Can Joe Biden Really Salvage the Iran Deal?
January 8, 2021 Topic: Politics Region: Middle East Blog Brand: The Reboot Tags: IranJoe BidenIran DealJCPOAMaximum Pressure

Can Joe Biden Really Salvage the Iran Deal?

Everyone is wondering if it is too late to stop Iran from getting the bomb.

U.S. presidential candidate Joe Biden has expressed he’d be open to quickly re-entering the Joint Comprehensive Plan of Action (JCPOA) if Iran returns to full compliance. But his predecessor’s hardline policies would probably necessitate expanding the scope of negotiations with Tehran beyond the current deal, leading Iran to adopt an even harder position on its nuclear program.

  • Biden criticized the Trump administration’s hawkish Iran policy and 2018 withdrawal from the nuclear deal in a Sept. 13 opinion piece, in which he wrote that returning to the JCPOA could be the start of broader diplomacy between Tehran and Washington. 

Simply re-entering the JCPOA would be difficult for both Washington and Tehran, as the current U.S. sanctions architecture is now far more complex than it was when the deal was signed in 2015. Under its “maximum pressure” campaign, the Trump administration has aggressively expanded the scope of sanctions in recent years and will continue to do so for as long as it remains in office. According to a Sept. 29 report by Bloomberg, the White House is considering designating Iran’s entire financial system subject to sanctions under Executive Order 13902. Such a move would effectively blacklist foreign companies from doing business with not only Iranian banks (which are already heavily sanctioned), but all Iranian financial actors, including the networks used for remittances and Iran’s hawala system. The overall impact on the Iranian economy, however, would be limited given the already expansive nature of current U.S. sanctions on Iran’s banking sector and exports (which are mostly humanitarian and food shipments).

  • In April 2019, the United States designated Iran’s entire Islamic Revolutionary Guard Corps (IRGC) as a foreign terrorist organization under Section 219 of the Immigration and Nationality Act.

  • In September 2019, the U.S. Treasury Department sanctioned Iran’s central bank and sovereign wealth fund under Executive Order 13224 for providing material support to Hezbollah and the IRGC’s Quds Force, both of which are designated as terrorist organizations under the same executive order.  

  • In October 2019, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a final rule determining that Iran was a jurisdiction of primary money-laundering concern under Section 311 of the U.S. Patriot Act.

Iran would demand the reversal of all U.S. sanctions implemented by the Trump administration, including those not specifically included in the JCPOA, before returning to full complianceEven if a future Biden administration lifts sanctions targeting Iran’s oil exports, Tehran will want to see Washington’s terrorism and money laundering designations of its financial system reversed. After the JCPOA was implemented, Iran still struggled to attract foreign investment in part because of investor hesitance. As long these U.S. designations and subsequent sanctions remain in place, international financial institutions and other foreign investors will continue to avoid doing business with Iran, thus robbing Tehran of the expected financial benefits under the JCPOA.

Legal hurdles and potential Congressional backlash from Republicans would impede Biden’s ability to quickly reverse some of the Trump administration’s additional sanctions. Lifting the Section 311 designation, in particular — which has effectively made the Iranian financial system toxic for foreign investment — would be Tehran’s top priority. But in order to remove this designation, a future Biden administration would have to first prove that Iran had sufficiently addressed the money laundering and terrorism financing concerns voiced by both the U.S. government and the Financial Action Task Force (FATF). 

  • Republicans are unlikely to have the support in Congress to implement legislation that would constrain a Democratic White House from reaching a quick deal with Iran. But their oversight and scrutiny would likely complicate any attempt to remove the current sanctions on Iran’s central bank and/or the IRGC.

  • In 2016, Iran launched an action plan with the FATF to address the organization’s concerns with money laundering and terrorism financing. But the Trump administration’s withdrawal from the JCPOA thwarted Iran’s ability to make political progress on the plan, which eventually prompted the FATF to reintroduce countermeasures on Tehran in February. 

  • The recent election of a more conservative Iranian parliament has also made the passage of legislation needed to address international concerns with Iran’s financial system even less likely.

Any U.S.-Iran deal reached before mid-2022 would probably be narrow in scope, with both sides making some commitments to return to the JCPOA and engage in comprehensive over an extended period of time. Such a deal could see Iran agreeing to forgo further stockpiling of enriched uranium and/or reversing expansion plans on centrifuge R&D. A narrow agreement could also see Tehran reducing the number of advanced centrifuges being installed in exchange for modest sanctions relief, which could entail resuming waivers for a specific volume of Iranian oil exports, suspending sanctions related to other Iranian exports and/or full U.S support for humanitarian-related trade channels. 

A prolonged negotiation period would force the United States to discuss issues with Iran beyond just the current terms of the JCPOA, as many of the deal’s sunset provisions expire in 2023 and 2025. Under the JCPOA’s original timeline, the United States would have only been okay with sunset provisions that allow for Iran to restart some nuclear activity and the removal of U.N. sanctions on Iran’s ballistic missile program if its relationship with Tehran during the following decade drastically improved. But Trump’s hardline sanctions strategy in recent years has made such an improvement in U.S.-Iran relations all but impossible. Washington would likely also demand that any successor agreement to the JCPOA extends the timeline for sunset clauses that expire in 2023 and 2025 and includes Iranian concessions on its missile program, which Iran has actively used in regional conflicts over the last three years. 

Such an expansion of negotiations would prompt Iran to adopt a more hardline position with its nuclear program in order to keep Washington focused on Tehran’s primary concern of sanctions relief. Iran’s nuclear program remains its most valuable negotiation tool against the United States. Tehran will thus want to maintain the most critical aspects of the program, such as the right to enrich uranium and holding on to current stockpiles and centrifuges, until the United States agrees to suspend or remove the vast majority of its economic sanctions on Iran. Otherwise, Iran would have to offer more significant concessions on its missile program and regional strategy, which are more important to Iran’s overall defense strategy, in order to receive significant sanctions relief. Iran hopes to use its nuclear program as a way to narrow any expansion of talks with the United States beyond it.  

The Limits of Biden’s Proposed Return to Diplomacy With Iran is republished with the permission of Stratfor Worldview, a geopolitical forecasting and intelligence publication from RANE, the Risk Assistance Network + Exchange. As the world's leading geopolitical intelligence platform, Stratfor Worldview brings global events into valuable perspective, empowering businesses, governments and individuals to more confidently navigate their way through an increasingly complex international environment. Stratfor is a RANE (Risk Assistance Network + Exchange) company.

Image: Reuters.