The negotiations between Iran and six world powers, including the United States, on how to revive the Joint Comprehensive Plan of Action (JCPOA), more commonly referred to as the Iran nuclear deal, have now dragged on for close to a year and a half. As these negotiations seem to be reaching a natural conclusion, the facilitator of the talks, the European Union’s External Action Service (EEAS) and its director, Josep Borrell, issued what they referred to as a final text document that the parties can either agree to or not. That sets a scenario in which the negotiations either finally succeed or are rejected. It seems more likely now that Iran will make its acceptance of the text contingent on some changes.

Some progress has been made in recent months in moving the sides closer together but that has primarily involved Iran backing away from several demands. These included the demand for an “objective guarantee” that the United States will not abandon the agreement again and the Trump administration’s decision to place the Islamic Revolutionary Guard Corps (IRGC) on the State Department’s list of foreign terrorist organizations (FTO) be reversed. Both were rejected by Washington. A compromise offer on the latter issue—that the IRGC stay on the FTO list but that several of its key economic organs be delisted—was also rejected. As the IRGC sanctions are not specifically “nuclear-related,” they are not slated to be lifted as part of a deal to revive the nuclear agreement.

Over the last week, as the parties consider Borrell’s document in their respective capitals, two major reports by Laurence Norman in the Wall Street Journal and Matthew Karnitschnig in Politico have argued that Washington has been far more flexible than previously expected. The two reports assert that Borrell’s text includes key concessions to Iran on two significant issues: the matter of the IRGC and Iran’s demand that a probe into its past nuclear activity is limited or eliminated. Iran sees this probe as a politicized effort by Western geopolitical adversaries to impose greater scrutiny upon it and extract concessions in the future.

The IRGC Issue 

Karnitschnig’s report contends that part of the text provided by Borrell suggests that “Joe Biden’s administration is prepared to make greater concessions than expected to secure a deal — especially by reducing pressure on the Islamic Revolutionary Guard Corps.” The actual passage in Borrell’s text, according to Politico, states as follows:

Non-U.S. persons doing business with Iranian persons that are not on the [U.S. sanctions list] will not be exposed to sanctions merely as a result of those Iranian persons engaging in separate transactions involving Iranian persons on the [U.S. sanctions list] (including Iran’s Islamic Revolutionary Guard Corps (IRGC), its officials, or its subsidiaries or affiliates).

The report argues that the text would gut regular compliance standards, sometimes known as KYC or KYCC. It provides quotes from both the Foundation for Defense of Democracies, an anti-Iran pressure group, as well as a European diplomat approving of that interpretation. This reading of the test could, in theory, even allow foreign firms to do business with IRGC-affiliated institutions by using non-sanctioned Iranian entities as middlemen.

But this is based on a flawed understanding of how America’s secondary (extraterritorial) sanctions function. As is currently the case today, foreign firms are responsible for scrutinizing Iranian partners to make sure that they are not, intentionally or unintentionally, conducting transactions with a sanctioned entity through a non-sanctioned entity. They do not, however, have the obligation to inspect that non-sanctioned Iranian partner’s entire business operation to make sure no unrelated business transactions are taking place with a sanctioned entity. Essentially, the mentioned section in Borrell’s text does not create a new loophole or change the enforcement of U.S. sanctions in any material way.

The report drew criticism from various sanctions scholars and even former Office of Foreign Asset Control officials. In a statement to Politico, Washington’s chief negotiator Rob Malley rejected the claims made stating that “To be clear: We have not engaged in any negotiation about changing due diligence, know-your-customer, or other U.S. sanctions compliance standards for sanctions that would remain under a mutual return to full [nuclear deal] implementation. Any report to the contrary is flat out wrong.”

The IAEA Inquiry

Laurence Norman’s Wall Street Journal report, published the previous day, argued that Borrell’s text provides “significant concessions” to Iran by linking the agreement’s reimplementation to Iran’s cooperation with the IAEA and willingness to answer questions about its nuclear weaponization efforts prior to 2003. Iran and the IAEA already agreed on a roadmap to provide clarifications on these issues in March, but the IAEA has since said that it is unsatisfied with Iran’s responses.

Norman’s report argues that this constitutes a concession to Iran because the IAEA will be placed under enormous pressure to approve whatever cooperation Iran provides in order not to block the reimplementation process. Karnitschnig’s Politico report also echoed this interpretation. The assumption that the IAEA, especially under Director General Raphael Grossi, would be pressured to sign off requires substantiation that is not provided.

Rather than jubilance, Norman’s report was initially met with alarm in many Iranian policy circles. The language described in the report was reminiscent of the JCPOA’s Article 14, which, many observers believe, directly links the IAEA’s approval of Iranian cooperation regarding an inquiry to whether Iran receives sanctions relief. That provision effectively gave the IAEA’s then-director general Yukiyo Amano a veto over the agreement’s implementation. Article 14 reads as follows:

14. Iran will fully implement the “Roadmap for Clarification of Past and Present Outstanding Issues” agreed with the IAEA, containing arrangements to address past and present issues of concern relating to its nuclear programme as raised in the annex to the IAEA report of 8 November 2011 (GOV/2011/65). Full implementation of activities undertaken under the Roadmap by Iran will be completed by 15 October 2015, and subsequently the Director General will provide by 15 December 2015 the final assessment on the resolution of all past and present outstanding issues to the Board of Governors, and the E3+3, in their capacity as members of the Board of Governors, will submit a resolution to the Board of Governors for taking necessary action, with a view to closing the issue, without prejudice to the competence of the Board of Governors.” (Emphasis added)

It is worth mentioning that while Amano, the previous IAEA director, was seen with some suspicion in Tehran, the view toward the current director is far worse. Amano was viewed as a technocrat who was far more accommodating to Western, especially American, desires than his predecessors. The moderate administration of Iranian president Hasan Rouhani acknowledged many of their concerns but still encouraged cooperation. Director Grossi, however, is seen especially by Iran’s ruling conservative factions as a Western political figure whose election was championed by the United States over Iranian opposition. Iran may still cooperate with the IAEA but giving Grossi veto authority over Iranian sanctions relief would not be acceptable. From Tehran’s perspective, if such a section was to appear in Borrell’s text, it would not be an opportunity for Iran to hold the process “hostage,” as Karnitschnig contended, but for the West to do so.

These concerns were somewhat allayed when Norman posted the exact text of the section in Borrell’s text now on social media. That text reads as follows:

The [five countries negotiating with Iran] and the United States take note of Iran’s intent that the safeguards issues referred to in the separate statement of the [five countries negotiating with Iran] and the United States will be duly addressed by Re-implementation Day. They affirm that they expect that Iran and the IAEA will hold further technical meetings and that Iran will answer the questions regarding those issues with a view to clarifying them. They further affirm that when the Director General reports his conclusion to the Board of Governors and confirms that those issues have been duly addressed, the [five countries negotiating with Iran] and the United States, in their capacity as members of the IAEA Board of Governors, will submit a resolution to a regular or extraordinary meeting of the Board of Governors removing the need for the Board’s consideration of these issues and noting that the request contained in the resolution of 8 June 2022 for the Director General to report on those issues is no longer necessary.” (Emphasis added)

The key difference between the two texts is that while Article 14 imposed an obligation on Iran to acquire the IAEA’s approval before December 15, 2015—meaning the day the IAEA was to affirm Iran’s compliance with nuclear commitments and the United States was to suspend sanctions in accordance with its obligation—the language in Borrell’s text only requires Iran to respond to the IAEA’s questions by “re-implementation day.” It simply “takes note” of a parallel but unrelated process without intertwining the two. If Grossi does not approve of Iran’s cooperation, therefore, the reimplementation process will not be impeded. It may only mean that the world powers negotiating with Iran may not seek to terminate the IAEA inquiry.