In the past weeks there has been an increasing focus on whether the United States will continue to participate in the Joint Comprehensive Plan of Action (“JCPOA”) - generally referred to as the Iran Nuclear Deal. President Trump has been an outspoken critic of the Iran Nuclear Deal and has threatened to unilaterally terminate the agreement unless a new, more stringent agreement is enacted. As one would expect, the Iranian response has been outrage. The Iranian position is that it has complied with all material aspects of the JCPOA which has been confirmed by international monitoring agencies - including the International Atomic Energy Agency (IAEA). The prospect of President Trump walking away from the Iran Nuclear Deal has increased geopolitical tensions in the region which, in addition to the OPEC+ production cut agreement and the Venezuelan drop in production due to political and economic turmoil, is supporting the recent run up in crude prices. According to the Trump Administration, it will make a decision with regard to recertification of the Iran Nuclear Deal by the 12th of May. Due to the importance of the Iran Nuclear Deal to the international energy markets, we thought it might be useful to review the agreement, its legal framework and the potential impact of non-recertification.
In July 2015 Iran signed the JCPOA along with China, France, Germany, Russia, the UK and the US. The general concept behind the Iran Nuclear Deal was to create a step-by-step framework between the parties to ensure Iran’s nuclear program would be limited to peaceful uses and that it would adhere to the nuclear Non-Proliferation Treaty (NPT) in return for the lifting of UN Security Council as well as multilateral and national sanctions against Iran. The agreement included limitations on the levels of Iran’s uranium enrichment, the number and type of centrifuges it could operate as well as limitations on the amount and type of uranium it could stockpile within the country.
There are some important items to note with regard to the JCPOA. First, it was not considered a treaty under United States law. Although it is not entirely clear, the JCPOA seems to be enacted pursuant to joint executive congressional authority (due to the subsequent passage of the INARA by Congress – see below). Second, it is a multi-lateral agreement and therefore the withdrawal by the United States from the JCPOA would not necessarily mean that other signatories would follow suit. In fact, recent visits to Washington by Chancellor Angela Merkel and President Emmanuel Macron made clear that both Germany and France wish to continue the Iran Nuclear Deal. Both leaders stated that while they agree that the Iran Nuclear Deal could be improved, leaving it in place (along with its restrictions and monitoring) was preferable to no deal at all. There can be little doubt that the unilateral termination of the Iran Nuclear Deal by the United States re-imposing sanctions will severely impact the remaining parties’ ability to continue with the agreement. It is important to note however, should the agreement founder due to the United States’ unilateral withdrawal, it is equally unlikely that the other participants will follow the Unites States in re-instituting sanctions on Iran.
Nowhere in the JCPOA is there a requirement for periodic certification. During the finalization of the Iran Nuclear Deal by the Obama Administration, Senators Bob Corker and Ben Cardin spearheaded bipartisan legislation referred to as the Iran Nuclear Agreement Review Act (INARA) requiring the President to certify to Congress Iran’s performance under the Iran Nuclear Deal every 90 days. It is this certification which President Trump is now threatening to withhold. The failure to recertify the Iran Nuclear Deal pursuant to the INARA does not immediately terminate the JCPOA. Non-certification by the President effectively pushes the Iran nuclear issue back to Congress. Under the INARA, Congress has several options available to it.
The argument of the parties to the Iran Nuclear Deal (other than the United States) is, although imperfect, the current agreement is better than no agreement. Moreover, these parties view the restrictions of nuclear energy use as well as inspection requirements contained within the agreement to be essential elements of containing Iran’s future nuclear ambitions. In the event President Trump were to fail to certify the Iran Nuclear Deal and push the decision of whether to re-impose nuclear sanctions to Congress, the outcome is difficult to predict. There are many members of Congress who opposed President Obama’s negotiations and agreement with Iran. In the event the United States were to re-enact sanctions and effectively unilaterally terminate the Iran Nuclear Deal it could create a negative precedent in which states view agreements with the United States as transitory and subject to the whims of different administrations. On the eve of potential negotiations with North Korea many have argued that this is not the message to be sending to the international community. Moreover, with regard to the upcoming discussions in Korea, one could easily see significant pieces of the Iran Nuclear Deal - i.e., limitation on the use of nuclear energy, levels of uranium enrichment and stockpiling and international monitoring, to be the foundation of any potential future deal with North Korea.
In light of the current situation we would expect international energy markets to remain in a heightened state of anxiety as the situation plays itself out. Should this be a ploy to renegotiate the Iran Nuclear Deal there is an equal likelihood between success and possibly destroying the foundations of what has been built over the past years. Likewise, should the United States unilaterally re-impose sanctions the open issue will be whether other countries (specifically the EU, Russia and China) will follow suit or will the United States be isolated in this course of action and thus mute the expected impact of such sanctions.
One further point worth highlighting, if President Trump wished to scrap the Iran Nuclear Deal on his own he could do so by simply not signing the four waivers of the individual United States statutes imposing sanction on Iran. Clearly, he does not wish to make this decision on his own hence the strategy to push this issue back at Congress using INARA.