What if Trump decertifies the Iran deal?

There is little doubt that President Trump seeks to undermine the Iran nuclear deal negotiated by his predecessor and world powers. Despite assessments by U.S. generals and eight reports from the International Atomic Energy Agency (IAEA) that verify Iranian compliance, Trump claims that Iran is violating the “spirit” of the deal, and he has repeatedly threatened to either walk away or renegotiate the agreement.

Reports have emerged that in the coming days Trump is expected to ‘decertify’ Iranian compliance with the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). This could have serious implications for European security interests with respect to non-proliferation objectives and the Middle East. European countries must now coordinate a more vigorous response to prevent Trump and the US Congress from derailing the nuclear accord.

What does ‘decertification’ entail?

Unlike in Europe, the US administration has a domestic legal requirement to ‘certify’ every 90 days that Iran is adhering to the nuclear deal. This law, the Iran Nuclear Agreement Review Act of 2015 (INRA), was introduced by Congress to increase oversight from the legislative branch over the implementation of the JCPOA. Trump has already issued such certifications twice but has strongly indicated he is unlikely to do so again at the next deadline on 15 October.

Certification can be withheld without any proof that Iran is in fact violating the deal. Trump could, for example, withhold certification to Congress based on a subjective assessment that the sanctions relief provided to Iran under the JCPOA is no longer vital to US national security interests given Iranian regional conduct.

But decertification is not the same thing as pulling out of the deal altogether. Instead, it shifts responsibility for next steps over to Congress, who will have 60 days to decide how to respond.

What might Congress do?

(1) Undermine the deal

Congress could re-impose some or all of the nuclear-related sanctions on Iran that are currently eased under the JCPOA. They may also use the opportunity to impose new requirements for how the nuclear deal is implemented. This would amount to a unilateral renegotiation of the JCPOA, which Iran is highly likely to reject.

Under the above scenarios, the Joint Commission established under the deal will need to decide if there has been significant 'non-performance' by the United States. This process can take up to 35 days to resolve. If the United States does not alter its decision, Iran can cease performing its commitments in whole or in part. The UN Security Council will then need to vote on a resolution as to whether to continue lifting UN sanctions that are currently eased. If such a resolution is not adopted by 30 days, the previous UNSC resolution sanctions snap-back.

(2) Continue the status quo

Congress has the option to do nothing in response to the decertification. In this scenario, the JCPOA remains intact.

(3) Strengthen the JCPOA

Conversely, there is also a possibility that, in addition to not reimposing sanction, Congress uses the 60-day window to amend INRA by removing the legal necessity for Trump to periodically issue certification of Iranian compliance to the deal. Such an amendment could create a face-saving measure for Trump, who has shown contempt towards the procedure, without jeopardizing the deal. It would also create greater assurance for Europe, particularly the business community, by removing an additional layer of unpredictability surrounding US compliance to the JCPOA.

What should Europe do?

If this political route fails, Europe should threaten to use, and eventually implement, legal mechanisms that block or penalise the enforcement of US extraterritorial and secondary sanctions.

If Trump decertifies the deal while Iran continues to comply with its requirements, European leaders (in particular the ‘E3’ parties to the deal – Germany, France, and the UK) should respond as follows:

(1) Urge Congress to adhere to the nuclear deal 

European governments, business leaders and ambassadors in Washington should urge US legislators to protect and strengthen the nuclear deal. The primary target of this outreach should be Republican Congress members who in 2015 opposed the nuclear deal but who nevertheless value the transatlantic alliance with Europe. Congress should be warned that breaching the JCPOA will damage transatlantic relations and dilute the unity over the West’s broader Iran policy, including cooperation over regional issues. 

Where possible, European governments should coordinate with members of the US administration, including national security advisor General H.R. McMaster, Secretary of State Rex Tillerson, and Secretary of Defense James Mattis, who have indicated a preference for the United States to remain committed to the JCPOA.  

(2) Send positive signals to Tehran and caution against provocation

European leaders should take every opportunity to outline their continued support to the JCPOA. The E3 should reiterate that Europe will seek to protect the JCPOA at the Joint Commission and continue cautioning the United States against sabotaging the deal. Iran must also be warned not to take actions – such as undertaking frequent ballistic missiles tests – that could provoke US legislators into a more hawkish position, particularly during the 60-day review period.

(3) Give greater assurances to European companies

Together with the EU, European governments should try to minimise the likely chilling impact of US decertification on business deals already in place between European companies and Iran. The E3 will need to communicate a clear roadmap for how they intend to safeguard the nuclear deal should the United States re-impose sanctions and how European companies will be protected from the enforcement of such sanctions.

Even if the US Congress protects the JCPOA, European governments will need to prepare for continual battles with the Trump administration over how the deal is implemented. European actors will need to be far more proactive in fixing existing problems related to the deal and rely less on US cooperation in resolving the banking and financial hurdles currently faced by European companies undertaking legitimate business with Iran.

(4) Prepare serious contingency plans

If it seems likely that Congress will seek to re-impose nuclear-related sanctions, the E3, together with China and Russia, should set out the measures they intend to implement in order to salvage the deal. Essentially, Iran should be expected to maintain the critical restrictions and inspections on its nuclear programme in return for an economic assistance package offered by the remaining parties to the JCPOA. This contingency plan needs to be communicated clearly to reassure European companies and signal to the United States that Europe is serious about its commitment to the deal.

As part of this plan, the EU and European governments will need to increase political push-back against the enforcement of renewed US secondary sanctions. This will be necessary to reassure European companies that they will not be penalized by the United States for undertaking legitimate business with Iran. It will also provide some comfort to Iran that it can continue reintegrating into international economic markets.

If this political route fails, Europe should threaten to use, and eventually implement, legal mechanisms that block or penalise the enforcement of US extraterritorial and secondary sanctions which unreasonably target European companies doing legitimate business with Iran.

To this end, the E3 have already begun reviewing a similar scenario from the 1990s, when Europe and the United States clashed over sanctions against Iran, Libya and Cuba. At that time, to resist the extraterritorial enforcement of U.S. sanction, Europe introduced a Blocking Regulation together with domestic legislation at member state level aimed at ring-fencing their companies. European countries also initiated a complaint against the United States with the World Trade Organisation.

It must be acknowledged that taking a similar approach now would be much more complex. Given the high degree of connectivity between European banks and the US market, European companies now have far more assets exposed to US regulators, who could retaliate against them, or force them to pick between the Iranian and the U.S. markets.

To devise smart contingency plans, therefore, it will be imperative for European governments to increase their coordination with China, Russia and other Asian economic giants such as India, South Korea and Japan. Not only do their interests align with respect to the JCPOA, but they also share concerns about the overreach of US secondary sanctions.

What lies ahead?

It seems inescapable that under the Trump presidency, Iran and the US are on a path of escalation. After a decade of close European coordination with the US on reaching a multilateral solution to resolve the Iranian nuclear file, Trump’s trend towards bilateralism and containment of Iran will limit opportunities for this to continue.

The prevalent assessment in Washington is that the Trump administration can either force or co-opt European countries to follow suit on its Iran policy. However, Europe can instead utilise the rare convergence that has emerged with Russia and China to push the United States to adhere to a multilateral non-proliferation agreement.

This is especially urgent at a time when global powers are faced with a real nuclear crisis from North Korea. Moreover, if the nuclear deal is undermined, there is little hope that there can be a diplomatic breakthrough with Iran on other contentious issues, and regional instability in the Middle East is likely to deteriorate further. But with greater European leadership, there may be a chance to minimise these costs.