Will the Trump Administration “waive” goodbye to sanctions relief under the Iran nuclear deal?

Last night, Secretary of State Rex Tillerson certified to Congress that Iran is in compliance with the Joint Comprehensive Plan of Action (JCPOA) agreement regarding Iran’s nuclear program, but signaled that the Trump Administration is reviewing whether continued sanctions relief under the JCPOA would be appropriate. Secretary Tillerson’s communication is set out in a letter to House Speaker Paul Ryan and summarized in a Reuters article.

The Tillerson letter states:

This letter certifies that the conditions of Section 135(d)(6) of the Atomic Energy Act of 1954 (AEA), as amended, including as amended by the Iran Nuclear Agreement Review Act of 2015 (Public Law 114-17), enacted May 22, 2015, are met as of April 18, 2017.

Notwithstanding, Iran remains a leading state sponsor of terror through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action (JCPOA) that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States. When the interagency review is completed, the administration looks forward to working with Congress on this issue.

What’s going on here? The key term is “vital to the national security interests of the United States”.

As we previously noted, among the pressure points available to the Trump Administration in implementing the JCPOA, two stand out: (1) the requirement to periodically certify Iran’s compliance with the JCPOA under the Iran Nuclear Agreement Review Act of 2015 (INARA), and (2) the requirement to periodically renew waivers issued under various sanctions statutes. (This is in addition to other potential approaches we previously have described.)

Under INARA, the President is required to certify to Congress every 90 days that Iran is in compliance with its nuclear obligations. If the President fails to make the certification or advises Congress that Iran has materially breached its obligations, then the statute provides for expedited congressional consideration of legislation re-imposing sanctions.

Meanwhile, several Iran sanctions statutes authorize the President to waive sanctions if he determines that it is “vital to the national security interests of the United States” to do so, but provide that he must periodically renew these waivers as follows:

The Obama Administration issued waivers under the above statutes in January 2016, and again in either December 2016 or January 2017. (The exact date of the later waivers is unclear, as is the question of whether the Obama Administration issued any waivers between January and December 2016.)

Through his letter, Secretary Tillerson certified Iran’s compliance with the JCPOA as required under the INARA, but indicated that the Trump Administration is initiating an inter-agency review as to whether renewal of waivers under the above statutes would be appropriate. Notably, the letter states that the Administration will be reviewing the JCPOA itself in order to assess whether continued JCPOA sanctions relief is appropriate.

The NDAA 2012 waiver could be up for renewal as early as this month, although if the Obama Administration held off on issuing the previous waiver until January, then the renewal date would be sometime in May. The ISA, ITRSHRA, and IFCA waivers are up for renewal in June or July.

What would happen if the Trump Administration fails to renew the waivers, essentially allowing them to lapse? Well, in that case, the sanctions provisions of the above statutes would again be in effect, and as clearly provided in those statutes, the President would be required to impose “secondary” sanctions on non-U.S. persons that engage in certain business with Iran’s energy, shipping, shipbuilding, and financial sectors. Whether to actually impose such sanctions would ultimately be up to the President, but Iran hawks in Congress may try to force his hand by loudly calling on him to enforce the statutes as required.

What could this mean for the JCPOA? Iran could treat any failure to renew the waivers as a breach of the JCPOA, and initiate dispute resolution proceedings under paragraphs 36-37 of the agreement. While this seems unlikely, the issue seems sure to factor into the May 19 Iranian presidential election, where passions regarding the JCPOA and sanctions—and their impact on the Iranian economy—will run high. Of course, if the Trump Administration not only fails to renew the waivers, but resumes enforcement of secondary sanctions, Iran almost certainly would treat that as a breach and would trigger the dispute resolution mechanism, if not repudiate the deal entirely.

In any case, the Trump Administration today signaled that it may seek to extract concessions from Iran—likely related to its support for terrorism, ballistic missile program, and support for the Assad regime in Syria—using the JCPOA as leverage. The Administration stated that it intends to involve Congress in the process, although it is not clear how it will do so, and what this could mean for the Iran sanctions bills recently introduced in Congress.

While President Trump indicated during the campaign that he would not rip up the JCPOA, he also described it as the “worst deal ever negotiated“, and vowed to get “tough” on Iran. The situation now is as fluid as ever, and warrants close attention.