaint about the ISA’s extension, the Joint Commission concluded that it does not affect Iran’s ability to benefit from sanctions relief as long as the suspension of relevant provisions continues. “Press release on behalf of the Joint Commission of the JCPOA”, EU External Action Service, 10 January 2017.Hide Footnote

C. Transactional, not Transformational

JCPOA ambiguities and technical implementation hitches in both the nuclear and sanctions realms become outsized political storms because the deal has done little to alleviate Iran-U.S. animosity. To ensure success, the parties negotiated it as a narrow arms-control accord not to usher in broader détente or collaboration in areas of shared concern, though some had hoped (or feared) that it would.

In both Tehran and Washington, powerful stakeholders moved to ensure the nuclear deal was a ceiling on, not a foundation for, rapprochement. Iranian provocations have included ballistic-missile tests, harassment of U.S. Navy ships in the Persian Gulf, alleged arms shipments to Huthi rebels in Yemen, arrest of dual Iranian-American nationals and hostile rhetoric toward the U.S. and its allies.[fn]A conservative Iranian parliamentarian explained: “If you were in the shoes of Ayatollah Khamenei and listened to U.S. officials boasting about how sanctions brought Iran to the table, would you move to make more compromises? No. You first demonstrate that you did not compromise from a position of weakness”. Crisis Group interview, Tehran, May 2016. “Reports: Iran fires missile marked with ‘Israel should be wiped’”, USA Today, 8 March 2016; “Iran’s Khamenei says U.S., ‘evil’ Britain can’t be trusted”, Reuters, 3 June 2016; “Americans sentenced to 10 years in Iranian prison”, CNN, 18 October 2016; “U.S. Navy says it seized weapons from Iran likely bound for Houthis in Yemen”, Reuters, 4 April 2016. Paragraph 5, Annex B, Security Council Resolution 2231, extended the conventional-arms embargo on Iran until 2020. The U.S. Navy contends it had 35 dangerous encounters with Iranian Revolutionary Guards patrol boats in 2016, compared to 23 in 2015. Whether the naval tangles in the Gulf were in Iranian or international waters is disputed. Dan Lamothe, “Navy destroyer opens fire after ‘harassing’ behaviour by Iranian patrol boats”, The Washington Post, 9 January 2017.Hide Footnote

Congress has evinced its own hostility and seems determined to derail any détente, as well as the JCPOA itself, through its own provocations. It lifted the U.S. visa exemption for citizens of 38 countries who had visited Iran (or Syria, Iraq and Sudan) since 2011, a move Iran deemed contrary to the JCPOA’s spirit, as it affected its tourism and business ties with Europe. Congress also manoeuvred the administration into sanctioning eleven Iranians and entities involved in ballistic-missile launches just a day after Implementation Day.[fn]“Iran warns Obama over visa waiver restrictions”, The Hill, 21 December 2015. The provision was attached to the $1.1 trillion federal spending bill at the last minute, making veto impossible. Crisis Group interview, U.S. official, Washington December 2015. “Treasury sanctions those involved in ballistic missile procurement for Iran”, Treasury Department, 17 January 2016.Hide Footnote A Supreme Court decision to compensate U.S. victims of overseas attacks with $2 billion of the Iranian central bank’s impounded assets further enraged the Iranian leadership.[fn]Rick Gladstone, “Iran threatens lawsuit in Hague court Over U.S. ruling on $2 billion”, The New York Times, 25 April 2106.Hide Footnote

This highlights a significant conundrum: not addressing broader disagreements makes the JCPOA fragile and implementation problematic, but without full implementation, resolving underlying antagonism is impossible. The dilemma is nowhere felt as strongly as in the linkage between nuclear and non-nuclear issues, which already complicates sanctions relief; the accord’s U.S. opponents are bound to play on this distinction, penalising Iran’s regional and domestic policies, which the JCPOA does not bar, to undermine the JCPOA itself.[fn]Indira Lakshmanan, “Inside the plan to undo the Iran nuclear deal”, Politico, 15 July 2016.Hide Footnote

Without improvements in Iran’s relations with the U.S. and its neighbours, the accord could eventually collapse even if it endures in the short term. A danger point could come when in 2023-2024, per the JCPOA calendar, Iran starts expanding its nuclear capacity in parallel to the U.S. permanently winding down its nuclear-related sanctions.[fn]In October 2023, per paragraphs 21.1-21.3 of JCPOA Annex V, the U.S. administration will seek appropriate legislative action to terminate statutory nuclear-related sanctions (eg, ISA). Six months later, per paragraph 63, Annex I, and Iran’s research and development plan, Iran will be permitted to test up to 30 IR-6s and 30 IR-8s (five to fifteen times more powerful than its existing IR-1 centrifuges) and produce up to 200 machines per year of each type for the next six and a half years. George Jahn, “Iran nuclear constraints to ease in about a decade, secret document reveals”, Associated Press, 18 July 2016. While caps on the uranium stockpile and enrichment level will continue until 2030, the ramping up of nuclear capability is bound to unsettle sceptics.Hide Footnote The immediate challenge, however, is the Trump presidency.

III. If it Ain’t Broke, Don’t Fix it

The most troubling uncertainty about the JCPOA’s future is the new U.S. administration’s approach. During the campaign, Trump condemned the accord as fundamentally flawed, calling it “horrible”. But it is not clear how he will act. His appointees have voiced conflicting views. Though they share antipathy toward Iran and the JCPOA, his national security adviser designate, Lt. General (ret.) Michael Flynn, has said he believes “regime change in Tehran is the best way to stop the Iranian nuclear weapons program”; his CIA director designate, Mike Pompeo, looks forward to “rolling back this disastrous deal”; while his candidate for secretary of state, Rex Tillerson, has promised a “full review”, and his defence secretary designate, former four-star General James Mattis, said that “there is no going back” on the accord.[fn]“Michael Flynn’s Testimony on Iran”, Joint House Foreign Affairs and Arms Services Subcommittees, U.S. Congress, 10 June 2015; “Mike Pompeo’s Iran file”, The Wall Street Journal, 21 November 2016; Rex Tillerson confirmation hearing, Senate Foreign Relations Committee, 11 January 2017; Ilan Goldenberg, “How James Mattis could stop Trump from ripping up the Iran Nuclear Deal”, Fortune, 17 December 2016.Hide Footnote

Washington’s P5+1 partners, who are highly satisfied with the agreement’s implementation so far, have weighed in forcefully in its support. EU foreign policy chief Federica Mogherini suggested a unilateral U.S. effort to scuttle the deal could put it on the opposite side of the EU, as well as Russia, which has warned that the accord’s demise would be “unforgivable”. China has said the deal should not be affected by “changes in the domestic situations” of countries involved.[fn]Mogherini said, “case by case, you will find issues where I wouldn’t be surprised to see the Europeans and the Russians on the same side — Iran deal, Middle East peace process, possibly the role of the U.N”, quoted in Laurence Norman and Julian E. Barnes, “Top EU diplomat, says bloc is Ppepared for Trump”, The Wall Street Journal, 14 December 2016; “Council conclusions on Iran”, European Council, 14 November 2016; “Russia says loss of Iran nuclear deal would be unforgivable”, Interfax, 15 December 2016. “China warns Trump: Iran nuclear deal must stand”, Agence France-Presse, 5 December 2016.Hide Footnote

Even some regional critics appear loath to see it scrapped. Saudi Prince Turki al-Faisal, a former senior official, warned that doing so “willy-nilly, as it were, will have ramifications”.[fn]“Senior Saudi prince says Trump shouldn’t scrap Iran deal”, Reuters, 11 November 2016. The Saudis sent a delegation to advise the Trump team shortly after his election to keep and strictly enforce the JCPOA. Crisis Group interview, European diplomat, Abu Dhabi, December 2016.Hide Footnote Prime Minister Benjamin Netanyahu of Israel, perhaps the deal’s most vocal opponent, still appears keen on scuttling it, but Israel’s military and security establishment favour its preservation. An Israeli intelligence official said that even in the Trump era, “various parts of the Israeli government deem the JCPOA as a done deal and want to focus on its rigorous implementation”.[fn]Crisis Group interview, Jerusalem, November 2016. “Netanyahu aims to discuss ‘various ways’ to undo Iran deal with Trump”, The Guardian, 12 December 2016; Graham Allison, “Is Iran still Israel’s top threat?”, Atlantic, 8 March 2016; “Israel’s Policies After the Iran Deal”, The Iran Primer, U.S. Institute of Peace, 19 September 2016. An Israeli diplomat in Europe said its official position is the deal should be kept but rigorously enforced. Crisis Group interview, 5 January 2017.Hide Footnote

While it is too soon to judge the next U.S. administration, its opposition to the JCPOA appears to stem less from the implementation record than its narrow focus: it is a non-proliferation deal that temporarily restricts an adversary’s nuclear program but has legitimised it and empowered the country to pursue what many view as a push for regional domination. Trump has several options:

  • Repudiate the deal or refrain from taking the affirmative steps necessary to sustain it, eg, renewing the waivers every 120 or 180 days that suspend nuclear-related U.S. sanctions.[fn]The Obama administration aimed to issue final waivers on or slightly before inauguration day (20 January 2017), so the incoming Trump administration would have at least around four months for a considered decision. Crisis Group interview, U.S. official, Washington, 9 December 2016. This also postpones the matter until after Iran’s 19 May presidential election.Hide Footnote He could snap back the unilateral U.S. sanctions with a stroke of the pen or even unilaterally reimpose UN sanctions, notwithstanding the JCPOA’s dispute resolution mechanism, likely opposition in the P5+1 and absence of a legitimate basis for redesignating Iran a threat to international peace after closure of the dossier on its nuclear program’s past military dimensions.

But abrogating the accord when Iran complies with it, even some Republican critics have warned, would lead the international community to squarely blame the U.S., thus eroding, if not completely unravelling, the broad coalition critical for enforcing sanctions that provided leverage for negotiating the accord in the first place.[fn]Republican Senator Bob Corker, chairman of the Senate Foreign Relations Committee and a prominent critic of the deal, said, “we gave up ... all of our leverage on the front end when we gave away the moneys that were stashed in various countries around the world, and so now the leverage is with them. I think the beginning point is for us to cause them to strictly adhere [to the deal] … we have to keep the Europeans and others with us in this process”. Quoted in Nahal Toosi, “Iran deal critics to Trump: Please don’t rip it up”, Politico, 16 November 2016.Hide Footnote This would likely put the U.S. in a weaker position to renegotiate the deal or reshape Iran’s regional and domestic policies. Brazen unilateralism also could weaken both the centrality of the U.S. financial system to the global economy, if other states organise to work around it, and the effectiveness of sanctions as a tool of its statecraft, if U.S. adversaries conclude Washington habitually shifts the goalposts for their lifting.

  • Rigorously police the deal and in parallel push back firmly against Iran’s regional policies. This could take two forms. Trump could seek to maintain the deal so long as Iranian compliance remains scrupulous in letter and spirit. If he pursues this path, he would need in parallel to ensure U.S. compliance; the deal’s upkeep requires Washington’s constant good-faith, pro-active management: granting licenses in a timely fashion to allow legitimate business with Iran, issuing guidelines to clarify sanctions relief ambiguities, providing assistance in modernising Iran’s Arak heavy-water reactor and shielding the accord from external pressures, particularly attempts by Congress to obstruct implementation.[fn]Congress tried repeatedly, for example, to block the sale of civilian aircraft to Iran contrary to Paragraph 5.1.1 of the JCPOA’s Annex II. “U.S. House votes to stop sales of Boeing jetliners to Iran”, Bloomberg, 17 November 2016.Hide Footnote Alternatively, the administration could carefully police Iran’s compliance while neglecting its own commitments, eg, by giving Congress a free hand to impose more sanctions or delay granting OFAC licenses, in the hope of provoking Iran to abrogate the deal, thereby avoiding some global blame and loss of leverage.

Regardless of whether the U.S. implements the pact in good faith or not, the risk of an overly militarised, unilateral approach toward Iran’s regional manoeuvres and/or provocations is that the JCPOA could become collateral damage in a tit-for-tat spiral. If the new administration hopes to kill the deal by a thousand cuts, it would need to be sustained long enough for those cuts to be inflicted. However, tactical decisions – such as interdicting illegal arms shipments or targeting Revolutionary Guards commanders and Iranian proxies in Iraq or Syria – could invite Iranian retaliation with rapid consequences. A U.S. official fretted: “Do you think the deal could survive a confrontation between Iranian and U.S. navies or the detention of U.S. sailors in the Persian Gulf? I’m not so sure”.[fn]Crisis Group interview, Washington, 14 December 2016.Hide Footnote

  • Renegotiate the deal to strengthen some of the nuclear-related provisions or add non-nuclear ones. Most sceptics seem to prefer this option, which in their view requires new non-nuclear sanctions to incrementally augment coercive pressure and/or a credible military threat to induce Iran to return to the negotiating table.[fn]Trump wrote: “A Trump presidency will force the Iranians back to the bargaining table to make a much better deal”. Donald Trump, “Amateur hour with the Iran nuclear deal”, USA Today, 8 September 2015. Joseph Lieberman and Mark D. Wallace, “How Trump should renegotiate the Iran deal”, The Washington Post, 6 December 2016; Dennis Ross and David Petraeus, “How to put some teeth into the nuclear deal with Iran”, The Washington Post, 25 August 2015; Michael Makovsky, “Five ways for Trump to put Tehran on notice”, The Wall Street Journal, 3 January 2017.Hide Footnote The challenge of devising new sanctions that are consistent with U.S. commitments under the JCPOA notwithstanding, this approach could harm Iran’s economy, as a prominent sanctions advocate put it, if simply “by increasing uncertainty in the marketplace”, prompting Tehran to take retaliatory measures of its own.[fn]“Trump team looks at new non-nuclear sanctions on Iran”, Financial Times, 2 December 2016. Identifying non-nuclear sanctions will not be easy, as nuclear-related sanctions targeted all the economy’s key sectors, and reimposition under a new guise would violate the JCPOA. The U.S. should, per JCPOA paragraph 29, “refrain from any policy specifically intended to directly and adversely affect the normalisation of trade and economic relations with Iran”, and according to Paragraph 33, “agree on steps to ensure Iran’s access in areas of trade, technology, finance and energy”. In his directive approving the JCPOA, Ayatollah Khamenei wrote: “Throughout the [accord’s] eight-year term, imposition of any sanctions at any level, under any pretext will be violation of the JCPOA”. Khamenei.ir, 21 October 2015.Hide Footnote

A senior Iranian official said Ayatollah Khamenei may have opened the door to this by criticising his negotiators for overlooking important details related to sanctions relief by negotiating in haste.[fn]Crisis Group interview, Berlin, November 2016. “دیدار فرماندهان نیروی دریایی ارتش با رهبر انقلاب” [“Supreme Leader meeting army, navy commanders”], Khamenei.ir, 27 November 2016.Hide Footnote But this criticism does not augur well for securing additional Iranian concessions: even if Iran were to agree to renegotiate, it would almost certainly demand more relief in exchange for more concessions, not accept less for more, especially given its discontent with sanctions relief under the JCPOA. The prospect of an Iranian leader acceding, even under duress, to terms significantly more favourable to the U.S. strains credulity and ignores the lessons of the decade-long nuclear standoff and the realities of Iranian politics.

Iran, whose leaders appear highly invested in the JCPOA for now, has several options to respond to an attempt to undermine the agreement:

  • Play the victim and shift blame to Washington in the hope of driving a wedge between the U.S. and its partners and eroding, if not neutralising, sanctions.[fn]Hamid Aboutalebi, Rouhani’s chief foreign policy adviser, tweeted: “If the JCPOA is a multilateral commitment, its breach by one party cannot be retaliated by another party’s breach. Any violation is an act against all signatories … who should move in unison to isolate the violator”. Tweet by Hamid Aboutalebi, @DrAboutalebi, chief foreign policy adviser, 7:11am, 2 December 2016.Hide Footnote A U.S. official pointed out: “The Iranians are good at this. They even played victim when the highly controversial [Mahmoud] Ahmadinejad was president, and Iran was a nuclear pariah”.[fn]Crisis Group interview, Washington, 14 December 2016. The same is true regarding Iranian reactions to ramped-up regional pressure: if Tehran reacts aggressively to U.S. provocations and precipitates the deal’s collapse, it likely will sacrifice the victim card.Hide Footnote Isolating Washington would require restraint in reacting to real or perceived U.S. violations of the JCPOA.[fn]An EU official said, “If Iran revives its nuclear activities or even tinkers around the JCPOA’s edges, we will be between a rock and a hard place”. Crisis Group interview, Brussels, 14 November 2016.Hide Footnote If abiding by the deal and playing victim seem to reinforce Iran’s position globally, those who advocate doing so might be strengthened internally.
     
  • Resuscitate the nuclear program. The Iranian parliament has mandated the government to ratchet up uranium enrichment and reduce cooperation with UN inspectors should the U.S. renege on the accord.[fn]The law instructs the government to halt voluntary cooperation with the IAEA and rapidly expand the nuclear program so that “within two years the country’s uranium enrichment capacity increases to 190,000 SWU [Separation Work Units, amounting to ten times Iran’s pre-JCPOA capacity]”. “Law on the Proportional and Reciprocal Measures of … Iran in Implementing the JCPOA”, Library of Congress, 15 October 2015. Decisions on Iran’s appropriate response, however, are in practice taken not by parliament but by the Committee for Supervision of the JCPOA’s implementation, headed by Rouhani and including Foreign Minister Zarif, Ali Larijani, speaker of the parliament and former nuclear negotiator, Hossein Dehghan, defence minister, Ali Shamkhani, secretary of the supreme national security council, Ali Akbar Salehi, head of Iran’s atomic energy organisation, Saeed Jalili, former nuclear negotiator, and Ali Akbar Velayati, the supreme leader’s chief foreign policy adviser.Hide Footnote The leadership has also put itself in a rhetorical corner by pledging to revive the nuclear program should the other side renege.[fn]Ayatollah Khamenei said, “the Islamic Republic won’t be the first to violate the nuclear deal … But if the threat from the American presidential candidates to tear up the deal becomes operational, then the Islamic Republic will set it on fire”, Khamenei.ir, 14 June 2016.Hide Footnote If it does so with more advanced centrifuges, it could restore its uranium enrichment capacity rapidly, which might prompt a nuclear-arms race in the region and/or in the extreme provide the rationale some regime-change advocates have been looking for to justify a U.S. or Israeli military strike.[fn]An IAEA official said that Iran could reach a “highly problematic” enrichment capacity within six months. Crisis Group interview, Vienna, November 2016.Hide Footnote To prevent this, Tehran might escalate gradually, creeping past some limits. This would conform to its previous strategy; but even a softer, calibrated response would reignite the nuclear standoff and complicate future talks.
     
  • Retaliate regionally. Proximity of U.S. to Iranian forces in several theatres across Iraq and Syria could provide another option for retaliation: increasing force protection costs for the U.S.[fn]Crisis Group interviews, U.S. officials, Washington, December 2016.Hide Footnote Rising tensions could also push Iran to double down on means of deterrence it considers essential to its national security: its ballistic missile program and what it calls its “forward defence policy” of empowering regional partners in Baghdad, Damascus and Beirut. This would undoubtedly provide ammunition for those in Washington who seek to bring more pressure to bear against Tehran, triggering escalation.

The above scenarios – individually or in combination – are troubling, especially as the JCPOA is delivering results. Any attempt by the Trump administration to undercut the deal in the hope of “fixing” it is likely to backfire. A senior Obama official said, “the paradox is that if he tries to strengthen the deal to 120 per cent of what it is, he might end up eroding it to 60 per cent”.[fn]Crisis Group interview, Washington, 14 December 2016.Hide Footnote Moreover, by destabilising the JCPOA, the new administration could usher in what it says it seeks to prevent: greater Iranian assertiveness, more regional instability and lower odds of resolving the conflicts in Syria, Iraq and Yemen – places where Iran is part of the problem and thus ought to be part of the solution.

IV. Sustaining and Improving the JCPOA

Like any negotiated outcome, the JCPOA is imperfect. Its implementation, too, has not been immaculate. Yet, the biggest threat to it is not procedural but political: the first major transfer of power in one of the countries that negotiated it has introduced a destabilising level of uncertainty. If the Trump administration decides to preserve the JCPOA while strictly enforcing and rigorously monitoring its implementation, it should do all that is necessary for its upkeep: from abiding by the letter and spirit of U.S. obligations – including ensuring that Iran is able to reap the economic dividends the deal entitles it to – to fencing it off, to the extent possible, from other disagreements with Tehran.[fn]Per JCPOA paragraph 26, the U.S. “will make best efforts in good faith to sustain this JCPOA and to prevent interference with the realisation of the full benefit by Iran of the sanctions lifting specified in Annex II”.Hide Footnote

Preserving the status quo does not exclude good-faith attempts to improve it. Renegotiating aspects, assuming the effort is consensual and mutually beneficial, might achieve a better and more stable outcome. A Republican president backed by a Republican-controlled Congress would have more credibility in offering incentives to Iran than Obama ever did. But if the U.S. seeks Iran’s capitulation through either economic pressure – which is unlikely to reach the intensity, scope and breadth of the sanctions that contributed to the existing outcome – or, even more dangerously, threat or use of military force, the result could be an explosive downward spiral.

Improving the JCPOA, even as implementation continues, would require a quiet Tehran-Washington dialogue in which both sides recognise one another’s security concerns and core interests, and communicate their red lines concerning both the nuclear and regional files. A possible outcome to such bilateral discussions could be an addendum to the JCPOA either strengthening some nuclear provisions (eg, longer timeframes for restrictions or more intrusive inspections) or adding non-nuclear ones (eg, curtailment of Iran’s ballistic missiles program or support for Levant militant groups) in return for rolling back the U.S. primary embargo.

If a better-for-better agreement is not attainable, the Trump administration could focus on non-Iran-specific arrangements, including creating a regional consortium for uranium enrichment or plutonium reprocessing or an international nuclear fuel bank that would remove need for a domestic enrichment program in Iran once the JCPOA sunsets. Alternatively, it could lead efforts to turn some JCPOA restrictions or transparency measures (eg, the ban on enrichment beyond 3.5 per cent and plutonium reprocessing, and continuous live-stream surveillance of key elements of the nuclear fuel chain) into common practice either at regional – as a first step toward a zone free of weapons of mass destruction in the Middle East – or global level.[fn]If the U.S. excludes Israel from such voluntary constraints, it would be a non-starter. Israel has reportedly relied on plutonium for its nuclear weapons capability but might also have a small uranium enrichment program. For more on such creative initiatives, see Alexander Glaser, Zia Mian, Hossein Mousavian, and Frank von Hippel, “Building on the Iran Deal: Steps Toward a Middle Eastern Nuclear-Weapon-Free Zone”, Arms Control Today, December 2015; Lord Hannay of Chiswick and Thomas Pickering, “Trumping Proliferation: From a one-off deal to a global standard”, European Leadership Network, 6 December 2016.Hide Footnote Curbing Iran’s missile program could also be achieved through international export control arrangements or requiring adherence of all states in the region to restrictions on range and payload.

On a more practical level, to avoid misunderstandings, the Trump administration should preserve the communication channels at the State Department, especially at the level of the office of lead coordinator for JCPOA implementation (currently Ambassador Stephen Mull), and also at the Energy Department, which have played an integral role in resolving technical issues in cooperation with the IAEA and the Atomic Energy Organisation of Iran. There is also need to create a new channel between OFAC and Iran’s Central Bank and Finance Ministry.[fn]OFAC has met several times with Iranian economic officials bilaterally and trilaterally (when a third country faced problems transferring Iranian unfrozen funds), but these meetings have been infrequent. There is also contact between the two sides through the Joint Commission, but at the diplomatic level, not that of experts who grapple daily with the technical and legal problems of normalising Iran’s banking relations.Hide Footnote While the Joint Commission’s 10 January meeting has clarified most JCPOA ambiguities that had been troubling implementation, especially in areas where the accord’s language lacks sufficient specificity, new technical hitches and interpretation differences will surely arise.[fn]Crisis Group email correspondence, European officials, 10 January 2017.Hide Footnote Resolving them will require effective communication and familiarity with the accord’s complex challenges. The IAEA is bound by its mandate from the Security Council and confidentiality agreements with its member states, but the Joint Commission should be more transparent, especially where its decisions have a significant impact on the accord’s implementation.

Iran should strictly adhere to its JCPOA commitments and move away from using brinksmanship as leverage.[fn]In addition to delaying the transfer of centrifuge infrastructure in Fordow to storage in the Natanz facility until shortly before the 16 January 2017 deadline, Iran kept its heavy-water stockpile close to the 130-ton threshold, and its low-enriched uranium stockpile just under the 300kg cap. Crisis Group interviews, U.S. and European officials, Brussels, London and Vienna, November 2016. Asked about the calculus behind this, an Iranian official retorted: “Because 299kg is under 300kg. We committed to remain under 300kg, not to keep a large distance from it”. Crisis Group interview, November 2016. Yet, as an EU official said, “implementing a long-duration agreement is difficult when you are always on the brink of surpassing the threshold, even if inadvertently”. Crisis Group interview, Brussels, 15 November 2016.Hide Footnote Exceeding the limits the accord sets, as an ex-U.S. nuclear negotiator put it, could be “technically insignificant in terms of advancing Iran’s nuclear capabilities, but … create a narrative that JCPOA opponents are all too eager to pounce upon”.[fn]Richard Nephew, “The Mirage of Renegotiating the Iran Deal”, Center for Global Energy Policy, Columbia University, 18 November 2016.Hide Footnote Tehran should also avoid deliberately provocative actions, eg, skirmishes with U.S. naval ships in the Gulf, and take other constructive steps, such as signing the Hague Code of Conduct against Ballistic Missile Proliferation (HCOC).[fn]By signing the HCOC, Iran would join the treaty’s 138 parties. HCOC provisions include commitments to provide pre-launch notifications for ballistic missiles and launch vehicles for satellites, as well as submission of an annual declaration of related policies.Hide Footnote It would be better served by focussing on structural and regulatory economic reforms needed for full realisation of sanction relief’s potential. These include continued progress on recapitalising and rendering its banking system more transparent and implementing the action plan to address its anti-money laundering and anti-terror financing deficiencies.

In return for meaningful advances on these issues, the U.S. Treasury should rescind Iran’s designation under the USA Patriot Act as a zone of primary money-laundering concern, continue a forward-leaning position to instil confidence in Iran’s market and issue licences for facilitating legitimate business. The administration should give OFAC more resources, as its staff has been stretched by a much increased workload.[fn]According to a report by the U.S. treasury department, the average time for processing licenses in 2015 increased from 71 to 88 business days, a statistic that significantly understates the problems, since half of the submissions remained unprocessed. See, “2nd, 3rd and 4th Quarter FY2015 Reports for Licensing Activities Undertaken Pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000”, Treasury Department, 15 September 2016.Hide Footnote An OFAC commitment to monthly progress reports and a target for reduced processing times as staff grows could aid efficiency.

But the problem is also institutional inertia: traditionally a source of pressure on the private and public sectors to curb business with target countries, today OFAC is charged with opening the taps.[fn]A senior U.S. official said, “we definitely implemented the letter of the JCPOA, but OFAC is not in the spirit business”. Crisis Group interview, Washington, December 2016.Hide Footnote Creating a sub-division or separate entity to unwind sanctions might be more effective and signal other countries, such as North Korea with whom similar negotiations might soon be necessary, that the dividends of relief in return for policy shifts are real.

Ultimately, the nuclear agreement – even if ostensibly firewalled from surrounding conflicts – will be sustainable only if accompanied by détente in U.S.-Iran ties and progress on de-escalating and resolving the region’s conflicts. If either side opts for escalation in the region, the other inevitably would sooner or later do the same, eventually imperilling the JCPOA. By contrast, mutual efforts to ease regional tensions, such as helping to preserve the Syria ceasefire and using influence to help bring the Yemen war under control, would be a constructive approach that could help strengthen the nuclear deal.

Other P5+1 members should go beyond expressing strong support for the JCPOA and discourage Iran from overreacting to a possible change in U.S. tone and approach.[fn]See Crisis Group Statement, “President Trump and the Art of the Iran Deal”, 23 November 2016; “EU warns Trump not to destroy Iran nuclear deal”, Financial Times, 21 December 2016.Hide Footnote The EU could revive its “Blocking Statute” forbidding compliance with U.S. extraterritorial sanctions that lack Joint Commission consent.[fn]Such legislation would provide political reassurance to European companies interested in re-entering the Iranian market by extending non-recognition of U.S. judgments and administrative determinations that give effect to U.S. sanctions, and by establishing a “clawback” clause for recovery of damages incurred for alleged sanctions violations. Council Regulation (EC), no. 2271/96, “Protecting against the effects of the extra-territorial application of legislation adopted by a third country …”, 22 November 1996. The legislation was designed to resist U.S. extraterritorial sanctions against Iran and Cuba. It effectively deterred Washington from enforcing those sanctions for more than a decade.Hide Footnote Establishing this pre-emptive measure without prejudice to the Trump administration’s commitment to the JCPOA would send a strong signal that if Washington walks away from the deal, it will do so alone, while demonstrating to Iran that the 28 EU member states will defend the agreement. The EU also could do more to help reduce tensions in the region, serving as an interlocutor between the U.S. and Iran and sounding out ideas with all sides in the various regional conflicts in which Iran is involved.

China, France, Germany, Russia and the UK should formally announce that new unilateral U.S. sanctions deemed unjustified by the majority of the Joint Commission and that interfere with Iran’s full realisation of the benefits of sanctions relief under the JCPOA would be cause to initiate disputes against the U.S. at the World Trade Organisation (WTO) and other international courts and institutions.[fn]In the late 1990s, the EU successfully challenged U.S. sanctions with a similar approach. Quentin Genard, “European Union responses to extraterritorial claims by the United States”, EU Non-Proliferation Consortium, Non-proliferation Paper no. 36, January 2014.Hide Footnote Simultaneously, they should continue to support Iran’s WTO candidacy.

More countries could provide export credit lines to reassure companies interested in trade with Iran.[fn]“Italy extends $5bn credit line and export guarantees to Iran”, Financial Times, 12 April 2016; “Norway offers €1bn in credit to Iran”, Press TV, 17 August 2016.Hide Footnote Eventually, and if banking problems continue, there might be need for a public body to do due diligence, akin to the role of the European Bank for Reconstruction and Development (EBRD) in Eastern Europe after dissolution of the Soviet Union and elsewhere today. More nuclear cooperation is also necessary to strengthen the connective tissue between Iran’s nuclear program and those of other countries, providing an insurance policy that it will remain solely civilian.

V. Conclusion

A year in, the JCPOA is working but fragile, mostly because the political environment that created the nuclear standoff has not changed. Segregating nuclear negotiations from other regional disagreements was logical – as complex as the nuclear issue was, regional politics are even more so, and there are many more stakeholders than the P5+1 – given Iran’s imminent achievement of breakout capacity. Still, the accord’s fate depends on making progress on other fronts, which in itself is contingent on preventing the JCPOA’s demise under a new, highly sceptical U.S. administration.

The same calculus that brought Iran and the P5+1 to compromise after thirteen years of standoff and two years of negotiations still holds: the alternatives to this accord – a sanctions-vs.-centrifuges race that could culminate in Iran obtaining the bomb or being bombed – would be much worse. Its unravelling now would have unfathomable consequences for the region, non-proliferation and multilateral diplomacy. To imagine a stronger pact can be built on its ruins is a chimera, as destroying it – even if gradually – would also destroy the hint of trust that led the parties to compromise, but if preserved, it is possible to build on it.

Trump is the first U.S. president in more than two decades who does not need to worry, on his first day in office, about Iran crossing the nuclear threshold to weaponisation without detection. If he tries to adjust the JCPOA by coercive pressure, he could, deliberately or inadvertently, deeply erode it, which could reignite the nuclear crisis and compound regional instability. But if, drawing on his business acumen, he opts to offer Iran a better-for-better deal, he has a unique chance to strengthen the accord for all, while helping reduce U.S.-Iran tensions. The consequences of a wrong choice could come to dominate his presidency.

Washington/Brussels, 16 January 2017

Appendix A: Map of Iran

Map of Iran United Nations. Department of Peacekeeping Operations. Cartographic Section.
Philippe Errera
Draft text for reviving the 2015 nuclear agreement as shared by France's lead negotiator in February. Philippe Errera
Briefing 87 / Middle East & North Africa

Is Restoring the Iran Nuclear Deal Still Possible?

Though hope is fading, the U.S. and Iran may still be able to revitalise the 2015 accord on Tehran’s nuclear program. Should they falter, they should pursue more modest interim goals rather than allow the risk of confrontation to grow.

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What’s new? Prospects of reviving the Iran nuclear deal have swung dramatically, from near certain in March to almost nil in July, then back in the direction of an agreement in August to yet another stalemate in September. Exchanges on a compromise text are still falling short of satisfying all the parties.

Why does it matter?Though the parties remain nominally committed to continuing diplomacy to restore the 2015 deal, an escalatory cycle looms should the talks meander aimlessly or end in failure. Contingency planning for a protracted stalemate or a no-deal scenario could help defuse tensions and manage the risk of a dangerous confrontation.

What should be done? A narrow pathway to a deal still exists. But if talks drag on or collapse, the best way forward may be for the sides to consider single-measure commitments, while respecting red lines to avert nuclear and regional escalation. Thus, they could buy themselves time to envision a more durable accord.

Overview

Since April 2021, parties to the 2015 Joint Comprehensive Plan of Action (JCPOA), or Iran nuclear deal, have sought to revive the agreement abandoned by U.S. President Donald Trump. Negotiations between Iran and its interlocutors – the U.S., France, the UK, Russia, China and Germany, coordinated by the EU – made progress over eight rounds in Vienna. By March 2022, they had yielded a close to final text. Since then, things have backslid: Russia’s Ukraine war has shifted world powers’ focus and hampered cooperation; disagreements between Tehran and Washington on key issues are deadlocked. The EU is trying to find a compromise, but its top diplomat believes that the parties are diverging, making a quick deal seem unlikely. The U.S. midterm elections narrow space for progress. If the parties take no escalatory measures, they may be able to cross the finish line prior to or after the November vote. But the negotiations might drag on, or the gaps prove unbridgeable. If so, the parties will need to pivot to a stopgap combination of single-measure agreements and respect for red lines to manage the risk of armed confrontation.

The text hammered out as of March addressed almost all the substantive issues separating the parties. It laid out how Iran would roll back its nuclear program consistent with the JCPOA’s limits, gave an approximation of what sanctions relief the U.S. would provide and sketched out how to sequence the two sides’ commitments. In parallel, Iran and the International Atomic Energy Agency (IAEA) agreed on a framework for settling outstanding questions concerning Iran’s past activities at undeclared sites. But the IAEA investigation stalled and the sides have become mired in disputes over issues that they had thought resolved or close to it.

At the stalemate’s core stand Iran’s bottom-line demands that the others cannot or will not satisfy. To guard against a future U.S. administration reneging on the deal like Trump’s did, Iran seeks guarantees that the economic dividends afforded by the restored JCPOA will endure. The Biden White House has indicated it cannot meet such a demand, because the administration cannot legally bind successor presidents in the way that Iran wishes. Iran also wants the IAEA investigation into its past work terminated, insisting that it could become a never-ending, politically motivated inquest. But calling it off would run contrary to the agency’s mandate for nuclear accountability, and the U.S. and the three European parties (France, Germany and the UK, or the E3) oppose the idea of doing so.

With little sign of Iranian flexibility and growing reluctance among Democrats ... ahead of midterm elections, an imminent breakthrough appears unlikely.

Recent moves offered a glimmer of hope that the deal might be revived, but that now appears to be flickering. In early August, the EU tabled a compromise text after several days of deliberations with all sides. Since then, Iran and the U.S. have exchanged a series of counter-proposals, but prospects for reaching a consensus document are uncertain. With little sign of Iranian flexibility and growing reluctance among Democrats to engage in a polarising Iran debate in Congress ahead of midterm elections, an imminent breakthrough appears unlikely. What is certain, however, is that escalatory measures or unexpected events could scotch what may prove to be the last chance at salvaging the JCPOA.

While compromise and seeing the Vienna talks through to a successful conclusion remains in all parties’ best interest, the goal of restoring mutual compliance with the original deal may remain beyond reach, in which case an inexorable drift toward a post-JCPOA reality looms. In Tehran, sentiment is bullish about the country’s ability to weather the impact of sanctions and bearish about the value of U.S. commitments to sanctions relief, which many think will end up delivering ephemeral returns, even if they are significant in the near term. In Washington, the political liability of pursuing a contentious deal increases with growing pushback from the agreement’s opponents and Iran’s irreversible nuclear advancements, while the no-deal status quo has yet to become a top-tier foreign policy priority amid other crises. But with Iran’s program closer to weaponisation capability than it has ever been, and operating with increasing opacity, the situation could well escalate into a nuclear proliferation crisis unless the parties move on to a more stable course.

If efforts to restore the JCPOA drag on or, worse, fall apart, the default positions of both the U.S. and Iran are easy to imagine. It is likely that Washington will increasingly emphasise sanctions enforcement and expansion, perhaps with growing buy-in from European allies and buttressed by the threat of force, especially if there are signs – absent for the moment – of Iranian moves toward building a nuclear weapon. For its part, Tehran will almost certainly step up nuclear advances, as well as provocations aimed at the U.S. and its allies in the Middle East, either directly or through its own regional partners. As a result, what has been a tenuous equilibrium of “no deal, no crisis” could prove unsustainable.

If the Vienna talks do fail to produce agreement on restoring the JCPOA, it will thus be vital to keep diplomatic space open by considering alternative ways forward. Contingency planning should start now. Some options that may have been possible at an earlier stage now look moribund. It once seemed that the U.S. and Iran might set aside the JCPOA in pursuit of a more ambitious deal, a “more-for-more” arrangement, but prospects are hardly propitious now, given the mistrust and mismatched expectations on display in efforts to revive an agreement the sides had accepted as a baseline understanding. Nor does a “less-for-less” interim agreement that trades limited nuclear rollback for a discrete set of economic incentives seem particularly promising, because the maximum the U.S. is willing to concede in sanctions relief is likely to fall short of Iran’s minimum requirements.

Against this backdrop, modesty could well be key to the feasibility of any approach. One possibility is to focus on single-step reciprocal gestures (eg, a step on the nuclear front in exchange for lifting one sanction), though even that could prove a bridge too far. Another possibility is that progress on humanitarian issues, including an exchange of imprisoned U.S. and Iranian nationals, desirable in any case, might help create a better atmosphere for resuming nuclear discussions. Finally, whether or not the parties can reach agreement on any of the foregoing, they need to determine red lines and tripwires to prevent mounting tensions on the nuclear and regional fronts from building into an escalatory spiral. The sides can communicate these through European and regional intermediaries. While perhaps not sustainable over the long run, this course may at least buy time for the parties to engage in a fundamental rethinking of the extent to which the paradigms that informed two decades of nuclear diplomacy still hold true, and how they can be constructively revised to avoid a showdown that spells peril for all.

I. One Step Forward, One Step Back

A. The Making of an Impasse

To understand how the JCPOA talks regressed from near success to the point of impasse in a matter of months, it is useful to review their short history. The negotiations aimed to return the U.S. to the deal and bring Iran back into full compliance with its provisions. They began in April 2021, continuing for six rounds until the Iranian presidential election that June. The talks paused during the post-election transition from the Hassan Rouhani to the Ebrahim Raisi government. Then, in the course of marathon eighth round of discussions in Vienna starting in December, they came within touching distance of the finish line in early March 2022.[1]

At that point, the global diplomatic crisis engendered by Russia’s invasion of Ukraine intruded. Whether the parties could have resolved their remaining disagreements if the invasion had not happened can only be a matter of conjecture. On 5 March, however, Moscow injected a demand for sweeping sanctions exemptions for its trade with Iran. It withdrew its objections to the draft text shortly afterward, but by then the European coordinators had already halted the discussions, citing “external factors”. The interruption stole the momentum: in-person negotiations involving all parties stopped for months, and in the interim, exchanges of proposals between the U.S. and Iran, and a brief round of EU-mediated indirect but face-to-face talks in Qatar at the end of June, made little progress. By the time negotiators reconvened in Vienna in early August, some of the gaps that the two sides had narrowed or thought they had closed had reappeared or even widened.[2] While their exchanges then and since have been substantive, lending the talks renewed impetus, they have as of yet failed to deliver a final understanding.

At the heart of the present stalemate in negotiations are three main contentious issues. The first is the IAEA investigation into past Iranian activities involving nuclear material at three undeclared sites.[3] During the Vienna talks, Iran has sought to have the long-running probe unconditionally closed by a predetermined deadline as part of a final agreement – a demand that the U.S. and E3 opposed.[4] Tehran’s concern seems to be that, by shedding light on outstanding questions about the past, the enquiry would validate the information’s primary source, namely its own archival material, which Israeli intelligence operatives smuggled out of Iran in 2018 and shared with the IAEA.[5] A senior Iranian official said, “This probe is a bottomless pit. If we don’t put an end to it at some point, 50 years from now they will still hold our feet to the fire over what happened before 2003”.[6]

Tehran thus has continued to make halting the investigation a precondition for returning to full JCPOA compliance.[7] But Western powers neither can nor wish to dictate how an independent UN agency should conduct its mandate of nuclear accountancy. Nor will they make a political commitment to press the agency to shelve a technical probe in advance of its outcome, which is dependent on the level of Iran’s cooperation with the agency.[8]

[1] On progress in the talks up to mid-January, see Crisis Group Middle East Reports N°224, Iran: The Riddle of Raisi, 5 August 2021; and N°230, The Iran Nuclear Deal at Six: Now or Never, 17 January 2022.

[2] E3 diplomats had left Vienna on 4 March with, in the words of the lead French negotiator, “our job done”. See tweet by Phillipe Errera, @PhilippeErrera, political director at the French foreign ministry, 7:54pm, 17 March 2022. But the next day, Russian Foreign Minister Sergey Lavrov, citing Western sanctions in response to Russia’s 24 February invasion of Ukraine, called for guarantees that these measures would “by no means affect our right to free and full-fledged trading, economic, investment, military and technical cooperation with Iran”. Quoted in “Russia demands U.S. guarantees sanctions will not harm Moscow-Tehran ties – Lavrov”, TASS, 5 March 2022. The U.S. called the exemptions request “irrelevant” to the JCPOA discussions, and five days later, the EU coordinator called a halt to the Vienna talks. U.S. Secretary of State Antony Blinken quoted in “Secretary Blinken with Margaret Brennan of CBS News”, U.S. State Department, 6 March 2022; and tweet by Josep Borrell, @JosepBorrellF, EU high representative for foreign affairs and security policy, 5:30am, 11 March 2022. Meeting Iranian Foreign Minister Hossein Amir-Abdollahian in Moscow on 15 March, Lavrov referenced U.S. “written guarantees” addressing “all projects and areas of activity envisaged by the JCPOA”, while the U.S. State Department confirmed that the U.S. “would not sanction Russia’s participation in nuclear projects that are part of a full return to the JCPOA”. Quoted in Liz Sly and Karen DeYoung, “Russia raises hopes for a return to the stalled Iran nuclear talks”, Washington Post, 15 March 2022. In June, Borrell asserted, “At a certain moment, Russia was very much against the deal … but after the contacts that the Iranians themselves had with the Russians, Russia has withdrawn any objection to the deal”. “Remarks by High Representative Josep Borrell after talks in Tehran”, European External Action Service, 25 June 2022.

[3] The first site is a warehouse in the Turquzabad district near Tehran, where, in 2018, the agency, by using satellite imaging, found evidence of sanitisation efforts and removal of containers. In 2019, environmental sampling yielded evidence of “natural uranium particles of anthropogenic origin, the composition of which indicated that they might have been produced through uranium conversion activities”, and later, “isotopically altered particles of low-enriched uranium”. The agency assessed Iran’s explanations to be “not technically credible”. The second location, Varamin, is a plant on Tehran’s outskirts that may have been used as a facility for storage and/or the processing and conversion of uranium ore, including fluorination, in 2003. Environmental samples taken in August 2020 found uranium particles of anthropogenic origin, resembling the ones found in Turquzabad. At the third site, named in IAEA reports as Marivan, near the city of Abadeh, “outdoor, conventional explosive testing” and tests related to “neutron detectors” may have taken place. The agency took environmental samples in August 2020, which revealed the presence of uranium particles. Among the three locations, Turquzabad is where questions are most pressing, as some of the particles detected there are of much more recent vintage than at the others. Crisis Group interviews, IAEA inspectors, Vienna, December 2021. See also GOV/2022/26, IAEA, 30 May 2022. For background on the IAEA investigation, see Crisis Group Report, The Iran Nuclear Deal at Six, op. cit.

[4] Crisis Group interviews, European and U.S. negotiators, Vienna, February-March 2022. Tweet by Stephanie Al-Qaq, @salqaq, director for Middle East and North Africa at UK Foreign, Commonwealth and Development Office, 10:12am, 1 March 2022.

[5] David Sanger and Ronen Bergman, “How Israel, in dark of night, torched its way to Iran’s nuclear secrets”, The New York Times, 15 July 2018; and Aaron Arnold et al., “The Iran Nuclear Archive: Impressions and Implications”, Belfer Center for Science and International Affairs, Harvard University, April 2019.

[6] Crisis Group interview, Tehran, March 2022.

[7] Crisis Group interviews, European and IAEA officials, Vienna, December 2021. As an adviser to Iran’s nuclear negotiating team put it, “The U.S./EU can’t have a deal [and] simultaneously keep a wrecking ball ready at hand. The IAEA can no longer be used as the sword of Damocles”. Tweet by Mohammad Marandi, @s_m_marandi, Tehran University professor, 5:08am, 4 August 2022. A senior Iranian official said, “We managed to close the outstanding questions about Iran’s nuclear program’s so-called possible military dimension [PMD], which was a precondition for the JCPOA coming into force. If the West had told us in 2015 ‘PMD is your problem, resolve it with the IAEA on your own’, there would have been no JCPOA. They helped determine a process with an end date and encouraged the agency to show flexibility, which resulted in closing the outstanding questions then, and with political will we can do it again”. Crisis Group telephone interview, August 2022. A senior U.S. official noted that “this is harder than PMD, because of undeclared nuclear materials. There is no way the IAEA can look the other way without undermining its own raison d'être”. Crisis Group interview, Washington, July 2022. The agency closed the PMD file in December 2015, almost a month before the JCPOA entered into force on 16 January 2016, but before the documents in the nuclear archive came to light. See GOV/2015/68, IAEA, 2 December 2015.

[8] A Western official noted that, during the August talks, Russia had been “helpful” on safeguards “but did not put any pressure on Iran to resolve the issue”. Crisis Group interview, 9 August 2022.

Tehran wants the world powers to commit that, no matter the IAEA’s findings [into past Iranian activities], the inquiry will stop.

On 5 March, IAEA Director General Rafael Grossi said he had agreed to a timetable with the Atomic Energy Organization of Iran to address the IAEA’s concerns.[9] Yet further talks between the two agencies in April and May made little headway.[10] In June, Grossi told the IAEA Board of Governors that Iran had provided no “technically credible” explanations for its past activities, prompting the board to pass a censure resolution, put forward by the U.S. and E3, expressing “profound concern”.[11] Meanwhile, Tehran has pressed for ending the probe during both the indirect contacts with the U.S. in Qatar and the later negotiations. In August, the EU offered another compromise.[12] Its proposal would see the JCPOA stakeholders submit a resolution to the IAEA Board of Governors to close Iran’s safeguards file should Tehran adequately answer the agency’s queries. Iran would keep a veto over the deal’s implementation in case it dislikes the probe’s outcome.[13] Still, Tehran wants the world powers to commit that, no matter the IAEA’s findings, the inquiry will stop.[14]

[2] Instead of shedding light on its past nuclear activities, Tehran accused Israel of planting uranium particles in Iran, an explanation that the IAEA dismisses as technically not credible. See “Communication dated 3 June 2022 received from the Permanent Mission of the Islamic Republic of Iran to the Agency”, INFCIRC/996, IAEA, 7 June 2022.

[3]IAEA Director General’s introductory statement to the Board of Governors”, IAEA, 6 June 2022. The Board passed the resolution by a vote of 30 to two (with Russia and China in opposition), with three abstentions. GOV/2022/34, IAEA, 8 June 2022.

[4] According to Western officials, Iran’s chief negotiator focused nearly three quarters of the discussions in Doha on the IAEA probe. Crisis Group interviews, U.S. and European officials, July 2022. See also Laurence Norman, “Iran, U.S. nuclear deal talks end without progress”, The Wall Street Journal, 29 June 2022. France’s lead JCPOA negotiator said, “[The] E3 and U.S. were crystal clear on their position in Vienna, where this issue had been resolved after intense and tough late-night sessions between E3 and Iran, with a solution supported by [the] U.S., Russia and China”. Tweet by Philippe Errera, @PhilippeErrera, 6:42am, 30 June 2022. An Iranian official maintained that, “Yes, the JCPOA and safeguards are not linked, and we have a process with the IAEA, but if the probe is unresolved, the deal won’t be done”. Crisis Group telephone interview, 7 July 2022. See also, “No deal without safeguards”, Tehran Times, 29 August 2022.

[5] According to the calendar for the implementation of the Vienna agreement, after concluding the deal (Conclusion Day), the parties enter a 60-day period dedicated to the deal’s review by U.S. and Iranian legislatures. Completion of that process (Confirmation Day) would trigger a 45-day verification period during which Iran would cap its proliferation-sensitive activities and the U.S. would allow Iran to legally export a certain volume of oil. At the end of this step is Reimplementation Day, when both sides start rolling back their JCPOA breaches during a 60-day period that ends in Completion Day. If Iran is unsatisfied with the IAEA’s probe, which will be conducted between Conclusion Day and Reimplementation Day, it can refrain from rolling back its nuclear program. Crisis Group interviews, U.S., European and Iranian officials, March-August 2022. See also Laurence Norman, “EU proposes significant concession to Iran to revive nuclear deal”, The Wall Street Journal, 11 August 2022; and Arshad Mohamed, “U.S. and Iran finesse issue of IAEA’s nuclear probes, for now”, Reuters, 29 August 2022.

[6] Crisis Group telephone interviews, European officials, 1 September 2022. As an E3 official put it, Iran’s latest demand on safeguards “reopens the coordinator’s text on safeguards, which was at the outer limits of our flexibility already – and which they implicitly accepted in their August 15 response”. Quoted in Laura Rozen, “European official blasts Iran text: ‘Moves us very far back’”, Diplomatic (Substack), 2 September 2022.

The second area of divergence is the scope of U.S. sanctions relief, centring around the Trump administration’s 2019 designation of Iran’s Islamic Revolutionary Guard Corps (IRGC) as a Foreign Terrorist Organization (FTO) – a decision the U.S. acknowledged at the time was “unprecedented” because it involved the listing of a state entity.[15] The Biden administration twice proposed to delist the IRGC on certain conditions: once in May 2021, in return for Iran agreeing to negotiate a follow-on “longer and stronger” agreement after the JCPOA’s restoration; and again in March 2022, in return for a mutual commitment by Iran and the U.S. not to target current or former officials amid Iranian efforts to avenge the U.S. killing of a senior Qods Force commander, General Qassem Soleimani, under the Trump administration.[16] Iran rejected the first offer out of hand, and although it appeared ready to accept the second, it backed out once talks halted in March.[17]

The terrorist designation issue then turned into a lightning rod in both Tehran and Washington, limiting both sides’ room for manoeuvre.[18] The U.S. and Iran appear to have moved on from clashing over the designation itself by agreeing to discuss it after restoring the JCPOA, when direct bilateral talks would be possible. Nevertheless, the U.S. has rejected Iranian counter-proposals that would not require full rescission of the designation, such as delisting IRGC-linked economic entities that are named as FTOs under separate U.S. sanctions authorities.[19]

[1]Statement from the President on the Designation of the Islamic Revolutionary Guard Corps as a Foreign Terrorist Organization”, White House, 8 April 2019. Iranian officials constantly ask European intermediaries to remind their U.S. counterparts that, when the Trump administration made the FTO designation in 2019, almost all the people who are now senior Biden administration officials working on the Iran file condemned it as reckless and superfluous. Crisis Group interviews, European officials, Vienna, March 2022.

[2] Crisis Group interviews, U.S. and EU officials, Vienna, Brussels and Washington, February-June 2022. U.S. intelligence agencies reportedly have concrete evidence of Iran seeking to assassinate former Trump administration officials involved in killing Soleimani in January 2020. Jana Winter, “U.S. government warns that Iran may try to kill American officials as revenge for killing top general”, Yahoo News, 13 July 2022; and Borzou Daragahi, “Iran’s supreme leader shares animated video depicting assassination of Donald Trump”, The Independent, 13 January 2022. On 10 August, the U.S. Justice Department charged an IRGC member in a plot to kill John Bolton, who served as national security advisor in the Trump administration, “likely in retaliation” for Soleimani’s killing. “Member of Iran’s Islamic Revolutionary Guard Corps (IRGC) Charged with Plot to Murder the Former National Security Advisor”, U.S. Department of Justice, 10 August 2022. Iranian officials express concern that if the designation remains in place, it could allow the U.S. to target more IRGC generals. Crisis Group interviews, senior Iranian officials, Tehran, March 2022.

[3] While Iranian negotiators seemingly agreed in early March that Iran would make a tacit commitment not to target U.S. nationals, they walked it back once they returned to Tehran. A senior European official said by way of explanation, “There is a risk that the private commitment could become public, which rendered the reputational cost of giving up on avenging Soleimani’s killing prohibitive for the Iranians”. Crisis Group interview, Washington, March 2022. After Iran’s foreign minister indicated in a speech that senior IRGC officials had told him that the terrorist designation should not hold up the deal, hardliners harshly reprimanded him, and he was forced to downplay his statement publicly. Saeid Jafari, “Why IRGC issue won’t go away”, Al-Monitor, 9 July 2022.

[4] Laying the groundwork for justifying the IRGC’s potential delisting, a senior White House official said in March, “Even after [terrorist designation] removal, we retain the authority to sanction any Iranian who has been involved in acts of terrorism”. Crisis Group interview, Washington, 3 March 2022. In June, another senior White House official said, “If we were to delist the IRGC, there will be blood on the ground during the congressional review and there was a real threat of a joint resolution of disapproval against a possible agreement negotiated in Vienna”. Crisis Group interview, Washington, 6 June 2022. In May, the U.S. Senate passed a non-binding resolution against delisting the IRGC by 62 votes to 33. Andrew Desiderio, “Congress fires its first warning shot on Biden’s Iran deal”, Politico, 5 May 2022. While having no binding effect, the resolution offers insight into the level of bipartisan congressional opposition.

[5] A European official said, “The only advantage that the diplomatic hiatus in the past three months has had is that it has rendered the [terrorist designation] issue less emotional, and so we can now explore alternatives to it”. Crisis Group interview, Brussels, 15 June 2022. One Iranian suggestion was reportedly that the U.S. delist Khatam al-Anbiya, the IRGC’s powerful business conglomerate. Parisa Hafezi, “Rise of Arab-Israel axis spurs Iran to redouble nuclear talks push”, Reuters, 1 July 2022. A senior White House official said, “It’s the same principle upon which we refused to delist the IRGC itself: IRGC activities are outside of the JCPOA’s scope”. Crisis Group interview, Washington, June 2022. A European official said, “The fact that the U.S. is the only country in the world that has sanctioned Mahan Air, an airline allegedly involved in transferring weapons to Syria, is indicative of U.S. obsessions that are more political than practical”. Crisis Group interview, Washington, March 2022.

Perhaps the most difficult issue relates to Iran’s concerns … about the longevity and reliability of U.S. sanctions relief.

The third and perhaps the most difficult issue relates to Iran’s concerns, which it has aired throughout the negotiations, about the longevity and reliability of U.S. sanctions relief. Reaching an agreement would facilitate for Tehran billions of dollars in additional oil revenue and access to tens of billions more in assets held abroad, but the possibility of a future U.S. withdrawal from the deal could render the benefits short-lived.[20] As an Iranian negotiator put it, “Without economic guarantees that outlast Biden’s presidency, no one will invest in Iran. So, we won’t get the majority of the deal’s dividends, compounded by the political risk of another U.S. withdrawal in 2025”.[21] Some in Iran also worry that the spectre of reimposed sanctions creates short-term uncertainty that is more harmful to the Iranian economy than the long-term predictability of living under U.S. sanctions to which the economy has adjusted. They fear that each time sanctions snap back, the economy experiences deeper shocks.[22]

Still, in worrying that the U.S. could again pull the rug out from under it, Iran’s anxieties are likely more political rather than financial. The leadership cannot help but note that the Biden administration itself, while underscoring its intention to follow through with sanctions relief agreed in a revived deal, acknowledges that a future president could choose to exit the agreement again.[23] Some in Tehran doubt that Washington will keep its word even for the duration of Biden’s presidency, especially if Republicans regain a majority in Congress and use their new leverage to throw a wrench into the deal’s implementation.[24] In such a scenario, Iran’s leaders could find themselves under fire domestically for having entered an agreement with the U.S., only for to it to end in grief again, exposing them to the same charges of naïveté they levied at the deal’s architects in the Rouhani administration.[25]

While the August negotiations made substantial progress on updating the technical text, the sides remain sharply divided on the IAEA safeguards investigation, and Iran continues to press the U.S. on the issue of guarantees to increase the cost for Washington of another exit from the deal. For now, the two sides are going back and forth with counter-proposals.[26]

[1] One assessment by a prominent expert on Iran’s economy concludes that even if sanctions relief extends only to 2025, it would be better for GDP growth than a no-deal scenario and also would push down inflation and unemployment rates. Bijan Khajehpour, “Two vital scenarios for Iran’s economy”, Amwaj Media, 8 August 2022. For more on the opportunity costs for Iran without an agreement, see Esfandyar Batmanghelidj and Ellie Geranmayeh, “Iran stands to lose the most if the nuclear deal isn’t revived”, Foreign Policy, 25 July 2022.

[2] Crisis Group telephone interview, February 2022. “We do not want to be stung in the same spot”, Iran’s foreign minister said in July. “In order to enjoy the full economic benefits of the JCPOA, the Americans must accept some commitments and guarantees”. Hossein Amir-Abdollahian, quoted in “Iran seeks nuclear deal guarantees to avoid being ‘stung twice’”, Agence France Presse, 22 July 2022.

[3] Crisis Group telephone interviews, Iranian officials, January-August 2022.

[4] For example, a joint E3-U.S. statement noted “President Biden’s clearly demonstrated commitment to return the U.S. to full compliance with the JCPOA and to stay in full compliance, so long as Iran does the same”. “E3+U.S. leaders-level statement on Iran”, Elysée, 30 October 2021. Acknowledging Iran’s “significant reservations … after the negative experience of recent years”, the EU foreign policy chief stressed that “the deal on the table reflects … the determination of all JCPOA participants to ensure its sustainability, including the commitment of President Joe Biden and U.S. assurances in this regard. As a result, the deal is better protected from potential unilateral moves to undermine it”. Josep Borrell, “Now is the time to save the Iran nuclear deal”, Financial Times, 26 July 2022.

[5] A senior Iranian official said, “Biden has already imposed more than 100 new sanctions, and the fact that he refuses to commit that he will not impose new ones in the next two years is very telling”. Crisis Group telephone interview, June 2022. A senior U.S. official said, “Of course, if Iran targets U.S. personnel, among other problems there will be new sanctions. That is not inconsistent with the JCPOA, which never was a grand bargain. But we are not paying a huge political price to lift the sanctions only to undermine the deal”. Crisis Group interview, Washington, June 2022. A Tehran University professor with direct knowledge of the talks said, “I am certain that a few months after the JCPOA is restored, the U.S. will ask for a ‘longer and stronger’ deal, and if Iran says no, it will start imposing sanctions to undermine Iran’s ability to benefit from the JCPOA”. Crisis Group interview, Nasser Hadian, Brussels, 15 June 2022. The U.S., which has not explicitly pursued a follow-on agreement for months, rejects such contention. It has gone as far as to agree to longer wind-down periods for companies to leave Iran in case of a sanctions snapback from the standard 90-180 days. Crisis Group interviews, U.S. officials, Washington, June 2022. See also Barak Ravid, “U.S. toughened positions in Iran deal response, Israeli officials say”, Axios, 25 August 2022.

[6] In January, when Foreign Minister Amir-Abdollahian raised the possibility of direct U.S.-Iran talks if need be, the editor-in-chief of the hardline daily Kayhan, who was appointed by the Supreme Leader Ali Khamenei, riposted: “The JCPOA was a golden document for the U.S., a result of passive diplomacy – that is to say, begging – by the Rouhani administration and naïveté by the previous administration’s negotiating team. … Our dear brothers are going to the mirage in search of water”. Hossein Shariatmadari, “Fraternally with our brothers Amir-Abdollahian and Shamkhani”, Kayhan, 25 January 2022 (Persian).

[7] Crisis Group interview, Western official, 9 August 2022. Discussing the IAEA investigation, a European official contended that Iran’s government “seems to prefer to protect some individuals involved in clandestine activities twenty years ago instead of freeing its economy and opening up the future for its people”. Quoted in Stephanie Liechtenstein, “Agreement on nuclear deal within reach but obstacles remain”, Politico, 8 August 2022. See also Nahal Toosi and Stephanie Liechtenstein, “Nuclear talks in peril as U.S. calls latest Iran missive a move ‘backwards’”, Politico, 1 September 2022.

B. A Sisyphean Struggle

The challenges to resuscitating the JCPOA were always stiff, as the sides had disparate endgames in mind. For Iran, which perceived itself as the aggrieved party, an important aim was to teach the U.S. a lesson that Washington cannot abandon agreements with Tehran at will and with no cost.[27] Hence its rejection of direct engagement with the U.S. and its insistence on guarantees to offset the impact, if not close off the possibility, of a future unilateral exit. In the same vein, even before Biden took office, Supreme Leader Ali Khamenei and parliament had put in place stringent – and unrealistic – criteria for the U.S. to return to the JCPOA, such as preconditioning Iran’s own restored compliance on the lifting of all sanctions and verification of their removal in practice.[28] Tehran considered the JCPOA’s full restoration the ceiling of what diplomacy could achieve given Washington’s proven unreliability as a negotiating partner; it thus rejected any discussion of a follow-on nuclear agreement, Iran’s missile program or its regional policies, and even ruled out the possibility of more limited quid pro quos.[29]

The Biden administration operated from a very different perspective. Overlooking the degree to which Trump’s policy had undermined the modicum of U.S.-Iran cooperation that the JCPOA had produced, it put the onus for returning to compliance on Iran; treated the JCPOA as a floor for what the negotiations could achieve by proclaiming a “longer and stronger” deal as its objective; and took precious few practical steps to create distance between its own policy and its predecessor’s, leading it to be perceived in Tehran as representing more continuity than change.[30] Moreover, it was, and still is, hesitant to pay the steep political price that a deal with Iran would entail.

[1] Crisis Group telephone interviews, Iranian officials, January-March 2021.

[2] Tehran even floated the notion of compensation for sanctions-related financial losses. See “Supreme Leader’s televised speech on the occasion of 19th of Dey”, Khamenei.ir, 8 January 2021 (Persian); and “The full text of Iranian parliament’s strategic action plan to lift sanctions revealed”, Iranian Labour News Agency, 1 December 2020. 

[3] As a senior Iranian official put it, “We just wanted to cash the JCPOA check [ie, sanctions relief] for which we had already paid with our nuclear concessions”. Crisis Group telephone interview, April 2022.

[4] For more background, see Crisis Group Report, The Iran Nuclear Deal at Six, op. cit.

The negotiations were hobbled by the procedural inefficiency of being ... indirect.

Against this backdrop, the negotiations were destined to struggle. When the U.S. put its opening offer on the table, which approached its bottom line on the extent of sanctions relief, Iran’s response was to pocket these terms in anticipation of additional concessions, while rarely countering with other concrete ideas.[31] Besides these problems, the negotiations were hobbled by the procedural inefficiency of being, at Iran’s insistence, indirect: in Vienna, U.S. negotiators were located in one hotel and the Iranian emissaries in another, with European intermediaries shuttling back and forth carrying messages and conveying positions.[32]

The talks faced similar pathologies on substance. As a senior European official put it, “The debate in Tehran and Washington has been anything but rational”.[33] The irrationality has only become more evident as the parties settled into a stalemate after the March suspension of negotiations. In particular, the discussion surrounding Iran’s demand that the U.S. rescind the IRGC’s FTO designation, for now seemingly sidestepped, and its insistence on long-term guarantees of the deal’s viability showcase the disconnect between the perceived and practical significance of the issues on the table.

[1] Crisis Group interviews, U.S. and European officials, Vienna and Washington, March 2021- June 2022. For more details, see Crisis Group Report, The Iran Nuclear Deal at Six, op. cit.

[2] Indirect talks in Vienna were riddled with miscommunications and misunderstandings. After these talks ended in March, messages were relayed back and forth mostly through the EU via messaging apps, aside from three visits to Tehran by EU officials and a brief indirect but in-person session in Qatar. On occasion, it took one party two weeks to respond to the other side’s proposals. Crisis Group interviews, EU officials, Brussels, June 2022.

[3] Crisis Group interview, Brussels, 15 June 2022.

The political headache posed by lifting the FTO designation far outweighed its real implications. Its lifting would have limited benefits for Iran given the other sets of U.S. sanctions on the IRGC.[34] Although the designation added another layer of sanctions and stigma to an already sanctioned and stigmatised group, it proved largely ineffective in taming the IRGC, which according to U.S. officials has posed an even more worrying threat to U.S. interests in the Middle East since being named an FTO.[35] With or without the FTO rescission, the IRGC would remain one of the most sanctioned entities in the world, radioactive for most multinational businesses.[36] Yet notwithstanding its modest practical significance, the FTO designation assumed an outsized role in the U.S. domestic debate, in which it became a political symbol of toughness on Iran. The idea of rescission faced opposition on both sides of the aisle, underscoring the extent to which it could be a political liability for Biden’s Democratic party in November’s midterm elections.

As for long-term guarantees, these ran up against issues of impracticability. No U.S. administration has the power to bind the hands of a future administration under U.S. law. Nor could U.S. negotiators offer any assurance that Biden or his Democratic party will retain power in the 2024 elections. Given that opposition to the JCPOA is undimmed within the Republican party (and indeed among many Democrats) despite the abject failure of the Trump administration’s “maximum pressure” campaign, another U.S. withdrawal remains a distinct possibility.[37] Still, rejecting a deal now turns future uncertainties around the agreement into a self-fulfilling prophecy in the present. “Predicating the future on a could-be [ie, what the next U.S. president will do] is the definition of insanity”, observed a senior European official.[38]

The limited diplomatic space to strike a deal shrank further in a political environment that became more polarised, as details of a possible agreement trickled out from sources on both sides.[39] One such leak in March hinted that the U.S. was considering lifting the FTO designation to meet Iran’s demand. Israel’s Prime Minister Naftali Bennett and Foreign Minister Yair Lapid promptly issued a joint statement, saying they “found it hard to believe that the IRGC’s designation will be removed in exchange for a promise not to harm Americans. … We believe the U.S. will not abandon its closest allies in exchange for empty promises from terrorists”.[40] After several weeks of high-level discussions between Israeli and U.S. officials, and fierce criticism from influential members of Congress and others opposed to the JCPOA, Biden ruled out an FTO delisting.[41]

[1] Secretary Blinken said, “As a practical matter, the designation does not really gain you much because there are myriad other sanctions on the IRGC. The primary sanction when it comes to the FTO designation actually is a travel ban. And the people affected by that ban when it comes to the IRGC, as you know, the IRGC is a large force that has a lot of conscripts in it, they would not be able to travel. The people who are the real bad guys have no intention of travelling here anyway”. See Blinken’s testimony before the Senate Foreign Relations Committee, “State Department Fiscal Year 2023 Budget Request and Biden Administration Foreign Policy”, C-Span, 26 April 2022.

[2] As U.S. State Department Spokesperson Ned Price stated, “From 2012 to 2018, there were no attacks against U.S. service members, diplomatic facilities in Iraq. That changed in 2018. And between 2019 and 2020, the number of attacks from Iran-backed groups went up 400 per cent. This was in the aftermath of the decision to abandon the JCPOA. It was in the aftermath of the decision to apply the FTO designation to the Iranian Revolutionary Guard Corps. It was in the aftermath of the killing of Soleimani”. “Press Briefing”, U.S. State Department, 31 March 2022.

[3] Daniel Benjamin and Jason Blazakis, “On Iran, Biden should reverse Trump’s imaginary statecraft”, Washington Post, 24 May 2022.

[4] For details of the “maximum pressure” campaign and its failures, see Crisis Group Statement, “The Vital but Delicate Task of Reviving the JCPOA”, 10 December 2020; and Crisis Group Commentary, “The Failure of U.S. ‘Maximum Pressure’ against Iran”, 8 March 2021.

[5] Crisis Group interview, Brussels, 14 June 2022.

[6] For an example of a leak on the Iranian side, see the response by hardline parliament member Mahmoud Nabavian, “The situation of the Islamic Republic’s red lines in the potential Vienna deal”, Fars News, 1 April 2022. For an example of the response to a leak by a former Trump administration official, see Gabriel Noronha, “This isn’t Obama’s Iran deal. It’s much, much worse”, Tablet, 7 March 2022.

[7] Barak Ravid, “Scoop: U.S. weighs deal to remove Iran’s IRGC from terror blacklist”, Axios, 16 March 2022; and “Joint announcement from PM Bennett and Foreign Minister Yair Lapid”, Israel Prime Minister’s Office, 18 March 2022.

[8] Ben Caspit, “In win for Israel, U.S. seems to backtrack on removing IRGC from terror list”, Al-Monitor, 29 April 2022; and Alexander Ward and Nahal Toosi, “Biden made final decision to keep Iran’s IRGC on terrorist list”, Politico, 24 May 2022.

The war in Ukraine … adversely affected the negotiations.

The war in Ukraine also adversely affected the negotiations in two ways. First, the crisis put the Iran issue on the back burner among Western powers, which shifted their focus to shoring up Ukraine’s defences in the face of Russia’s assault.[42] Between March and early August, there were no discussions about the deal involving all parties. Secondly, Russia’s invasion empowered the JCPOA’s opponents in Tehran, who concluded they had room to press for advantage in the talks; they argued that Moscow would now join Iran in sanctions busting and that international buyers facing tight supplies and high prices would want Iranian oil.[43]

As the deadlock continued into mid-year, both sides seemed increasingly resigned to the possibility that they would fail to reach a deal. On the economic front, and notwithstanding acute challenges in terms of inflation and unemployment, Iranian leaders appear to view the status quo as not only tolerable but trending in their favour.[44] Moreover, with tentative steps toward regional de-escalation under way – for example, through bilateral Iranian-Saudi talks – they seem to have concluded that discord with the West and détente in the region can go hand in hand.[45]

On the U.S. side, officials view Iran’s posture since March as, most charitably, reflecting a system that has no clear bottom line on its own priorities, divided between those approaching the negotiations as gambit to secure the best terms and those merely seeking to prolong the process and avoid the diplomatic and economic consequences of its collapse. U.S. Special Envoy for Iran Robert Malley described a session of indirect talks with Iran in Doha as “more than a little bit of a wasted occasion”, mainly for that reason.[46] Reflecting the frustration that had built up before the EU reconvened the parties in Vienna, another U.S. official contended, “There’s no proposal on which the Iranians have said yes [since March]. If their system doesn’t have a consensus on returning to the deal, the specifics don’t seem to be the core issue”.[47]

Such doubts as to Iran’s actual endgame in turn harden Washington’s attitude in opposition to offering concessions out of concern that Iran could pocket these, too, while still refusing to close the deal.[48] While the August talks yielded substantial progress, the to-and-fro since, with Iran sending comments on the EU text, the U.S. responding with its own counter-proposals and Tehran in turn dispatching a reply assessed in Washington as “moving backwards”, underscores the challenge of resolving the remaining issues.[49]

[1] Crisis Group interviews, U.S. and European officials, March-July 2022.

[2] “How is it that some people naïvely argue that we should turn to the West?”, queried Ali-Akbar Velayati, one of Ayatollah Khamenei’s senior foreign policy advisers, in a recent interview. Instead, he said, Iran should “look in the direction that is rising”, namely Russia and China. Quoted in “Iran, Russia and China: Three important and independent powers against American and Western expansionism”, Khamenei.ir, 22 July 2022. See also “Alliance of the world’s energy triangle to defeat U.S. sanctions”, Islamic Republic News Agency, 15 June 2022 (Persian). Here, the term “energy triangle” refers to Iran, Russia and Venezuela.

[3] Iran’s Central Bank pegged GDP growth at 5.7 per cent in its most recent quarterly assessment, covering the last three months of the Iranian fiscal year ending in March 2022. “Economic growth at 5.7% in Q4 of fiscal 2021-22: CBI”, Financial Tribune, 22 July 2022. Iran avoided an expected contraction of fiscal expenses thanks to high oil prices, as well as a rebound in non-oil sectors due to a currency depreciation that expanded exports, a relaxation of COVID-19 containment measures in the service sector, an accelerated vaccine rollout and higher demand for industrial products. As of August, the World Bank projects Iran’s GDP growth in the current (2022-2023) fiscal year at 3.3 per cent, down from 4.7 per cent in 2021-2022, and forecast to dip to 2.5 per cent in 2023-2024. World Bank, “Iran Economic Monitor: Managing Economic Uncertainties”, Spring 2022. See also “Iran’s annual inflation rate rises 1.1 per cent to 40.5 per cent in July: SCI”, Press TV, 23 July 2022. In July, following a meeting between Turkish and Iranian officials touting a $30 billion target for bilateral trade and the signing of a memorandum of understanding between the National Iranian Oil Company and Russia’s Gazprom purportedly worth $40 billion, Kayhan tellingly headlined its edition: “Aiming for $70 billion in trade with Russia and Turkey without the JCPOA or FATF”, Kayhan, 19 July 2022 (Persian). Iran is blacklisted by the Financial Action Task Force (FATF), an international watchdog monitoring states’ cooperation with efforts to fight terrorism financing and money laundering. The headline indicates the belief that the Iranian economy can weather more years of the resultant penalties. For a less sanguine view, see “Statement of 61 economists regarding the country’s economic situation”, Aftab News, 11 June 2022 (Persian). “Europe in critical need of reaching an agreement with Iran”, Mehr News Agency, 14 May 2022.

[5] Quoted in “U.S. and Iranian delegations fail to reach a deal to restore the Iran nuclear deal”, NPR, 5 July 2022. Malley previously served as President and CEO of Crisis Group.

[6] Crisis Group interview, senior U.S. official, Washington, 17 June 2022. A European diplomat asserted, “Nobody in Tehran dares to make an individual decision. It has to be the collective thinking of the Supreme National Security Council, put to the Supreme Leader”. Crisis Group interview, 31 March 2022.

[7] As the UK’s intelligence chief said regarding the uncertainty of Iranian intent, “I don’t think the Supreme Leader of Iran wants to cut a deal. … The Iranians won’t want to end the talks, either”. Richard Moore quoted in Phil Stewart, “Iran doesn’t want a nuclear deal, British spy chief says”, Reuters, 21 July 2022.

II. The Escalation Ladder

Though the diplomatic track remains open for now, the months of deadlock preceding the latest discussions in Vienna have also hinted that a shift to an escalatory approach may have begun, without fanfare, with both sides and other key players – Israel in particular – signalling a willingness to raise the stakes rather than cede the ground needed to conclude a deal.

Tehran’s all-or-nothing approach toward the IAEA of late is one reason to be sober about the prospects of a breakthrough. Despite the agency’s repeated statements of concern about the lack of cooperation with its investigations in the run-up to its June Board of Governors meeting, which made a U.S./E3 decision to introduce a censure vote all but unavoidable, Iran was not fully forthcoming and reacted to the resolution (which merely exhorted Iran to follow through on commitments it had itself made in March) in a disproportionate manner.[50] Tehran promptly increased its nuclear activity and dismantled one third of IAEA’s monitoring equipment after the vote. It continues to expand its enrichment capabilities.[51] A comment by Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, sums up the dominant line of thinking in the national security establishment: “[T]he only way to defend the country’s rights against bullying, whether in #JCPOA or @iaeaorg is reciprocity”.[52]

For its part, in the absence of a breakthrough and against the backdrop of Iran’s nuclear advancements, the Biden administration has sharpened the coercive tools it has been using in an attempt to get Tehran to compromise. Since March, it has regularly unveiled new sanctions targeting Iran’s ballistic missile program, as well as its oil and petrochemical trade.[53] Biden has also stated a U.S. willingness to take military action against Iran’s nuclear program as a last resort, and in the meantime to “continue to increase diplomatic and economic pressure until Iran is ready to return to compliance”.[54] The U.S. has also stepped up efforts to increase coordination with regional allies to stop missile and drone threats, as well as in maritime security.[55] In response to Iran’s provision of Unmanned Aerial Vehicles to Russia, Washington on 8 September announced sanctions against Iranian persons and companies engaged in the development and transfer of drones, and the following day designated Iran’s intelligence minister, and ministry, citing “cyber-enabled activities against the United State and its allies”.[56]

[1] See, for example, “IAEA warns that Iran not forthcoming on past nuclear activities”, Reuters, 10 May 2022. Yet, even as it failed to move ahead with its own consultations with the IAEA, Iran raised a hue and cry over what it deemed an untimely visit by Grossi to Israel. “Iran nuclear chief blasts IAEA for being exploited by Zionists”, Tasnim News Agency, 10 June 2022.

[2] Francois Murphy, “Iran expands advanced centrifuge work underground, IAEA report shows”, Reuters, 8 June 2022; “Iran escalates enrichment with adaptable machines at Fordow, IAEA reports”, Reuters, 9 July 2022; and Jon Gambrell and Philipp-Moritz Jenne, “Iran pulls UN nuke cameras in possible ‘fatal blow’ to deal”, Associated Press, 9 June 2022. Iran’s most recent steps have been the activation of two IR-6 cascades at Natanz, enriching up to 5 per cent, with a third installed but not yet operating. “Iran enriching uranium with more IR-6 centrifuges at Natanz – IAEA”, Reuters, 31 August 2022. A European official said, “Half of the Iranian establishment is completely convinced that all the sabotage [against nuclear facilities] has come from the [IAEA’s] cameras. It does not matter if it is true or not; it is what they believe”. Crisis Group interview, June 2022.

[3] Tweet by Ali Shamkhani, @alishamkhani_ir, secretary of Iran’s Supreme National Security Council, 11:34am, 9 June 2022.

[4] In March, citing an IRGC-claimed missile strike in Erbil and attacks by the Iran-backed Huthi rebels in Yemen on Saudi Arabia and the UAE, the Treasury Department blacklisted one individual and four companies engaged in ballistic missile-related procurement. “Treasury sanctions key actors in Iran’s ballistic missile program”, U.S. Treasury Department, 30 March 2022. Subsequent designations in May, June and July focused on oil and petrochemical networks. See “Treasury targets oil smuggling network generating hundreds of millions of dollars for Qods Force and Hizbollah”, U.S. Treasury Department, 25 May 2022; “Treasury targets international sanctions evasion network supporting Iranian petrochemical sales”, U.S. Treasury Department, 16 June 2022; “Treasury targets Iranian oil and petrochemical trade network”, U.S. Treasury Department, 6 July 2022; and “Treasury targets companies supporting Iranian petrochemical conglomerate”, U.S. Treasury Department, 1 August 2022.

[5] Joe Biden, “Why I’m going to Saudi Arabia”, Washington Post, 9 July 2022; and “Biden says he would use force as ‘last resort’ to keep Iran from nuclear weapons”, Reuters, 13 July 2022.

[7] Ellen Nakashima and Joby Warrick, “Iran sends first shipment of drones to Russia for use in Ukraine”, The Washington Post, 29 August 2022; and “Treasury sanctions Iranian persons involved in production of unmanned aerial vehicles and weapon shipment to Russia”, U.S. Treasury Department, 8 September 2022. The Albanian government had on 7 September severed ties with Iran over a July cyberattack that the U.S. condemned as “reckless and irresponsible”; Iran’s foreign ministry maintained that “as one of the countries that have been the target of cyber attacks on its critical infrastructure, the Islamic Republic of Iran rejects and condemns any use of cyberspace as a means to attack the infrastructure of other countries”. “Videomessage of Prime Minister Edi Rama”, Albania Prime Minister’s Office, 7 September 2022; “Statement by NSC Spokesperson Adrienne Watson on Iran’s cyberattack against Albania”, White House, 7 September 2022; Iranian foreign ministry spokesperson quoted in “Iran rejects Albania claims for cutting ties as unfounded”,  Mehr News Agency, 7 September 2022; and “Treasury sanctions Iranian Ministry of Intelligence and Minister for malign cyber activities”, U.S. Treasury, 9 September 2022.

Israel … has been calling for a more explicit threat of force as the only way to convince Iran to make diplomatic concessions.

Israel, though not a party to the deal, has strong views about it and its capacity to shape regional dynamics; in recent months, Israel appears to have escalated its campaign of covert operations in Iran and has been calling for a more explicit threat of force as the only way to convince Iran to make diplomatic concessions.[57] Notwithstanding internal disagreements over the merits or demerits of restoring the JCPOA, the Israeli government’s stated view of what would constitute a satisfactory accord remains more sweeping than a mere compliance-for-compliance exchange.[58] As a senior Israel official put it, “We want an acceptable framework of agreement, not the JCPOA, which gave Iran’s nuclear program legitimacy and merely limited its scale. We still think a deal is possible, but the way to reach it is to create a crisis. Deterrence can also quickly produce effects. Iran needs to feel that the regime is in danger”.[59]

Gradual escalation over the past few months has created in both Tehran and Washington the belief that the “no deal, no crisis” status quo is sustainable, but the reality is that both sides are operating on a knife edge.[60] As both have used so much leverage already – with the “maximum pressure” campaign, on Washington’s part, and Tehran’s “maximum resistance” response – there may be little space left for measures that would not provoke a major escalation. Because of advances in Iran’s nuclear program, its breakout time, which is the amount of time needed for Iran to enrich enough fissile material to weapons-grade level for one nuclear weapon, now stands at a mere four days and is shrinking.[61] (When it was being observed, the deal had extended the time from four to over twelve months.)

In parallel, given limits on its monitoring of Iranian facilities, the IAEA’s “continuity of knowledge” about what has and is happening at those sites, which is essential for its ability to account for all nuclear material and equipment in Iran, is increasingly imperilled.[62] “If there is an agreement, it is going to be very difficult for me to reconstruct the puzzle of this whole period of forced blindness”, Grossi has indicated. “It is not impossible, but it is going to require a very complex task and perhaps some specific agreements”.[63]

[1] Prime Minister Yair Lapid said, “Diplomacy will not stop them. … The only way to stop them is to put a credible military threat on the table”. Quoted in “PM Yair Lapid’s remarks alongside President of the United States Joe Biden”, Prime Minister’s Office, 14 July 2022.

[2] Ronen Bergman, “Israeli security officials are divided over Iran nuclear deal”, The New York Times, 14 July 2022.

[3] Crisis Group interview, Jerusalem, July 2022.

[4] One U.S. official said the lack of concern on both sides about the growing peril is akin to a “frog in boiling water”. Crisis Group interview, Washington, May 2022.

[5] Crisis Group calculations, based on the fact that Iran has now installed several hundred IR-6 centrifuges and possesses enough 60 per cent enriched uranium for one nuclear weapon if it were enriched to weapons grade. While Western governments still use the “few weeks” timeline, others have gloomier projections. See Paul Kerr, “Iran and Nuclear Weapons Production”, Congressional Research Service, 25 July 2022; and David Albright and Sarah Burkhard, “Iranian Breakout Time Now at Zero”, Institute for Science and International Security, 1 June 2022. Moreover, Iran’s installation of advanced IR-6 centrifuges with modified subheaders allows it to switch the centrifuge cascade's uranium enrichment level much more quickly. “Tehran does not have a legitimate civilian purpose for installing centrifuges in this configuration, which is more suited to rapidly ratcheting up enrichment for weaponisation purposes”. Crisis Group correspondence, Kelsey Davenport, director for nonproliferation policy, Arms Control Association, 10 August 2022.

[6] In what was supposed to be a stopgap measure, Iran and the IAEA in February 2021 agreed to instal cameras in facilities to which the agency no longer had regular access, so that the IAEA could reconstruct the timeline of Iran’s activities and re-establish a baseline for inspections once the JCPOA was restored. “Joint Statement by the Vice-President of the Islamic Republic of Iran and Head of the AEOI and the Director General of the IAEA”, IAEA, 21 February 2021.

[7] Grossi, quoted in “Iran’s nuclear programme is ‘galloping ahead’, IAEA chief says – El Pais”, Reuters, 22 July 2022. The IAEA’s latest quarterly report on Iran’s nuclear activity notes that should the JCPOA be restored, the Agency would have “to apply additional safeguards measures and Iran would need to provide comprehensive and accurate records” to ensure a complete and correct account of activities since Iran restricted its oversight in February 2021. GOV/2022/39, IAEA, 7 September 2022. A parallel report on safeguards noted: "The Director General is increasingly concerned that Iran has not engaged with the Agency on the outstanding safeguards issues during this reporting period, and, therefore, there has been no progress towards resolving them... The Agency is not in a position to provide assurance that Iran's nuclear programme is exclusively peaceful". GOV/2022/42, IAEA, 7 September 2022. 

The combination of continued nuclear development and limited visibility is such that in theory Iran could ... manufacture a weapon without the IAEA’s knowledge.

The combination of continued nuclear development and limited visibility is such that in theory Iran could, for the first time since the crisis over its nuclear program began in 2003, break out and divert fissile material to an unmonitored facility where it could manufacture a weapon without the IAEA’s knowledge. That said, neither the IAEA nor any U.S. or allied intelligence service has publicly said Iran is trying to build a bomb.[64]

Should the U.S. or its European allies conclude that negotiations have run their course, they may avail themselves of the JCPOA’s snapback mechanism, under which parties to the agreement may reimpose UN sanctions. It would likely be France or the UK, both of which are permanent members of the UN Security Council who remain party to the deal, that takes this action. The two countries might also jointly snap back pre-2015 UN sanctions enacted under Chapter VII of the UN Charter, which in the eyes of some countries would turn Iran once more into a pariah state.[65] The mechanism is designed to bypass blocking efforts by other JCPOA participants, but it seems fair to assume that Russia and perhaps China, if opposed, would do what they can to make the process contentious and portray it as illegitimate.

Snapback, in turn, could lead to a worrying response on Iran’s part. Tehran has threatened before that such a step might prompt it to withdraw from the Nuclear Non-Proliferation Treaty (NPT), which obligates non-nuclear-weapon state parties not to acquire nuclear weapons.[66] Such action – even in the absence of concrete evidence of steps toward weaponisation – in turn might convince Israel and/or the U.S. to strike Iran’s nuclear facilities in order to pre-empt any further move toward building a bomb.[67] That Iranian leaders seem broadly dismissive of the threat of military confrontation is even more troubling as it suggests too high a risk of miscalculation or misjudgement.[68]

Developments beyond the realm of the nuclear negotiations could also quickly lead to escalation. A former senior Iranian official suggested that “it [will only] take another assassination of an Iranian nuclear scientist or sabotage of an Iranian nuclear facility for Iran to enrich to 90 per cent or kick out the UN inspectors”.[69] Frictions between Israel and Iran are growing, with reports of near-misses in Iranian-ordered operations against Israeli nationals abroad an indicator of the escalatory dynamic between the two states.[70] More broadly, in the Middle East, what a senior U.S. commander described in July as a “period of stasis” in the U.S.-Iranian standoff could quickly unravel in places where Washington, Tehran and their respective allies have crossed swords in past years. Recent flare-ups between U.S. and Iran-backed forces in Syria, as well as a spate of naval encounters, offer potent reminders of the fluid and combustible regional picture.[71]

[1] Kelsey Davenport, “The last chance to restore compliance with the 2015 Iran nuclear deal”, Arms Control Association, 13 July 2022. In July, CIA Director William Burns indicated that “our best intelligence judgment is that the Iranians have not resumed the [nuclear] weaponisation efforts that they had under way up until 2004”. Quoted in “UK spy chief doubts Iran supreme leader will back nuclear deal”, Agence France Presse, 21 July 2022.

[2] For background, see Crisis Group Middle East Report N°218, Iran: The U.S. Brings Maximum Pressure to the UN, 19 August 2020.

[3] Crisis Group telephone interviews, Iranian officials, March-July 2022. Iranian hardliners have been advocating for this measure for a long time. See “Shariatmadari: Iran’s only solution is to use the NPT’s Article X to withdraw from the treaty”, Fars News, 7 June 2022. The only country to withdraw from the NPT is North Korea, which did so in 2003 ahead of its first nuclear weapons test three years later.

[4] The fact that senior Iranian officials are increasingly hinting at the country’s capability to develop nuclear weapons, an objective they deemed religiously forbidden and had consistently denied pursuing in the past, adds to these concerns. Jon Gambrell, “Analysis: Iran now speaking openly on nuclear bomb prospects”, Associated Press, 4 August 2022.

[5] An Iranian official insisted, “Israel can’t and the U.S. won’t strike Iran. They know the consequences are too horrible to fathom”. Crisis Group telephone interview, Tehran, July 2022. Another official in Tehran noted, “The U.S. is trying to diminish its footprint in the region, not to enlarge it. We hear the bark, but we know there is not going to be any bite”. Crisis Group telephone interview, July 2022.

[6] Crisis Group telephone interview, July 2022.

[7]Iranian plot in Turkey reportedly targeted Israel’s ex-consul to Istanbul”, The Times of Israel, 1 July 2022; Najmeh Bozorgmehr, “Israeli attacks feed distrust and fear in Iran”, Financial Times, 19 July 2022; Suleiman Al-Khalidi, “Israeli attacks squeeze Iranian aerial supplies to Syria, sources say”, Reuters, 2 September 2022.

[8] Lieutenant General Alexus Grynkewich, quoted in Isabel Debre, “Air force official expects Iran to resume attacks on U.S.”, Associated Press, 21 July 2022. Following attacks by what the White House described as “Iran-backed militia groups” against two U.S. bases in Syria, the U.S. carried out airstrikes in eastern Syria; further exchanges between U.S. forces and “Iran-affiliated militants” resulted in three U.S. injuries and several militia fatalities. “Letter to the Speaker of the House and President pro tempore of the Senate consistent with the War Powers Resolution (Public Law 93-148)”, White House, 25 August 2022; and “CENTCOM forces engage militants in north east Syria”, U.S. Central Command, 25 August 2022. Iranian naval forces also took a trio of U.S. unmanned surface vessels, again releasing them as U.S. air and sea craft responded. “U.S. Navy foils Iranian attempt to capture unmanned vessel in Arabian Gulf”, U.S. Naval Forces Central Command Public Affairs, 20 August 2022; and Jon Gambrell, “Iran briefly seizes 2 US sea drones in Red Sea amid tensions”, Associated Press, 2 September 2022. For additional coverage of Iran-U.S. flashpoints, see Crisis Group’s “Iran-U.S. Trigger List”.

III. Planning for a Post-JCPOA Reality

When the EU reconvened the JCPOA stakeholders in early August for deliberations about a compromise, it gave the deal what could be a last lease on life, though neither side came to Vienna burdened by excessive optimism.[72] At the talks’ conclusion, High Representative Josep Borrell noted: “What can be negotiated has been negotiated, and it’s now in a final text. However, behind every technical issue and every paragraph lies a political decision that needs to be taken in the capitals”.[73] Still, whatever glimmer of progress emerged from the days of discussions is tempered by the reality that the political decisions to which Borrell referred, notably as they relate to Iran’s willingness to soften its position on the IAEA investigation and U.S. guarantees, remain far from certain to converge on common ground.[74] Any commitment sought by Tehran that subverts the IAEA’s technical mandate is unlikely to fly for the reasons noted above. With respect to guarantees, there is little the Biden administration can offer: it simply cannot make commitments that extend beyond its time in office. More negotiations will not change these facts.[75]

Timing is also a consideration. Whatever measure of momentum has been reinjected into the negotiations may prove short-lived if the parties do not seize it quickly. Each passing day makes the technical text crafted in Vienna more challenging to carry out, particularly with the IAEA’s monitoring so severely hampered. Sands in the political hourglass also work against a resolution. The Biden administration may be increasingly reluctant to proceed with an agreement that will prompt heated congressional debate as November’s midterm elections loom.[76] At the same time, if midterm elections place Republicans hostile to the deal in charge of one or both houses of Congress, Iran may worry that the legislators’ harassment will derail the deal’s implementation, and decide to spare itself the hassle.[77] The leadership in Tehran may prefer to wait and see who the next U.S. president will be in 2025. Iran also has its own presidential election coming up in 2025, which is likely to create further delays.

Although there is still a chance for the Vienna process to generate a successful outcome by year’s end, there is also reason to fear that the current framework may soon be acknowledged as no longer fit for purpose, with the gaps over safeguards, sanctions and guarantees too wide to bridge, and the distrust between the U.S. and Iran too deep to overcome. As such, it is time for the parties to seriously consider alternatives that could help prevent a dangerous escalatory spiral.

[1] The lead U.S. negotiator asserted, “Our expectations are in check. … [I]t will shortly be clear if Iran is prepared to negotiate in good faith”. Tweet by Robert Malley, @USEnvoyIran, U.S. special envoy for Iran, 10:47am, 3 August 2022. His Iranian opposite number maintained: “The onus is on those who breached the deal”. Tweet by Ali Bagheri-Kani, @Bagheri_Kani, deputy foreign minister of Iran, 12:28pm, 3 August 2022.

[2] Tweet by Josep Borrell, @JosepBorrellF, 11:50am, 8 August 2022. A senior European diplomat said, “We addressed several technical issues based on developments on the ground that required updating the draft that Borrell submitted to the parties on 21 July. For instance, we agreed on how to reinstall IAEA’s cameras that Iran removed in June and what to do with small amount of 60 per cent enriched uranium that Iran has turned into metal and irradiated. Overall, we didn’t touch more than four to five paragraphs in the nearly 25-page document”. Crisis Group telephone interview, 8 August 2022. As for the text, while the EU referred to it as “final”, Iran and Russia indicated that it remains negotiable. A senior Iranian official said, “The fact that the EU negotiator publicly announced that the text is final and non-negotiable is seen in Tehran as a tool to pressure Iran into accepting it, which means that we now have to demand additional changes”. Crisis Group telephone interview, 10 August 2022. The Russian negotiator wrote, “The Russian #MFA: according to the #EU spokesman the participants in the #ViennaTalks face a choice – either to accept the current text or to recognise that the talks failed. The Joint Commission of the #JCPOA didn’t authorise the EU coordinator to make statements like that”. Tweet by Michael Ulyanov, Russian permanent representative to international organisations in Vienna, @Amb_Ulyanov, 10:12am, 11 August 2022.

[3] A European official said, “The delay in finalising the talks stems from the psychology that each side believes the other needs the deal more. This is compounded by the fact that both sides constantly misread each other’s timelines”. Crisis Group telephone interview, 1 September 2022. See also “Iran is in no rush to restore the JCPOA – The U.S. and Europe need the deal”, Kayhan, 26 August 2022 (Persian).

[4] Hardline Kayhan wrote, “So far, the Vienna talks have not reached a stage that would satisfy Iran’s national interest or benefit Iran economically. They remain inconclusive on the four key issues [ie, safeguards, sanctions relief, guarantees and sequencing]”. See “So-called reformists should not interpret extortion as agreement”, Kayhan, 10 August 2022 (Persian).

[5] Crisis Group interviews, U.S. officials, Washington, July-August 2022. The 2015 Iran Nuclear Agreement Review Act (INARA) requires renewed congressional scrutiny in case of any change to the JCPOA or any new agreement with Iran. Public Law 114–17, Federal Register, 22 May 2015. If such a deal is reached, the White House has a five-day window to transmit the contents to Congress, which then has 30 days to review them. If the Senate and House of Representatives are against the deal, the president could veto any legislative effort within twelve days to block it and resist a veto override effort during the subsequent ten days if supported by one third of lawmakers. The State Department indicated in May that should a deal be concluded, “pursuant to INARA, it is our intention to submit it for a congressional review if – and it’s a big if – there is a mutual return to compliance with the JCPOA”. “Department Press Briefing”, U.S. State Department, 25 May 2022.

[6] Republican senators have promised to once again undermine the deal. Patricia Zengerle, “U.S. Republican senators say they will not back new Iran nuclear deal”, Reuters, 14 March 2022. A recent example of such attempts is a proposed bill that would eliminate the sunset provision of the Iran Sanctions Act, currently set to expire on 31 December 2026, entirely. “Scott, colleagues introduce bill to solidify U.S. sanctions on Iran”, press release, Office of Senator Tim Scott, 10 August 2022. An adviser to Iran’s Supreme Leader said, “Biden’s situation is not good and the Republicans are likely to come back to power. Thus, it is probable that the U.S. would exit the JCPOA again. The serious question facing us is whether it is expedient for Iran to agree to a deal that would slow down our current economic progress only to disrupt it again”. See “Kamal Kharrazi: It doesn’t seem that the JCPOA will prompt a major economic boon”, Fararu, 19 July 2022 (Persian).

A. Dealing with No Deal

In a post-JCPOA era, the parties should try to manage tensions within the framework of a broadly scoped new deal, a narrower new arrangement or a series of one-off agreements on specific issues. They could also seek to build confidence by resolving longstanding humanitarian issues. The range of options includes:

  • More-for-more. Given that both the U.S. and Iran seek gains that the other side regards as exceeding JCPOA parameters, they could discuss these demands as part of an arrangement that widens the scope of negotiations. The Biden administration’s desire for a “longer and stronger” deal that strengthens non-proliferation provisions, including by extending nuclear restrictions that under the JCPOA phase out over time (“sunsets”), and more rigorous monitoring is matched by Iran’s wish for a deal that entails more extensive, verifiable and sustainable economic dividends. Even in the current negotiations, Iran asked for relief from U.S. primary sanctions, which apply to U.S. persons and entities.[78] The JCPOA did not touch upon these, except in a few minor areas, and present negotiations likewise grapple mainly with secondary sanctions.[79] As Crisis Group has suggested in the past, a follow-on agreement to a revived JCPOA or one that is negotiated in the absence of restoration should include both more stringent conditions for withdrawal, enshrined in an exit clause (which the JCPOA lacks), and higher costs for the party that violates the deal.[80] 

    Yet shifting to a more substantial set of discussions over a more-for-more arrangement is difficult to envision when talks about reviving the existing baseline understanding (that is, the JCPOA itself) have been so fraught. Iran’s refusal to negotiate directly with the U.S. and the increasingly tense relations between Russia and the West add layers of complexity. Even if accepted in principle by both sides, what is likely to be a prolonged and difficult dialogue would still need to first address immediate non-proliferation concerns, with the entire process remaining at the mercy of regional escalation.
     
  • Less-for-less (interim deal). Another option would be to shift talks to a more limited interim agreement focused on the most proliferation-sensitive activities Iran is undertaking (eg, seeking to reduce the level of uranium enrichment), along with the restoration of IAEA monitoring and verification, in return for relief from U.S. sanctions on oil exports and/or the release of frozen assets. Such an approach would have the benefits of capping the growing nuclear crisis and giving the U.S. and Iran the capacity to present to domestic critics that they have conceded little, while bypassing the thorny questions of sanctions relief guarantees or sunsets on nuclear limitations.

    There is precedent. Iran and world powers reached an interim agreement in November 2013 that opened breathing space for negotiating the comprehensive accord concluded in July 2015.[81] But at the time, the U.S. and Iran negotiated the understanding for the most part through a secret bilateral channel in Oman, and both sides had the political will to freeze the escalatory dynamics. These ingredients are now in short supply, especially in Tehran: indeed, both sides contemplated an interim deal in February-March 2021 before Iran dismissed the idea in favour of pursuing full JCPOA restoration; it was broached again in December, but Iran did not accept.[82] The flip side to having conceded less is also having delivered, on the U.S. side, fewer nuclear restrictions than the JCPOA, and on the Iranian side, only partial sanctions relief.

    Many diplomats observing the negotiations do not believe a less-for-less deal is realistic under present circumstances. One senior European official said it would be “impossible”, citing the likely complications of finding a mutually acceptable set of commensurate quid pro quos.[83] The West would likely demand that Iran freeze enrichment beyond 5 per cent, blend down its stockpile of uranium enriched to 60 per cent, refrain from producing and installing additional advanced centrifuges, halt uranium metallurgy work and restore the IAEA’s enhanced monitoring.[84] Yet for Iran, these are key sources of leverage that it will want to have to strengthen its hand in negotiations. It is unlikely to give them away for anything short of a price that would in all likelihood be prohibitive for Washington, not least because any resulting deal would be notified to Congress.[85]

  • Single-measure deal. If the less-for-less option comprises multiple measures in one package, its most modest version would be a single-measure exchange that helps manage tensions and keeps the diplomatic path open. For example, Iran could dilute its existing uranium stockpile enriched at 60 per cent, which is near weapons-grade, in return for the U.S. partly unfreezing Iran’s assets abroad; or Iran could restore the IAEA’s enhanced access as devised in the JCPOA in return for the U.S. lifting restrictions on Iran’s oil exports.

    Pursuit of this option entails some of the same difficulties as an interim deal, namely lack of face-to-face contacts, mismatched expectations and domestic political pushback; it will be a challenge convincing Iran to roll back what it sees as its key nuclear leverage for limited financial returns. Conceivably, however, its scope would not reach the threshold of the 2015 Iran Nuclear Agreement Review Act, which requires U.S. congressional review of any new deal with Iran.[86] If successful, the parties could then pursue a series of similar single-measure deals that would eventually bring them to the outcome that a direct attempt at an interim agreement might have produced.

  • Humanitarian deal. There are four U.S.-Iranian dual nationals detained in Iran, while more than a dozen Iranians are in U.S. jails on various charges.[87] The terms of a four-for-four prisoner swap are almost complete – it reportedly also includes Iran receiving some access to its frozen assets in South Korea – but deadlock in the JCPOA talks has hindered the parties in carrying it out.[88] Iran and the U.S. could revive this understanding and wrap it into any of the abovementioned options. Should they fail with respect to those options, they should consider making the swap anyway given humanitarian exigencies, and because securing at least this one understanding could usher in an atmosphere more conducive to talks on political matters.

[1] The Raisi administration also wants to outperform its predecessor by extracting more concessions from the U.S. Crisis Group telephone interviews, current and former Iranian officials, January-August 2022.

[2] Primary sanctions apply to U.S. persons and entities, while secondary sanctions extend to non-U.S. actors. One benefit of lifting the primary sanctions from Iran’s perspective would be to enable currency conversion and limited access to the U.S. financial system to facilitate Iran’s banking transactions. Crisis Group telephone interviews, Iranian negotiator, February-March 2022.

[3] See Crisis Group Report, The Iran Nuclear Deal at Six, op. cit.

[4]Joint Plan of Action” (JPOA), IAEA, 24 November 2013.

[5] A senior White House official said, “The key advantage of an interim agreement is that it does not have sunsets”. Crisis Group interview, Washington, June 2022. But an Israeli official warned that “the problem with an interim agreement, which imposes fewer constraints on Iran’s nuclear program, is that it could become permanent”. Crisis Group interview, Washington, November 2021.

[6] The diplomat added, “We went around in circles over this question in early 2021”. Crisis Group interview, Brussels, 14 June 2022.

[7] Crisis Group interviews, U.S. and European officials, Washington, March 2021-July 2022.

[8] A former U.S. official said, “The price will be indistinguishable from that of a full return to the JCPOA, but the benefit will be even less than a restored JCPOA, which the critics already call a ‘shorter and weaker’ deal”. Crisis Group interview, Washington, 24 July 2022. See also Lahav Harkov and Anna Ahronheim, “Bennett: Shorter, weaker Iran deal may be coming soon”, Reuters, 20 February 2022.

[9] Crisis Group interviews, current and former U.S. officials, Washington, June-July 2022.

[10] Stephen Kalin, “Iran prisoners’ families ask Biden to push for their release as chances of a deal dim”, The Wall Street Journal, 12 May 2022; Siamak Namazi, “I’m an American. Why have I been left to rot as a hostage of Iran?”, The New York Times, 29 June 2022; and “