What’s new? The U.S. is threatening to withdraw from the 2015 nuclear accord with Iran if what it calls the deal’s “disastrous flaws” are not fixed by 12 May. Europe is scrambling to placate Washington without alienating Tehran, but the prospects appear dim.
Why does it matter? U.S. withdrawal from the deal might kill it instantly; more uncertainty over the deal’s fate might suffocate it, as opinion in Tehran is turning against it. Iran could cancel the deal; target the U.S. or its Middle East-ern allies; or leave the Nuclear Non-Proliferation Treaty – all exacerbating the regional turmoil.
What should be done? Europe should develop a plan B to keep Iran party to the deal regardless of what the U.S. does on 12 May. This plan should include short- and medium-term measures to build trade with Iran, contingent upon verification of continued Iranian compliance with the deal and additional re-forms.
The nuclear agreement between Iran and the P5+1 (also known as the E3/EU+3) is beginning to look like a pyrrhic victory. U.S. President Donald Trump has had the 2015 Joint Comprehensive Plan of Action (JCPOA) in his crosshairs since taking office in January 2017. A year into his term, he declared that unless the U.S. Congress and European allies addressed the deal’s “disastrous flaws” by 12 May 2018, the U.S. would withdraw from it despite Iran’s ongoing, independently verified compliance. Amid rising tensions in the region, Israel has once again alleged that Iran has neither come clean about its past nuclear activities nor abandoned its nuclear weapons ambitions. Europe has made last-ditch efforts to meet Trump’s challenge. But it may very well need a backup plan to salvage the nuclear deal if the U.S. withdraws or carries out its part of the bargain half-heartedly.
Negotiators for the U.S. and the UK, France and Germany, collectively known as the E3, have made progress toward accommodating the White House’s concerns. In the last week of April, French President Emmanuel Macron and German Chancellor Angela Merkel were in Washington to give talks a final push. Yet, notwithstanding the rollercoaster quality of Macron’s visit (first suggesting an understanding might be struck, saying there is no “plan B”, then dashing hopes the following day), at this writing the success of their entreaties is highly questionable. Indeed, even were Trump to accede, uncertainty will likely continue to hover over the accord, economic benefits to Iran will therefore dwindle, and Tehran’s incentives to remain in the deal will diminish.
Since Trump’s ultimatum, negotiators have discussed four main concerns: Iran’s ballistic missile program, its regional policies, the inspection of Iranian nuclear sites and so-called sunset clauses contained in the JCPOA, which refer to time-limited restraints on Iran’s nuclear capabilities. The contours of a transatlantic understanding have emerged, particularly on the first three items. But the E3 insist they will not unilaterally change the JCPOA’s terms, which means that – contrary to the White House’s demand – they will not agree to automatically punish Iran if it expands its nuclear activities in ways consistent with the deal’s terms. They also are unconvinced that Trump will ever abide by a deal he has consistently derided. In fact, they fear he will reject whatever compromise the negotiators reach.
Tehran has left no doubt as to its determination to respond if the U.S. reimposes sanctions.
President Trump’s administration has four broad options: reach some kind of understanding with the E3 that includes U.S. compliance with the JCPOA and continued waiving of U.S. nuclear-related sanctions on Iran; postpone a decision by waiving sanctions once more to allow for additional negotiations with the E3; refuse to waive sanctions but delay their imposition, again to allow for additional negotiations with the E3; or withdraw from the deal, refusing to waive sanctions and beginning penalising those who violate them. The first option would be the best but also, based on what Macron said at the tail end of his visit, and given Israel’s recent accusations, the least likely. As for the other three, they range from the undesirable to the frankly destructive. Each would, at a minimum, mean the damaging ambiguity surrounding the nuclear deal’s fate would persist.
Absent from the deliberations are Russia, China and Iran. Moscow and Beijing have both expressed continued support for the accord. As for Tehran, it has left no doubt as to its determination to respond if the U.S. reimposes sanctions; there is greater uncertainty as to how it would react to a U.S./E3 agreement that preserves the JCPOA but sanctions its missile program and regional activities, suggests a tough U.S./E3 line toward Iran’s future nuclear program, and insists on negotiating a broader deal addressing all those issues. Iranian leaders bitterly criticised Macron’s suggestion of a U.S./E3 push for a broader agreement with Iran covering all those matters, seeing it as rewarding the U.S.’s threats to exit the deal by appeasing Trump rather than simply insisting on Washington’s full compliance.
Without a European initiative vis-à-vis Tehran ... the deal either will expire instantaneously or die a slow death.
Views vary in Tehran, but those who advocate continued adherence to the deal and attempting to drive a wedge between Europe and the U.S. are losing ground. Iran’s reaction to a U.S. withdrawal or to what it perceives as a hostile U.S./E3 understanding could be to violate its own JCPOA commitments; respond asymmetrically against U.S. forces or assets in the Middle East; or, in the most extreme version, withdraw from the deal and go even further by pulling out of the Nuclear Non-Proliferation Treaty (NPT). As talks with the U.S. continue, the E3 should be careful not to act in ways that will be read in Tehran as moving the goalposts given Iranian domestic dynamics: opinion is rapidly turning against any additional compromises with what Tehran views as a mercurial U.S. and an unreliable Europe.
At this point, it appears that without a European initiative vis-à-vis Tehran – and barring a last-minute understanding with Washington that meaningfully preserves the JCPOA – the deal either will expire instantaneously or die a slow death. To minimise these risks, the E3 should cease focusing solely on keeping the U.S. in compliance with the JCPOA; it should also devise a means of keeping Iran on board even if the U.S. is not. As the E3 continue discussions with the U.S. until the 12 May deadline, they should develop a plan B to roll out if a compromise agreement proves elusive or the U.S. keeps chipping away at the JCPOA’s intended dividends for Iran. This contingency plan could succeed if the E3 present it to Iran as an economic cooperation package with short- and medium-term components. Of course, such an effort would be conditioned on Iran’s continued compliance with the JCPOA and meaningful action toward reforming its financial institutions and de-escalating tensions in the region.
A unilateral U.S. withdrawal would doubtless deal a serious blow to the JCPOA. Proactive E3/EU steps could ensure it is not fatal.
Washington/Brussels, 2 May 2018
U.S. President Donald Trump came into office as a staunch Joint Comprehensive Plan of Action (JCPOA) critic.Some thought he would abrogate the deal immediately or during the first year of his presidency. He did not, due at least in part to warnings from his national security team about adverse diplomatic repercussions of a unilateral – and given Iran’s compliance, unjustified– withdrawal. Another reason he stayed his hand was an inter-agency strategic review of U.S. policy toward Iran that took nearly ten months to complete. In the meantime, his administration continued to issue periodic, congressionally mandated certifications of Iran’s compliance and extend nuclear sanctions relief, while in parallel designating new Iranian individuals and entities for non-nuclear U.S. sanctions and withholding licences for commercial agreements allowed under the JCPOA.The strategic review laid out a broadly pressure-centric policy toward Iran; in tandem, the president refused to certify the JCPOA on the grounds that sanctions relief had been disproportionate to steps Iran had taken to implement the deal.
This decision placed the deal’s fate into the hands of the U.S. Congress, which had the power – under the 2015 Iran Nuclear Agreement Review Act (INARA) – to use an expedited process to restore U.S. nuclear-related sanctions by a simple majority.Yet Congress, reluctant to alienate such key U.S. allies as the E3, instead attempted to put in place an automatic snapback mechanism in case Iran were to expand its nuclear program after some of the JCPOA-imposed restraints lapse between 2026 and 2031.The effort ran aground when most Democrats and key Republicans proved loath to consider measures that risked jeopardising European support and could put the U.S. in violation of the JCPOA.Instead, Congress effectively threw the ball back into the E3’s court, with the Republican leadership telling the administration that if it reached a deal with the E3, they would be happy to legislate that agreement.
By January, Trump, who had long expressed distaste for his predecessor’s every achievement, had run out of patience and his national security team seemingly out of excuses to buy time.While renewing U.S. sanctions waivers on 12 January, he declared that unless Congress and Europe addressed several “disastrous flaws” in the agreement, he would no longer extend sanctions relief but pull the U.S. out of the agreement. “This is a last chance”, the president warned.The announcement triggered a 120-day deadline to meet the White House’s terms to “fix” the JCPOA before 12 May 2018.
II. Between a Rock and a Hard Place
President Trump’s declaration put the burden of alleviating the U.S. administration’s concerns on Europe’s shoulders.The E3 evinced surprise. A senior European official noted: “It didn’t make much sense for U.S. negotiators to try to address with us what they could not get agreement on with their own Congress”.
Nonetheless, the E3 believed that even if the path through which the U.S. could remain party to the deal was narrow, it was incumbent upon them to explore whether a compromise consistent with the JCPOA was reachable.The ultimatum created a sense of urgency.Between February and April, the U.S. and E3 negotiators met four times, in London, Paris, Berlin and Washington, to address U.S. concerns within and beyond the JCPOA.
While the quartet’s discussions dismayed other JCPOA participants, there was a high degree of harmony among the E3.Moreover, transatlantic talks showed there was considerable common ground concerning Iran’s ballistic missile program and its Middle East policies.Both sides could agree on imposing tough penalties on any Iranian move toward developing intercontinental ballistic missiles (ICBMs); on enforcing strict export controls and responding jointly to Iran’s testing of short- and medium-range missiles capable of carrying a nuclear warhead; and on pushing back against what they see as Iran’s regional meddling. There is likewise apparent consensus on steps related to efforts by the International Atomic Energy Agency (IAEA): that it should vigorously verify Iranian compliance; receive from the E3 and U.S. timely intelligence regarding suspicious activities at Iranian military or nuclear sites; and rigorously enforce the JCPOA’s access provisions.A senior European official said, “we are going very far but, honestly, it is justified, regardless of the JCPOA. We were awakened to the magnitude of what Iran is doing”.
It’s totally unrealistic to believe that Iran will accept perpetual limits on its sovereignty.
The four countries also made progress on the most contentious issue, the JCPOA’s so-called sunset clauses – ie, the fact that several, albeit not all, restrictions on Iran’s nuclear program will expire at some point. Critics, the U.S. administration among them, claim that the expiry provides Iran with a pathway to building nuclear weapons over time.The U.S. has been seeking an E3 commitment to automatically reimpose sanctions if Iran, although acting in compliance with the JCPOA, expands its nuclear program after certain constraints go away.For the E3, however, this step would be tantamount to a violation – even if a deferred one – of the JCPOA, which contemplates the normalisation of Iran’s civilian nuclear program after a confidence-building period that ends gradually between 2026 and 2031. A senior Iranian official said, “the question of duration was the toughest in the talks. We wanted two years and the U.S. wanted twenty. We compromised and now will agree to neither a one-sided change nor a renegotiation [of this clause]. It is either all or nothing”.As a French official put it, “it’s totally unrealistic to believe that Iran will accept perpetual limits on its sovereignty”.
Instead, the E3 have said they are willing to reassert their determination not to allow Iran to acquire a bomb and to judge Tehran’s intentions by assessing a range of factors, including whether its nuclear program was commensurate with its civilian needs for nuclear fuel.In other words, the U.S. and E3 would seek to define indicators of a potential Iranian move toward nuclear weapons. They would also agree on what they would and would not provide Iran in terms of nuclear-related technology after those constraints expire.Finally, they would consent to a U.S.-E3 review after a few years to assess Iran’s intent.
In return for their cooperation with the U.S., the E3 would want the Trump administration to stabilise the JCPOA by halting the cycle of uncertainty that derives from the administration having to certify Iranian compliance or extend sanctions relief at frequent intervals. They also seek a firm commitment that the U.S. will issue licences for legitimate business in Iran and put a stop to U.S. Treasury officials explicitly discouraging such commerce, in contravention of the JCPOA.
By late April, a mutually acceptable compromise seemed within reach, with a few brackets remaining over the key question of the sunset clauses. Even if the differences were bridged, however, it remains unclear whether a compromise would satisfy Trump.His April 2018 decision to bring ardent JCPOA opponents into key national security posts bodes ill. Both the new national security advisor, John Bolton, and the new secretary of state, Mike Pompeo, have in the past openly favoured abrogating the agreement, a military strike on Iran and regime change.Indeed, in dismissing his first secretary of state, Rex Tillerson, Trump specifically cited the JCPOA as one area of disagreement: “I wanted to either break it or do something, and he felt a little bit differently”.As seen from Europe, these changes at the top portend a growing hawkishness and cast a shadow over the viability of putative U.S.-E3 compromise on the JCPOA, even though the talks have made progress in the interim.
The Trump administration’s problem is not with the deal; it’s with the Islamic Republic of Iran.
Some European officials are sceptical that the administration’s ultimate goal is to improve the accord. They believe its aim is to restore maximum coercive pressure on Iran in order to change not only that country’s behaviour, but also its regime. In that reading of Trump’s intentions, the JCPOA is an obstacle. As a French official put it, “the truth is that the Trump administration’s problem is not with the deal; it’s with the Islamic Republic of Iran. We are in 2018, but the U.S. is stuck in 1979”.Trump seems to have bought into Israeli Prime Minister Benjamin Netanyahu’s argument that because little investment has flowed into Iran thus far, the time to cut it off is now, before European firms develop a strong financial interest in the country being open. Withdrawing from the JCPOA and increasing pressure on Iran might also satisfy the president’s political base ahead of U.S. midterm elections in November.Should Trump decide to leave the JCPOA, his approach arguably would enable him to pin responsibility on the E3. As a Republican senator mused, “Trump is in the ‘catbird seat’. He’ll be able to blame Europe if a ‘fix’ fails to emerge, and whether or not this is fair, his base is likely to buy it. Internationally, perceptions may be different, but that is not Trump’s concern”.
Macron engaged in a last-ditch effort to sway Trump during his visit to Washington. In what appeared to be a somewhat new approach, the French president suggested that he and Trump had discussed building on, rather than destroying, the JCPOA. As he described it, the U.S., Europe, along with several other interested countries would seek to achieve a “new” broader agreement with Iran that had “four pillars”, of which preserving the JCPOA would be one. As he explained:
The first one is to block any nuclear activity of Iran until 2025. This was feasible thanks to the JCPOA. The second is to make sure that, in the long run, there is no nuclear Iranian activity. The third fundamental topic is to be able to put an end to the ballistic activities of Iran in the region. And the fourth one is to generate the conditions for a solution – a political solution to contain Iran in the region – in Yemen, in Syria, in Iraq and in Lebanon.
The idea was intriguing, though it left many important questions unanswered – notably, whether the JCPOA would remain in force regardless of the outcome of the negotiations and, if so, for how long; whether Trump would agree to fully implement it; and why Iran would accept negotiations about these matters under these conditions. Yet, before such issues could even begin to be elucidated, Macron poured considerable cold water on his own proposal. As he was departing Washington, he said, “my view – I don’t know what your president will decide – is that he will get rid of this deal on his own, for domestic reasons”. He added that “his experience with North Korea is that when you are very tough, you make the other side move and you can try to go to a good deal or a better deal” – though he went on to say that “it can work in the short term, but it’s very insane in the medium to long term”.In other words, and as a senior French official had previewed the previous week, “Trump believes he can negotiate a better deal than anyone. So he’s tempted to do with Tehran as he did with Pyongyang – maximum pressure, followed by negotiations. Whether he’d try to do those unilaterally or in a multilateral format is anyone’s guess”.
Nonetheless, the idea of adding provisions to the JCPOA as a means of securing continued U.S. adherence to the deal has gained more currency within the E3.For its part, Iran seems loath to accept additional constraints on its nuclear program, but has declared itself ready to discuss regional issues.
III. The Iranian Wild Card
Increased anxiety over the JCPOA’s fate means that Iran has not reaped the foreign capital and investment it keenly anticipated and badly needs.
Even prior to President Trump’s refusal to certify the JCPOA in October 2017, Iranian officials complained of U.S. “bad-faith implementation”.An official said he believed that “the White House wants to turn the JCPOA into an empty shell by creating uncertainty around it, depriving Iran of its economic dividends and forcing us to walk away from the deal”.The leadership in Tehran, however, decided not to fall into what they viewed as a trap by announcing that Iran would not be the first to violate the agreement.But increased anxiety over the JCPOA’s fate means that Iran has not reaped the foreign capital and investment it keenly anticipated and badly needs. Instead Iran has witnessed massive capital flight and currency devaluation as a result of JCPOA-related uncertainties and structural economic problems in the country.
Iranian officials have been critical of the E3 for putting so much effort into reassuring the U.S., arguing that Tehran is in full compliance with its JCPOA obligations – but not Washington. A senior Iranian diplomat complained, “the E3 are dead set on appeasing Trump, forgetting that we, who unlike the U.S. have fulfilled our JCPOA commitments, also have a contentious domestic atmosphere”.A conservative lawmaker added, “the irony is that we signed the JCPOA to unshackle ourselves from sanctions. Now the Europeans are telling us, ‘we have to sanction you to satisfy Trump and preserve the JCPOA’”.They also reject any U.S.-E3 initiative to alter the deal or seek to negotiate a new one, as Macron proposed. “Together with a leader of a European country [the U.S. leaders] say: ‘We want to decide on an agreement reached by seven parties’. For what? With what right?” President Hassan Rouhani asked, adding: “If Europe wishes to satisfy Trump, it should spend out of its own pocket, not Iran’s”.
Iranian officials have warned that internal political imperatives will compel them to reject a joint U.S.-E3 agreement and to react even more strongly if the U.S. withdraws from the JCPOA.The nature of such a response is a subject of debate within the political elite. There appear to be three schools of thought. One group – an increasingly narrow circle around President Rouhani – argues that while it is important to rectify the European perception that Iran is willing to stay in the deal no matter what the circumstances or how meagre the economic dividends, Tehran should not play into the Trump administration’s hands. In other words, it should remain committed to its JCPOA obligations, preserve the moral high ground, and seek to drive a wedge between the U.S. and other E3/EU+3 members to neutralise new or revived U.S. sanctions. This course of action, however, would not be an option if Europe either fails to preserve as much of the deal’s economic dividends for Iran as possible or joins the U.S. in slapping sectoral sanctions (targeting economic sectors instead of individuals and entities) on Iran.The bleak economic situation has rendered this posture difficult to sustain for JCPOA supporters in Tehran.One official predicted that the foreign ministry might soon lose control over the nuclear dossier. It might be reassigned to the Supreme National Security Council, where the deal’s sceptics have more sway.
A second group, apparently comprising the majority of national security decision-makers, argues that if the E3 impose sectoral sanctions on Iran or fail to stand up to the U.S. in case the latter violates the JCPOA, Iran should retaliate with its own JCPOA violations. These could include stepping up its nuclear research and development, resuming enrichment at the Fordow bunker facility up to 20 per cent and/or halting voluntary cooperation with the IAEA (thus limiting the agency’s access to Iran’s non-nuclear sites).It could also hit back through non-nuclear/indirect measures: targeting U.S. forces in Iraq and Syria through Shiite militias; encouraging Huthi rebels in Yemen to fire rockets and missiles at Saudi or Emirati cities or ships in the Red Sea.Finally, the most dramatic step would be to walk away from the JCPOA altogether. They might do this by first initiating the JCPOA’s dispute resolution mechanism, thereby giving themselves 35 days to try to reach an understanding with Europe, or by withdrawing immediately.
The third group, which is now gaining momentum, consists of even more hard-line political elements and some within the Islamic Revolutionary Guard Corps (IRGC). The response to a U.S. withdrawal from the JCPOA that they advocate is pulling out of not just the JCPOA, but also the Nuclear Non-Proliferation Treaty (NPT). This move would allow Iran to resuscitate its enrichment program at full speed and change its nuclear doctrine to pursue weaponisation.They point to the Trump administration’s desire to engage with North Korea as evidence that Iran can only deal with the U.S. from a position of strength with the ultimate deterrent in hand. A senior Iranian official said, “the [nuclear] bomb is increasingly seen as the rational option”.Pursuing this option would allow them to close the door on any further improvement in Iran’s relations with the West, which they view as a threat to their economic interests and loathe for its cultural subversion; it would also further discredit the Rouhani administration ahead of the 2020 parliamentary and 2021 presidential elections, with the supreme leader’s succession additionally looming on the horizon.Thus the hardliners reject continued adherence to the deal after a U.S. withdrawal. As the editors of the Kayhan newspaper, which is closely aligned with the supreme leader, wrote, “the JCPOA is a disaster, with or without the U.S.”
Iran’s response will be informed both by domestic politics and by the supreme leader’s determination not to project weakness in the face of what he considers U.S. bullying.
It is difficult to predict the outcome of this debate though a dash to nuclear breakout capability – let alone the pursuit of a bomb – is far from the most likely response. The Iranians also see merit in trying to get Europe to side with it against Trump, rather than with the U.S. against the Islamic republic. But complacency would be ill-advised. As a senior European official noted, “Iran, facing a lot of threats now, sees the JCPOA as more than an economic guarantee – as also a security one. They fear that without it they could be exposed to an attack by the U.S. or Israel. So they are likely to remain in the deal”.Yet Iran’s response will be informed both by domestic politics and by the supreme leader’s determination not to project weakness in the face of what he considers U.S. bullying, lest Iran invite more harassment. As a senior Iranian official put it, “even JCPOA supporters within Iran’s political elite express regret at how little, in their view, President Rouhani has pushed back against growing U.S. pressure”.
Compounding these risks, the JCPOA’s apparent demise is occurring amid rising tensions between Iran, the U.S. and their respective Middle Eastern allies. As detailed in Crisis Group’s Iran-U.S. Trigger List, an incident at any one of the points of friction between the parties, be it in Yemen, Syria, Iraq, Lebanon, Afghanistan or the Gulf, could easily spiral into military confrontation.Paradoxically, one result of the Macron visit to Washington appears to have been to bolster Trump’s resolve to counter Iran in Syria – in other words, and contrary to the French president’s hope, we could find ourselves with a more bellicose U.S. posture and without the JCPOA.
IV. A European Contingency Plan
On the eve of his April state visit to the U.S., President Macron said there was no “plan B” if the JCPOA collapses. He might have said that to warn the U.S. against a unilateral withdrawal or because he knows Europe cannot defy the U.S. with contingency measures to protect the deal. Or he might have had both factors in mind.A senior European official said: “Our firms are clear that they will not be able to do business with Iran if sanctions are reimposed. This is not like the 1990s; integration into international banking and financial sectors is such that all our firms touch the U.S. and thus risk losing big. Even oil exports from Iran might not be able to continue. So we can try, but Iran will soon see economic benefits disappear, so pressure will grow on them to withdraw or violate [the] deal”.
For these reasons, the E3 are trying hard to keep the U.S. in the agreement. Yet, while the odds of achieving a JCPOA-compliant compromise that would stabilise the deal seem long, there could still be a joint U.S.-E3 understanding that would signal to Washington the E3’s willingness to act on issues of mutual concern regarding Iranian behaviour, while stopping short of violating a multilateral agreement with which Tehran continues to comply. It could also bring a degree of reassurance for foreign capital and technology to flow into Iran. As a stepping stone toward a broader agreement with Iran to address its ballistic missile program and regional activities, such an understanding could include the following elements:
A permanent commitment to prevent Iran from manufacturing or acquiring nuclear weapons; this could apply specifically to the list in the JCPOA’s Section T concerning activities that could contribute to the design and development of a nuclear explosive device,as well as regular U.S./E3 assessments of the growth and evolution of Iran’s uranium enrichment activities and their commensurability with the country’s civilian nuclear fuel needs;
A commitment to seek a supplemental agreement among JCPOA signatories to address all parties’ concerns. Talks could begin once confidence in the JCPOA’s implementation has been restored, optimally two years prior to the JCPOA’s Transition Day in October 2023, when Iran is to ratify the Additional Protocol to the NPT and the U.S. and EU are to terminate nuclear-related sanctions;
A commitment to consider an Iranian move toward acquiring long-range intercontinental ballistic missiles a threat to international peace and security, and grounds for imposing targeted sanctions;
Enforce strict export controls and impose targeted sanctions against individuals and entities engaged in the production of missiles that are designed to be nuclear capable, specifically Ghadr medium-range missiles, as well as anyone engaged in transferring ballistic missile technology to non-state actors in the region;
Dedicate additional intelligence resources to, and share information about, suspicious activities at Iranian nuclear and non-nuclear sites; assess and fulfil the funding needs of the IAEA; and underscore the IAEA’s full authority under the JCPOA’s Section Q to inspect non-nuclear sites in Iran;
A statement of policy by the Trump administration to adhere to U.S. commitments under the JCPOA, as long as the IAEA has verified Iran to be complying with the JCPOA’s terms;to refrain from discouraging business that is permissible under the JCPOA; and to issue licences for legitimate trade with Iran, including those related to civilian aircraft, in a timely manner;
White House support for congressional action to amend existing Iran sanctions statutes by removing the periodic waiver requirements and replacing them with a bill pursuant to which sanctions would be reimposed if the executive branch reports to Congress a significant JCPOA violation by Iran, as verified by the IAEA; and support for congressional action to replace INARA’s 90-day certification requirement on Iran’s JCPOA compliance with an executive branch report to Congress in case of a significant JCPOA violation by Iran, as verified by the IAEA.
In parallel to these measures, the E3/EU could launch an effort to prevent the proliferation of dual-use nuclear fuel cycle technology in the Gulf region. This goal could be reached in several ways: proposing a joint venture enrichment plant among countries in the region; multinationalising Iran’s enrichment program by staffing its facilities with technicians and experts from Iran and the EU countries to add another layer of monitoring; and/or establishing a nuclear fuel bank for use by Iran and other countries in the region before the JCPOA’s Transition Day to discourage enrichment activities on their soil.
The E3 should broaden its approach, developing a plan B that might induce Iran to continue respecting the JCPOA’s terms even if the U.S. stops doing so.
The E3’s negotiating position is complicated by the uncertainty over what Trump will decide in May. Among possible options, he could reach an agreement with the E3, waive sanctions, bring the U.S. into compliance with the JCPOA and shift the focus of his and Europe’s pressure strategy to Iran’s regional activities; once more waive sanctions to give the U.S.-E3 talks more time to yield results while maintaining uncertainty about the JCPOA’s fate; reimpose nuclear-related sanctions but not enforce them in order to grant negotiations more time; or reimpose sanctions and enforce them as soon as bureaucratically possible.
Neither unilateral U.S. withdrawal from the JCPOA nor protracted uncertainty about Washington’s stance is desirable – either for Europe or for the future of the nuclear deal. By taking the former course, the Trump administration might strangle the nuclear deal; by taking the latter, it might condemn the accord to slow suffocation. To minimise the damage, the E3 should broaden its approach, developing a plan B that might induce Iran to continue respecting the JCPOA’s terms even if the U.S. stops doing so, whether entirely or in part.
If the U.S. withdraws, and the nuclear agreement no longer can be maintained as an E3/EU+3 arrangement, Europe might still be able to salvage it as a JCPOA minus – with Russia and China, but without the U.S. This, at a minimum, would require presenting an economic and political package to Tehran pursuant to which as many of the benefits envisioned by the JCPOA for Iran as possible would be preserved. This could help Iranian policymakers justify restraint in the face of U.S. non-compliance, prevent renewed crisis over Iran’s nuclear activities and leave the door open to continued EU-Iran dialogue on Iran’s ballistic missile program, regional policies and human rights situation, as well as the fate of dual nationals arrested in Iran on dubious charges.Alternatively, if the U.S. remains party to the JCPOA but in a grudging and potentially temporary way, adopting parts of the package could offset continued uncertainty as to the accord’s fate and tackle existing bottlenecks in permissible trade.
While there is no foolproof way to shield Iran’s economy completely from the repercussions of a U.S. exit or from continued uncertainty, the E3 could develop a package whose political and economic value would be greater than the sum of its individual elements. The package could contain two sets of elements:
Short-term measures designed to provide immediate reassurance to European businesses interested in entering the Iranian market, while empowering those in the Iranian leadership who advocate continued compliance with the deal:
The E3 and European Council would publish a statement reiterating their strong support for the JCPOA;
In an effort to minimise the effects of U.S. secondary sanctions on Iran’s ability to export oil and repatriate its revenue, the EU would protect energy companies with a small footprint in the U.S. to continue purchasing Iranian oil and gas, and empower pertinent European central banks to process related payments. Movement of funds could occur at the “net level”, ie, Iran’s revenues from exporting oil to Europe could be used to pay for Iran’s imports from Europe;
The EU could publish a general licence describing an acceptable standard for due diligence and regulatory compliance for its companies to conduct legitimate business with Iran, thus providing them with a legal shield against secondary U.S. sanctions;Brussels could also negotiate with the U.S. Treasury Department to retain General License H, which authorises U.S.-owned or controlled foreign entities to engage in certain Iran-related transactions;
In parallel, the EU – as a whole, not each state individually – could negotiate with the U.S. to acquire special protection for a set of its industries or companies that do business with Iran, threatening to impose tariffs on U.S. exports to the EU if such carve-outs are not granted;
The EU could replace its so-called 1996 Blocking Statute that prohibited European companies from complying with secondary U.S. sanctions imposed on Iran with legislation that supports its companies when they press charges against U.S. regulators at the International Court of Justice or International Chamber of Commerce. It could also establish a “clawback” clause for recovery of damages incurred for alleged sanctions violations through imposing tariffs on U.S. exports to the EU.
The E3 – along with other willing EU member states – could announce a joint effort by their state-owned export credit or investment agencies to cover the risks, including those related to sanctions, that their companies might face in trading with Iran. In the past few months, a number of European governments have taken significant steps to facilitate legitimate trade with Iran by sharing the risks through such a mechanism, but the E3 can spearhead a more systematic, multilateral effort;
France’s Agence Française de Développement, Germany’s Kreditanstalt für Wiederaufbau and the UK’s Department for International Development could launch a joint effort to support infrastructural development projects in Iran and enter into negotiations with Tehran to select projects and extend loans as soon as possible; and
The E3 could more readily facilitate visas for Iranian students and entrepreneurs.
Medium-term measures would require more time to negotiate and implement, but could signal the seriousness of the European commitment to the JCPOA as well as to developing a cooperative and mutually beneficial relationship with Iran:
The EU could create a multilateral Euro-denominated trading bank comprising state-owned and medium-size to smaller private banks. Its aim would be to pool these institutions’ resources and share risks, process payments, and provide credit guarantees and insurance services to European private-sector firms seeking to trade with or invest in Iran, and share due diligence and compliance information;
The European Commission could move Iran from the list of potentially eligible to fully eligible countries for receiving loans from the European Investment Bank to finance large public or private sector projects, and negotiate a framework for the bank’s operations in Iran;
The EU and Iran could negotiate and sign a long-term energy partnership, which in return for Iranian natural gas supplies to Europe via existing or new pipelines would provide Iran with access to cutting-edge renewable energy technologies;
The EU and Iran could support the establishment of an Iran-EU chamber of commerce; and
The EU and Iran could enhance civil nuclear cooperation, including construction of new civilian nuclear power reactors, in return for an agreement to turn Iran’s enrichment plants into joint European-Iranian ventures, or staff them with European nationals.
The onus is on Iran to act first if it wants the E3’s help in preserving the JCPOA.
Of course, such measures would have to be conditioned on Iran abiding by its JCPOA commitments. If Iran resuscitates its nuclear activities, gradually or at full speed, the E3 almost certainly would themselves end their support for the JCPOA and back the reimposition of multilateral nuclear-related sanctions. As a French official said, “the nuclear crisis began in 2003 because of concerns over Iran’s nuclear activities. If Iran restarts the program, we are back to square one and have no choice but to side with the U.S. in imposing maximum pressure on Iran”. Furthermore, Iran could not benefit from the banking mechanisms described above if it fails to take additional steps to reform its finance and banking sectors, including outstanding areas of its action plan with the Financial Action Task Force (FATF).
A genuine and measurable Iranian effort to de-escalate tensions in the region, along the lines Crisis Group recommended in an April 2018 report, is equally critical.Recent European (E3 plus Italy, coordinated by the EU) engagement with Iranian officials over the crisis in Yemen has yielded little.The Europeans criticised Iran for intransigence, while Tehran put the blame on European unpreparedness and Saudi Arabia’s unwillingness to reciprocate.Regardless, given the perception of its ascendancy in the region, the onus is on Iran to act first if it wants the E3’s help in preserving the JCPOA. By taking the first step, Tehran would demonstrate the value of engaging it versus coercing it to play a more constructive regional role.
Finally, Tehran should agree in principle to future negotiations over a mutually beneficial supplemental agreement that could alleviate concerns about the eventual expansion of Iran’s nuclear fuel cycle activities and set in place regional limits on range and payload of ballistic missiles in return for reciprocal steps – eg, the lifting in whole or in part of U.S. primary sanctions that, as the JCPOA’s implementation record proves, hinder Iran’s reintegration in the global financial system.
The E3 now find themselves caught between trying to placate the U.S. by “fixing” the JCPOA and ensuring that, in so doing, they do not prompt Iran to walk away. They face the additional challenge of ensuring that other EU member states accept what they propose. This is not self-evident; in April 2018, EU member states rejected an E3 recommendation to impose targeted sanctions upon fifteen Iranian individuals and entities involved in the country’s ballistic missile program and regional activities.
Given the intricate set of compromises on which the agreement is built, the E3 have made it clear that it can be neither renegotiated nor reinterpreted (at least, not without a consensus decision of the Joint Commission established under the JCPOA). Nonetheless, the E3 engaged the Trump administration in an effort to accommodate its principal concerns in order to keep it a party to the JCPOA. The question is not only whether this can be done, but also whether it can be done in a manner that will not push Iran out of the deal and that does not merely preserve the deal beyond yet another deadline. The goal – aside from the declared aim of achieving stronger transatlantic consensus on how to address Iran’s ballistic missile program and regional activities – should be to stabilise the JCPOA by allowing Iran the economic dividends to which it is entitled.
Iran has given away most of its nuclear leverage and would be loath to renegotiate from a position of perceived weakness.
The Trump administration, confident in the utility of its maximum pressure strategy, which appears to have borne some fruit in opening dialogue with North Korea, appears oblivious to the fact that no broader deal could be constructed on the JCPOA’s ruins in the foreseeable future, as its demise likely would destroy Iranian trust in the utility of future talks. Also, unlike Pyongyang, which has secured the ultimate deterrent, Iran has given away most of its nuclear leverage and would be loath to renegotiate from a position of perceived weakness.
It is not too early for Europe to devise a plan that would seek to protect the JCPOA from both a U.S. withdrawal and continued uncertainty. This aim could be achieved through a package of incentives aimed at persuading the Iranian leadership that the benefits of remaining compliant with the JCPOA outweigh the potential costs of noncompliance and retaliation. If the E3 preserve their current unified position and, if need be, chart a path independent of the U.S. to salvage the nuclear deal, they potentially could help avert the reignition of the nuclear crisis in a Middle East in turmoil.This course also would leave the door open for a future U.S. return to the JCPOA. Trump has demonstrated in other cases that he might be prepared to rejoin agreements he previously abandoned.Moreover, even if U.S. nuclear-related sanctions against Iran come back into force, there will be another U.S. presidential election in two years that could bring to power leaders with a different view about U.S. adherence to its international commitments.
Almost everyone thinks that, with his next decision on the JCPOA, Trump will endanger the deal. But the peril need not be mortal.
Washington/Brussels, 2 May 2018
Appendix A: Map of Iran