The US Withdraws From the Iran Deal: What’s Next
Reimposed Sanctions Less Likely to Be Effective This Time Around
President Donald Trump’s announcement that he was withdrawing the United States from the Joint Comprehensive Plan of Action (JCPOA) should not have come as a surprise, but raises the fundamental question—What happens now?
“Congress is likely to… expand US sanctions against Iran and those groups it supports in the region” such as Hezbollah, wrote Columbia University’s Richard Nephew. Some JCPOA advocates might support sanctions legislation, if Iran restarts its nuclear program, a result that many feel is likely.
The US’s partners will want to mitigate the effects of Trump’s action by trying to convince the Iranians to abide by the JCPOA’s restrictions. Their success will depend “on the integrity of sanctions relief,” and the Iranian president has already stated that his country might remain in the agreement if its benefits continue to flow to Iran. That means sanctions and economic relief.
Trump has reimposed all of the sanctions previously in place and the Treasury Department has already published guidance on sanctions that will come back in 90 days and others in 180 days. It will be interesting to see whether some sort of exemptions process is initiated, as the administration did for the steel and aluminum tariffs. But if the administration is serious about the Iran sanctions, carve-outs will be difficult since the sanctions in effect require companies to choose between doing business in Iran or in the United States.
“This decision risks isolating the US from European allies, which had aggressively lobbied the president to remain in the deal,” said Ryan Fayhee, head of the sanctions, export control and anti-money laundering group at Hughes Hubbard & Reed. “Iran is expected to engage in intense negotiations with key European diplomats in order to maintain relationships with European companies.”
The Europeans are actually in a position to retaliate against the US, according to Nephew, although that eventuality is not likely.
Earlier sanctions against Iran worked, and prodded them to the negotiating table because the US secured the political support of its partners for action. One example: the US and its partners were able to eliminate purchases of Iranian oil almost immediately.
That’s why JCPOA proponents like Nephew are skeptical that a restart of sanctions will work, “because grudging cooperation is no way to generate real pressure on the Iranians.” Also, the implementation of sanctions this time “will not reinforce their value to” Trump. “And, once more,” Nephew concluded, “the United States will then be forced to decide between acquiescing to Iranian nuclear activities that raise the specter of an imminent weapons breakout or undertaking military action to set back the nuclear program.”
“One key unknown is the affect this decision might have on the negotiations with North Korea over its nuclear program,” said Fayhee. “The implementation of the JCPOA began in January 2016, less than 30 months ago. North Korean negotiators are likely to be concerned about the finality of any agreement that may be reached.”
How Smaller Businesses Are Impacted By The New Tariffs