8 January, 2018 12:15

Donald Trump Will Have to Reach Decision on Iran Nuclear Deal

Petrostrategies, a Paris-based consulting firm analyses the US President Donald Trump’s Iranian policy. The White House schedule is sprinkled with numerous Iranian deadlines, which fall every 90 days for the certification of the 2015 Nuclear deal, and every 120 days for waivers to certain sanctions. The article suggests that Trump will soon have to reach a decision about the Iranian nuclear deal.  (The article was published on January 8, 2018, in the World Energy Weekly).  

Countries and companies interested in Iran are attentively and anxiously following the protests that have been shaking this country since mid-December. As these events are unfolding, crucial deadlines are approaching for the White House, which will soon have to make a series of decisions relating to Iran. The first deadline falls on January 11, 2018: Donald Trump must rule whether or not, in his opinion, Iran is fulfilling its commitments to the 2015 nuclear deal (the “Joint Comprehensive Plan of Action”, or JCPOA). The second deadline falls between January 12 and 17: the US President must decide whether or not he will renew waivers to US sanctions against Iran (including those relating to oil exports). During his electoral campaign, Trump violently criticized the JCPOA and promised to “tear it up” if he was elected. So far, he hasn’t carried out that threat. Countries such as Israel and Saudi Arabia are goading him to do so, while the other signatories to the JCPOA (Germany, China, France, the United Kingdom and Russia) and most of the US political establishment are, on the contrary, asking him not to touch the agreement. What will he do?

The White House schedule is sprinkled with numerous Iranian deadlines, which fall every 90 days for the certification of the JCPOA and every 120 days for waivers to certain sanctions. On October 13, 2017, when the last deadline fell, Donald Trump refused to certify that Tehran was fulfilling its nuclear commitments, despite the assurances given by the International Atomic Energy Agency (IAEA). Although he didn’t go so far as to repudiate the JCPOA, he issued a kind of ultimatum: “In the event [that] we are not able to reach a solution working with Congress and our allies, then the agreement will be terminated”. The US Congress had 60 days to decide; it has not done so. Some countries, such as France, have tried to find a solution by proposing to open negotiations with Iran on its ballistic missile program, but this has not worked. The Iranian “hot potato” has thus bounced back to the White House, placing Donald Trump in an uncomfortable situation.

The US President generally tends to give priority to what he believes his electorate expects, as occurred in the case of Jerusalem. He is tempted do the same in the case of Iran by repudiating the JCPOA, as promised. But that’s not his only option. Although a bipartisan draft resolution appears plausible in the eyes of the US Congress (one is in gestation), Trump could postpone a decision. In the meantime, he could decree new sanctions against individuals and entities deemed responsible for suppressing the demonstrations which have taken place in Iran over the last two weeks. This is why the White House stated on January 3 that “actionable information” is being collected about those who commit acts of repression. On January 4, the US Treasury Department sanctioned five Iranian organizations involved in the country’s ballistic missile program. In a Tweet sent on January 2, Donald Trump defended the “great Iranian people [who] have been repressed for many years. They are hungry for food and for freedom”. He may therefore set himself up as the “protector” of the Iranians and impose sanctions against individuals and entities which “oppress” them, without repudiating the JCPOA.

The US President generally tends to give priority to what he believes his electorate expects, as occurred in the case of Jerusalem. He is tempted do the same in the case of Iran by repudiating the JCPOA, as promised. But that’s not his only option.

If chosen by Donald Trump, such an outcome could satisfy the other signatories to the JCPOA, but it would not suit Iran and companies that want to work with that country. It would not eliminate the uncertainty that has weighed on the JCPOA’s fate ever since Trump entered the White House. The US President holds a Sword of Damocles which could fall on the agreement every 90 days, each time he has to “certify” (or not) that the Iranians are fulfilling their commitments. This uncertainty is stopping many companies (especially European ones) from investing in Iran, for fear of eliciting Washington’s ire.

The Iranian government’s options are extremely limited in this affair. President Rouhani, who negotiated the JCPOA, had hoped that the agreement would pave the way for a marked improvement in his country’s economic situation by attracting foreign investment, especially in the oil sector. Like other Iranians, he is disappointed; but he can’t revoke the JCPOA, as this would be tantamount to abandoning all hope of economic improvement and admitting that his detractors at home (the Islamic Revolutionary Guards) and his external enemies (mainly Saudi Arabia and Israel) are right.

Last December, Tehran sent emissaries to Europe to deliver a message that can be summed up as follows: “Iran stands by the JCPOA, even if it hasn’t enjoyed the expected benefits. If Europe respects this agreement, Iran will also comply with it even if the United States repudiates it. However, the Europeans will have to ‘protect’ their companies against possible US sanctions so that the latter can invest in Iran”. The critical moment for a decision is approaching; Trump would contravene the JCPOA if he refuses to renew waivers, and this would represent a de facto repudiation of the deal. What would Iran and the EU do in that case? In 1995, the European Union granted “protections” to its companies when the United States decreed its first extraterritorial sanctions against Iran in 1996 (Iran-Libya Sanctions Act: ILSA). This is what allowed Total to sign an oil development contract in Iran at that time. The European Union could implement such measures again, but things have become more difficult since 1995, as the United States has added financial constraints to its system of sanctions. Thus, major western banks no longer want to do business with Iran. Although Tehran is trying to expand its trade in currencies other than the US dollar, the results obtained so far have been more than modest.