As US sanctions loom, Iran nuclear deal faces three possible fates

Gradual demise of the nuclear deal appears the most likely outcome if Europe, Russia and China fail to neutralise crippling US sanctions against Iran.
Sunday 29/07/2018
Fragile economy. An Iranian cleric walks at the old main bazaar in Tehran, on July 23. (AP)
Fragile economy. An Iranian cleric walks at the old main bazaar in Tehran, on July 23. (AP)

The exodus of international firms from Iran is accelerating as the August deadline for the reimposition of US sanctions against Tehran approaches. US President Donald Trump’s decision to withdraw from the multinational Joint Comprehensive Plan of Action (JCPOA), which lifted international sanctions against Iran in exchange for curbs on its nuclear programme, has left the 2015 accord hanging dangerously in the balance.

French shipping giant CMA CGM on July 7 announced its decision to leave Iran “due to the Trump administration,” the group’s Chief Executive Officer Rodolphe Saade said. The announcement came two days after talks in Vienna between Iranian Foreign Minister Mohammad Javad Zarif and his counterparts from Britain, China, France, Germany and Russia produced no breakthroughs.

The first of its kind since Trump’s withdrawal announcement in May, the meeting was intended to provide Iran with an economic package that would make up for its losses under US sanctions.

Today, the weakened nuclear agreement confronts three possible fates: survival, abrupt death or gradual demise.

Since the conclusion of the accord, Iranian leaders have maintained that Tehran will remain in it as long as its interests are preserved and the deal continues to benefit Iran’s economy. Their position did not change after the US administration’s decision to shelve the agreement.

Iranian President Hassan Rohani reiterated Iran’s commitment to the pact shortly before the Vienna meeting but, a few days later, in a phone conversation with German Chancellor Angela Merkel, described the compensatory EU package as “disappointing” and lacking “a clear road map.”

To persuade the Iranian leadership to abide by the JCPOA, Europe has a three-pronged action plan that consists of guaranteeing European Investment Bank (EIB) services to Iran, activating the “blocking statute” to safeguard European firms active in Iran against US secondary sanctions and securing direct credit transfers to Iran’s central bank that would bypass the US financial system.

French Foreign Minister Jean-Yves Le Drian said Europe will probably fall short of shielding Iran from US nuclear sanctions by August but its protective economic package may come through by November 4, when the second round of penalties against Tehran is set to take effect.

Barring significant domestic or foreign developments, the Iranian leadership is likely to wait until November while monitoring European efforts. Notably, on July 17, Behrouz Kamalvandi, spokesman for the Atomic Energy Organisation of Iran (AEOI) confirmed that Tehran had received Europe’s package of incentives and that it meets “elements of Iran’s demands but still requires further consideration.”

Nevertheless, Iranian Supreme Leader Ayatollah Ali Khamenei may be tempted to use the impaired agreement to boost his credibility with an increasingly recalcitrant Iranian public by taking a “revolutionary” decision to jettison the nuclear accord.

It was Khamenei’s policy of “heroic flexibility” that made entering nuclear negotiations with world powers in 2013 possible and the near failure of that landmark policy, manifested by the US withdrawal from the JCPOA and the restoration of sanctions, cost Iran’s top leader politically. A decision by Khamenei to take this path would see Iran resuming nuclear work on a larger scale and faster pace than in the past and cause the collapse of the agreement.

Such a decision by the Iranian leader, however, would alienate China and Russia and set Iran on a collision course with Western powers, not least Europe. It would also pave the way for the readoption of UN Security Council sanctions against Tehran. For this and other reasons, including the concern that Israel could launch a military response, the Iranian leadership is unlikely to go down the path of nuclear “breakout.”

To avoid inviting military action at a time of growing domestic dissent and heightened tensions with neighbours or having its nuclear dossier reopened at the Security Council, Iran will probably try to creep out — rather than break out — of the JCPOA if efforts to guarantee benefits of staying in it fail.

This is partly because Tehran seems to have reached the conclusion that, even if Europe does summon the political will to shield Iran from US penalties, it may not be able to resist American pressure in the long run and it may ask Tehran to make other compromises, such as on its missile programme and regional interventions, in return.

EIB President Werner Hoyer recently cast doubt on the European Union’s ability to deliver on its pledge to salvage the Iran nuclear accord, cautioning that EIB’s global operations would be imperilled if it invested in Iran as it is the kind of country “where we cannot play an active role.”

On June 4, in his first official response to Trump’s pullout decision, Khamenei ordered the AEOI to lay the groundwork for achieving “190 000 SWUs [separative work units]” involving uranium enrichment capacity “as soon as possible” but “within the framework of JCPOA for the time being.” (By some assessments, Iran’s enrichment capacity before the deal was around 10,000 SWUs; today it is about 6,000 SWUs.)

That speech came days after Rohani instructed the organisation to make preparations for “industrial-scale [nuclear] enrichment without limits.”

In practice, creep-out may take the form of implementing the accord selectively, perhaps by measures such as allowing the International Atomic Energy Agency inspectors limited or delayed access to Iran’s nuclear sites. In its first report since Washington’s pullout in May, the agency tacitly criticised Tehran for dragging its feet on so-called “complementary access” as part of the Additional Protocol, which Iran agreed to implement “voluntarily” under the JCPOA.

Gradual demise of the nuclear deal appears the most likely outcome if Europe, Russia and China fail to neutralise crippling US sanctions against Iran. Though it might not lead directly to war, this scenario would substantially escalate regional tensions and further destabilise the Middle East.

Finally, with the escalating war of words between Tehran and Washington, including Trump’s all-caps “NEVER, EVER THREATEN THE UNITED STATES” tweet — a response to Rohani’s “mother of all wars” speech on July 22 — Iran’s desire to keep Europe and other powers on its side as a bulwark against American military action may serve as the ultimate — but imperfect — saviour of the nuclear deal.