16 Oct 2017

Consequences of President Trump's refusal to re-certify the Iran Deal

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On Friday 13th October, President Trump announced the results of the US strategic review of its policy towards Iran.

The following is a summary of those conclusions and what they mean for international businesses.

What the President said

The conclusions of that review are that:

  • the US will impose “tough sanctions on Iran’s Islamic Revolutionary Guard Corps” for its support for terrorism and will apply sanctions to its officials, agents and affiliates;
  • the President refused to certify that the sanctions relief provided by the suspension of sanctions under the JCPOA is appropriate and proportionate to the measures that Iran is taking to limit its nuclear program.

The background to the President’s statements

Under the Iran Nuclear Agreement Review Act of 2015, the President is required to certify not less than every 90 days that (i) Iran is, in general terms, fully implementing the terms of the JCPOA; that (ii) the continued sanctions relief provided by the JCPOA is appropriate and proportionate to the specific and verifiable measures taken by Iran to terminate its nuclear programme; and that (iii) the suspension of sanctions is vital to the security interests of the United States.

A failure to certify the sanctions relief under the JCPOA requires Congress to consider which, if any, sanctions relief provided by the JCPOA shall be waived, suspended, reduced or otherwise relieved.

The IAEA has repeatedly confirmed Iran's compliance with the JCPOA through its ongoing verification and monitoring programme.

What does this mean in practice?

In practical terms, very little has changed for now.  The JCPOA and the US sanctions relief it applied is unaffected.   The announcements made by the US President do not amount to a direct re-imposition of US sanctions or an event of “snap-back’ as allowed for under the JCPOA.

The Islamic Revolutionary Guard Corps (IRGC) continued to be a designated entity under US and EU sanctions following the signature of the JCPOA in July 2015. The imposition of additional sanctions on the IRGC will not therefore impose any additional restrictions on international businesses looking to engage with Iranian counterparts since international businesses have never been permitted to engage with the IRGC or any entities or businesses owned or controlled by it.

The JCPOA was never intended to address any issues between Iran and the international community other than the Iranian nuclear programme. The President is now requesting that Congress require amendments to be made to the JCPOA which make permanent the restrictions on Iran’s development of a nuclear programme, as well as taking additional measures to deal with other activities of Iran which are outside the scope of its nuclear programme, such as imposing restrictions on its ballistic missile programme and its involvement in other regional disputes.

As a number of watchers of Washington have pointed out, international businesses would do well to look beyond the statements made by the US Administration and watch what the US actually does in relation to Iran. The State Department has made it clear in its tweets and subsequent remarks made by Secretary of State Rex Tillerson that the US is seeking "strict enforcement" of the JCPOA rather than withdrawal from it. Secretary of State Tillerson also expressed confidence that European friends and allies of the US would work with the US to counter the threats posed by Iran. Following the announcement of President Trump, the UK, France and Germany issued a joint statement re-affirming their commitment to the JCPOA and expressing concern at the President's decision not to re-certify the deal. The joint statement went on to encourage the US Administration and Congress to consider the implications to the security of the US and its allies before taking any steps to undermine the JCPOA, such as re-imposing any sanctions.

Conclusions

Whilst the language used by the US President is likely to raise tensions between the US and Iran, nothing substantive has changed for the time being. Any future changes by the US will depend on the steps taken by Congress to address the President’s perceived weaknesses in the JCPOA. Whilst its European allies have indicated a shared concern with the US regarding Iran's ballistic missile programme, they have also stated that any additional discussions in relation to that programme need to take place outside any consideration of the JCPOA. Whilst the President's remarks have clearly concerned those in Europe, it is far from clear that they will lead to a substantive change to the current ability of international businesses to engage with Iran.

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