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September 11, 2017

The Legal Steps and Policy Challenges of Reimposing Sanctions on Iran

By Peter Harrell and Elizabeth Rosenberg

Under the Iran Nuclear Agreement Review Act (INARA), a 2015 statute designed to give Congress oversight over the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement with Iran, President Trump is required to periodically certify to Congress whether or not Iran is complying with its obligations under the deal. President Trump has twice certified Iranian compliance with the JCPOA since his inauguration, once in May and once in July. However, since mid-July President Trump himself and other senior administration officials have publicly indicated that Trump is unlikely to certify Iranian compliance with the JCPOA when the administration is next required to do so in mid-October.

A decision not to certify Iranian compliance with the JCPOA would not, legally speaking, automatically reimpose sanctions on Iran. It would, however, begin an executive branch and congressional process of developing ways to reimpose some or all of the sanctions on Iran that the United States suspended as part of the JCPOA, and it would create strong policy and political momentum for reimposing sanctions. Reimposing sanctions would, in turn, create significant uncertainty about the future of the JCPOA and could begin a process of unraveling the nuclear agreement.

This issue brief explains the legal and practical steps that the administration and Congress would take to reimpose sanctions on Iran. The brief also explains the major international and diplomatic challenges the Trump administration would face in reimposing U.S. sanctions on Iran absent clear, internationally-accepted evidence of an Iranian violation of the JCPOA and a broad international consensus in favor of reimposing sanctions. Finally, the brief explains the potential oversight role Congress can play with respect to a decision by the Trump administration to reimpose sanctions.

Legal and Practical Steps to Reimpose U.S. Sanctions

As a matter of U.S. law there are three options for the United States to reimpose sanctions suspended pursuant to the JCPOA: (1) the executive branch can terminate the existing sanctions waivers that implement JCPOA sanctions relief and reimpose sanctions that were suspended pursuant to the JCPOA; (2) Congress can compel the termination of the existing JCPOA sanctions waivers and reimpose sanctions that were suspended pursuant to the JCPOA; and (3) the executive branch or Congress could technically maintain the sanctions waivers implemented pursuant to the JCPOA but nonetheless impose identical sanctions on Iran for non-nuclear reasons. For example, the United States could technically maintain the JCPOA waiver of sanctions on Iran’s Central Bank, but then sanction Iran’s Central Bank in response to Iran’s support for terrorism and/or Iran’s destabilizing activities in the Middle East. Each of these options is described in greater detail.

Executive Branch Termination of JCPOA Sanctions Waivers

The Obama administration implemented most of the U.S. sanctions relief provided under the JCPOA by executing a series of national security waivers that allowed the administration to suspend sanctions that Congress had enacted into law. For example, the Obama administration used national security waivers to suspend U.S. sanctions on Iran’s oil exports, U.S. sanctions on foreign banks that transacted with the Iranian financial sector, and U.S. sanctions on Iran’s ports, shipping, and other key sectors. (The Obama administration also left a number of sanctions in place, including the embargo on most U.S. trade with Iran, sanctions on Iran’s Revolutionary Guards Corps, and other sanctions on Iran’s support for terrorism and Iran’s ballistic missile program).

These national security waivers, however, are time-limited in duration, generally for either 120 or 180 days, depending on the specific sanction. The Obama administration and the Trump administration have periodically reissued these waivers to ensure that the sanctions relief provided under the JCPOA remains in place. 

Should President Trump not certify Iranian compliance with the JCPOA, the administration could reimpose one or more of the U.S. sanctions lifted pursuant to the JCPOA by declining to reissue the relevant waiver or waivers when they need to be renewed. Alternatively, the administration could also cancel an existing waiver mid-cycle. Legally speaking, after a waiver is not renewed (or if a waiver is cancelled), the relevant sanction would then snap back into legal force, and the Trump administration would be required to enforce it. As a result, the administration has broad legal leeway to snap back U.S. sanctions into place under its own executive branch powers.

Under this approach to reimposing sanctions, the Trump administration has wide latitude to decide on the specific sanctions to reimpose on Iran. For example, the administration could reimpose only a handful of sanctions, such as sanctions on specific Iranian companies, or it could reimpose most or all the sanctions suspended pursuant to the JCPOA, such as sanctions on Iran’s oil exports and banking system.

Congressional Termination of JCPOA Waivers

If the Trump administration does not certify that Iran is complying with the JCPOA in mid-October, INARA authorizes, but does not require, Congress to consider legislation that would terminate JCPOA waivers and reimpose U.S. sanctions that were suspended pursuant to the JCPOA. Whether Congress would in fact consider legislation reimposing sanctions is fundamentally up to leadership offices in the House and the Senate: INARA allows the House and Senate majority and minority leaders to introduce legislation reimposing sanctions, but not other members of Congress.

Should House or Senate leadership introduce legislation to reimpose sanctions, Congress would consider it under expedited procedures that ensure a rapid congressional vote and that the congressional vote would not be subject to a Senate filibuster. Congress could use such legislation to reimpose some or all of the legislative U.S. sanctions suspended under the JCPOA. Congress, like the executive branch, would have wide latitude to decide which sanctions to reimpose on Iran, meaning Congress could reimpose only a handful of sanctions or a much broader range of sanctions. Congressional leadership could also choose not to introduce legislation reimposing sanctions given that INARA authorizes, but does not require, Congress to act. If congressional leadership did not introduce legislation under INARA, any other member of Congress could in theory introduce legislation reimposing sanctions on Iran, but legislation introduced by those other members would not be subject to expedited consideration, leadership would not be required to bring such legislation to the floor for a vote, and such legislation could be filibustered in the Senate. 

Maintaining Termination of JCPOA Waivers but Reimposing Sanctions on other Grounds

Finally, the administration could choose to maintain the waivers issued pursuant to the JCPOA, but then impose substantively identical sanctions on Iran on other policy grounds. Under this approach the Trump administration would reissue all of the JCPOA sanctions waivers. However, the Trump administration and/or Congress would then impose some substantively identical sanctions on other, non-nuclear grounds. For example, the Trump administration could continue to issue JCPOA waivers of U.S. sanctions on Iran’s oil sales, but announce new, substantively identical sanctions on Iran’s oil sales due to concerns about Iran’s support for terrorism and other destabilizing activities in the Middle East.

Under any of these approaches, the Trump administration would also need to take several follow-up steps to give sanctions on Iran practical effect. These include:

  • Issuing guidance documents and FAQs: The administration would need to issue guidance documents and FAQs related to reimposing sanctions to guide compliance for the enormous array of international banks and businesses that deal with Iran in some direct or indirect fashion. The administration would need to answer key questions, such as how to handle deals that are partly underway but not completed, timeframes for companies operating in Iran to wind down their business there, and whether any individual waivers or exemptions would be available.
  • Redesignating Iranian companies and people taken off U.S. sanctions blacklists: The United States removed hundreds of individuals, companies, airplanes, and vessels from U.S. sanctions blacklists as a part of the JCPOA. Even after underlying sanctions laws snap back into place, specific individuals and companies would need to be redesignated onto U.S. sanctions lists before sanctions are applied to those individuals and companies.

Major Challenges to Reimposing Sanctions

While all three options to reimpose sanctions on Iran that were lifted pursuant to the JCPOA are relatively straightforward as a matter of U.S. law, any effort by the United States to reimpose sanctions will likely encounter significant practical and diplomatic challenges unless there is a clear international consensus that Iran has violated the JCPOA or engaged in other activities that merit strong international pressure. Without foreign cooperation in sanctions on Iran, the Trump administration likely would have difficulties making sanctions hurt Iran. This means that the United States would face tough choices about how to implement sanctions and court serious consequences for U.S. economic, diplomatic, and security policy interests and credibility. Specific challenges the administration would face include the following:

U.S. allies may view the United States as violating the JCPOA: The other countries that are party to the JCPOA and most U.S. allies view the International Atomic Energy Agency (IAEA) as the primary arbiter of Iranian compliance with the JCPOA. The IAEA has regularly deemed Iran in compliance with its nuclear obligations under the JCPOA despite some concerns over specific issues such as the quantity of Iran’s heavy water stockpiles. The IAEA position that Iran is in general compliance with the JCPOA has attracted widespread international support. Unless the IAEA determines that Iran has failed to comply with its obligations under the JCPOA, many U.S. allies almost certainly will view a U.S. decision to reimpose sanctions on Iran as political and a violation of U.S. obligations under the JCPOA, and are unlikely to support the U.S. position.

Iran may challenge the U.S. action as violating the JCPOA: The JCPOA established a dispute resolution mechanism to resolve disagreements about whether a party is meeting its JCPOA obligations. The dispute resolution mechanism is comprised of all JCPOA parties (the U.N., Iran, the United States, Germany, the United Kingdom, France, Russia, and China). If the United States reimposes sanctions that were suspended under the JCPOA, Iran would be able to ask the dispute resolution mechanism to find the United States out of compliance with its obligations under the JCPOA. The specifics of the JCPOA dispute resolution mechanism are complex and beyond the scope of this issue brief. However, a decision by the other seven members of the JCPOA dispute resolution mechanism that a U.S. reimposition of sanctions places the United States out of compliance with its JCPOA obligations would create significant international diplomatic ramifications.

U.S. allies may refuse to join the United States in reimposing sanctions lifted by the JCPOA: Key U.S. allies and partners are likely to oppose any U.S. sanctions that they view as non-compliant with the JCPOA and are unlikely to cooperate with the United States in imposing them absent clear, IAEA-supported or other internationally-accepted evidence that Iran has violated the JCPOA. Without foreign cooperation, the Trump administration will likely face significant challenges in effectively implementing major sanctions on Iran and in enforcing penalties on major foreign companies that violate U.S. sanctions. While some industries that are heavily reliant on the United States, like international financial services, may comply with many U.S. sanctions even absent political support from foreign financial regulators, other industries, like international energy traders, are unlikely to curb their dealings with Iran unless the United States has broad international backing for reimposing sanctions. If foreign governments make only symbolic efforts to comply with U.S. sanctions, turning a blind eye toward circumvention and offering U.S. intelligence and law enforcement officials limited cooperation to discover circumvention, it will be extraordinarily difficult to make the sanctions work. These scenarios could potentially cause systemic risks to international financial and oil markets, seriously damage U.S. credibility, and deliver very limited economic leverage with Iran. 

A decision to reimpose sanctions on Iran would complicate other critical U.S. sanctions priorities: The United States is currently engaged in several major international sanctions campaigns, including recently escalated sanctions on North Korea and on Russia. In recent months, the United States has achieved a high degree of cooperation from the international community regarding sanction on North Korea, and is in the process of seeking international support for new U.S. sanctions on Russia. A move by the United States to reimpose sanctions on Iran, if seen as a violation of U.S. JCPOA commitments, would likely make U.S. allies and partners less likely to join in U.S. sanctions on other countries. In addition, it would almost certainly send a signal to foreign governments that the United States cannot be trusted to deliver on promises of sanctions relief, undermining America’s ability to use the promise of sanctions relief as leverage in diplomatic negotiations. This could have long-term ramifications for the United States in foreign and security policy.

Congressional Oversight    

Congress was instrumental in developing U.S. sanctions on Iran, particularly between 2010 and 2012, and in pressuring the Obama administration to ensure that the JCPOA imposed tough limits on Iran’s nuclear program. There are several steps that Congress should take now to ensure oversight of the Trump administration’s posture toward the JCPOA.

Congress should press the Trump administration to address disputes over Iran’s compliance with the JCPOA within the JCPOA framework before deeming Iran noncompliant: Given the diplomatic and foreign policy challenges the United States will face in reimposing sanctions on Iran absent an international consensus that Iran has violated the JCPOA, Congress should press the administration to resolve disputes over Iran’s compliance with the JCPOA through the JCPOA dispute resolution mechanism prior to finding Iran noncompliant. These disputes could include concerns that Iran has imported certain dual-use goods outside of the JCPOA and that Iran has exceeded heavy water limits. Seeking to work through the dispute resolution mechanism and presenting an internationally-accepted finding that Iran had breeched the JCPOA would add much-needed international credibility to any U.S. finding that Iran is not in compliance with the JCPOA.

Congress should ensure that any new sanctions imposed on Iran are consistent with JCPOA commitments: In July 2017, Congress imposed new sanctions on Iran’s Revolutionary Guard Corps, ballistic missile programs, and human rights abuses as part of a broad sanctions bill targeting Russia, Iran, and North Korea. These sanctions were consistent with the JCPOA and reflected a bipartisan view in Congress that increases in U.S. pressure on Iran should remain so, in part to obtain strong international support. Congress should use hearings and other oversight mechanisms to ensure that any new sanctions the Trump administration imposes to target Iran’s ongoing illicit activities remain consistent with the JCPOA.

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