18 December 2021

The U.S. Should Rethink Its Approach to Reviving the Iran Nuclear Deal

Sina Toossi 

More than three years after former U.S. President Donald Trump withdrew from the Iran nuclear deal and almost a year after his successor, Joe Biden, took office seeking to revive it, the consequences of the U.S. withdrawal are becoming increasingly clear—and increasingly grim. Even in Israel, one of few countries that supported Trump’s approach to the Middle East, former senior security officials are widely rebuking his decision to renege on the accord. As Gadi Eisenkot, the former Israeli chief of staff, recently declared, the U.S. withdrawal from the deal “was a net negative for Israel: It released Iran from all restrictions, and brought its nuclear program to a much more advanced position.”

Some hawkish critics of Biden’s attempts to revive the deal accuse him of using an “all carrot, no sticks” approach to the currently stalled negotiations in Vienna. In fact, Biden has pursued a continuation of the Trump administration’s “maximum pressure” campaign, and the only carrots he is offering provide Iran the prospect—but not any certainty—of long-term benefits in exchange for rejoining a deal the U.S. already reneged on once. Iran is understandably reluctant to do so, but it might if it knows it will enjoy immediate economic benefits from reviving the deal, regardless of whether a future U.S. president abandons it again in 2025.

In other words, restoring the deal’s stringent constraints on the Iranian nuclear program requires creative thinking about what economic incentives might induce Tehran to return to compliance, rather than doubling down on the failed policies that created this crisis.

Trump tarnished Washington’s global credibility by targeting the core quid pro quo at the heart of the deal, formally named the Joint Comprehensive Plan of Action, or JCPOA. In exchange for sanctions relief, Iran agreed to unprecedented limits on its uranium enrichment program, as well as an exceptionally intrusive oversight regime by the International Atomic Energy Agency, or IAEA, of its nuclear program. In reneging on a deal made in good faith by the U.S. government, and with which Iran was in compliance according to the IAEA, Trump set a dangerous precedent that will haunt U.S. diplomats for years.

Tehran has a legitimate concern that it will not receive the kind of economic benefits from returning to the deal that would merit giving up the leverage it has gained since 2018 through reversible breaches of the limits the JCPOA placed on Iran’s nuclear program. Since then, Iran has enriched uranium to up to 60 percent, rather than the 3 percent cap under the JCPOA. It has also accumulated a stockpile of 113.8 kilograms of uranium enriched to 20 percent, 17.7 kilograms of uranium enriched to 60 percent and 1,622.3 kilograms of low-enriched uranium, rather than the limit of 300 kilograms of low-enriched uranium it was allowed under the deal. And it has prevented the IAEA from making in-person, on-site inspections to certain facilities for months.

As was widely expected, a new team of Iranian nuclear negotiators representing the government of conservative President Ebrahim Raisi, who took office in August, showed up to the negotiations in Vienna on Nov. 29 with hardline positions. It is still unclear if these represented Raisi’s opening bid or if they reflect Tehran’s bottom lines. Regardless, the specter of a future U.S. administration reneging on the JCPOA again is a major disincentive for Iran rejoining the deal.

All hope for reviving the Iran nuclear deal is not lost, but the onus is on the U.S. to ensure that Iran can actually benefit from returning to compliance with the JCPOA.

But it is also a disincentive for Western companies whose promised investment in a sanctions-free Iran was also a linchpin of the JCPOA’s appeal to Tehran. As Gerard Araud, France’s former ambassador to the U.S., put it in a recent tweet, “Even if the JCPOA was restored, no Western company would dare invest a cent in Iran, no Western bank would finance any deal in Iran with the threat of the return of US sanctions in 2025. … The Iranians know it.”

All hope for the negotiations is not lost, but the onus is on the U.S. to ensure that Iran can actually benefit from a revived JCPOA. The Biden administration cannot provide legal guarantees that a future administration will not repeat Trump’s strategic blunder, but it can take actions to ensure that Iran benefits economically from the deal—immediately, rather than in what remains a very uncertain long-term timeframe. The key question is, What level of economic relief will tip the calculus of Iran’s leaders in favor of returning to the JCPOA?

A report from Iran’s parliament research center gives a clue, stating that the “threshold” for making the deal worth Tehran’s while would be the export of 2.5 million barrels per day of Iranian oil and combined monthly economic transactions between European companies and the Iranian private sector worth at least $5.7 billion.

The resumption of Iranian oil exports will not be as much of a challenge as trade with Europe. After the JCPOA was struck in 2015, Iran restored ties with its oil customers in relatively short order and eventually regained its global market share. However, increased trade with Europe is a dicier proposition, given that, as Araud noted, most European private companies will choose to avoid the risk of doing business with Iran altogether. This is where the U.S. can make a difference, by backing an economic incentive package consistent with the framework of the JCPOA.

The Raisi administration has stated that its foreign policy priority is to improve ties with Iran’s regional neighbors. As part of this agenda, Raisi has pursued negotiations with close U.S. partners, such as Saudi Arabia and the United Arab Emirates. This week, the UAE’s national security adviser traveled to Tehran, in part to discuss deepening economic relations. Iran’s improving ties with the UAE, and its already healthy relations with Oman and Qatar, present an opportunity for salvaging the JCPOA.

The UAE and Iran share an interest in regional stability as well as in environmental and water management in their increasingly water-scarce region. Significantly, the UAE and other Gulf Arab states also continued to trade with Iran at the height of Trump’s maximum pressure campaign, with the UAE remaining one of Iran’s top five trading partners.

Still, greater trade between Iran and its regional partners is still constrained by U.S. Treasury Department notices, statements and narrow licenses that dissuade it. So as part of an economic incentive package to Iran offered alongside a return to the JCPOA, the U.S. Treasury Department can rescind all these dissuasive notices and statements. It can also issue a general license to regional banks in the region to release frozen Iranian assets and finance deeper economic ties, including on projects such as water desalination, the development of shared natural gas fields and investments in Iranian infrastructure.

By contrast, European governments were unable to induce their companies to trade with and invest in Iran after being threatened by secondary U.S. sanctions. There is less that the U.S. can do with Europe, where companies are not state-owned like many are in the Persian Gulf. However, if European firms are still skittish about making long-term investments in Iran due to the uncertainty of Washington’s commitment to the JCPOA, the Biden administration can encourage them to provide much-needed capital goods to Iran in the short term. China is currently Iran’s biggest capital goods supplier, so facilitating Iranian imports of European goods and technology will have the added benefit for Washington of weaning Iran off of its dependency on China.

Washington itself can also take several actions in the economic realm that fall within the JCPOA’s parameters. Although the deal kept primary U.S. sanctions on Iran in place, it allowed for a specific exemption for U.S. aerospace companies to sell commercial planes to Iran for its ailing civilian fleet, which has suffered under decades of sanctions. The Treasury Department should quickly authorize Boeing to do so. The U.S. can also greenlight a limited form of dollar-clearing, currently prohibited by sanctions, to allow Iran to convert its assets abroad into other currencies to use for international trade.

Importantly, the ball is not just in Washington’s court. Iran’s aggressive proposals at the latest round of negotiations, as well as its activation of advanced centrifuges at its underground uranium enrichment facility at Fordow as those talks began, send the wrong messages about Tehran’s intentions. If Iran wants more from the U.S., it would do well to refrain from escalatory actions of its own, while also resolving its current inspections disputes with the IAEA. Both the U.S. and Iran must show increased flexibility to salvage the JCPOA, because a failure to revive it would leave no good options for either side.

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