On January 12, 2018, the Trump Administration released a statement that the US Government would renew waivers of certain sanctions provisions in compliance with the US Government’s commitments under the Joint Comprehensive Plan of Action (“JCPOA”). This same statement indicated, however, that future waivers would not be issued unless both the US Congress and US allies in Europe take action. This development further escalates the uncertainty about the future of the JCPOA that followed the Trump Administration’s October 2017 decision not to recertify Iran’s compliance with the requirements of the nuclear deal as described here.
On the same day, the US Treasury Department’s Office of Foreign Assets Control announced the designation of fourteen parties as Specially Designated Nationals due to their involvement in human rights abuses and censorship in Iran or their support for designated WMD proliferators.
Why are the waivers necessary?
By way of background, as part of the JCPOA, the US Government committed to suspending certain sanctions provisions targeting Iran. Many of these provisions were so-called “secondary sanctions” that primarily targeted non-US companies engaging in business in or with Iran entirely outside US jurisdiction. While some of these provisions were removed by executive order, others are required under US statute and could only be “waived” by the US President. Such waivers are limited in time and must be renewed at certain statute-specific intervals—the shortest of which is 120 days. Failure to do so would result in these sanctions going back into effect in violation of US commitments under the JCPOA.
What changes to the JCPOA does President Trump require?
In the statement issued by the White House on January 12, President Trump reiterated that he was dissatisfied with the JCPOA because it “gave Iran far too much in exchange for far too little.” President Trump then stated that the deal’s flaws must be fixed or else the US Government would withdraw from the agreement. President Trump specifically listed four critical components that he said must be included in future legislation to be passed by the US Congress on this topic:
- A demand that Iran allow immediate inspections at all sites requested by international inspectors;
- Measures to “ensure that Iran never comes close to possessing a nuclear weapon”;
- A requirement that such provisions have no expiration date and that failure to comply by Iran would lead to automatic resumption of sanctions; and
- An explicit statement that “long-range missile and nuclear weapons programs are inseparable,” and that “Iran’s development and testing of missiles should be subject to severe sanctions.”
In addition to these directions to US legislators, President Trump also indicated that he will require US allies in Europe to take action. According to the statement, President Trump’s decision to waive sanctions at this time was intended to provide European allies with a “last chance” to supplement the agreement to address his concerns. Specifically, the Trump Administration’s statement calls on European allies to reach a supplemental agreement that imposes new multilateral sanctions should Iran develop or test long-range missiles, thwart inspections, or make progress toward a nuclear weapon. President Trump threatened that he will not again waive sanctions as required under the JCPOA without such an agreement and that he would withdraw US participation in the deal “immediately” if he judged that no agreement would be reached.
What happens next?
The January 12, 2018 waiver of at least some sanctions provisions will expire in 120 days, giving Congress and European allies a short amount of time to meet the Trump Administration’s demands. US news outlets report that President Trump is satisfied with Congress’s progress on new sanctions legislation targeting Iran, and the January 12 statement provides an outline for Congress when finalizing such legislation in upcoming weeks. The larger questions, however, surround whether other European allies or other parties to the agreement (including Iran) would accept changes to the basic deal that served as the foundation of the JCPOA. International response to President Trump’s demands has been muted, and Iran’s foreign minister responded to President Trump’s statement by tweeting that the JCPOA “is not renegotiable.”
If no agreement can be reached that satisfies President Trump’s requirements and he decides to withdraw from the JCPOA, some or all of the sanctions relaxed by the US Government as part of the JCPOA’s implementation could eventually “snap back” into effect. The reimposition of such sanctions would dramatically complicate trade between non-US entities and Iran that has grown in volume under the more relaxed sanctions environment of the JCPOA.
For additional information, please contact the authors, Sylwia A. Lis, Joseph A Schoorl and Meghan Hamilton or any member of the US Outbound Trade group with whom you normally work.
