Throughout his campaign, President-elect Trump promised to terminate or renegotiate the Iran nuclear agreement, known formally as the Joint Comprehensive Plan of Action (JCPOA). Action could come as soon as January 20, 2017, Trump’s first day in office, because the deal is not a treaty, and because President Obama authorized the sanctions relief outlined in the agreement using executive orders and administrative rulemaking, both of which can be quickly reversed.
Although in the past newly elected presidents have altered course when faced with reality, many observers cite the president-elect’s lack of government service experience and his extreme views in predicting that significant actions could be taken early in the new administration, regardless of the consequences. If President Trump reverses course and re-applies secondary sanctions, it would likely reverse much of Iran’s gains in foreign investment over the past year, as well as cut down on the new revenue generated by increased oil sales, two things he has cited as reasons for the need to reverse the Obama approach.
U.S. and Western Allies Push to Strengthen Nuclear Agreement
In an attempt to dissuade the incoming Trump Administration from withdrawing or attempting to re-negotiate the JCPOA, the U.S. and its Western allies are pushing Iran to cut the amount of radioactive material it holds to levels below what the agreement requires. It is hoped such a reduction would lengthen Iran’s breakout time, the time required to obtain enough material to build a nuclear weapon, beyond the one year provided for in the JCPOA.
Under the deal Iran is allowed to stockpile 300 kilograms of low-enriched uranium, as well as 130 metric tons of heavy water. Earlier this month, after being notified by the International Atomic Energy Agency (IAEA) that it had exceeded its heavy water limit, Iran quickly exported 11 tons to Oman, an action which should keep Iran under the 130 metric ton limit for several months. Although Iranian officials have engaged in serious discussions on this idea, Iran has made no concrete commitment to any further reductions.
Recent increases in licensed business between U.S. and non-U.S. companies and Iran will increase the costs for any withdrawal from the JCPOA. For example, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) granted Airbus a license to sell more than 100 passenger aircraft to Iran in November. OFAC had previously licensed Airbus to sell 17 planes last September. These licenses were under threat from the current Congress, even before a Trump Administration. The House has already passed legislation which would ban the sale of civil aircraft or parts to Iran, legislation that President Obama has pledged to veto, but which might face a different fate on President-Elect Trump’s desk.
EU Re-Commits to JCPOA after U.S. Elections
On the heels of the U.S. elections, the Council of the EU issued a set of forward-looking conclusions on the EU’s relations with Iran. The main conclusion relates to the JCPOA, confirming the EU’s “resolute commitment” to support its full and effective implementation with a view to expand trade and investment with Iran. The conclusion is premised upon Iran’s continued full and timely cooperation with the IAEA in its verification of Iran’s nuclear-related commitments under the JCPOA.
The Council also refers specifically to the export of commercial passenger aircraft and related parts and services to Iran, stating its expectation that OFAC will continue issuing the requisite licenses for aircraft reserved exclusively for civil aviation. In addition, the Council confirms its support for the opening of an EU Delegation in Iran to address a broad range of other areas of common interest. Other conclusions address Iran’s World Trade Organization (WTO) accession, the use of export credits in dealings with Iran, human rights, Iran’s missile program, and the role of Iran in Syria.
The Council’s conclusions were prompted partly by President-elect Trump’s repeated denouncement of the JCPOA during the U.S. presidential election campaign, and underscore the breach with Europe that would occur if the Trump administration were to leave the JCPOA and seek to reapply secondary sanctions. EU companies have expressed strong interest in investing in Iran, and have begun concrete steps to take advantage of the opening to Iran’s economy created by the JCPOA (e.g., the joint venture agreement between PSA-Peugeot-Citroen and Iran Khodro to produce 200,000 cars annually). Furthermore, in response to the foreign policy uncertainty resulting from the election’s outcome, certain EU foreign affairs ministers and officials have identified an opportunity for the EU to assume more responsibility with respect to geopolitical issues, including in relation to Iran. Accordingly, while noting a variety of Iran’s shortcomings in economic terms, they are also emphasizing the need to engage with Iran economically to facilitate its reintegration into the global trading system and to bolster political elements within Iran favoring closer ties with the West. With EU-Iran trade slowly recovering since the implementation of the JCPOA, European officials are unlikely to accommodate President-elect Trump’s desire for increased pressure on Iran and will seek instead to convince his administration to respect the current terms of the JCPOA.
Iran Sanctions Act (ISA)
The U.S. House of Representatives passed an extension of the Iran Sanctions Act (ISA) by a vote of 419-1 last month, sending the measure to Senate, where it passed on a 99-0 vote on December 2. The legislation now moves to the White House for President Obama’s signature. Although the President is expected to sign the bill, the administration noted the extension does not by itself require any change in U.S. policy towards Iran – the main sanctions in the ISA have been suspended by presidential waiver to meet the terms of the JCPOA, and the new law would allow this practice to continue. The Obama Administration had claimed that it already had sufficient authority to re-impose the ISA sanctions pursuant to other authorities if needed, and that the extension of the ISA risked unnecessarily antagonizing Tehran.