The United States is concerned about the Iran nuclear deal (Joint Comprehensive Plan of Action or JCPOA) that the P5 + 1 (the United States, the United Kingdom, Germany, France, China and Russia), the European Union and Iran agreed and signed in 2015. The US is concerned about the sunset provisions that left limits on elements like Iranian stockpiles of low-enriched uranium between 2025 and 2030; the failure of the deal to prohibit Iran’s development of ballistic missiles; and the lack of provisions on inspections of suspected Iranian military sites. A related US law (the Iran Nuclear Agreement Review Act or INARA) passed in 2015, requires the president to determine every 90 days whether Iran is complying with the JCPOA and whether the JCPOA is vital to US national security interests. The next determination is due on 15 October. Reports suggest that the US may want to use this certification process to renegotiate the JCPOA.
In assessing the US strategy with respect to the JCPOA, it is important to review the obligations of the US and Iran under the JCPOA. Interestingly, under the “Preamble and General Provisions,” it is clearly stated that “Iran reaffirms that under no circumstances will Iran ever seek, develop or acquire any nuclear weapons”. Indeed the independent International Atomic Energy Agency (IAEA) has repeatedly confirmed that Iran is in compliance with its nuclear-related obligations under the JCPOA. In return for such commitment and other nuclear-related commitments by Iran under the JCPOA, the US “will cease the application, and will continue to do so, in accordance with this JCPOA of the [secondary i.e. non-US person related] sanctions…..” To be clear, the JCPOA further states that “if a law at the state or local level in the United States is preventing the implementation of the sanctions lifting as specified in the JCPOA, the United States will take appropriate steps, taking into account all available authorities, with a view to achieving such implementation”.
Also, the US can have recourse to the dispute resolution mechanism under the JCPOA if it believes that Iran is not meeting its commitments. It could do so by referring the matter to a Joint Commission which can be referred further to the Ministers of Foreign Affairs, an Advisory Board (consisting of three members, one each appointed by the participants in the dispute and a third independent member) and finally to the UN Security Council for resolution.
In light of the above, the US threat not to certify Iran’s compliance with the JCPOA is being made despite the fact that (1) such refusal would be based on INARA which is a domestic US law and not an international agreement like the JCPOA which is pursuant to a UN Security Council Resolution; (2) the US’s international obligations under the JCPOA require it to cease application of secondary sanctions and take appropriate steps domestically to implement the JCPOA; (3) the IAEA has repeatedly confirmed Iran’s compliance under the JCPOA; and (4) in the event of a dispute, the US can refer such dispute to a Joint Commission as prescribed by the JCPOA.
Nevertheless, if the US does not certify Iran’s compliance with the JCPOA by 15 October, then, pursuant to INARA and within 60 days Congress may introduce legislation to reimpose secondary sanctions, which legislation would need to be debated and voted upon. As a result, such decertification by the US pursuant to INARA would not automatically mean that secondary sanctions are reimposed. It also certainly would not mean that the JCPOA is terminated. However, such decertification would result in stepping into uncharted JCPOA territory.
Banking with Iran: Challenges Continue
Following the reconnection of Iranian Banks to SWIFT, a few regional banks in Belgium, Germany, Italy, Austria, Switzerland, Turkey, India and other countries have begun to handle Euro-based transactions with Iran. Moreover, some financial institutions have begun to offer financing in Euros for capital goods, commodities, technology, industrial projects and services. In addition, certain foreign investment funds for the hospitality, manufacturing and retail sectors have been established to tap investment opportunities in Iran. However, most foreign banks continue to be reluctant and nervous to conduct Iranian business.
Finally, while the US has increased the number of Iranian individuals and entities with whom it is prohibited to do business, trade with the European Union has doubled and the number of joint ventures between Iranians and European businesses has grown. However, growth in the Iranian economy as a result of the lifting of secondary sanctions is still well below expectations. ■