January 13, 2018
On January 12, US President Donald J. Trump announced he would renew a number of waivers to provide limited sanctions relief to Iran in order to continue to implement the Joint Comprehensive Plan of Action (JCPOA).  At the same time, Trump committed to withdraw from the deal if he could not reach agreement with European allies and obtain US legislation to threaten additional sanctions against Iran if it does not address what Trump perceives as flaws in the nuclear deal. Trump’s move marks a continuation of the successful policies of former US President Barack Obama to prevent Iran from obtaining a nuclear weapon, yet supplements this policy with unpredictability and potential chaos in the future.

The Trump administration seems intent to define its policy on Iran, above all else, by distinguishing itself from the previous administration. In his statement on January 12, Trump said that his approach stood “in stark contrast to the policy and actions of the previous administration” and claimed that Obama had “turned a blind eye” to Iran’s ballistic missile program and support for terrorism. Trump previously called the JCPOA “one of the worst and most one-sided transactions the United States has ever entered into.” Yet Trump’s announcement on January 12, to continue the sanctions relief, makes clear that the administration’s approach to Iran, at least on the nuclear deal and sanctions, looks awfully similar to Obama’s. So far, Trump has simply added an additional layer of bellicosity and a less predictable future. Trump’s approach allows for sound policy in the immediate term, but may eat up the political capital to achieve his stated goal of additional protections against an Iranian nuclear program.

A.             What Did the Administration Just Do?

In October and again on January 12, Trump declined to certify to Congress pursuant to the Iran Nuclear Agreement Review Act (INARA) that, among other things, the sanctions relief was appropriate and proportionate to the measures taken by Iran. He said the nuclear deal allows Iran to continue developing certain elements of its nuclear program.  He said the Iranian regime had committed multiple violations of the agreement.  He said Iran was not living up to the spirit of the deal. However, he did not say that the United States would immediately pull out of the JCPOA or fail to fully implement its commitments under the deal.

Also on January 12, Trump announced he would renew a number of waivers necessary to maintain the sanctions relief to fulfill the United States’ commitments under the JCPOA.  By issuing the waivers to Congress, Trump continued the United States’ implementation of the deal by removing the threat of sanctions against foreign companies for engaging in certain business in Iran set out in US legislation. Absent the waivers, foreign companies, including financial institutions, would pursue business in certain sectors in Iran with the possibility of US sanctions hanging over them.  This would surely chill significant swaths of global business with Iran.  While Trump’s failure to make the certification to Congress pursuant to INARA triggers a congressional review period under domestic law, it does not directly implicate any terms of the JCPOA.  The waivers, by contrast, are a necessary part of the United States’ implementation of the JCPOA because they suspend mandatory statutory sanctions on Iran, and are the more significant indicator, therefore, of the United States’ continued commitment to the deal.

Specifically, Trump waived provisions of four key statutes that require the president to impose sanctions on foreign individuals or entities he determines have engaged in certain activities described in the statutes.  Those statutes are the Iran Sanctions Act, the National Defense Authorization Act for 2012, the Iran Freedom and Counter Proliferation Act, and the Iran Threat Reduction and Syria Human Rights Act.

Notably, these waivers did not remove the general prohibition on transactions between the United States or US persons and Iran.  Those prohibitions, though subject to some exemptions and licenses, remain intact and broadly limit commercial ties between the United States and Iran.  Instead, the waivers continue to lift the threat of sanctions against non-US persons for their commercial ties with Iran. 

Alongside these waivers, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has maintained additional sanctions relief that did not require legislative waivers.  OFAC issued on January 16, 2016, and continues to maintain General License H, which generally authorizes non-US entities owned or controlled by a US entity or individual to engage in business in Iran. In addition, OFAC removed over 400 Iranian or Iran-related individuals and entities from the List of Specially Designated Nationals and Blocked Persons (SDN List), allowing foreign companies to do business with these persons without the threat of US secondary sanctions. These elements of sanctions relief do not require a legislative waiver, and therefore can be maintained—or rescinded—purely at the will of the administration.

B.             Designations to Accompany JCPOA Relief

Meanwhile, the United States continues to impose sanctions on Iranian actors for their involvement in Iran’s ballistic missile program, support to international terrorism, and human rights abuses, just as the Obama administration did during negotiations and following implementation of the JCPOA in 2016.  While one wouldn’t know it from the current administration’s press releases, the Obama administration did the same thing, both after the signing of the interim Joint Plan of Action and following implementation of the JCPOA, albeit less frequently than the current administration.

The current administration has appeared to follow a policy of what Mark Dubowitz of the Foundation for Defense of Democracies has called “waive-and-slap” approach. In other words, the administration has continued to waive the sanctions as agreed in the JCPOA while continuing to impose targeted sanctions on bad actors.  In the last year, OFAC has imposed targeted sanctions on fifty-one individuals and entities in ten different announcements.

This “waive-and-slap” approach looks awfully similar to the policy of the previous administration following the successful negotiations with Iran and the P5+1.  At the same time he defended the merits of the JCPOA, Obama called the Iranian regime “dangerous” and repressive.” He said that the United States “would continue to have sanctions in place on Iran’s support for terrorism and violation of human rights.”  Indeed, OFAC imposed a number of new targeted sanctions after the signing of the interim Joint Plan of Action in November 2013, albeit less frequently and in smaller numbers than over the past year.  During that time, OFAC imposed sanctions on thirty-four individuals and entities through five different announcements.  The designations during Obama’s final years were at a much lower pace, both in frequency and volume, than over the past year, but hardly a refusal to call out Iran’s bad actors outside of the nuclear program.

C.              Heated Rhetoric and Unpredictability

The key difference in the policies of the Trump and Obama administrations with respect to the JCPOA seems to be the addition of heated rhetoric toward Iran and the unpredictability of the Trump administration’s future commitment to the deal.  As with previous statements on Iran, the announcement was accompanied by rhetoric critical and dismissive of the JCPOA.  In addition, Trump demanded legislation to threaten sanctions against Iran if it does not accept additional limitations on its civil nuclear activities in future years and expand inspection rights.  He also demanded European allies’ agreement to fix the “terrible flaws” of the Iran deal.  Absent those demands being satisfied, Trump said he would pull out of the deal.

By throwing the process to Congress, Trump has injected additional unpredictability into the process.  Republican Sen. Bob Corker produced a brief outline of legislation that would meet Trump’s requests, but it lacked any meaningful detail on the new sanctions and triggers that would address the sunset provisions of the JCPOA or strengthen inspection rights for Iranian facilities.  The final form of the legislation is far from clear.

Trump’s demands may actually backfire and undermine US influence with our allies and in the P5+1 process, making it harder to address deficiencies in the JCPOA and Iran’s other nefarious activities in the future.  The unpredictability of the United States’ future actions with respect to the JCPOA leave the country isolated among its allies. Indeed, one day prior to the president’s January 12 announcement, the foreign ministers of the United Kingdom, France, Germany, and the European Union held an extraordinary joint press conference after meeting with Iranian Foreign Minister Javad Zarif.  German Foreign Minister Sigmar Gabriel stated that the European powers would protect the deal against every possible decision that might undermine it. Trump has managed to unite a fractious Europe to push back on the United States, instead of uniting Europe to pursue his goals with respect to Iran.

Conclusion

The renewal of the sanctions waivers marks an important victory for the survival of the JCPOA and the continuation of Obama’s Iran nuclear and sanctions policy.  However, that victory may be short lived. In the meantime, Trump’s hostility to the deal and the allies that negotiated it with the previous administration will eat up significant capital that Trump could be using to unite the P5+1 in efforts to counter Iran’s destabilizing activities in the region, suppression of protestors, and other nefarious activities.  Trump may need to consider whether his capital is best spent on stopping those Iranian activities or stopping the JCPOA.

David Mortlock is a nonresident senior fellow in the Atlantic Council’s Global Energy Center.  He is a partner and chair of the Global Trade & Investment Group at Willkie Farr & Gallagher LLP.  Follow him on Twitter @yotus44.  Thanks to Daniel Fried, a distinguished senior fellow in the Atlantic Council’s Future Europe Initiative and Eurasia Center, and Oliver Koppany of American University Washington College of Law for their helpful contributions.
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