TEHRAN, IRAN: Before Donald Trump has even arrived in the White House, Iran says the United States has already violated the nuclear deal and threatened to build atomic-powered ships in retaliation. Is the historic accord at risk?
Earlier this month, US lawmakers renewed a law called the Iran Sanctions Act (ISA), extending its provisions for another decade.
ISA, first introduced in 1996, aimed to cut off foreign investment in Iran’s oil and gas sector to starve it of funds that might be used for its nuclear programme or to fund “terrorist” groups.
Key provisions of ISA were suspended in January when the nuclear deal between Iran and world powers came into force, although Washington has kept others linked to human rights and terrorism in place.
The White House said renewing ISA was pointless since it remains suspended so long as Tehran sticks to its promises to curb its nuclear programme.
Knowing it would pass anyway, President Barack Obama let the law through, but refused to sign it.
The president symbolically let a deadline slide to ink his name on the legislation – which he has called unnecessary – meaning the 10-year sanctions renewal will automatically become law.
Even if it were pointless, however, Tehran was up in arms, with both the supreme leader Ayatollah Ali Khamenei and President Hassan Rouhani calling the renewal a “clear violation” of the accord and lodging a formal complaint with the United Nations.
So is Iran right about a violation?
Iran points to Article 26 of the deal, which says the US “will refrain from re-introducing or re-imposing the sanctions specified in Annex II”, which includes ISA.
It argues that even if the sanctions remain suspended, the law has still been “re-introduced”.
“The US Congress never liked the deal and now that Obama is leaving office, they’re trying to find ways of violating the deal without being too obvious about it,” said Foad Izadi, a world politics professor at the University of Tehran.
Western analysts disagree, saying Iran is just trying to score political points.
“If it doesn’t have any practical impact, who cares about the legislation? I think the Iranians are just posturing,” said Dan Newcomb, a sanctions lawyer with Shearman and Sterling in New York.
Moreover, sanctions expert Sam Cutler, of consultancy Horizon Client Access, said there was “a zero percent chance” that Iran was not briefed during the nuclear talks that the Congress would re-introduce ISA.
“The Iranians knew this was going to happen and for them to claim this is a violation now beggars belief,” he said.
Cutler says a specific phrase was included in the deal – referring to “the respective roles of the President and the Congress” – to draw a dividing line between the actions of the White House and sabotage attempts by hawkish lawmakers.
So if ISA is suspended and the renewal makes no difference, why is Tehran making such a fuss?
The answer lies with Iran’s wider frustration that the nuclear deal has not produced many of the expected benefits, said Izadi.
“Iran is not getting what it thought it would get. The reason Iran is going to the complaints process is not just the Iran Sanctions Act, it is also other areas where the other side has not played its part,” he said.
Top of the list are Iran’s continued banking problems. Although hundreds of European companies are desperate to resume trading with Iran, major banks are still refusing to facilitate big transactions.
This is because Washington still has a number of non-nuclear sanctions in place that prevent anyone doing business with a long list of Iranians it says are linked to terrorism, human rights abuses and its ballistic missile programme.
The banks would have to sift through each transaction to make sure none of the money ended up with someone on this list – a costly and time – consuming affair when dealing with a country as opaque as Iran.
A wrong move could result in gigantic penalties like the $9 billion fine slapped on French bank BNP Paribas in 2014.
When the banks ask the US Treasury for guidance, the answers are slow and ambiguous, said Izadi.
“They ask for a green light, and they are given a yellow light, which is not enough.”
The problem was banks were excluded from the nuclear talks, said Newcomb. “I don’t think either side understood that the financial community would not simply turn 180 degrees on Iran transactions because of this deal,” he added.
He says he tried to explain the problem to both US State Department officials and Iranian delegations, but no one listened. “I think (the Iranians) thought… if the president announces sanctions are removed, then everything will fall into place. They come from a different political climate.”
None of this amounts to a clear breach of the nuclear deal by the US, but the Iranians see it as another attempt to quietly undermine the accord.
As for Iran’s plans to produce nuclear-powered ships, experts say this is not a violation either, or at least not yet.
It was a carefully chosen response by Rouhani because nuclear engines could use highly-enriched uranium – also used for nuclear weapons – but not necessarily.
Both France and China use only low-enriched uranium in their nuclear-powered ships, said Shashank Joshi, from the RUSI think tank in London.
“Iran is showing they’re looking into doing something tough, without actually doing it… that they’re willing to tear up the deal if pushed too far.”