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Trump and Iran

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Before 15 October – and most likely this week – US President Trump will announce whether his administration will certify to the US Congress Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA).

Under the terms of the JCPOA, which was signed in July 2015 between Iran and the US, UK, Russia, France, China and Germany (P5+1), Iran agreed to temporary nuclear restrictions and close monitoring, in return for the lifting of most international sanctions. Key restrictions on Iran’s uranium enrichment are in place for 10-15 years.

Although on 31 August the international nuclear watchdog, the International Atomic Energy Agency (IAEA) confirmed (for the eighth consecutive time) that Iran has not deviated from its nuclear obligations, and on 14 September the Trump administration continued to waive nuclear-related sanctions as required by the JCPOA, numerous reports have claimed that President Trump is expected to decertify Iran’s compliance with the JCPOA. Trump has been outspoken in his dislike of the agreement, stating in July, that “if it was up to me, I should have had [Iran] noncompliant 180 days ago.” He added said he would be “surprised” if Iran were to be in compliance at the next certification deadline in October.

In July – the last time the issue of certification came up – President Trump was reportedly rebuffed by senior administration members, including Secretary of State Rex Tillerson, Defence Secretary Jim Mattis, Lt. Gen. H. R. McMaster, the National Security Adviser, and Gen. Joseph F. Dunford Jr, the chairman of the Joint Chiefs of Staff, who wanted the President to continue to certify Iran’s compliance. Trump ultimately issued the certification on the condition that his team come back with a new strategy to confront Tehran outside of the nuclear file. That strategy review led by National Security Adviser McMaster is expected on 12 Oct.

Several policy analysts such as Gary Samore at the Belfer Center for Science and International Affairs, Mark Fitzpatrick at the International Institute for Strategic Studies and Colin Kahl, former deputy assistant to President Barack Obama and national security advisor to Vice President Joe Biden, believe the US should continue to certify Iranian compliance. These advocates argue that the JCPOA achieved the best of the available alternatives: it is fulfilling its sole purpose of closing off all pathways for Iran’s acquisition of a nuclear weapon and its success should not be blurred with Iran’s problematic policies and actions in the Middle East outside of the nuclear file, as the deal never pretended to end all grounds for mutual hostility. They warn that scrapping the nuclear deal now, or imposing new or suspended sanctions on Iran to force it back to renegotiate, will only make it harder to constrain Iran in other areas, including over Iran’s ballistic missile programme, and its support for Hezbollah in Lebanon, Houthi rebels in Yemen, and President Bashar al-Assad in Syria.

The relationship between certification and the Nuclear Deal

As this debate intensifies, it is important to emphasise that the decertification process and America’s continued commitment to the JCPOA are not one and the same. Trump’s potential decertification would not necessarily mean that Iran is in noncompliance with the nuclear deal nor that the US has abandoned the deal itself.

After the JCPOA was signed, US Congress passed the Iran Nuclear Agreement Review Act (INARA), whereby the US President must certify to Congress every 90 days that Iran is implementing the agreement.

The scope of the certification under the Iran Nuclear Review Agreement is broader than Iran’s commitments under the JCPOA in that it states four conditions that must be met for certification to take place: a) Iran is fully implementing the JCPOA; b) Iran has not committed a material breach; c) Iran has not taken any action that could significantly advance a nuclear weapons programme, and; d) Suspension of sanctions is appropriate and proportionate to the measures taken by Iran and vital to US national security interests. If Trump decertifies it will likely be based on clause d – and signal his acceptance of the argument that the suspension of sanctions is no longer vital to US national security interests.

The framework for this thinking was set out during a speech to the American Enterprise Institute on 5 September by US Ambassador to the UN Nikki Haley. Haley made the administration’s case for deciding whether to certify Iranian compliance based on a broader view of all Iranian provocations, including the activity of the Iranian Revolutionary Guard Corps (IRGC), support for Hezbollah and its ballistic missile development (rather than on whether Iran remains within the parameters of the JCPOA).

What might happen next?

One unlikely – but very serious – scenario is for President Trump to decide to withdraw from the deal completely (the P4+1 option). This would be based on the principle that, as former US Ambassador to the UN John Bolton has argued, the JCPOA is fundamentally flawed as it fails to address Iran’s ongoing belligerent behaviour in the Middle East, allows Iran enormous latitude to continue advancing its nuclear and ballistic-missile programmes without technically violating the deal, and will legally allow Iran to reach nuclear breakout in a matter of weeks if they so choose after the sunset period. Those promoting this position argue that the Trump administration should scrap the deal and work with allies to expand the West’s approach to countering Iran that includes its behaviour in the region as well as the nuclear file.

More likely is that Trump decides to decertify without walking away from the JCPOA. Advocates of decertification, who include Mark Dubowitz of Foundation for Defence of Democracies and David Albright of Institute for Science and International Security, have argued that such a decision is the first step necessary to obtain leverage to get a better deal. From here there are two main scenarios.

Scenario 1: Re-impose (“snap back”) suspended or waived sanctions

Decertifying would trigger a 60-day window during which Congress can introduce legislation to re-impose sanctions waived or suspended under the JCPOA. A bill to re-impose nuclear sanctions must be introduced in the House of Representatives and the Senate by the majority or minority leader and pass by a majority. The legislation must specify which sanctions are being re-imposed and cannot contain new sanctions (it also does not have to re-impose all measures waived under the JCPOA). After 60 days, the Senate would need 60 votes to overcome a probable Democratic filibuster to restore the sanctions.

The strategic goal of this option — which would likely involve re-imposing prominently secondary sanctions on those who do business in Iran’s financial, energy, and automotive sectors, and on purchases of Iranian oil — would be to force Iran to negotiate on its nuclear programme by inflicting broad and escalating pain on its economy. If this option is to work, especially in the absence of credible evidence that Iran is not complying with the JCPOA and with virtually zero trade relations between the US and Iran, it would require the consent and cooperation of many other countries and non-US companies.

There is also no guarantee that US Congress would vote to re-impose suspended sanctions and in effect dismantle the 2015 deal. The Republicans hold a narrow 52-seat majority and many Republican senators are undecided as to what they would choose if the issue is sent to the Senate.

Moreover, the EU is already threatening to block its companies from complying with US secondary sanctions on Iran that they consider illegitimate, and against their economic interests with Iranian companies, as they have done in the past. European countries face an awkward situation under this option; they will have to choose between breaking publicly with a key ally and losing credibility by failing to honour a diplomatic agreement.

This option also relies on Iran not pulling out of the JCPOA, which Iranian Foreign Minister hinted last week in an interview that Iran may do if the US were to re-impose suspended sanctions.

Scenario 2: Strengthen congressional action against Iran

The second scenario involves the US decertifying but continuing to waive sanctions under the nuclear deal, in exchange for European support for a US proposal to either negotiate a follow-on agreement with Iran or re-negotiate the current nuclear deal. To force Iran back to the table, Congress could threaten to or impose new non-nuclear sanctions and other legislation concerning Iranian behaviour.

In this context, the administration will likely sign the IRGC Terrorist Designation Act, which it is required to do by 30 October under the Countering America’s Adversaries Through Sanctions Act (although the act does give the President the power to waive this action when he determines). This would effectively put companies either run or connected with the Iranian Revolutionary Guard Corps (constituting approximately 20 per cent of the total market capitalisation of the Tehran Stock Exchange) on the US Treasury’s blacklist. That designation would include the IRGC’s Ground Forces, Aerospace Forces, Navy and the Basij paramilitary (which a 2015 study estimated as having 200,000 Special Forces and 1 million active members). Just as important, companies and foundations owned by the Supreme Leader that fund the IRGC and its activities would also be eligible for designation. For example, most of Iran’s aviation and shipping industries are owned by the IRGC or affiliated companies, whilst the IRGC also has important stakes in several others industries including oil and gas, metals and minerals, construction, automotive and banking. As of 2016, the US Treasury had sanctioned only 25 IRGC individuals, 25 companies, and two academic institutions as owned or controlled by the IRGC. A 2016 Foundation for Defense of Democracies study found that there were 229 companies with significant IRGC influence. The US could also require the Treasury to lower its 50 per cent threshold to determine IRGC ownership of companies to 25 per cent, increasing the number of entities under IRGC influence eligible for sanctions. Moreover, the US could define “owned or controlled” to include not only a majority equity share, but also a majority of seats on the board of directors, and thus more accurately targeting the IRGC’s influence in the Iranian economy.

Alternatively, Congress could issue new targeted sanctions against entities involved in the Iranian ballistic missile programme, destabilising activities in the region, and support for Iranian-backed terrorism. Such entities may have been previously removed from the sanction list under the JCPOA. This is the path Congress took earlier this year in the Countering America’s Adversaries Through Sanctions Act which requires the president to designate “foreign persons” that are “agents” or “affiliates” of the IRGC. US law defines “agent of a foreign power” as a person who “acts for or on behalf of a foreign power,” which meets the definition for Iran’s proxies that do its bidding in the region, such as Hezbollah and its other militias operating in Syria.

But just as the nuclear deal does not commit Iran to curb its non-nuclear activities, it does not commit the US to refrain from sanctioning them.

If this option is to work, the Trump administration would need to convince its JCPOA partners. EU leaders have said they are interested in negotiating additional agreements with Iran to address its non-nuclear policies ― but they have warned that undermining the nuclear deal will only make it harder to constrain Tehran in other areas, including over Iran’s ballistic missile programme, and its support for Hezbollah in Lebanon, Houthi rebels in Yemen, and President Bashar al-Assad in Syria.

For this option to work effectively America’s JCPOA partners would most likely want assurances that any new sanctions will not endanger the nuclear deal and its business dealings since its signing. Thus, any new sanctions will need to allow international companies to do business with responsible, unsanctioned Iranian companies, which will help strengthen such companies relative to their IRCG-affiliated competitors. To that end, the EU may take specific cases to the Dispute Settlement Body of the World Trade Organisation. On Sunday, the chief of Iran’s Revolutionary Guard, Gen. Mohammad Ali Jafari, threatened that if the US designates the Guard as a terrorist group, it will consider the US Army as equivalent to the Islamic State terror group.

As the decision nears, Trump has seemingly gone too far rhetorically to re-certify again, but despite his great dislike of the JCPOA, both scenarios will undoubtedly counter much pushback from his JCPOA partners.

What remains to be seen is how he will decertify and how America’s P4+1 partners and Iran will respond.

Samuel Nurding is BICOM’s Research Analyst