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US Withdrawal from the Iran Deal – What Comes Next?

US Withdrawal from the Iran Deal – What Comes Next?

May 20, 2018

On 8 May the President of the United States announced the USA would no longer participate in the Joint Comprehensive Plan of Action (JCPOA, also known as the Iran Deal), effective immediately.  Furthermore, the President announced that US sanctions on Iran relating to its nuclear activity would be reinstated.  These sanctions were waived, not rescinded following the JCPOA agreement. While the JCPOA continues to be an active agreement among the remaining parties, US action in relation to Iran will have an impact upon any state or any private entity that is commercially associated with the Iranian regime, directly or indirectly.

The President is right to pull out of the Iran Deal in order to re-orientate thinking and action towards Iran.  The Iran Deal was necessary to curb Iran’s development of nuclear weapons, as well as being a step towards limiting Iran’s actions in destabilising regional and international peace and security.  It appears that neither objective has been met in an effective way.  Iran’s nuclear activity has been monitored and is in line with the details of the JCPOA, but unknowns remain as the final terms of the JCPOA made the inspection regime limited in critical respects.

More of an issue is the absence of any changed behaviour in Iran’s destabilising activities in the region. In fact it has been the exact opposite as Iran has directly and indirectly engaged in military and terrorist activity across the region.  The Iran Deal was a two way deal – the US and others would lift nuclear related sanctions on Iran in return for an ending of nuclear developments related to weapons proliferation, which in turn would allow for a resumption of economic activity with Iran for the benefit of the Iranian state as whole.  Instead the Iranian regime has used the economic benefits of the Deal to fund disruptive activity across the region.

The Deal and Its Consequences

United Nations Security Council authorised sanctions upon Iran for its nuclear weapons activity began in 2006 and were increased over the years.  From 2010 the Security Council expanded this sanctions regime to include Iran’s development of ballistic missile technology that may be used for nuclear weapons.  This sanctions regime was lifted in 2015 as a result of the JCPOA.  The United States has had sanctions on Iran since 1995 under President Clinton, who declared Iran a state sponsor of terrorism.  Since then the US has enacted a range of sanctions related to Iran’s support for terrorism, its domestic human rights record and other threats to security. The European Union has also applied a wide range of sanctions upon Iran, as have other states.

The extensive sanctions had an impact on Iran’s economic viability and upon the regime’s ability to govern.  Eventually Iran entered into negotiations regarding its nuclear activity leading to the JCPOA.  The JCPOA document itself is an arms control agreement, not a holistic security agreement.  It details specifics on the use of nuclear technology by Iran and mechanisms for inspection and compliance.  However, the JCPOA was adopted as part of a wider global objective for limiting the proliferation of nuclear weapons and bringing about a substantive change in behaviour from the Iranian regime.  Outside of the nuclear proliferation matter, US sanctions on Iran for the ballistic missile programme, its human rights record, and for funding and supporting terrorist groups remain in place.

However, since the conclusion of the Deal, Iran has not made any effort to modify its destabilising behaviour and has used the relaxing of restrictions on its economic activities for expanding its military and terrorist based activities across the Middle East.  Iran has been highly active in the war in Syria providing extensive support for Syrian President Assad.  Iran has continued to support Hezbollah, a designated terrorist organisation, which has moved from being a destabilising force in Lebanon, to a destabilising actor across the region.  The military wing of Hezbollah and Iran have funded and supported militias across Iraq which have not been a benign security actor in the region, but rather a malign force.  In the context of Yemen, Iran has allied with the Houthi militias, set on perpetuating a civil war through the supply of ballistic missiles.  Iran’s supplies of missiles and technology to the Houthi is very problematic as these weapons are not being used in the civil war (which in itself is an illegal act in violation of UN Security Council Resolutions on the Houthi) but for attacks on neighbouring states; something that is supposed to be wholly unacceptable in international law and relations.

Former President Obama attempted to argue that the key to resolving Iran’s destabilising actions regionally and globally was curbing its nuclear capability.  Nothing could be further from the truth when looking at Iran’s activities since the Deal was agreed. This should be no surprise as the Iranian constitution sets out the export of the Iranian revolutionary project as part of the state’s foreign activities, a matter JCPOA participants overlooked.

Even domestically the Iranian leadership has not used the lifting of the nuclear sanctions to develop the national economy in any substantive way.  Money has instead been used for Iran’s disruptive activities and supporting terrorism.  Judging by the widespread protests within Iran against the regime, the Iranian people are expressing dissatisfaction with the policies the rulers are pursuing.

Arguments were made in the run up to the Iran Deal that by cooperating with Iran, engaging in economic activity and investments, behaviours modification could occur.  Over the past two years it has been obvious that Iran has expanded influence across the Middle East, but not with any positive outcomes.  This is a result of two factors.  Companies who have rushed to reengage with Iran after the lifting of the nuclear sanctions only have business and profit in mind, provided they are able to benefit from engaging with Iran, there is no interest in changing the political direction of the leadership.  Secondly the states from which these companies operate also like the idea of increased economic activity with Iran.  Iran is large economic market with extensive potential, the economic arguments easily overcome political positions. Iran itself has a vested interest for staying in the JCPOA as the agreement gives it global standing, confirms that it part of the nuclear club, and it has been able to use the agreement to intimidate Europe and others for overlooking its disruptive behaviour.

What Next?

The Iran Deal has not achieved its wider objectives of getting Iran to be a more cooperative actor in the region and has only allowed it to be a more disruptive actor.  Even though Iran’s actions and intentions have been well known, it is has taken a significant amount of time to recognise the threats Iran is posing to regional and global security, but now the focus is back on.  The US has the ability to apply a range of increased sanctions as part of its domestic law in relation to the ballistic missiles programme, support for terrorist groups, human rights violations and for any other reason whereby an argument can be made that US interests are threatened.  The US could work to gain allies for the imposition of these sanctions which could have a major impact on Iran.  However, President Trump has focussed on the JCPOA itself so it is necessary to look at what next steps are possible for the US and its allies in the region following the US withdrawal.

A New Deal?

President Trump has prided himself on being a strong deal maker.  He has spoken about a number of “deals” where he feels the US did not receive favourable terms.  His rhetoric on the Iran Deal is that this has been the worse deal ever for the USA.  The President wants to achieve better terms for the US through more limitations on Iran’s activities. A renegotiation of the JCPOA or finding ways to add to the existing agreement appear unlikely. All other members of the UN Security Council, who are also participants in the JCPOA, have signalled there are not interested in renegotiating the JCPOA, but this option remains open. It is unlikely that Iran would negotiate bilaterally with the US to achieve some new agreement that somehow reinforces the JCPOA.

Saying that, there is some time for a possible renegotiation.  The 8 May announcement gives 90-180 days for a new deal to be agreed.  This is determined by the US position on the reinstating the sanctions on Iran that were waived by the JCPOA.  With the re-imposition of the sanctions companies currently engaged in economic activity with Iran need to “wind down” these connections in either 90 days (inter alia, activities involving gold and other metals, machinery, automotive sector, trade in the Iranian Rial, support for airlines) or 180 days (inter alia, trade in oil and petrochemicals, engagement in the energy sector generally, and any engagement with Central Bank of Iran).  Furthermore, the US will also reinstate sanctions upon persons included in the List of Specially Designated Nationals and Blocked Persons, and it has already started to add names to this list.

The wind down period may give some time for movement in improving the current Iran Deal, or coming up with a new one.  Equally, Iran is under no obligation to negotiate with the US and as stated the other parties to the JCPOA have ruled out renegotiation.  Under the JCPOA Iran could make use of the dispute settlement mechanisms as a response to the US withdrawal, thereby delaying any engagement with the US outside of the agreement.  Either way it is up to the US to further any new deal.

The main concern in pursuing a new deal would be the question of resources and commitment. The original JCPOA negotiations took almost two years to achieve an outcome. The US Administration has a range of important negotiations already going on, including, but not limited to – meeting with North Korea, negotiations over NAFTA, a new free trade agreement with the EU.   All of these will be time consuming exercises and a drain on available resources.  Domestically, the first Congressional mid-term elections of President Trump’s term are coming in November and campaigning is already underway, which may be a distraction.  There is a coming announcement about a roadmap for a possible new deal, but given the factors above it appears a new, or revised Deal is not likely.

Military Responses

If diplomacy through a new Deal is unlikely, military options are a possible choice.  This is a complicated area where domestic priorities and international law are conflicting on what the best course of action may be.  If the US wishes to engage in a military strike on Iran, or any state for that matter, it is able to do so, provided acceptable justifications can be presented.  The use of force against another state is not a normal part of international relations and has been condemned in international practice, except when authorised by the UN Security Council or as an act of self defence.  It is unlikely the Security Council would ever authorise the use of force against Iran, leaving self defence as the only possible argument available.

Iran’s compliance with the details of the JCPOA has been confirmed by the IAEA inspectors and the US government (by Pompeo), making a military strike on Iran’s nuclear infrastructure difficult to justify legally, and even politically.  Previous strikes on a state’s nuclear ability as a matter of self-defence have been undertaken by Israel against Iraq and Syria.  These arguments have struggled for legitimacy or widespread acceptance.  If, as suspected, Iran is continuing with its nuclear development, some evidence of this, in any form, will be needed.  The recent release of Iranian documents confirming the country has kept the information on their programme would not be sufficient as it has not shown a continuation of nuclear activity directed at weapons creation to date.  Even though the nature of nuclear weapons development gives rise to complicated arguments of self-defence, there is no clear consensus on the acceptability of such action. Any strike upon a military establishment in Iran to target unknown nuclear activity would be highly problematic for it would be a clear prelude to war and Iran would be able to invoke the right to self-defence under the UN Charter.

With the primary argument of US withdrawal form the Deal being Iran’s expansionist policies across the region, military strikes upon Iranian military facilities, or key allies such as Hezbollah remains an option.  Israel has already undertaken such military strikes in Syria.  But such military measures would also need to be sustained in light of arguments of self-defence in the absence of Security Council authorisation.  For the states in the region, arguments along the line of self-defence are possible as Iran’s activities can be seen as an imminent threat upon national security.  Political arguments that Iran’s effective national security requires pro-active policies do not carry legitimacy from the international legal standpoint on using force and supporting terrorism.  The complication in this respect is distinguishing between Iran’s direct actions and actions through proxies.  Military action against proxies need to be justified upon the imminent threat posed by these groups and not a general threat posed by Iran.  But actions against proxies is potentially messy given their disjointed organisation and issues of proportionality in a state taking military action against a non-state actor who is asymmetrically capable.

Equally it appears that military responses by, or supported by, the US are unlikely.  The US administration has already called for withdrawing troops from Syria.  In recent testimony, Secretary of Defence Mattis responded to questions if the current US military budget is sufficient in the case of the US withdrawal from the JCPOA.  He clearly stated that the budget was sufficient indicating the US in not planning on any military escalation against Iran.  Can the states in the region argue there is an imminent threat posed by Iran justifying the use of force?  Such arguments can be made by the states in region much more so than the US can.  The issue would be a willingness to take such action in the absence of direct US involvement

Economic Isolation

A third alternative is finding ways to bring about economic isolation of Iran, forcing the current regime to change its ways, globally, regionally, and domestically.  As Iran has been directing the bulk of its economic resources to funding and supporting proxies across the region, cutting off its financial outlets would help to hinder this activity.  Furthermore, greater limitations on Iran’s resources would result in greater dissatisfaction within the population against the government, creating another form of pressure for the Iranian government to change its behaviour.

The US announcement on 8 May made clear that the re-imposition of sanctions was to isolate the Iranian regime.  If this can be done systematically, it would be the most effective action in response to Iran’s destabilising activities.   As discussed above, economic benefits for Iran were supposed to bring about more cooperative behaviour for Iran and not a furthering of instability across the region.  Iran has taken advantage of the situation and funded malign activities across the region.  As a result the Iranian economy continues to suffer as the economic benefits have not been directed to the people.

For sanctions on Iran to be effective in changing behaviour, a great deal of action and cooperation is needed.  European states are trying to find ways to continue economic activity with Iran. Russia and China took extensive efforts prior to the 8 May announcement to ensure ongoing support for the JCPOA, both states are unlikely to support the US.

Perhaps more importantly is the need to bring about a complete boycott of Iran from the states in region.  This would have both symbolic and direct results on Iran’s ability to obtain global currency and would limit exports and imports in key areas, as well as limiting Iran’s transport links. The current boycott of Qatar is a model that should be used with Iran, alongside rigorous enforcement of the US sanctions regime.  The combination would demonstrate the resolve of the states in the region in standing up to Iran.

Conclusion

It is necessary to sever, as much as possible, Iran’s links with the wider world to give the message that its destabilising behaviour is no longer acceptable.  Beyond the political rhetoric action needs to be taken to cut Iran’s links with its proxies and to stop its support for terrorism.  Political persuasion has proven ineffective and direct military action is not a desired course of action.  Focus needs to be on Iran’s banking and transports links throughout the world in order to isolate the regime even further.  Iran has been funding and fuelling terrorist insurgency across the region and it has been expensive.  The people of Iran have been protesting against the regime on a regular basis to express their dissatisfaction for not benefiting from the lifting of sanctions.  By cutting back on Iran’s access to hard currency and its ability to supply its proxies, Iran’s disruptive behaviour can be curtailed.

Equally, the US needs to establish a clear strategy for dealing with Iran.  It will be essential to keep the White House focussed on Iran and not be influenced by other considerations.  Two days after announcing the US was leaving the JCPOA and would reimpose sanctions, President Trump announced he wanted to take action to support the Chinese company ZTE.  ZTE is a company sanctioned by the US for providing technology and services to Iran and other rogue states in contravention to US sanctions.

To keep the US focussed on Iran following the 8 May announcement, the GCC states need to be part of the ongoing discussions on what actions are needed to reign in Iran.  The GCC states were excluded from the negotiations of the JCPOA.  These same states are the ones who lie within range of Iranian missiles being fired by various proxies and it is the GCC states that feel the direct results of Iran’s destabilisation activities.  Their input is essential for any future deal to ensure effective action against Iran’s destabilising activities.

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