*What*’*s the issue?* The 2015 Iran nuclear accord is as successful as it remains fragile. President Trump has warned he will scuttle it unless Congress, in coordination with Europe, unilaterally alters its terms, an
outcome which is unlikely and a violation of the deal. Meanwhile, friction between Iran, the U.S. and their regional rivals is growing and could undermine the deal’s implementation.

*Why does it matter?* Iranians are frustrated by problems with sanctions
relief, international banking ties and a hoped-for economic upsurge.
Washington is frustrated by Iran’s regional activism, prompting more
militarised U.S. responses and possible new sanctions. The resulting
frictions have fuelled domestic Iranian protests, U.S.-Europe tensions,
dangers of the deal’s unraveling, and conflict in the Middle East.

*What should be done?* Attempts to renegotiate the deal through
brinksmanship or unilateral demands are unlikely to work. The deal’s
other signatories need both to persuade the U.S. not to renege on its
commitments and to preserve sufficient incentives for Tehran to remain
in the deal, even if Washington reneges on it or if U.S. actions
continue to eat away at Iran’s economic benefits.

It could have been worse. President Trump’s 12 January decision to waive
sanctions while threatening to withdraw from the Joint Comprehensive
Plan of Action (JCPOA) – the July 2015 nuclear agreement between Iran
and the five permanent members of the UN Security Council plus Germany
(the P5+1) – unless Congress and Europe agree to unilaterally alter its
terms, leaves the deal in the state of limbo it acquired shortly after
his election. Still, given his unpredictability, manifest hostility to
the deal, abhorrence at the thought of validating anything that bears
his predecessor’s mark and the unrest that has shaken Iran, speculation
had been rampant that he would announce the agreement’s demise. But
celebration is premature. The White House decision constitutes little
more than a reprieve: taken at face value, the standard Trump insisted
be met by May in order for the U.S. to remain in the deal is
inconsistent with the JCPOA. The accord’s other signatories should use
this period to encourage the U.S. not to withdraw while considering ways
to sustain the accord regardless of U.S. actions. Its collapse would
reignite a crisis that could deepen tensions in a tumultuous region and
strike a hard-to-reverse blow to multilateral diplomacy and the
non-proliferation regime.

As it enters its third implementation year, the JCPOA continues to serve
its essential purpose: last year, Tehran scrupulously adhered to its
nuclear obligations, according to the International Atomic Energy Agency
(IAEA), rendering an undetected dash toward nuclear weapons impossible.
This apparently is only of marginal interest to the Trump
administration, which continues to denounce the accord as flawed because
some of its nuclear restraints expire between 2026 and 2031 and because
it fails to address Iran’s broader policies, including its ballistic
missiles program and support for non-state actors in the region.

Trump took a first major step toward undermining the JCPOA in October,
when he refused to certify the accord on the grounds that the sanctions
it suspended were not proportionate to Iran’s nuclear steps. Pressed by
most of his cabinet members, who argued that withdrawal from the deal
would be diplomatically costly, he has continued to waive the sanctions.
But the administration has both imposed other economic penalties and
discouraged international business with Iran, thereby putting Tehran in
the uncomfortable position of having to comply with the deal’s nuclear
restrictions while only partially benefiting from its economic rewards.
Trump also tasked Congress with passing legislation that would
unilaterally alter the terms of the JCPOA. As some of his backers put
it, his message was plain: either fix the deal, or I will nix it.

“Congress to date has been unable to find a compromise that
simultaneously placates the White House, complies with the deal and is
acceptable to the Europeans ”

By the time Trump once again had to decide whether to waive the
sanctions, his approach had not borne fruit. This in no small part is
because unilateral alteration of the JCPOA would constitute a violation
and thus would isolate the U.S., something even many Republican members
are loath to do. Congress to date has been unable to find a compromise
that simultaneously placates the White House, complies with the deal and
is acceptable to the Europeans. So this time he upped the ante: he made
clear he would pull the plug on the JCPOA if over the next 120 days
Congress and Europe failed to meet his demands.

For its part, and for the time being, Tehran has complied with the deal,
focused on winning the international blame game and ensuring continued
European economic dealings. But patience could be wearing thin. Iran’s
favourable diplomatic posture hasn’t helped inside Iran, where the
accord’s dividends have been slow to materialise, dashing popular
expectations and contributing (alongside deeply rooted dissatisfaction
at mismanagement, endemic corruption, and political and socio-economic
deprivation) to unrest and protests in several cities. Should those
dividends further erode as a result of U.S. actions – more uncertainty,
more sanctions, or pulling out of the deal – Iran could respond in
damaging fashion.

Europe, with which Iran’s trade has nearly doubled in the past year,
arguably holds the key to the deal’s survival: it needs both to persuade
the U.S. not to renege on its commitments and to preserve sufficient
incentives for Tehran to remain in the deal even if Washington does so
or if its actions continue to eat away at Iran’s economic benefits. But
here too there is uncertainty over how effective Europe can be. The
Trump administration would like to act in unison with its European
partners, but not at all costs; it could decide to go its own way
notwithstanding European opposition. And the imposition of U.S.
secondary sanctions on European companies doing business in Iran would
confront them with the choice of either scaling back their (still
relatively modest) Iranian trade and investment or risk jeopardising
access to the far larger and more lucrative U.S. market.

Fear that the president might keep his word and walk away from the deal
likely will motivate European actors and members of the U.S. Congress to
seek ways to mollify Trump without endangering the JCPOA. Several
Republicans and Democrats in the U.S. Congress already have been
floating draft legislation that would meet the White House half-way. For
their part, France, Germany, the UK and the European Union (EU) have
been debating how to signal greater concern about Iran’s
ballistic-missile program and regional activities, considering what to
do once some of the nuclear restrictions expire and weighing their
reaction to passage of the above-mentioned U.S. legislation. How Trump’s
bombastic 12 January ultimatum will affect their calculus – and whether
his tough rhetoric still leaves room for compromise – remains uncertain.

There was some ambiguity in the president’s language that it is worth
testing, but only up to a point. Should Congress pass legislation or
Europe agree to U.S. measures that constitute JCPOA violations – for
example by threatening automatic sanctions snapback if Iran engages in
activity permitted under the deal – they would be complicit in the
deal’s breakdown. This in turn would render it virtually impossible to
keep Iran from taking reciprocal measures of its own. In other words,
steps designed to forestall a U.S. pullout from the deal could end up
killing it. Neither the U.S. Congress nor Europe should have anything to
do with them.

If the Trump administration is determined to breach the JCPOA, better it
do so on its own, and better Europe then do what it can to save it. Key
would be to ensure sufficient diplomatic and economic dividends for Iran
provided Tehran abides by its commitments and even though these
dividends undoubtedly would fall short of the full realisation of what
the JCPOA envisioned. For this to happen:

* Europe should move beyond rhetorical support and ensure the JCPOA’s
survival by providing cover for its businesses in the event of
unwarranted U.S. secondary sanctions. According to an exclusive Crisis
Group survey of more than 60 senior managers at multinational companies
actively pursuing opportunities in Iran, this could be achieved if Iran
remains committed to its JCPOA obligations and European countries
pre-emptively revive their “Blocking Regulations”, shielding their
companies from U.S. extraterritorial sanctions. Europe so far has been
wary of taking a step that could prompt a trade war with the U.S., but
may now feel its own security is at stake. It should also reach
agreements on a bilateral EU plan to invest in the Iranian economy and a
long-term energy partnership with Tehran, while diplomatically engaging
on its regional policies and human rights record.

* Iran should take several steps of its own. It should put its house
in order by improving its banking standards and creating a less corrupt
and more transparent business environment; this is not only essential to
attract foreign capital and technology, but also to address popular
grievances. To increase Europe’s confidence in its intentions, Tehran
should bolster cooperation with the 1996 Comprehensive Nuclear Test-Ban
Treaty (CTBT) organisation, sign the 2002 Hague Code of Conduct (HCOC)
against ballistic-missile proliferation, and release dual-nationals
arrested in Iran on dubious charges.

* The U.S. Congress should refrain from altering the JCPOA’s terms by
threatening to reimpose sanctions even if Iran abides by the deal. Such
legislation might defer an immediate crisis, but it would violate a
delicately balanced multilateral accord and undermine U.S. credibility
as a reliable negotiating partner. Congress could reduce the president’s
certification burden, strengthen sanctions’ snapback provisions tied to
potential Iranian JCPOA violations, and express its sense that there
needs to be a supplemental deal, but it must not be complicit in killing
a deal that is working.

That the JCPOA, despite Trump’s antagonism, has outlived other
multilateral accords that he rolled back is a testament to its utility
and possibly its strength: the agreement has put a lid on Iran’s nuclear
program and opened the door to its economic rehabilitation. But its
other signatories should not assume that it can withstand further blows.
They ought to defend it proactively, before it gets too late.

*Washington/Brussels, 15 January 2018*

The Iran Nuclear Deal at Two: A Status Report

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