Insider news & Analysis in Iran
On Anniversary of US Withdrawal from Nuclear Deal, Tehran Threatens its Future

By Edward Carney

Wednesday marked the one-year anniversary of President Donald Trump announcing American withdrawal from the nuclear deal that had been negotiated with Iran in 2015 by his predecessor’s administration. Both the US and the Iranian regime used that occasion as an opportunity for further steps in their ongoing, mutual escalation over the Iranian nuclear program, the regime’s regional role, and the US-led economic pressure that is intended to address such issues.

The previous day, Iranian officials teased the announcement of “diminished commitments” to the nuclear deal, formally known as the Joint Comprehensive Plan of Action. The details of that scaling-back were to be announced publicly after being communicated in letters to each of the five other nations that remained a party to the agreement after the US pulled out.

The United Kingdom, Germany, and France have been struggling to uphold mutual commitments to the JCPOA without undermining their close alliances with the US, while Russia and China have generally defended Iran’s position more vigorously while echoing talking points that hold the US primarily responsible for ongoing escalations. These contrasting relationships with the JCPOA were clearly on display throughout Wednesday as representatives of each nation responded to the latest announcements from Tehran and Washington.

For its part, the Islamic Republic maintained its previously-expressed promise to avoid withdrawing from the nuclear deal or directly violating its provisions for now. The International Atomic Energy Agency has repeatedly affirmed Iran’s compliance with the core provisions of the agreement, but in pulling out of it the Trump administration emphasized perceived violations of the “spirit” of the JCPOA, pointing for instance to the persistent development and testing of ballistic missiles that are capable of being used to carry nuclear warheads. While this activity is not addressed by the agreement itself, a corresponding United Nations Security Council resolution calls upon the Islamic Republic to avoid all work on such weapons.

The Trump administration also expressed more skepticism about Iran’s commitments under the JCPOA, in light of allegations that the regime had done more work in service of nuclear weapons ambitions than had ever been exposed. Wednesday’s announcement of explicitly diminished commitments may play into that skepticism and amplify the significance of Washington’s warnings about the “spirit” of the deal.

This was arguably the implication of some of the responses to that announcement from the remaining Western signatories. Although they remain tentatively committed to preserving the agreement and helping Iran to see economic benefits from it in spite of American non-participation, that commitment may now come with a specific expiration date. This is because Iran’s announcement sets the stage for Iran to cancel the agreement altogether if the government is not satisfied with European actions during the ensuing 60 days.

In the meantime, Iran will stop exporting its low-enriched uranium and its heavy water, a byproduct of plutonium reactions. Both of these stockpiles are limited under the terms of the JCPOA, and such exportation served as a means for Iran to continue producing the relevant materials without substantially exceeding those domestic limits. The end of that exportation constitutes a threat of imminent violation, although surprisingly, it is also in line with the strategy the US was pursuing in the run-up to the one-year anniversary.

The White House already effectively ended Iran’s export of enriched uranium last week by ending the sanctions waivers that made certain exchanges both lawful and feasible. But the intention behind this action was evidently to compel the Iranians into producing only enough of the substance to meet their own domestic needs while remaining within the defined limits. Consequently, Iran’s announcement could set the stage for either violation of the JCPOA or greater compliance with American demands, depending on which actions the major players take in the coming weeks.

Speaking to Fox News on Wednesday, former CIA station chief Daniel Hoffman referred to Iran’s gambit as “nuclear blackmail,” while Secretary of State Mike Pompeo told reporters that it was clear the regime was trying to scare the nuclear negotiating powers into taking hasty action to prevent Iran’s withdrawal and resumption of large-scale nuclear enrichment. Indeed, the head of Iran’s atomic energy authority reiterated a longstanding promise that if the country decided to take this action, it could reach 20 percent enrichment of uranium within four days. According to experts, this would cut the breakout time in half for enrichment to weapons-grade.

But Pompeo also expressed doubt about whether Tehran would actually follow through on any such threat. Accordingly, the White House professes to be maintaining a wait-and-see approach to the issue, although it is already moving steadily toward the implementation of a “maximum pressure” strategy. This was evident last month when the administration announced it would be blacklisting the Islamic Revolutionary Guard Corps as a foreign terrorist organization and withholding all waivers for importers of Iranian oil. And it was evident once against on Wednesday, when Trump marked the anniversary of JCPOA withdrawal by imposing sanctions on some of Iran’s leading non-oil exports.

As reported by Reuters, the US president’s executive order prohibits partners of the US financial system from purchasing Iranian iron, steel, aluminum, and copper. Collectively, these metals account for approximately 10 percent of Iran’s export economy, and their targeting stands to amplify an already serious economic crisis. The country’s national currency, the rial, is hovering around seven-month lows, and has been generally declining since even before the re-imposition of sanctions that were suspended under the JCPOA.

Trump’s executive order provides importers of Iranian metals with a 90-day grace period before they are penalized for such purchases. But the White House also pointed out that any additional orders that were placed after the announcement would be considered a violation. In this sense, the pressure being exerted on partner nations by the US is arguably stronger than that being exerted by Iran through its threats of future expansions of nuclear enrichment.

Nevertheless, Iran continues in its efforts to downplay the effectiveness of US sanctions and the readiness of mutual partners to comply fully with new sanctions as they come into effect. Speaking to a Russian news agency on Tuesday, Iranian Foreign Minister Javad Zarif said that Tehran and the European Union were “on the brink of agreement” concerning the sale of Iranian oil. But Zarif cited no specific details to justify that claim, which appears to be contradicted by other public comments by Iranian and European officials alike.

While US sanctions remain in place, any such oil sales would no doubt involve the operation of a sanctions-busting trade mechanism that was set up specifically in response to the US withdrawal from the JCPOA. But this Instrument in Support of Trade Exchanges, or Instex, has yet to become active, and Tehran has long complained about supposed European inaction and unwillingness to defy the will of the United States. The US in turn has exerted modest political pressure on its European partners over Instex, noting for instance that the mechanism was unlikely to serve its purpose while still complying with the money-laundering controls imposed on all global markets by the French-headquartered Financial Action Task Force.

This particular skepticism stems in large part from the Iranian regime’s refusal to come into compliance with the FATF standards. A deadline for such compliance was established with the implementation of the JCPOA, but was later extended to June of this year, after the Iranian government failed to pass relevant legislation. Iranian markets will come under greater scrutiny from FATF, as well as experiencing the aggregate effects of US sanctions, if such legislation is not adopted in the next month. And according to Reuters, the regime has made little movement toward that goal.

But regardless of the presence or absence of FATF compliance legislation, the US government can be expected to continue casting doubt upon Europe’s ability to simultaneously comply with JCPOA-related commitments and commitments concerning the isolation and punishment of governments and entities that sponsor global terrorism. “I question how that’s even remotely possible ... with a country like Iran where the IRGC is so endemic within the economy but also hidden in many different respects,” said Sigal Mandelker, the US Treasury’s undersecretary for terrorism and financial intelligence.

As the Associated Press reported on Wednesday, British Foreign Secretary Jeremy Hunt acknowledged that the US and the United Kingdom have virtually identical goals for dealing with the threat posed by the Islamic Republic, although they still differ over the means to achieving those goals. The same report detailed the rising levels of difficulty that the UK, France, and Germany are facing as they work to make up for the effects of the US pulling out of the JCPOA and pursuing maximum pressure on the regime.

However, those efforts may be mooted in the near future if Iran does follow through on its threat to resume higher-level uranium enrichment and effectively cancel the 2015 nuclear agreement. Far from taking hasty action to prevent that outcome, the three European powers appear to be readying themselves for an assertive response, possibly one that brings them into line with the Trump administration’s maximum pressure strategy.

On Tuesday, ahead of Iran’s formal announcement of diminished commitment, sources close to French President Emmanuel Macron said that “Europeans would be obliged to re-impose sanctions” in the event that any action undertaken by Iran amounts to reneging on its commitments under the JCPOA. For the time being, the EU continues to urge the Islamic Republic against such action, but Tehran has seemingly backed away from earlier claims that it would only withdraw if the deal collapsed on its own.

Meanwhile, the Trump administration continues to insist that all international partners avoid economic exchanges with the Iranian regime until it has made a more comprehensive commitment to changing its behavior, as it relates to nuclear ambitions, missile development, regional interventionism, and the support of international terror groups.

As Energy Secretary Rick Perry put it in an interview with CNBC, “The smart message for our friends and allies around the world is: 'Don't do business with this people until they understand that there is a way that you conduct yourself in the global community.’”

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