A Way Out of the U.S.-Iranian Impasse

This commentary is part of our Watch List 2020.

As 2019 faded into 2020, the U.S. and Iran careened up to the brink of war. In late December, a series of U.S. airstrikes on Iranian-backed Iraqi militias, in response to militia attacks on U.S. assets in Iraq, brought crowds of Iraqis with a battering ram to the doors of the U.S. embassy in Baghdad. On 2 January, reportedly stinging from the embassy assault and determined to restore what he considered to be eroded U.S. deterrence, President Donald Trump ordered a drone strike on Qassem Soleimani, head of the Quds Force, the expeditionary unit of Iran’s Islamic Revolutionary Guards Corps. Vowing revenge for the general’s death, Iran fired ballistic missiles at U.S. bases in Iraq, killing no one there, but in the aftermath inadvertently downing a Ukrainian passenger jet outbound from Tehran with 176 people on board. Both the exchange of attacks and the airline disaster seemed to close this particular chapter of the conflict between Tehran and Washington. But the danger of broader confrontation has not passed.

At the origin of these events lies the Trump administration’s exit from the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). Under the JCPOA, Iran accepted limits on its nuclear program in return for integration into global trade. Since May 2018, when it withdrew from the pact, the U.S. has been exerting “maximum pressure”, mostly through unilateral sanctions, to compel Iran to negotiate a more stringent, comprehensive deal and curb its regional behaviour. Sanctions have inflicted great harm upon Iran’s economy. In light of the failure of the JCPOA’s remaining signatories to provide Tehran economic respite, Iran took retaliatory measures of its own. It ramped up its regional activities, notably in the Gulf, and started loosening its compliance with the nuclear deal as of May 2019, shedding all restrictions on its uranium enrichment program by January 2020. That last move in turn led France, Germany and the UK, the so-called E3, to trigger the deal’s dispute resolution mechanism, which could ultimately resuscitate UN sanctions on the Islamic Republic. The JCPOA is closer than ever to collapse, and any small incident could fuel escalation, by either the U.S. or Iran.

To help ease tensions, the EU and its member states should:

• Seek to salvage the nuclear deal by delivering some economic benefits to Iran in exchange for its compliance with the JCPOA. Triggering the dispute resolution mechanism could backfire if failure to reach a settlement leads the E3 to restore UN sanctions – a step that Tehran has warned would prompt it to withdraw from the deal and perhaps the non-proliferation treaty as well. The E3 should seek to stretch the timeline provided by the mechanism as much as possible;

• Ensure the Iranian people’s access to humanitarian goods, via the Instrument in Support of Trade Exchanges (INSTEX);

• Encourage a partial drawdown of U.S. forces from Iraq and a reaffirmation of the fight against ISIS as Western militaries’ sole objective in Iraq, which would remove an immediate source of U.S.-Iranian friction. As part of the drawdown, European states and other members of the International Coalition to Counter ISIS should take over some of the more visible military tasks from U.S. forces in Iraq.

• Explore possible ways of lowering regional tensions, such as a deconfliction channel.

As the smoke cleared after the Soleimani killing and the Ukrainian airliner catastrophe, both Washington and Tehran were sticking to the strategies that produced the present impasse. The Trump administration boasted of having “restored deterrence” against Iran, claiming that by responding to Soleimani’s death with restraint, Tehran was tacitly admitting that “maximum pressure” works. Economic sanctions, notably those limiting oil exports, have indeed drained the Iranian state’s coffers, forcing it to enact deeply unpopular spending cuts, and hurt the living standards of Iranian citizens. To date, however, “maximum pressure” has failed to deliver on the goals laid out by the U.S. administration itself. Far from curtailing nuclear ambitions, it has led Iran to wriggle out of the JCPOA’s handcuffs; rather than stop Iranian meddling in the Middle East, it has prompted Tehran to redouble it. Meanwhile, and despite recurrent eruptions of mass discontent, the Islamic Republic appears firmly ensconced in power.

For its part, Iran is continuing to pursue parallel paths: escalating on the nuclear front while leaving a door open to diplomacy. On 5 January, Iran breached its nuclear commitments for the fifth time, announcing that it would cease observing JCPOA limits on centrifuge quantities – the last restriction it still faced. It stopped short of quitting the accord, however, and it did not say what practical steps it might take. The diplomatic part of its strategy suffered a blow on 15 January, when the E3 triggered the deal’s dispute resolution mechanism, which could result within 65 days in reimposition of the UN sanctions in place before the 2o15 deal – an outcome that the Trump administration appears to be keen on, if only because it would stop removal of the UN arms embargo on Iran that the JCPOA says should be lifted on 18 October 2020. U.S. Treasury Secretary Steven Mnuchin, in his statement welcoming the E3’s move, said he “expect[s] that the UN sanctions will snap back into place”, though E3 officials were at pains to say they have no such intention. Should there be no resolution within the coming months, U.S. pressure on the E3 to take the next step – snapback of sanctions – inevitably will grow.

As renewed UN sanctions would signal the nuclear accord’s demise, the E3 should do all they can to ward off this outcome. In the short term, their best option is to extend the timeline for dispute resolution – something the JCPOA allows – so that they can assemble an economic relief package that might persuade Iran to reverse its breaches and stay in the deal. They also should accelerate efforts to meet humanitarian needs in Iran, ensuring that the INSTEX mechanism gets fully up and running.

The E3 could also help broker other means of rescuing the nuclear deal. One option that had previously been mooted would be for the U.S. to reissue limited oil waivers for key Iranian importers and restore civil nuclear waivers, in return for Iran’s full compliance with the JCPOA, de-escalation in the region and, possibly, its agreement to initiate negotiations with the U.S. and others over a new nuclear arrangement, but also regional security and ballistic missiles. In a narrower version, the U.S. would suspend key non-oil sanctions (eg, on Iran’s metals and petrochemical sectors) and restore civil nuclear waivers, in return for Iran agreeing not to ramp up its nuclear program beyond its current status and, possibly, reversing one or more of its breaches, as well as halting aggressive behaviour in Iraq and the Gulf. A third party would almost certainly be required to facilitate either of these bargains.

From the outset of the U.S.-Iranian standoff, Crisis Group has warned that it could take its deadliest form in third countries where both powers have strong interests. Particularly in the wake of the Soleimani killing, the country at highest risk of becoming a battleground is Iraq.

The circumstances surrounding the killing – the preceding bombing of Iraqi militia bases without notice to Baghdad, the targeting of the Quds Force leader on Iraqi soil, the death of militia commander Abu Mahdi al-Muhandis alongside Soleimani – have greatly angered many Iraqis and not just those close to Iran. Many Iraqi politicians are calling upon the government to expel U.S. troops from the country. The result is a triple challenge: first, the demand, while popular with many, is nevertheless liable to be so divisive that it paralyses Iraqi political institutions. Secondly, some of the factions opposed to the U.S.-led troop presence will resort to violence, particularly if attempts to end that presence through parliamentary and diplomatic means fail. Thirdly, a full U.S. withdrawal would likely put paid to the mission of the International Coalition to Counter ISIS, perhaps giving the jihadist organisation a new lease on life.

To mitigate the attendant risks, the EU should encourage the U.S. to partially draw down its military forces in Iraq and to transfer some military tasks to other members of the International Coalition to Counter ISIS, while continuing to provide logistical and other forms of support. The EU should also encourage the Coalition to reaffirm the fight against ISIS as its sole objective in Iraq.

In addition, the EU and its member states should expand existing cooperation with Iraq, in particular in, but not restricted to, the security sector. While calling for foreign troops to leave the country, Iraqi authorities have affirmed that the EU’s civilian Advisory Mission to Iraq is welcome to stay for the purpose of security sector reform support. In order for this mission to be effective, the EU should make sure that all its personnel return to Iraq, with adequate resources and security guarantees to maintain a full presence. Iraq desperately needs more security forces that are committed to the state, rather than various factions, and that can handle challenges such as public protests in a professional manner. At the same time, the EU ought to send unambiguous signals that it respects Iraqi sovereignty above all else, as the contrary impression created by the U.S. attacks and dismissal of calls for its departure threatens the very basis of any cooperation. The High Representative has received the acting Iraqi prime minister in Brussels to demonstrate the EU’s support for the country’s stability and reconstruction, which is a good start.

The EU also needs to urgently impress on the U.S. and Iran the need to refrain from turning Iraq into an arena for their rivalry. The contestation between Tehran and Washington is already polarising the Iraqi political system, rendering reform impossible and creating a real risk of backsliding to the partial state collapse that pertained in 2014. The EU should clearly convey this message to Washington, while it should tell Tehran that it, too, would be harmed were the Iraqi government to weaken further and the resulting vacuum to allow ISIS to re-emerge.

Outside Iraq, the EU and its member states should seek to expand possibilities for engagement between U.S. regional allies, in particular Saudi Arabia and the United Arab Emirates, with Iran, either bilaterally or through other Gulf countries, such as Kuwait and Oman. European states could establish a core group to encourage Gulf states to set in motion an inclusive regional security dialogue on issues of dispute in order to open up new channels of communication, gradually build trust among these governments and thus reduce risks of inadvertent conflict. A deconfliction channel through a mutually acceptable third party – perhaps Oman – could also diminish such risks by relaying messages between the U.S. Central Command and Iran’s general staff.