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Last week France, Germany and the United Kingdom (the so-called E3) announced that they would trigger the dispute resolution mechanism (DRM) of the 2015 Joint Comprehensive Plan of Action (JCPOA), commonly referred to as the Iran nuclear deal. This move could well lead to the re-imposition of previous UN sanctions on Iran’s nuclear programme, which were lifted as part of the JCPOA. The E3 presented the move as a good-faith attempt to preserve the agreement. The decision, however, was characterised by Iran as a strategic mistake and might spell the end of the agreement, which has been hanging by a thread ever since the United States withdrew from it in May 2018.
The JCPOA appeared to end the international crisis around Iran’s nuclear programme. Made possible by secret US-Iranian diplomacy during the Obama administration, the compromise agreement allowed Iran to continue uranium enrichment under strict limitations in exchange for the lifting of sanctions. As part of that agreement, previous UN Security Council sanctions that had been imposed on Iran’s nuclear programme in 2006-2010 were revoked.
At the same time, the JCPOA was hailed as a major EU foreign policy achievement; the EU facilitated the agreement, and the E3 were among the core group of negotiators, together with China, Iran, Russia and the US. After the Trump administration threatened to tear up the agreement, European nations were determined not to let this happen.
European efforts to counter the sanctions that the US imposed since 2018 have, however, been largely ineffectual. The US measures have mainly targeted third parties and have practically ended all EU-Iranian trade and oil exports from Iran. The EU Blocking Statute, which was meant to protect European companies from such extraterritorial sanctions, lacks a credible enforcement mechanism. As for the yet non-operational Instrument in Support of Trade Exchanges (INSTEX), its scope—in contrast to previous plans for facilitating Iranian oil exports—has now been reduced to goods not technically covered by US sanctions.
The embargo on Iranian oil is a major factor behind the current economic deterioration in the country, contributing to high inflation and unemployment and jeopardizing access to basic necessities such as food and medicine. The situation has led to growing domestic criticism of the JCPOA in Iran, including calls not only to withdraw from that agreement but also from the 1968 Nuclear Non-Proliferation Treaty (NPT).
Iran nevertheless remained in full compliance with the JCPOA for one year after the US withdrew from the agreement, in the hope that Europe could compensate for the economic harm done by US sanctions. On 8 May 2019, however, Tehran announced that it would scale down its commitments under the JCPOA, taking further measures every 60 days. By 5 January—after its fifth and final step in reducing nuclear commitments— Iran had stopped observing all key operational limits of the agreement, notably those regulating the scale of its uranium enrichment activities. According to Iran, all of these measures can be reversed once the other JCPOA parties start meeting their respective commitments. Iran has also pledged to continue fully cooperating with the International Atomic Energy Agency, which seems to suggest that the JCPOA verification regime will remain in place.
Europe, China and Russia have openly criticised the US maximum pressure policy on Iran, which they view as a threat to the JCPOA. Despite the extraterritorial effects of US sanctions on EU-Iranian trade, the E3 argue that they have fully upheld their commitments by lifting their own sanctions on Iran.
At the same time, the E3 and the rest of the EU have condemned Iran’s countermeasures to US policy, calling them escalatory, and stressing that their commitment to the nuclear deal depends on full compliance of Iran. While their initial response was relatively cautious, the European tone hardened in autumn 2019. In September, the E3 stated that the time has come for Iran to accept negotiation on a long-term framework for its nuclear programme as well as on issues related to regional security, including its missile programme. The statement, coupled with recent comments by the UK’s prime minister, diverges from the previous European opposition to US calls for renegotiating the JCPOA as a broader agreement.
In November 2019 the EU and the E3 went a step further by threatening to trigger the DRM as a response to Iranian countermeasures. The threat was carried out on 14 January, with the E3 saying that they had no choice but to initiate the DRM at the JCPOA Joint Commission. Their stated goal was to bring Iran back into full compliance with its commitments. The decision may have been influenced by economic pressure reportedly exerted on the European governments by the Trump administration.
Iran has justified its countermeasures to US policy using two JCPOA articles. According to article 26, Iran has stated that it will treat a re-introduction or re-imposition of nuclear-related sanctions as grounds to cease performing its JCPOA commitments in whole or in part.
Article 36, in turn, outlines the DRM, which can be triggered by any party who believes others have breached their commitments. If the mechanism fails to resolve the issue between the complaining party and the one whose performance is in question, the former could treat the unresolved issue as grounds to cease performing its commitments. Such an issue could also be referred to the UN Security Council.
Taken together, the two articles create some ambiguity about whether Iran’s right to stop observing its JCPOA commitments in response to re-imposed sanctions is conditional of the DRM process. While article 26 makes no reference to the DRM, article 36 suggests that Iran could only scale down its commitments after the failure of the DRM process.
Neither the EU nor the E3 have acknowledged the validity of the Iranian justification based on those articles. Instead, after a long silence on the matter, on 14 January the E3 argued that Iran has no legal grounds to cease implementing the provisions of the agreement, as it had never triggered the DRM. Iran’s Foreign Minister Javad Zarif responded by arguing that Iran had sought to trigger the mechanism already in May 2018.
Regardless of conflicting interpretations of JCPOA articles and proceedings within the Joint Commission, one might ask whether the DRM is appropriate for addressing Iranian grievances in the first place. The logic of dispute resolution is difficult to apply in a context where the participant whom the complaint concerns has left the Joint Commission. While it would have made more sense to focus the process on disputes among remaining parties—in this case Iranian complaints about the effect of US sanctions on European performance—this might have undermined the simultaneous EU and E3 efforts to counter those sanctions.
Moreover, the DRM—particularly the last-resort measure of referral of disputes to the UN Security Council—was specifically created with the prospect of Iranian violations in mind. In such a case, the UN Security Council would have voted on whether to continue to lift sanctions. As a permanent member of the Security Council, the US could block such a decision with its veto right, leading to the snap-back of all previous international sanctions on Iran. Iran thus has little to gain and much to lose from the DRM process.
If the E3-initiated DRM process leads to the re-imposition of previous UN Security Council sanctions, Iran is likely to leave the JCPOA for good. The resulting collapse of the agreement would lead to a situation even worse than in the pre-2013 period, as the trust deficit created by previous broken promises would leave little room for diplomatic ways out of the crisis. In addition to contributing to regional instability, this would be a major blow to the global non-proliferation regime—particularly if Iran left the NPT, which it threatened to do if the case is referred to the UN Security Council.
The good news is that worst-case scenarios are still avoidable. Instead of making things worse by blaming each other, Europe and Iran should salvage what is left of the JCPOA, and seek to resolve the compliance dispute to the best of their ability at the Joint Commission. Any definitive solution is bound to remain elusive under the current US sanctions, which are preventing all parties from living up to previous expectations regarding their commitments. While little more than its outer shell might seem to remain at the moment, the JCPOA and its verification regime is still worth holding in place. In addition to preventing further escalation, maintaining the agreement would leave the door open for the US to seek to undo the damage created by its recent policies, if it decides to change course.