The Joint Comprehensive Plan of Action (JCPOA) between Iran and six of the world’s major powers over its nuclear program remains on track. Adoption Day, which occurred on October 18, 2015, marked the date on which the JCPOA went into effect, although no sanctions were lifted as of that date. Under the agreement, before easing of any sanctions, Iran must take certain steps to ensure the peaceful nature of its nuclear program while the United States and the European Union (EU) cease the application of nuclear-related sanctions and ultimately repeal them.
On December 2, 2015 the International Atomic Energy Agency presented a report to its board of governors concluding that Iran had a coordinated nuclear-weapons program until 2003, and that some of these activities continued as late as 2009. This report was a key milestone under the JCPOA, as Iran was required to provide information to the IAEA so that it could render a judgment regarding the possible military dimensions (PMD) of Iran’s nuclear program. The IAEA’s Board of Governors will vote on December 15 on whether to close the agency’s probe of Iran’s PMD activities.
It is important to note that the JCPOA does not provide any immediate impact on the Iran sanctions already in place until Implementation Day, when the IAEA verifies that Iran has completed all of the required nuclear steps specified in the text of the agreement. On Implementation Day, as we outlined in our prior alert, the U.S. and EU will provide sanctions relief in a number of areas beyond the limited relief afforded under the interim joint plan of action in effect since November 2013.
The timing of Implementation Day is uncertain. Press reports indicate that the world powers are prepared to lift sanctions on Iran as soon as January 2016. This, however, seems fairly optimistic. Under the JCPOA, Iran must still complete some key steps in reducing the scale of its nuclear program, including disconnecting thousands of centrifuge machines used to enrich uranium, converting a heavy-water reactor to produce less plutonium, and shipping out its stockpile of low-enriched uranium to third countries.
As previously noted, the sanctions relief, if implemented, represents a significant opportunity for European companies who do not sell goods or technology subject to U.S. law, but it remains to be seen what impact the deal will have on U.S. companies and their non-U.S. subsidiaries, given the agreement’s limited impact on U.S. primary sanctions, which will largely remain in place after Implementation Day. Under the JCPOA, the U.S. will only lift certain secondary sanctions, which apply to non-U.S. companies, but not its primary trade embargo against Iran, which apply to U.S. companies.
Nevertheless, the JCPOA may ease primary sanctions measures relevant to subsidiaries of U.S. entities located outside the United States. In mid-October, the U.S. Department of Treasury’s Office of Foreign Assets Control committed to issuing licenses for certain transactions while advising that more detailed guidance will be provided in the future. This has not yet occurred.
Meanwhile, the U.S. Congress continues with its oversight of the agreement. On December 3, the Senate Foreign Relations Committee announced a series of hearings and classified briefings with Obama Administration officials over the JCPOA in advance of Implementation Day. The Committee will seek to better understand the extent of Iran’s compliance with the agreement, as well as the regional and nonproliferation implications of the agreement.
This oversight activity reflects strong bipartisan interest in the course of the JCPOA, especially as Implementation Day draws nearer. However, Congress was previously unable to achieve a veto-proof majority disapproving of the agreement and, as a result, has no mechanism by which to block the JCPOA from proceeding as envisioned in the text. Barring testimony stating that Iran is in non-compliance with the agreement, it seems unlikely that this oversight package will do much to impact the deal’s implementation so long as Iran implements the terms of the agreement.