Trump's Unequivocal Iran Deal Withdrawal Was the Best Outcome for Iran

President Trump has violated the Joint Comprehensive Plan of Action and withdrawn from a landmark arms control agreement that enjoyed broad international support. Crucially, he did so more decisively than many expected. In his televised announcement on Tuesday, Trump clearly relished the opportunity to follow through on his campaign promise to “rip up” the Iran nuclear deal, declaring, “The United States no longer makes empty threats. When I make promises, I keep them.”

There is no doubt that the JCPOA is in jeopardy. But the deal has been in jeopardy for a long time. New polling data from IranPoll, drawing on a nationally representative survey of Iranians conducted between April 13-17 and released on May 8 at a Bourse & Bazaar round table in Stockholm, illustrates this point. When asked how confident they are that the “United States will live up to its obligations toward the nuclear agreement,” a resounding 92 percent of Iranians indicated that they lacked confidence, up dramatically from 41 percent in September 2015. Iranians consider U.S. violations of the deal to have been indisputable, even prior to today’s announcement.

The real question is whether the decisiveness with which Trump discarded three months of negotiations with the E3 on a “fix” to the Iran deal will change political perceptions in Europe. European leaders may have be tempted to latch onto any ambiguity in the extent of the U.S. withdrawal, for example had Trump pursued the reapplication of sanctions without immediate enforcement. Over the last few months, France, Germany, and the United Kingdom have proven reluctant to take a robust stance vis-a-vis the United States’ unilateral demands for the renegotiation of the JCPOA. Unsurprisingly, the E3 negotiating strategy was lambasted as one of “appeasement” by Tehran.

The significant and very public investment of political capital in trying to convince Trump to remain in the deal, which saw Macron and Merkel make visits to Washington, as well as British foreign secretary Boris Johnson, meant that an admission of defeat would always have been unlikely. Had Trump taken a more muddled stance on the future of the United States as a party to the nuclear deal, it is not difficult to image that the E3 would have “welcomed” certain aspects of Trump’s relevant announcement.

But there was no muddling on Tuesday. As per the White House statement, Trump “has directed his Administration to immediately begin the process of re-imposing sanctions related to the JCPOA” with the aim of targeting “critical sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors.” The implementation memo shared with the Secretary of State, Secretary of Treasury, and other key actors within the executive branch makes the detail of the impending actions even more clear.

Responding to Trump’s bold move, the joint statement from Macron, Merkel, and May calls for “the US to ensure that the structures of the JCPOA can remain intact, and to avoid taking action which obstructs its full implementation by all other parties to the deal.” Moreover, the statement declares that the E3 will “remain committed to ensuring the agreement is upheld, and will work with all the remaining parties to the deal to ensure this remains the case including through ensuring the continuing economic benefits to the Iranian people that are linked to the agreement.”

The statement from European Union High Representative Federica Mogherini further declares the importance of protecting trade and investment, stressing that “The lifting of nuclear related sanctions is an essential part of the agreement” and “that the lifting of nuclear related sanctions has not only a positive impact on trade and economic relations with Iran, but also and mainly crucial benefits for the Iranian people. The European Union is fully committed to ensuring that this continues to be delivered on.”

Bold statements beget bold statements and European governments are growing increasingly confident in signaling their willingness to protect channels for trade and investment with Iran. However, signaling will need to be followed-up by action. Again, the decisiveness of Trump’s move on Tuesday will probably help ensure that practical measures are pursued in earnest.

The clear failure of the E3 negotiating strategy will likely see the mantle of leadership on Europe-Iran relations return to Mogherini and the European External Action Service. This will happen first and foremost with the convening of the Joint Commission of the JCPOA which is expected in the coming week. Mogherini’s position draws on the foreign policy consensus of the EU’s 28 member state governments. With the policy debate once again expanded to this wider group, the input of the governments of Sweden, Austria, Italy, and the Netherlands, among other countries, will become more influential as Europe seeks to preserve the JCPOA’s economic benefits and keep Iran in the deal. Importantly, these smaller member states are those which have made the most progress in devising special financial vehicles, concluding export credit agreements, and encouraging banks to engage in the Iranian market in adverse conditions. In short, Trump’s rebuke of the E3 can restore the mantle of JCPOA engagement to the wider EU—an outcome that is good for Iran.

Moreover, in taking itself out of the deal, the Trump administration may have actually limited the damage it can do to the legal environment for trade and investment in Iran. Administration officials have confirmed that the United States will not pursue the snapback of UN sanctions lifted as part of United Nations Security Council resolution 2231, which enshrined the JCPOA in international law. As the United States is out of the deal, they no longer have the right to trigger such a vote as per Article 37 of the JCPOA. So while the White House has announced a full snapback of U.S. primary and secondary sanctions eased under the nuclear deal, European and Iranian commercial actors can take some comfort that EU and UN sanctions will not snapback (so long as Iran continues to abide by its commitments under the deal).

Finally, and perhaps most importantly, the nature of Trump’s withdrawal will impact public opinion in Iran. For President Rouhani, there will be great pressure to retaliate in order to prove that Iran cannot be bullied by the United States. This pressure is coming not just from hardliners, but from the general public as well.

When asked whether Iran should “retaliate” or “continue to live by the JCPOA” in the event that “the United States takes measures against Iran that are in violation of the JCPOA agreement,” 67 percent of Iranians believe that Iran should retaliate. Just 31 percent believe that Iran should stick with its commitments under the deal. The proportion of Iranians calling for retaliation has risen 8 percent in the past three months, which corresponds precisely to the period in which the E3 launched its attempt to fix the deal by placating Trump. The political consequences of that strategy are starkly exhibited in the new polling.

Yet, the undeniably aggressive nature of Trump’s move may actually serve to inspire Iranians to choose resilience over retaliation. Resilience is what has made Iran one of the world’s twenty largest economies despite enduring both a decade of war and a decade of sanctions in just the last forty years. In his address to the nation, Rouhani described Trump's decision as "an act of psychological warfare against Iran.” The Iranian response to this psychological warfare will be determined following consultations with the remaining parties in the JCPOA. If the Rouhani administration can credibly demonstrate to the public that there is a plan for principled defiance, and if that plan includes clear commitments from Europe to protect Iran’s economic prospects, it remains possible for Iran to remain in the deal. If this can be achieved, following such a direct attempt by Trump to kill the deal, Iran will reassert its strength in a remarkable way. Cooperative resilience, not retaliation, must prevail. Defying Trump must be the rallying cry. 

Photo Credit: REX/Shutterstock

Europe’s Balancing Act on the Nuclear Deal: Wooing Trump Without Losing Iran

This piece was originally published on the website of the European Council on Foreign Relations. 

For much of Iran’s political elite, and its overwhelmingly young population, the nuclear deal is becoming a story of failure. This situation risks impacting on Tehran’s willingness to engage politically and to reach diplomatic compromises with Western powers. Last week European leaders were in Washington for a last push to keep the United States on board ahead of the 12 May deadline for Donald Trump to issue waivers required under the nuclear deal. During his visit, Emmanuel Macron suggested that the US and Europe could work on a “new deal” with Iran – one which preserves but expands on the 2015 accord. But with Iran kept out of the European-US talks, Hassan Rouhani has questioned the legitimacy of proposals now put forward by Macron and Angela Merkel for Iran to negotiate further deals on its nuclear programme and regional issues. In the process of wooing Washington on this bigger and better deal, Europe must ensure it does not end up losing Tehran, whose buy-in will be essential to succeeding in this effort.

Iran's Rethink on Europe

Despite increasing pressures coming from Trump, Iran has continued to fulfil its part of the deal, as verified by the International Atomic Energy Agency 11 times since the deal was implemented in January 2016. Iran has waited to see what actions Trump would take and carefully assessed the ability and willingness of Europe to safeguard the nuclear deal. In October, Tehran sent out clear signals that it would consider sticking to the deal so long as Europe, China, and Russia could deliver a package that served Iran’s national security interests. But as talks between the US and the EU3 (Germany, France, and the United Kingdom) have stepped up over the last few months, Iranian thinking on European positioning has begun to sour.

Officials and experts from Iran, interviewed on condition of anonymity over the past month, outlined a growing perception inside Tehran that Europe is unable and/or unwilling to deliver on the nuclear agreement without the US. Even those who defend the nuclear deal inside the country are finding it difficult to continue to do so, not just because of Trump but also because of European tactics, which one Iranian official described as “appeasement by Europe to reward the violator of the deal and Iran’s expense”.

This perception has contributed to considerably hardened Iranian rhetoric in recent weeks around a possible US withdrawal. The secretary of Iran’s Supreme National Security Council (SNSC), which includes the most important decision-makers inside the country, warned that Iran may not only walk away from the nuclear deal, but also withdraw from the Non-Proliferation Treaty. Such public statements from senior figures signal that a rethink may be taking place over Iran’s foreign policy orientation and openness to engaging with the West. Decision-makers in Europe should be alert to the gravity of such political shifts.

Keeping Iran on Board

Iranian officials have repeatedly outlined that Iran will abide by the nuclear deal so long as the US does not violate the agreement. If Europe wants to keep Iran on board with the agreement in the scenario where Trump does not issue the sanctions waivers required, or to even sell a new European-US framework to Iran, it will need to shore up its fast-diminishing political capital with Tehran. While Macron’s hour-long call with Rouhani on Sunday was a good start, greater activity is urgently needed.

First, Europeans should seek to alleviate growing Iranian fears that the price of saving the deal will be a wider “pressure package”, one which returns their relations to the pre-2013 policy of isolation and sanctions. While the focus is understandably now on securing ongoing US support for the deal, the EU3 should not neglect the fact that any new framework agreed will require at least some Iranian buy-in to make it workable. In the current political climate in Iran, this is not a given.

As such, the EU3 should, as a unified coalition, work at the highest level with Iran’s foreign ministry to shore up confidence regarding the nuclear deal. In advance of the 12 May deadline, if it looks increasingly likely that Trump will not waive sanctions, the newly appointed German foreign minister should follow up on Macron’s call to Rouhani with a visit to Tehran to meet with their Iranian counterpart and consider contingencies (some measures for which are outlined below).

Second, EU member states should delay the prospect of new sanctions targeting Iranian regional behaviour, at least until firmer guarantees are in place regarding Trump’s decision on the nuclear deal. The timing of such sanctions has reportedly been the topic of heated debate among the 28 member states. At a minimum, the countries supporting such measures should step up their public messaging to communicate the reasons and the targeted nature of new sanctions, including a commitment that these are not the start of more far-reaching sanctions that will hurt the wider Iranian economy. This is particularly the case with Iran’s private sector, which constantly meets new hurdles placed in its way when seeking to do business with Europe.

Third, European governments should double down on efforts to maintain Iranian compliance to the nuclear deal if Trump fails to renew waivers due on 12 May. Such action by the White House would result in the snap-back of US secondary sanctions and are likely to be viewed in Tehran as significant non-performance of the nuclear deal. Europe will need to coordinate with Russia and China to persuade Iran to continue adhering to its nuclear obligations, at least for a period of time. The exhaustion of the dispute resolution mechanism under the nuclear deal can buy time (estimated to be between 2-3 months) for contingency planning while allowing Iran to save face.  

In this scenario, European governments will need to convince the US that it will be in their mutual interest to agree on an amicable separation on the nuclear deal. Europeans will need to argue that such a settlement would allow Trump to claim victory with his base for withdrawing US participation in the JCPOA, while avoiding deeper damage to transatlantic relations and possibly maintaining Europe’s quiet compliance on regional issues. This path should also allow the US to reverse its course (Europeans should continue to encourage such a reversal, whatever the 12 May decision).

As part of this contingency plan, to keep Iran on board Europeans will need to offer some degree of economic relief. It will be critical to reach a pan-European deal with the Trump administration to limit the extent to which the US secondary sanctions that may snap back are actually enforced by US regulators. This should include a series of exemptions and carve-outs for European companies already involved in strategic areas of trade and investment with Iran, with the priority being to limit the immediate shock to Iranian oil exports.

European governments should further make a strong case to the Iranian government and public as to why the nuclear deal can continue to serve Iran’s security and economic interest even without the US. They should emphasize the immediate economic benefits of continued oil exports to Europe and possible longer-term commitments for investments in the country. Sustained political rapprochement between Europe and Iran could also influence Asian countries that closely watch European actions (such as Japan, South Korea, and India) to retain economic ties with Iran. 

Finally, regardless of the fate of the nuclear deal, Europe should keep the pathway open for regional talks with Iran. Germany, France, the UK, and Italy should establish and formalize a regular high-level regional dialogue with Iran that builds on those held in February in Munich. It is a positive sign that a second round of such talks is reportedly due to be held this month in Rome. Such engagement will become even more important if the US withdraws from the nuclear deal, increasing the risk of regional military escalation that is already surfacing between Israel and Iran in Syria. Europeans should focus these talks on damage limitation and de-escalation in both Yemen and Syria, to help create an Israeli-Iranian and Saudi-Iranian modus vivendi in both conflict theaters (something which the US seems uninterested in).

Ultimately, Iran’s willingness to implement any follow-up measures on regional issues will be heavily influenced by the fate of the nuclear deal and how the fallout over Trump’s actions is managed. Europe may well not be capable of salvaging the deal if the US withdraws from or violates it. But Europe must at least attempt to do so and demonstrate its political willingness through actions that serve as a precedent for the international community. To do otherwise is likely to have an immediate and consequential impact on Iranian foreign policy and significantly reduce Europe’s relevance for the Iranian political establishment. For Iran’s youth, as the largest population bloc in the country, this will be an important experience in how far Europe is willing to go in delivering on its promises to defend the nuclear deal, whose collapse would affect the Iranian psyche and domestic political discourse for years to come. 

Photo Credit: Wikicommons

As the Iran Deal Approaches its D-Day, Uncertainty Only Set to Increase

The Joint Comprehensive Plan of Action (JCPOA) was, like many complex pieces of international diplomacy, a necessarily imperfect creation born out of compromise.

The deal is dependent for its survival on continued waivers of US secondary sanctions by the US President (a function of the congressional approval of the deal in the first place). It is also limited—quite deliberately—in the scope of its ambition: it did not seek to settle disputes concerning Iranian intervention in regional conflicts, Iran's human rights record or its ballistic missile program. And, much to the chagrin of Iran hawks in the US and elsewhere, the sunset clauses place no restriction on Iran's uranium enrichment after the first 15 years of the deal, though other aspects of the deal will be in force in perpetuity. From the Iranian side, whilst it provided relief against EU sanctions and US extraterritorial secondary sanctions, the JCPOA offered Iran no access to the US economy or, crucially, the US dollar denominated financial system.

But, imperfect as it was, it did result in the destruction of Iran's stockpile of enriched uranium and afforded the International Atomic Energy Association (IAEA) access to Iran's nuclear sites to verify continued Iranian compliance. And it has allowed Iran access to major European investment in Iran, including high profile deals struck with Airbus and French oil major Total.  

In any event, some of the lingering congenital defects would not have mattered as much, or at all, were it not for other extraneous events. For example, it was always intended by the Obama administration that the JCPOA would be a starting point for further discussions and deals on other areas of difference once the nuclear boil was lanced; negotiating the nuclear settlement was lengthy enough without complicating the negotiations further by involving issues such as Syria and ballistic missiles. And continued sanctions waivers were never thought to be seriously in doubt, even as the Trump campaign gained momentum throughout 2016. The State and Treasury Department reach out sessions following Implementation Day emphasized that the political consequences of a US lead snapback would be so serious that the next President would balk at tearing it up, even if that President was a candidate who described the deal as the "worst ever."

Fix It or Nix It

Even after further criticism of the deal from the newly inaugurated President Trump, that conclusion seemed to hold good. Early forays into extending sanctions against Iran with SDN designations in February 2017 were limited in scope. They did not designate Iranian financial institutions or state owned enterprises. Indeed, they were no different in character to some of the late Obama administration's post Implementation Day Iran designations.  Many concluded that moderate voices within the administration had managed to constrain the President's more hawkish impulses.  

But recent personnel changes amongst the President's close advisors, and the lack of much perceived benefit from the deal in Iran, mean that the defects matter much more now. The appointment of two key Iran skeptics, John Bolton (national security advisor) and Mike Pompeo (Secretary of State) mean that President Trump now has core of foreign policy advisors in place who share his dim view of Iran deal. The President is now determined to either "fix" the perceived failings of the Iran deal or "nix" it.

There is, therefore, a very real fear that President Trump will refuse to renew the next set of waivers that are due to expire on 12 May 2018. Those waivers apply to the secondary sanctions contained in the National Defence Authorization Act (NDAA) 2012 which provides for penalties against foreign financial institutions that engage in significant financial transactions with Iran's central bank. Further secondary sanctions on the provision of significant support to Iran's energy, shipping, shipbuilding sectors or the provision of insurance and reinsurance or refined petroleum products to Iran, which apply under other congressional acts, are due to expire in July 2018 unless the waivers are renewed.

But Iran has its own JCPOA hawks, and the risk is that an abrogation of the JCPOA by the US through a failure to renew the NDAA waivers in May will provide just the excuse they are waiting for to precipitate an Iranian reaction that effectively ends the JCPOA as a meaningful deal.

Caught in the Middle

That concerns the European Union greatly. The EU sees the JCPOA as the most effective way to stop Iran obtaining a nuclear weapon, and precipitating a nuclear arms race in the Middle East that will potentially involve Gulf Arab states, Turkey as well as Israel. As the EU points out, the IAEA has repeatedly confirmed substantial Iranian compliance with the terms of the deal. More immediately, however, it could see European companies that have chosen to engage with Iran since Implementation Day exposed to US secondary sanctions for the first time.

The US did not relax its own self-denying sanctions preventing US persons dealing with Iran after Implementation Day; only the secondary sanctions affecting non-US persons. By contrast the EU lifted most of its general restrictions on trade with Iran except for those on controlled good or remaining designated persons. As a result, European companies that have been able to find means of getting paid (not an easy task when US dollar transactions are still proscribed) have engaged with Iran more enthusiastically—a fact that is no doubt not lost on a President currently jostling with the EU over aluminum tariffs. Any unilateral re-imposition of US secondary sanctions could impact these European companies significantly. The recent application of US secondary sanctions against certain Russian companies and oligarchs illustrates some of the problems that this can cause.

Historically the threat of a divergence between the US and EU over Iran has never been a problem. The two have managed to proceed in concert with each other so that US sanctions which unilaterally sought to regulate or restrict trade and investment activities carried out by persons outside the US were mirrored by the EU's own regulations and restrictions on what EU persons are able to do. But there are earlier precedents for transatlantic fallings out over the extraterritoriality of US sanctions.

In the 1980s the US imposed sanctions on companies doing business on a Russian pipeline in Eastern Europe, provoking a diplomatic falling out. And in 1996 the Helms-Burton Act, which, amongst other things, imposed penalties upon non-US persons "trafficking" in Cuban property formerly owned by US persons, provoked a furious response from the EC which launched blocking legislation and a WTO panel investigation alleging that the extraterritorial restriction of trade between the EC and Cuba breached various provisions of the GATT and GATS. The US countered that it was prepared to rely on the rarely used national security exemption in the GATT. The dispute was only withdrawn after high level political compromise. 

But the prospect of a large scale transatlantic trade dispute over Iran occurring at the same time as a US-EU dispute over US aluminum tariffs and extraterritorial Russia sanctions is deeply concerning for the EU.

To that end the EU has even been looking at further potential sanctions against Iran for ballistic missile activities. The rather circular logic is that new sanctions might persuade President Trump that the EU is being tough enough on Iran to renew the waivers in May and may actually save the Iran deal. The EU recently renewed its existing human rights sanctions against Iran, which date back to 2011 and which impose asset freezes and bans on exports of equipment which might be used in internal repression.  However, a recent meeting of EU foreign ministers failed to reach any agreement on the imposition of new sanctions against Iran.  The clock continues ticking towards May 12.

The Dispute Settlement Process

So what would happen if the US failed to renew the waivers of the NDAA sanctions that expire in May? The JCPOA obliges the US not only to cease the application of its secondary sanctions program but to "continue to do so." A failure to renew the waivers could therefore in theory amount to a breach of the terms of the agreement. Iran could then refer the issue to the JCPOA dispute settlement mechanism, which is a largely consensual process.

The question of US compliance would first be considered by the Joint Commission established under Annex IV of the JCPOA, which consists of the participants from each JCPOA signatory (including Russia and China). The Joint Commission must make decisions by consensus, which would presumably mean that no decision would be made confirming US non-compliance (or no decision would be made within the mandated 15 days). This would then presumably precipitate an escalation to the next level; an Iranian referral of the question of US compliance to a three person advisory board. The board would consist of one person appointed by each of the US and Iran and a third independent person appointed by the first two.

The advisory board can issue a non-binding opinion on the compliance issue and must do so within 15 days. The Joint Commission will then consider the non-binding opinion for a further 5 days to try to resolve the dispute by consensus again. If the dispute has not been resolved to Iran's satisfaction, and if Iran deems the refusal to renew the NDAA waivers as "significant" non-performance, Iran could at that point treat the unresolved issue as grounds to cease performing its commitments under the JCPOA in whole or in part and/or notify the UN Security Council that it believes the issue constitutes significant non-performance.

A referral to the UN Security Council would mean that it must vote on whether to continue the sanctions relief provided by UN Security Council Resolution 2231 (2015) which endorsed the JCPOA and disapplied six previous UN resolutions imposing sanctions against Iran. Under the JCPOA dispute resolution mechanism and Resolution 2231 itself, unless the UN Security Council votes in favor of continuing the sanctions relief, the six former UN resolutions will "snap back" into force automatically. As a veto wielding permanent member of the UN Security Council, the US could, therefore, force the snap back of previous UN sanctions simply by exercising its veto.

Diplomatic Manoeuvres

There are clearly options and opportunities throughout this process for diplomacy and deal making to vary the procedure above. Whilst Iran has already hinted, most recently through its Foreign Minister Javad Zarif, that it would probably react by restarting production of enriched Uranium, it might nonetheless choose to use the fact that some of the waivers expire in May and others in July to bide its time before actually withdrawing from the deal.

It could perhaps choose to take the process through the Joint Commission and advisory board stages, until it reached a point at which it could claim that the unresolved dispute was US non-performance. That point would be reached in mid to late June. It could then refrain from referring the dispute to the Security Council and perhaps even confirm its continued performance (for the time being) despite the lapse of US waivers in May. That would avoid an automatic "snap back" of UN sanctions, or the risk that the US could treat an Iranian abrogation as non-performance and refer the matter to the Security Council itself.

Iran could then utilize the remaining weeks before the next US waivers expire to rally support from concerned EU signatories, perhaps even relying on a potentially positive advisory board opinion, to garner diplomatic sympathy for its position. It would then have a further opportunity to go through the JCPOA dispute resolution process in July if those diplomatic efforts failed and the other waivers were not renewed.

Of course, it is equally possible that Iran's own hardliners gratefully accept any failure to renew waivers in May as the excuse that they have been waiting for to finally tear up the deal. No-one can rule out a last gasp left-field intervention from the US President himself that changes everyone's calculations.

No doubt such diplomatic brinksmanship will cause investors and exporters to Iran to be reaching for their contracts and examining any "snapback" provisions. Would a limited US re-imposition of NDAA secondary sanctions, in the absence of any other secondary sanction re-imposition—let alone any EU sanctions or UN sanctions—constitute a "snapback?" The answer, of course, will depend on what sort of trading relationship is concerned and how the actual clause is drafted. Some are drafted very mechanically requiring specific events to occur; others are more subjective and only require one party to reasonably consider their position is affected by unspecified sanctions. As ever, close attention is required before making any decisions about terminating contracts.

But it is clear that the coming weeks and months will be a rollercoaster ride for all affected.

Photo Credit: Wikicommons

Macron and Merkel Must Flex Muscles to Save Iran Nuclear Deal

This article is adapted from a recent report from the European Leadership Network. 

The fate of the international nuclear agreement with Iran, known as the Joint Comprehensive Plan of Action (JCPOA), looks increasingly uncertain in light of repeated attacks from U.S. President Donald Trump, who has threatened to walk out of the deal unless Congress and European counterparts agree to “fix it.” The recent appointments of Mike Pompeo and John Bolton—both vocal critics of the JCPOA and widely seen as staunch hawks on Iran—make it less likely that Trump will keep the United States in the deal at his next decision point by 12 May. Faced now with the likelihood of U.S. withdrawal, Europe must decide how far to go to try to preserve the agreement in the face of renewed U.S. sanctions.

Against this backdrop, the forthcoming visits to Washington by French President Emmanuel Macron and German Chancellor Angela Markel come at a time of great importance for the nuclear agreement, regional security, and transatlantic relations. Macron’s meeting with Trump will be of particular significance, given the good rapport between the two leaders. Syria will likely feature at the top of the agenda, but the visit will offer an urgent opportunity to remind President Trump of the importance of the nuclear deal for his European allies.

U.S. decision makers can still be influenced. Washington’s position on the nuclear deal is far from monolithic and it is still possible that President Trump could be influenced by congressional opinion, which remains sensitive to European concerns. There is no congressional majority for a unilateral U.S. withdrawal from the JCPOA while Iran remains compliant, still less for the re-imposing secondary nuclear-related sanctions on European allies. Even if the United States decides to leave, some main provisions of the deal might still be kept.

This leaves plenty of scope for European intervention. Representatives of the European signatories of the JCPOA, the so-called E3 (Germany, France, and the United Kingdom), are currently engaged in consultations with their U.S. counterparts to save the agreement. This includes discussions on how to accommodate President Trump’s concerns over the deal’s inspection provisions and “sunset clauses,” as well as over Iran’s missile programs and regional activities. But European leaders are also making clear that they will not just fall into line if Washington decides to leave the agreement and re-introduce sanctions.

A re-introduction of sanctions does not necessarily equate to a full re-introduction of all U.S. sanctions without exemptions. American policymakers can calibrate the sanctions they choose to re-instate and the executive powers of the president in matters of national security add to this flexibility. This means that there is plenty for Europeans to negotiate for with their U.S. counterparts about the terms of any U.S. withdrawal. It is possible to envision a transatlantic quid pro quo in which U.S. secondary sanctions are waived even if the United States leaves the agreement.

The risks of a U.S. withdrawal and a comprehensive snap back and enforcement of secondary are nonetheless tangible. As a result, European policymakers are considering credible ways to signal that the EU is willing to take action if confronted with this scenario. This includes reviving EU “blocking regulation” (which seeks to prohibit EU persons from complying with U.S. secondary sanctions or acknowledging the jurisdiction of non-EU courts or authorities with respect to those sanctions) and filing complaints at the World Trade Organization (WTO).

There are significant and inherent risks with these options. These retaliatory measures could easily escalate into an unpredictable and unmanageable tit-for-tat. This would not only impose significant costs on the EU and cause serious friction in the transatlantic relationship but also do damage to the institutions that uphold the free movement of goods, services, and ideas – bedrocks of the multilateralism the EU cherishes. After all, pushing back against the United States requires political will. And while there is undivided support for the JCPOA within the EU, there is little appetite for further confrontations with the United States.

Notably, this could change if Washington is seen as taking further steps to undermine transatlantic relations and European interests. An already fractured partnership is sensitive to further blows – for instance if the United States would go ahead and impose tariffs on European exports after the temporary exemptions on EU steel and aluminum exports expire on May 1.

The wider international context in May is therefore going to matter a great deal for the fate of the JCPOA. So too will the way that the Europeans choose to frame their differences with Washington over the deal. A choice between the JCPOA and good relations with Washington is one thing; the ability of the EU to maintain its security, its autonomy and the values it thinks should define the international order is quite another. The latter would merit a tougher stance.

Still, an inconvenient truth remains—no EU action can completely shield European businesses and investments in Iran. In this sense, there is no bulletproof defense of the JCPOA’s economic benefits in the event of a U.S. withdrawal. The EU and its member states can pursue measures to shield existing links, encourage further business activity and boost investors’ confidence in the Iranian market, but while government can facilitate business, it cannot control it.

Consider the lingering caution of financial institutions despite sanctions relaxation under the JCPOA, which is a sobering reminder of the challenge of steering the private sector through Iranian market obstacles. As the chief legal officer at HSBC noted in response to the Obama administration’s push to encourage European banking activity in Iran, “Governments can lift sanctions, but the private sector is still responsible for managing its own risk and no doubt will be held accountable if it falls short.” In light of the current uncertainty surrounding President Trump’s policy towards Iran, private sector actors will have plenty of reasons to be wary of the Iranian market. This will continue to restrict investment for the foreseeable future.

As a result of struggles with financing, major businesses are canceling or scaling back their planned activities in Iran. Airbus is struggling to complete its sales of Aircraft to Iran; Total, the French energy giant, is deep into contingency planning for its Iranian operations; and Bouguyes, a French industrial group, has decided to put their Iranian plans on the shelf. As noted in a recent Bourse & Bazaar study, this risks dragging the JCPOA into a “zombie state.”

Europe nevertheless has realistic options in the face of a U.S. withdrawal. There is a strong commercial interest in engaging with Iran, and European policymakers can promote policies that help turn interest into action. They need not—indeed, should not—put all their eggs in one basket but should pursue an array of options in parallel. This includes solidifying international support for the JCPOA, demonstrating that re-imposing sanctions unilaterally will come at a cost for the United States, seeking U.S. exemptions for European businesses to continue operating in Iran, and bolstering international business confidence in the Iranian market. Such practical steps, taken now, can bolster European negotiating leverage with Washington, send useful signals to Tehran and strengthen European political will to defend the JCPOA.

Photo Credit: Armando Babani/EPA

In Confirmation Hearing, Pompeo Unwittingly Makes Strong Case for the Iran Nuclear Deal

Mike Pompeo is eager to be Trump’s new Secretary of State, a position that would offer the former Kansas congressman a public profile far greater than he enjoyed as director of the Central Intelligence Agency. Pompeo wants to represent America on the world stage and to restore the “swagger” of the Department of State.

His eagerness shone through as the nominee was questioned on his views regarding the Joint Comprehensive Plan of Action (JCPOA) by members of the Senate Foreign Relations Committee yesterday. Republican and Democratic members alike were ready with sharp questions as Trump’s self-imposed May 12 deadline for a “fix” to the deal loomed.

During the hearing, Pompeo was obliged to navigate his record of hawkish statements on Iran and the nuclear deal, his need to show ideological consistency with the President (without which his tenure as Secretary of State would surely be short-lived, as Tillerson’s experience showed), and his need to demonstrate a character befitting America’s lead diplomat. Pulled between these three obligations, Pompeo confused his talking points, struggled to dodge his record of hawkish and bigoted statements, and sought to seem reasonable the one way he could—by making a strong case for the Iran nuclear deal. 

The cracks in Pompeo’s thinking first appeared as Arizona senator Jeff Flake began a line of questioning focused on the economic benefit Iran had received from the JCPOA. Flake observed, “In effect Iran has already realized much of the benefit of the agreement, but if we were to exit the agreement now, we would give them reason to renege on the agreements they have made nuclear side.”

The question put Pompeo in a bind. The Trump administration has been vocal about the economic pressure it has placed on Iran. Yet, as Flake’s questions sought to establish, the economic dividend of the deal is the source of American leverage to maintain Iranian compliance.

Flake asked whether there exists any means to claw back money received by Iran to date in the event of an American withdrawal from the agreement. There is no such means, Pompeo conceded, exposing that withdrawal from the JCPOA will mean forgoing significant leverage to prevent Iranian proliferation. Iran would have nothing to lose.

Pompeo, sensing the point about leverage, agreed that Iran has “received great economic benefit from the JCPOA” and that there remains “continued interest on the part of Iran to stay in this deal. It is in their own economic self-interest to do so.”

Senator Flake gets Pompeo to concede that Iran presents a low proliferation risk

But to deflect the concern about a loss of economic leverage in the face of a proliferation risk, Pompeo took a surprising tact, claiming “Iran wasn’t racing to a weapon before the deal, there is no indication that I am aware of that if the deal no longer existed that they would immediately turn to racing to create a nuclear weapon.”

Pompeo did not hold this belief until recently. In 2012, when he criticized the Obama administration's assessment “that the Iranians have not yet decided to build a bomb,” saying at the time, “To me, these words are reminiscent to those of Neville Chamberlain.”

In now downplaying Iran’s ambition to proliferate to Senator Flake, Pompeo undermined his earlier testimony, given in response to questions asked by Senator Bob Menendez, in which the nominee described the urgent need to “fix” the nuclear deal. After all, if Iran is not hellbent on acquiring a nuclear weapon, and was not seeking such a weapon prior to the deal coming into force, then surely the concern over “sunsets” is overblown.

This inconsistent logic reveals who has been advising Pompeo on Iran policy. A recent Washington Post op-ed by Reuel Gerecht of the Foundation for Defense of Democracies, written with Ray Takeyh of the Council on Foreign Relations, makes precisely the same argument. Gerecht and Takeyh write that “there’s no need for hysteria” if Trump abandons the nuclear deal, because “the Islamic Republic still isn’t likely to run amok, ramping up its nuclear program” given technical and political limitations. Pompeo is known to lean on FDD analysis, and participated in a summit organised by the hawkish think tank in October of last year.

Pompeo further contradicted himself on the matter of Iranian proliferation when pressed on Iran’s verifiable compliance with the Iran nuclear deal by New Mexico Senator Tom Udall.

Senator Udall pushes Pompeo on Iran's proven compliance with the JCPOA

Udall read a past statement by Pompeo expressing concern about the expiration of the JCPOA and the so-called “sunset clauses.” Pompeo had previously stated that “Iran will have the freedom to build an arsenal of nuclear weapons at the end of the agreement.”

Udall pointed out that in addition to its commitments under the JCPOA, Iran is also a signatory to the NPT and abides by the IAEA Additional Protocol, the commitments of which Iran has agreed to in perpetuity. He then asked Pompeo whether he had seen any evidence that Iran had not complied with its commitments under the JCPOA. Pompeo’s response was clear: “With the information I have been provided, I have seen no evidence they are not in compliance today.”

When Pompeo was read his own 2014 statement, in which he suggested that a military solution would be easier than a negotiated agreement to halt Iran’s nuclear program, he feebly replied “I don’t think that is what I said that day” before seeking to reassure members of the committee that he believes the “solution to preventing Iran from getting a nuclear weapon… is through diplomacy.”

Whether or not Pompeo’s newfound interest in diplomacy is genuine, it is clear that he is wary of the potential chaos that may follow Trump’s abrogation of the deal. Echoing another FDD talking point, Pompeo claimed that diplomatic efforts to “achieve a better outcome and better deal” could continue “even after May 12.”

The notion that the U.S. could continue to pursue diplomacy, and even remain in the deal, even after Trump opts not to further waive secondary sanctions on May 12, reflects the “fix not nix” approach devised by FDD which seeks to prevent American responsibility for the deal’s demise. Tellingly, Treasury Secretary Steven Mnuchin made a similar statement this week, claiming that “If the president decides not to sign [the waivers], it doesn’t mean we’re necessarily pulling out of the deal.”

Pompeo, after years of saber rattling, seemed willing to give diplomacy a chance. But committee members could see clearly that Pompeo’s testimony was first and foremost about giving himself a chance for confirmation. For Pompeo the verifiable success of the JCPOA is nothing more than an inconvenient truth to be acknowledged briefly now and then denied vociferously later.

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