The United States is withdrawing from the Iran nuclear deal.
In a speech delivered in the Diplomatic Room of the White House, President Donald Trump harkened back to his 2016 campaign rhetoric, describing the 2015 “plan of action” between Iran, the U.S., the European Union, and the United Nations aimed at hindering and monitoring Iran’s nuclear ambitions as “horrible,” “one-sided,” and “disastrous.”
Under the terms of that deal, the U.S. is permitted to reinstate sanctions if it alleges that there has been significant non-performance of the obligations of another participant to the deal. In that case, the old sanctions can “snap back” into place. And this is what Trump announced Tuesday will now happen.
In order to understand what this will mean, it helps to know a bit about how the history of Iranian sanctions, how the nuclear deal agreement worked, and what has happened since Trump took office.
- What are the origins of the Iranian sanctions? President Jimmy Carter first imposed U.S. sanctions against the Iranian government during the hostage crisis that began in 1979 and stretched into 1981, issuing executive orders to freeze Iranian assets in the U.S. Later, new U.S. sanctions aimed to curb Iranian support of terrorism and limit its strategic reach in the Middle East. The Bush administration focused its sanctions on Iran at ensuring that Tehran’s nuclear program would be solely for civilian uses. Under Obama, the international community and the United Nations was enlisted to further the goal of preventing Iranians from developing nuclear weapons.
- How did the sanctions work? The U.S., U.N., and EU sanctions were all different in scope and implementation, but we’ll focus on the U.S. rules here. The U.S. deployed two types of sanctions, known as “primary sanctions” and “secondary sanctions.”
The primary sanctions generally prohibited U.S. companies and individuals from doing almost any kind of business with Iranian people or organizations. U.S. banks were barred from clearing any dollar transactions on behalf of Iranians or that involved Iran. The secondary sanctions reached further, threatening to punish foreign citizens and businesses if they did certain types of business with Iran or with particular Iranian individuals and entities — even when the transactions had nothing to do with the U.S. This basically forced foreign companies to choose between being able to operate in U.S. markets or in Iran — an easy choice for most since the U.S. is the world’s largest economy.
- What did the nuclear deal do? The 2015 deal removed most the EU sanctions and lifted the U.S. secondary sanctions, which meant that foreign individuals and companies could now do business with Iran without fear of U.S. penalties. Most of the primary sanctions, which block U.S. people and entities, still applied. Exceptions were made, however, allowing for non-U.S. subsidiaries of U.S. global businesses to do certain types of business with Iranians, for Persian rugs and certain foods to be imported from Iran, and for other activities approved on a case-by-case basis. In exchange, the Iranian government promised to limit its civilian nuclear power program, allow in international inspectors, and to cease development of nuclear weapons.
- What went wrong? Critics of the deal said that it did not do enough to limit Iran’s ability to develop nuclear weapons, allowed the country to continue to work on missile technology that could easily be converted to nuclear weaponry, and that the inspections were too limited to assure that Iran was not covertly working on weapons. The new business the deal permitted Europeans and other to do with the country enriched the Iranian regime, allowing it to expand its military spending even while its economy suffered. Iran’s support for terrorism grew while the sanctions were lifted, according to U.S. officials.
- What did Trump promise in 2016? Throughout the 2016 presidential campaign, candidate Donald Trump insisted that the Iran nuclear deal would have to be canceled if it could not be renegotiated to make it an effective block to Iran’s nuclear ambitions.
- What happened last year? While some had thought Trump’s harsh criticism of the Iran nuke deal would mellow after he assumed office, Trump kept up his sharp criticism in his first year in office. During this time, the administration met with allies to explore strengthening the deal. Iran, however, made it very clear that it would not accept any proposal to renegotiate the deal, and allies were not supportive of attempting to force Iran’s hand. During this period, Trump reluctantly certified that Iran was in compliance with the deal’s terms — something an Obama-era law compelled the president to do periodically. When Trump declined to certify Iran’s compliance in October 2017, the law gave Congress a 60-day period during which it would be able to impose new sanctions against Iran. Not surprisingly, Congress did not act.
- What happened this year? On January 12, 2018, Trump announced that he would issue final waiver sanctions against Iran. This meant that after May 12, 2018, the pre-nuclear deal sanctions would return. The “snap back” would kick in. The recent visits by the heads of state of France and Germany were last-chance opportunities to discuss the possibility of a new deal, but it quickly became clear that neither President Macron nor Chancellor Merkel was willing to push Iran hard enough to force a new, tougher deal, although Macron signaled a willingness to attempt to negotiate further deals with Iran to deal with concerns about the original deal.
- The deal is over. On Tuesday, Trump said the U.S. was exiting the nuclear deal. “In a few moments, I will sign a presidential memorandum to begin reinstating U.S. nuclear sanctions on the Iranian regime. We will be instituting the highest level of economic sanction,” Trump said.
- Sort of. Iranian President Hassan Rouhani said Tuesday that his country’s diplomats would meet with Europe, Russia, and China in an effort to keep the nuclear deal alive. America’s European allies have been critical of Trump’s decision to abandon the deal, saying they would not immediately do so.
- So what happens now? The exit will mean that the U.S. will revive the pre-nuclear deal sanction regime, eliminating the exemptions to the primary sanctions and restoring the secondary exemptions. This will mean that, after a period to give companies and individuals time to unwind their dealings with Iran, the U.S. will once again threaten to punish foreign individuals and companies that do business with Iran in ways the U.S. deems aids its nuclear development. Most likely, this will involve restricting foreign purchases of Iranian oil and restricting exports of some goods into Iran. This will make it challenging for European countries, for example, to keep the nuclear deal in place since U.S. sanctions threaten their businesses with various punishments if they keep doing business in Iran.
- What will this do to Iran? The reimposition of U.S. secondary sanctions could do serious damage to Iran’s economy. During the harsh sanction regime that applied from 2012 to 2015, Iran’s economy shrank by nine percent per year, crude oil exports were cut in half, and more than $120 billion in Iranian reserves held in banks abroad were frozen, according to a Congressional Research Service report.
Trump administration officials hope that the strain on the Iranian economy will be enough to force Iran to negotiate a new deal that would effectively and broadly contain Iran’s ambitions for regional influence and nuclear weapons. Alternatively, it could cripple the regime so badly that it would collapse altogether, permitting the U.S. to negotiate a deal with a new ruling body in Iran. Critics of the Trump administration’s Iran policy say it risks Iran restarting its nuclear weapons program and lashing out militarily or through terrorism against its rivals. No one knows for certain what will happen.
Trump’s promise to cancel the Iran nuke deal was similar to promises he has made about NAFTA and trade with China, two other deals he has described in harsh language and promised to renegotiate or cancel. Each time, Trump — and by extension, the millions of Americans who voted for him — was saying that the costs of the current deal were too great and the potential rewards of gambling for a better deal were worth the risks that would have to be borne.