On April 2, top global diplomats announced parameters for the Joint Comprehensive Plan of Action (JCPOA) with Iran. This comes as a long- awaited step in negotiations between Iran, the European Union, and the P5+1 countries—China, France, Russia, the United Kingdom, the United States, and Germany—in an effort to scale back Iran’s nuclear program. The parameters outline central features of the forthcoming final text of the JCPOA, which must be completed by June 30, 2015. The U.S. Department of the Treasury has confirmed that from now until the conclusion of the JCPOA, “other than the sanctions relief provided under the JPOA, all U.S. sanctions remain in place and will continue to be vigorously enforced.”
As reported in the January 2014 issue of King & Spalding’s Trade & Manufacturing Alert, the P5+1 first reached agreement on a Joint Plan of Action (JPOA) in November 2013. The plan provided Iran with limited and temporary sanctions relief so that the parties could arrive at a long-term solution for dismantling Iran’s nuclear program. Hotly contested issues, however, such as Iran’s plans for its nuclear centrifuges, protracted negotiations, and the JPOA was extended twice. The latest extension is set to expire on June 30, 2015. The sanctions relief currently in place under the JPOA provides limited allowances in the crude oil, petrochemical, auto, gold and precious metals, and civil aviation sectors. Importantly, the bulk of these relief provisions do not apply to U.S. persons or, where applicable, U.S.-owned or controlled entities. Firms should continue to proceed with caution before engaging in any transactions with Iranian parties.
As part of the parameters announced on April 2, Iran has agreed to cut its installed centrifuges by about two-thirds; to refrain from building any new nuclear enrichment facilities or additional heavy water reactors for 15 years; to submit excess centrifuges to the International Atomic Energy Agency (IAEA); and to comply with IAEA inspections. Iran will also be discontinuing enrichment at its Fordow facility and will only conduct enrichment at the Natanz facility, using specified equipment. The parameters outline a phased approach, with Iran submitting to limitations over a ten, 15, and 25 year period.
In exchange, “Iran will receive sanctions relief, if it verifiably abides by its commitments.” The contemplated relief includes the United States and the EU suspending their nuclear-related sanctions upon verification from the IAEA that Iran is complying with its commitments. The United States also plans to reinstate—or “snap back”—nuclear- related sanctions “in the event of significant nonperformance.” Under the parameters, the United States will still maintain its terrorism, human rights, and ballistic missile-related sanctions programs on Iran. The parameters also foresee the United Nations lifting sanctions if Iran complies with the JCPOA, and the Security Council issuing a new resolution to implement the agreement. Additionally, the parameters propose a dispute resolution process through which parties to the JCPOA may address disagreements regarding Iran’s compliance.
The Iran Nuclear Agreement Review Act of 2015 (S. 615) (the Act), introduced by Senator Bob Corker (R-Tenn.), has become the focal point of Congressional opposition to President Obama’s Iran policy. The Act would give Congress the power to approve or reject a nuclear deal with Iran. On April 14, the Senate Foreign Relations Committee unanimously approved the legislation. The bipartisan Committee support for the bill was a result of a compromise led by Senator Corker and ranking member Senator Benjamin L. Cardin (D- MD), which allows Congress to review the final text of an agreement with Iran and decide whether it will eventually end sanctions. If Congress rejects the agreement, President Obama can, with enough congressional support, veto that rejection. The compromise language reduces Congress’s 60-day period to review a nuclear deal to a general baseline of 30 days and eliminates the requirement that the President repeatedly certify that Iran is no longer backing terrorism, instead requiring periodic reports on Iran’s activities. On April 23, Senator Corker opened Senate debate on the Act. White House officials have stated that the President would be willing to sign the compromise version of the bill.
Because the compromise has been met with criticism in Iran, its momentum in the United States may make negotiations with Iran more difficult in the months ahead. However, the Act’s proponents are fiercely protecting the bill and discouraging further amendments.
Despite what appears to be the beginnings of domestic compromise on the JCPOA, the new parameters have raised questions as to how JCPOA compliance and sanctions relief can be effectively implemented. Some have asked whether the IAEA is capable of the “daunting” task of monitoring and verifying Iran’s nuclear reductions as contemplated by the parameters. Others have questioned the timing of sanctions relief, inquiring as to how soon after the completion of a deal the United States will be lifting its nuclear-related sanctions. While the President can waive certain legislatively-imposed sanctions, Congressional action is required to permanently lift them. The current version of the Iran Nuclear Agreement Review Act of 2015 would prohibit the President from suspending Congressional sanctions while a deal is under Congressional review. Some have also raised questions regarding the U.S. commitment to “snap- back” provisions—where sanctions can be reinstated if Iran does not hold up its end of the bargain—and how the snap-backs would practically be implemented.
The timing of sanctions relief remained a key issue going into the late April negotiations between the P5+1 and Iran. Although the timeline for removing sanctions against Iran has not been set in stone, the Obama Administration is pursuing a phased approach, while Iran reportedly is insisting on a simultaneous lift of all international sanctions. President Obama recently indicated that Iran could receive some sanctions relief as soon as the deal is finalized. With reports circulating that the P5+1 agreed to “the complete removal of sanctions,” U.S. Secretary of State John Kerry met with with Iranian Foreign Minister Mohammad Javad Zarif on April 27 to discuss the issues that remain unresolved.