One last gasp by the Iran nuclear deal

When President Trump announced on May 8 that the United States would withdraw from the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (“JCPOA”) and reimpose nuclear-related sanctions on Iran, one could have been forgiven for not knowing exactly how he intended to do so. The speech was a series of broadsides against the deal negotiated by his predecessor, similar to his previous statements on Iran. What was missing, however, was any detail about how the sanctions would actually be implemented and how they would lead to his desired outcome of a stronger deal. 

{mosads}Although doubtful, it was conceivable at that moment that the United States would stumble slowly out of the deal, reimposing a limited set of sanctions simply by inaction and reviving only those sanctions subject to a waiver, and even those sanctions, such as sanctions on oil sales and transactions with the energy sector, could have been half-heartedly implemented. It was possible that the United States would avoid interfering meaningfully in foreign business with Iran, and the JCPOA would have ultimately survived with Iran maintaining its limited commercial ties and abiding by the inspections and other obligations.

Such a view proved to be overly optimistic. Indeed, the guidance issued by Treasury’s Office of Foreign Assets Control (“OFAC”) moments later quashed any such hope, and made crystal clear the United States intends to interrupt any international commercial ties with Iran. This approach, without any articulated strategy to build international consensus and get Iran back to the negotiating table, sets the United States on a collision course with its closest allies and possibly a nuclear Iran. The administration has left only a slim window to avoid it. 

OFAC’s 10 pages of guidance laid out in detail how sanctions would be phased back in over the next six months to disrupt foreign business ties with Iran, but gave no hint how the reimposed sanctions would lead to a better deal with Iran. The administration will once again generally prohibit foreign subsidiaries of U.S. companies from doing business in Iran and will revive a broad array of statutes and executive orders that threaten sanctions against foreign companies doing business in Iran.  

A State Department background briefing later that afternoon also focused on the technical aspect of the sanctions snapback, and betrayed the administration’s lack of a strategy for building the leverage and international unity the Obama administration enjoyed five years ago. Indeed, the briefing turned downright testy when reporters challenged the State Department officials to explain how the U.S. sanctions would take the international community from Point A to Point B. 

It appears that a collision between the United States, Europe, and numerous governments is almost inevitable. Six months from now, the administration will impose the threat of sanctions on numerous transactions with Iran related to Iranian oil sales, including banking, shipping, and insurance, unless the administration determines a country has significantly reduced its purchases of Iranian crude over the past six months.

Without any consensus over the threat posed by Iran’s nuclear program and given the numerous other areas of friction between the United States and other countries, it is entirely possible China, India, Turkey, EU member states and other countries will refuse to do so, leaving the administration with a difficult choice on its hands: Do nothing or begin to sanction banks and other companies involved in purchases of Iranian oil. 

The former choice could render U.S. sanctions an empty threat and make sanctions less effective in altering the behavior of Russia, North Korea, or the next target of U.S. sanctions. The latter choice could disrupt Iran’s entire oil trade and the global market, as well as rapidly deteriorate our international relationships. Neither course gets the United States any closer to a stronger deal with Iran.

In spite of all of the above, a last gasp could remain for the administration to reach the agreement with Europe to address Iran’s support for international terrorism, ballistic missile program, and the sunset provisions of the JCPOA.  With the sanctions coming back into effect 90 to 180 days following the May 8 announcement, the administration has a brief window for one last effort. Secretary of State Mike Pompeo said after the announcement that he would be “hard at it” with the Europeans in the next several days.  It is conceivable the president’s rough-shod announcement and the strong statements on sanctions from the agencies could compel the Europeans to meet the final U.S. demands and encourage Iran to live with it. 

Although some in the administration may believe that an agreement on how to deal with the sunset provisions of JCPOA is all that holds up an agreement between the United States and its European counterparts, many in Europe wonder if it is worth even talking to this administration in light of the U.S. breaching its commitments on JCPOA, the Paris Climate Change Agreement, and threatening damaging tariffs on European companies. They would argue that any concession to the United States would jeopardize keeping Iran in the Agreement. 

Nonetheless, Europe could find a small space between a rock and a hard spot. For the sake of transatlantic relations, which have reached its lowest point in decades, and the continuation of a non-nuclear-armed Iran, it is worth the effort. While the unfortunate likelihood seems to be that the “better” Iran deal will face the same destiny as the “better” Paris deal and the “better” Trans-Pacific Partnership Arrangement, absent some sort of agreement in the next six months, the possible outcomes all seem ugly.

Ambassador Richard Morningstar is the founding chairman of the Atlantic Council’s Global Energy Center. He also served as the U.S. ambassador to Azerbaijan, US ambassador to the European Union, special adviser to the president and secretary of State for Caspian Basin energy diplomacy, and special envoy for Eurasian Energy.

David Mortlock is a partner and the chair of the Global Trade and Investment Group at Willkie Farr & Gallagher in Washington, D.C., and a senior fellow at the Atlantic Council’s Global Energy Center. He previously served as the director for international economic affairs at the White House National Security Council.