As US sanctions loom, can Iran nuclear deal still be saved?

The exodus of international firms from Iran is accelerating as the August deadline for the re-imposition of US sanctions against Tehran approaches. President Donald Trump’s decision to withdraw the United States from the multinational Joint Comprehensive Place of Action, which lifted international sanctions against Iran in exchange for curbs on its nuclear program, has left the 2015 accord hanging dangerously in the balance.

On July 7, French shipping giant CMA CGM announced its decision to leave Iran “due to the Trump administration,” the group’s chief executive Rodolphe Saadé said. The announcement came two days after talks in Vienna between Iranian Foreign Minister Mohammed Javad Zarif and his counterparts from Britain, China, France, Germany and Russia produced no breakthroughs. The first of its kind since Trump’s withdrawal announcement in May, the meeting was intended to provide the Islamic Republic with an economic package that would make up for its losses under US sanctions.

Today, the weakened nuclear agreement confronts three possible fates: survival, abrupt death, or gradual demise.

Since the conclusion of the accord, Iranian leaders have maintained that Tehran will remain in it as long as its interests are preserved, and the deal continues to benefit Iran’s economy. Their position did not change after the US administration’s decision to shelve the agreement. President Hassan Rouhani reiterated Iran’s commitment to the pact shortly before the Vienna meeting but, a few days later, in a phone conversation with German Chancellor Angela Merkel, he described the compensatory European Union package as “disappointing” and lacking “a clear roadmap.”

To persuade the Iranian leadership to abide by the JCPOA, Europe has a three-pronged action plan that consists of guaranteeing European Investment Bank (EIB) services to Iran, activating the “blocking statute” to safeguard European firms active in Iran against US secondary sanctions, and securing direct credit transfers to Iran’s central bank that would bypass the US financial system.

According to French Foreign Minister Jean-Yves Le Drian, Europe will probably fall short of shielding Iran from US nuclear sanctions by August, but its protective economic package may yet come through by Nov. 4, when the second round of penalties against Tehran are set to take effect. Barring significant domestic or foreign developments, the Iranian leadership is likely to wait till November, while monitoring European efforts. Notably, on July 17, Behrouz Kamalvandi, spokesperson for the Atomic Energy Organization of Iran (AEOI) confirmed that Tehran has received Europe’s package of incentives and that it meets “elements of Iran’s demands but still requires further consideration.”

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Nevertheless, Iran’s Supreme Leader Ayatollah Ali Khamenei may be tempted to use the impaired agreement as an opportunity to boost his credibility with an increasingly recalcitrant Iranian public by taking a “revolutionary” decision to jettison the nuclear accord once and for all. It was Khamenei’s policy of “heroic flexibility” that made entering nuclear negotiations with world powers in 2013 possible in the first place, and the near failure of that landmark policy, manifested by the US withdrawal from the JCPOA and the restoration of sanctions, has cost Iran’s top leader politically. A decision by Khamenei to take this path would see Iran resuming nuclear work on a larger scale and faster pace than in the past, and cause the sudden collapse of the agreement.

Such a decision by the Iranian leader, however, would alienate China and Russia and set Iran on a collision course with Western powers, not least Europe. It would also pave the way for the re-adoption of UN Security Council sanctions against Tehran. For this and other reasons, including the concern that Israel could launch a military response, the Iranian leadership is unlikely to go down the path of nuclear “breakout.”

To avoid inviting military action at a time of growing domestic dissent and heightened tensions with neighbors, or having its nuclear dossier reopened at the UN Security Council, Iran will probably try to creep out – rather than break out – of the JCPOA if efforts to guarantee benefits of staying in it fail. This is partly because Tehran seems to have reached the conclusion that even if Europe does summon the political will to shield Iran from US penalties, it may not be able to resist American pressure in the long run, and it may ask Tehran to make other compromises, such as on its missile program and regional interventions, in return. Recently, European Investment Bank President Werner Hoyer cast doubt on the EU’s ability to deliver on its pledge to salvage the Iran nuclear accord, cautioning that EIB’s global operations would be imperiled if it invested in Iran as it is the kind of country “where we cannot play an active role.”

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On June 4, in his first official response to Trump’s pullout decision, Khamenei ordered the AEOI to lay the groundwork for achieving “190 000 SWUs [Separative Work Units]” involving uranium enrichment capacity “as soon as possible,” but “within the framework of JCPOA for the time being.” (By some assessments, Iran’s enrichment capacity before the deal was around 10000 SWUs; today it is about 6000 SWUs.) This speech came days after Rouhani instructed the same organization to make preparations for “industrial-scale enrichment without limits.”

In practice, creep-out may take the form of implementing the accord selectively, perhaps by measures like allowing the International Atomic Energy Agency (IAEA) inspectors limited or delayed access to Iran’s nuclear sites. In its first report since Washington’s pullout in May, the agency tacitly criticized Tehran for dragging its feet on so-called “complementary access” as part of the Additional Protocol, which Iran agreed to implement “voluntarily” under the JCPOA.

Gradual demise of the nuclear deal appears the most likely outcome if Europe, Russia and China fail to neutralize crippling US sanctions against Iran. Though it might not lead directly to war, this scenario would substantially escalate regional tensions and further destabilize the Middle East. Finally, with the escalating war of words between the Islamic Republic and Washington, including Trump’s all-caps “never, ever threaten the United States” tweet – a response to Rouhani’s “mother of all wars” speech on Sunday – Iran’s desire to keep Europe and other powers on its side as a bulwark against American military action may serve as the ultimate – but imperfect – saviour of the nuclear deal.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.