September 20, 2018

Dissecting Trump’s Iran Decision: A Prudent Gamble?

AFP/Scanpix
An Iranian family walks past the shuttered window of the closed offices of a travel agency showing the logos of various air lines in the capital Tehran on August 24, 2018. - Air France and British Airways announced on August 23 that they will halt flights to Tehran in September citing low profitability as the US reimposes sanctions on Iran.
An Iranian family walks past the shuttered window of the closed offices of a travel agency showing the logos of various air lines in the capital Tehran on August 24, 2018. - Air France and British Airways announced on August 23 that they will halt flights to Tehran in September citing low profitability as the US reimposes sanctions on Iran.

On 12 May 2018, president Trump announced that the US would withdraw from the Joint Comprehensive Plan of Action (JCPOA) and reimpose US economic sanctions on Iran. The JCPOA was signed on 14 July 2015 in Vienna between the United States, Germany, Britain, China, Russia and France with Iran (the “P5+1”).

The non-Iranian signatories agreed to lift the tough economic sanctions (financial, trade and energy) that had been adopted to press Iran to end its uranium enrichment programme—prohibited by various UN Security Council resolutions—in exchange for Tehran limiting its nuclear activities. In particular, the JCPOA required Iran not to enrich uranium to above the level needed to fuel civilian nuclear reactors (about 5%) and to dilute its existing enriched uranium to below that level, cease installing advanced uranium enrichment centrifuges, stop manufacturing heavy water, and agree to comprehensive international inspections of its nuclear activities.1 The intent was to allow Iran to develop limited civilian nuclear capabilities under international supervision to ensure that this programme would be solely for peaceful purposes.

Explaining his decision to withdraw, president Trump said, “The Iran deal is defective at its core. If we do nothing … [i]n just a short period of time, the world’s leading state sponsor of terror will be on the cusp of acquiring the world’s most dangerous weapons”.2 The decision defied domestic and foreign predictions that, despite his campaign rhetoric, Trump would tolerate the Iran deal in practice, while blaming its defects on previous administrations. Indeed, Trump has shown flexibility on many issues, such as reaffirming support for NATO security guarantees and considering a wide range of policy options regarding North Korea. On certain issues, however, including climate change, Jerusalem and Iran, Trump has stuck to controversial positions heedless of domestic and international criticism.

The US Debate

The JCPOA is highly controversial. Its supporters argue that the agreement ensures that Iran will not become a nuclear threat for many years, while critics have denounced the deal as a misguided attempt at appeasement. Following negotiation of the agreement and certification by the IAEA that Iran was meeting its terms, the United States and European nations released roughly 100 billion dollars of frozen Iranian assets. The JCPOA (along with rising world hydrocarbon prices) helped Iran’s economy grow by double digits in following years.

Donald Trump has long been one of the JCPOA’s leading critics. He has repeatedly excoriated the agreement, calling it “the worst deal ever negotiated”. During Trump’s speech announcing his candidacy for president on 16 June 2015, he suggested that a nuclear deal with Iran could lead to the destruction of Israel. When the deal’s terms became clear, Trump denounced “the total incompetence of our president and politicians” given that Iran was “being choked to death” and boasted that “When I am elected president, I will renegotiate with Iran”.  Trump’s animus towards the deal is likely related to his negative views of Iran. In his 2011 book Time to Get Tough, Trump wrote that the United States and others must do everything possible to keep Iran from becoming a nuclear state. In particular, he feared that fanatics in the Iranian government could transfer nuclear weapons to terrorists.

Following his election, the Trump administration imposed more sanctions on Iran. On 3 February 2017, the White House targeted entities and individuals that had provided financial and logistical support to Iran’s ballistic missile programme. During his first visit to the Middle East in May 2017, Trump cited the need to counter Tehran as a factor increasing multilateral cooperation among US partners in the region, stating that “the aggression of Iran … it’s forcing people together in a very positive way”. The Trump administration also tried to communicate directly with the Iranian people while circumventing their government. For instance, in a message for the Iranian citizenry during the Persian New Year in March 2017, the Trump administration excised any segments of text that addressed Iran’s political leadership or the prospect of a future reconciliation between the Iranian and US governments. In essence, this action was tantamount to a refusal to acknowledge and recognise the legitimacy of the Iranian government. Like previous administrations, Trump also declared that the US would contemplate military strikes against Iran in certain circumstances.

Still, the Trump administration debated what to do with the JCPOA. The president twice affirmed to Congress Iran’s compliance with the agreement, to justify extending the sanctions waiver. At various times, Trump suggested that he would withdraw from the deal, renegotiate it, or step up enforcement. Senior administration officials such as former Secretary of State Rex Tillerson, former National Security Advisor H.R. McMaster and Secretary of Defence James Mattis called for caution, not wishing to end JCPOA without assurances that something better would replace it. The US intelligence agencies confirmed Iran had been complying with its JCPOA obligations.  However, the more recent Trump appointees, especially Mike Pompeo as Secretary of State and John Bolton as National Security Advisor, have long advocated a tougher line towards Tehran. In early 2018, Trump told allies that he would void the deal by 12 May unless three principal issues were addressed: the deal’s sunset provisions; Iran’s limiting inspections of its military sites; and the Iranian government’s obnoxious non-nuclear behaviour, such as its ballistic missile tests and support for terrorist groups.

Trump administration officials affirmed that a withdrawal would allow the US to construct a more effective strategy to counter Iranian threats. In a speech to the Heritage Foundation on 21 May describing the administration’s New Iran Strategy, Secretary Pompeo listed a dozen demands that Tehran had to meet to avert the “strongest sanctions in history” and develop a better bilateral relationship with the United States. These steps included that Iran must stop uranium enrichment and never attempt plutonium reprocessing; grant the IAEA access to all nuclear sites; terminate development of ballistic missiles; release all American hostages; end support for terrorist groups; disband its IRGC Quds force; and respect the sovereignty of foreign governments rather than interfere in their internal affairs.

The Trump administration continued previous US sanctions on Iran and then, with congressional encouragement, widened and intensified them. The range of sanctioned activities has expanded to cover ballistic missile tests, Iranian support for terrorism, the regime’s human rights abuses, Tehran’s support for the Assad regime in Syria, harassment of US Navy ships in the Persian Gulf and other issues. The United States has said that the renewed nuclear sanctions would apply first to the automobile and civil aviation sectors in August and then against Iran’s energy and finance sectors in November. The new measures include cutting Iran off from dollar-denominated financing (banks and currency) and punishing US companies that conduct business with Iran or with foreign firms having such business. The Trump administration has given companies six months to cease commercial activities with Iran before they face economic penalties. Non-Iranian companies such as Airbus, Boeing, Total, Renault and Peugeot are now reassessing their business strategies in Iran, often curtailing planned investments.

The US goal is to curtail foreign trade, technology-sharing and investment regarding Iran. The Trump administration may have hoped the economic pressure on Iran would encourage a recurrence of the 2017–18 protests over high food prices or even the 2009–10 mass demonstrations, which contested the regime’s legitimacy. At the time, Republicans faulted the Obama administration for not rendering the protesters enough support. Even before the recent US decision, the threats from Washington to pull out have already acted as a disincentive for large international companies considering investing in Iran. For example, Boeing had an 18-billion-dollar deal with Iran, but never delivered a single new aircraft. Despite its pro-business policies, the Trump administration has shown no interest in securing Iranian business deals, even for US companies.

The International Response

Several US allies, most notably Israel and Saudi Arabia, praised Trump’s withdrawal from the JCPOA and the restoration of sanctions against Iran. The Israeli prime minister, Benjamin Netanyahu, applauded the move, saying the JCPOA guaranteed rather than prevented an Iranian nuclear weapon. Netanyahu released documents shortly before the US announcement that he claimed exposed Iran’s nuclear ambitions and called into question whether they intended to abandon them under the deal, though supporters of the JCPOA stated that the documents did not contain new revelations. Saudi Arabia, the United Arab Emirates and Bahrain also welcomed the US decision and the reintroduction of sanctions against Iran.

Many governments, however, have criticised the decision and sought to sustain the JCPOA despite the US withdrawal. Russia has decried the US decision, with officials stating the move is likely to increase Middle East tension, decrease North Korean interest in negotiating a nuclear deal, and challenge the international non-proliferation regime. Moscow tried to alienate Europe from Washington and stressed that Russia would work with the Iranian and other governments to preserve the deal and negate US sanctions. Kremlin spokesman Dmitry Peskov said the US sanctions were a form of economic protectionism designed to hamper non-US companies dealing with Iran.

Similarly, China has affirmed its intention to continue normal, transparent and pragmatic cooperation with Iran, provided Tehran does not violate its obligations under the JCPOA. Foreign ministry spokesman Geng Shuang said that Beijing would “continue to uphold an impartial, objective and responsible attitude, remain in dialogue with all parties and continue to devote itself to safeguard and implement the deal”. In particular, China would maintain “normal economic and trade exchanges” with Iran. When Iranian foreign minister Mohammad Zarif met his Chinese counterpart Wang Yi, the latter said, “I hope and believe that these visits to multiple countries will … help protect Iran’s legitimate national interests and peace and stability in the region”. China’s special envoy to the Middle East, Gong Xiaosheng, said in a press conference in Iran that “[h]aving a deal is better than no deal. Dialogue is better than confrontation.” Beyond having direct economic interests in trading with and investing in Iran, Beijing wants access to port facilities in Iran to support its Maritime Silk Road, which would extend Chinese trade and military presence in the Indian Ocean while marginalising that of the US and India. Beijing could benefit economically from the US decision. European governments have broached the idea of China providing alternative financing to foreign businesses still carrying out business in Iran.

Europeans are worried that the US sanctions will hurt their economic interests and businesses.  Since the signing of the JCPOA in 2015, member states of the EU have invested billions of dollars in Iran, notably in its energy sector. Trade and economic ties between the EU and Iran have grown considerably. In 2015, trade between Iran and the EU amounted to around 1.25 billion euros (1.48 billion dollars); by 2017, that total had increased ten-fold, to 10.14 billion euros (16.4 billion dollars). Nevertheless, Iran does not rank among the EU’s top 30 trading partners.

After Trump’s election, EU governments lobbied the administration not to withdraw from the JCPOA. This campaign of persuasion intensified in 2018. French president Emmanuel Macron, German chancellor Angela Merkel and then British foreign secretary Boris Johnson all travelled to Washington in the weeks leading up to Trump’s decision in a failed effort to avert a US withdrawal. EU governments tried to negotiate additional restrictions on Iranian activities with Tehran and to impose additional unilateral sanctions on Iran to meet US concerns. European allies appeared flummoxed when the US withdrawal actually occurred, presumably believing that US threats had been a bluff to negotiate more concessions from Iran and other partners. EU Council president Donald Tusk called Trump “selfish” and “capricious” for abandoning the JCPOA heedless of the wishes of its other signatories or the risks to international peace and non-proliferation. In their view, the agreement had been unanimously endorsed by the UN Security Council, but the US unilateral withdrawal was now threatening its sustainment.

Following the US decision, the EU reiterated its commitment to the JCPOA, contingent upon continued Iranian compliance with its obligations under the agreement. The EU High Representative for Foreign Affairs and Security Policy, Federica Mogherini, insisted that “the European Union is determined to preserve” the nuclear deal with Iran, stating that the JCPOA could survive even without support from the United States. Mogherini argued that “the lifting of nuclear related sanctions has not only a positive impact on trade and economic relations with Iran, but also … crucial benefits for the Iranian people.” The European Commission has been considering blocking measures to protect European companies doing business with Iran from US sanctions. The President of the European Commission, Jean-Claude Juncker, stated that “we have the duty, the Commission and the European Union, to do what we can to protect our European businesses”.

The leaders of the UK, Germany and France issued a joint statement expressing their regret and concern over the US withdrawal from the JCPOA, which had made the world “a safer place”. The statement said that the countries would “remain committed to ensuring the agreement is upheld” and “ensure this remains the case including through ensuring the continuing economic benefits to the Iranian people that are linked to the agreement”. The statement also called upon the United States to “avoid taking action which obstructs full implementation by all other parties to the deal,” while urging Iran to “show restraint”.

British prime minister Theresa May expressed her support for the Iran nuclear deal to Iranian president Hassan Rouhani in a phone call, stating that remaining in the deal and abiding by its terms was in both countries’ national interests. Even so, British leaders stressed that they shared US and Israeli concerns about Tehran’s non-nuclear actions. Boris Johnson stated, “We have no illusions about Iran’s disruptive behaviour, but we think we can tackle those in other ways”.

President Macron reiterated his commitment to the deal but added that Paris would engage with Tehran on a number of issues, including Iranian ballistic missile development, regional stability and what would happen when the JCPOA restrictions expired. French finance minister Bruno Le Maire argued that the EU should push back hard against the Trump administration’s attempts to be an “economic policeman” and exterritorial sanctions, which applied US national law to non-US entities, as a “matter of principle”. Le Maire suggested that the EU create a body similar to the US Department of Justice with powers to charge foreign companies against violations of trade practices.

The German foreign minister, Heiko Maas, called Trump’s announcement “incomprehensible” as Germany found no justifiable cause to abandon the JCPOA. Volker Treier, head of foreign economics at the Association of German Chambers of Commerce and Industry, echoed Johnson’s warning, saying “the reintroduction of US sanctions would cause enormous insecurity in the German economy”. Chancellor Angela Merkel, however, cautioned against inflicting undue harm on transatlantic relations. “This is a serious event, we have to say that, but it is not a reason to call into question the entire transatlantic partnership”.

However, the European financial response options (blocking measures, euro-denominated funding, special credits to compensate for sanctions, etc.) have downsides. As one EU official observed, the foreign ministers were “very well aware that there is no magic option which can be applied. There will be a complicated and comprehensive pattern of options both at the EU and at the national level and therefore it may take some time to establish all of them.” In 1996, the EU introduced “blocking” regulations that compel EU businesses to ignore sanctions, but they have never actually been implemented. European companies that rely on American parts for their products, such as Airbus, will still be vulnerable to US extraterritorial sanctions.

Iran’s Hard Choice

Before the US withdrawal, Iranians suggested that they would abandon the JCPOA as soon as Washington did. Instead, Iranian leaders said that, while the US decision showed Washington could not be trusted, for now they would demand that European countries offset US sanctions through increased purchases of Iranian exports and investments. Some Iranians said that the United States was not fulfilling its obligations under the JCPOA in any case. President Rouhani described the US withdrawal as a manoeuvre to weaken and isolate Iran but argued that, by staying in the deal, Tehran had outmanoeuvred Washington. Foreign minister Zarif went on a diplomatic blitz, urgently meeting with Russian, Chinese and European leaders. However, Rouhani directed the Atomic Energy Organization of Iran to prepare to resume its uranium enrichment programme, “so that if necessary we can begin our industrial enrichment without any limitations”.

Even so, the move has placed the Iranian government in a difficult position. Iran could continue to comply with the nuclear deal in return for receiving sanctions relief from Europe and Asia while excluding the United States from conversations about Iran’s nuclear capabilities and painting Washington as an irresponsible and provocative actor. Before the JCPOA, the entire international community was unified against Iran and its nuclear programme. Now it is claimed that Iran and the international community is united against the United States for withdrawing from the deal. The Iranian leadership may also fear the political consequences of economic instability and thereby conclude that continuing to receive some benefits is better than not having the deal.

Alternatively, Iran could follow Pyongyang’s recent path of seeking a negotiated settlement with Washington. However, the Trump administration is unlikely to give Tehran as generous a deal as it is offering North Korea. Tehran’s bargaining position is weaker due to its less well-advanced nuclear programme and Iranians’ unwillingness to accept the degree of isolation North Koreans have accepted for decades. Some in the Trump administration perceive the end of the nuclear deal as one component—along with US non-nuclear sanctions and greater support for Iran’s regional opponents such as Israel and Saudi Arabia—of a multi-dimensional US effort to weaken or undermine the Iranian government; some even want to overthrow it.

Lastly, Iran could resume uranium enrichment at the same levels that occurred before the JCPOA was enacted, which would bring its “breakout time” required to manufacture a nuclear warhead to roughly two months. Iran could even follow the North Korean path of the 1990s and completely reject any limits on its nuclear activities, expel IAEA inspectors and leave the Non-Proliferation Treaty. But doing so would alienate European governments that still want to work with Tehran and risk a military strike from Israel or the United States, where the Trump administration categorically does not want to face yet another hostile nuclear-weapon state.

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1 Peçanha, Sergio, “Understanding the Deal With Iran”. The New York Times: Middle East, 24 November 2013. archive.nytimes.com/www.nytimes.com/interactive/20… (accessed 18 May 2018); Gordon, Michael R. “Accord Reached With Iran to Halt Nuclear Program”. The New York Times: Middle East, 23 November 2013. www.nytimes.com/2013/11/24/world/middleeast/talks-… (accessed 18 May 2018); United Nations Press Release, “Security Council Imposes Sanctions on Iran for Failure to Halt Uranium Enrichment, Unanimously Adopting Resolution 1737 (2006)”, 23 December 2006. www.un.org/press/en/2006/sc8928.doc.htm (accessed 18 May 2018).

2 “Trump pulls United States out of Iran nuclear deal, calling pact ‘an embarrassment’”. The Washington Post: National Politics & Government, 8 May 2018. www.nola.com/national_politics/2018/05/trump_pulls… (accessed 22 May 2018); “Trump pulls United States Out of Iran Nuclear Deal, Dramatically Escalating Threat of War with Iran”. Democracy Now, 9 May 2018. www.democracynow.org/2018/5/9/trump_pulls_united_s… (accessed 22 May 2018).