Reports Highlight Possible U.S. Options for Iran Sanctions Relief Under Nuclear Agreement

July 17, 2014, Washington, D.C. – The November 24, 2013 Joint Plan of Action (JPA) between Iran and the P5+1 countries— the United States, Britain, France, Germany, Russia, and China— promises Iran comprehensive international sanctions relief if a final agreement is reached over its nuclear program. With nuclear negotiations likely to continue beyond the initial deadline for a final agreement, questions persist on what sanctions relief may entail in final accord between Iran and the United States. Two recent reports, by the Atlantic Council’s Iran Task Force and the Center for a New American Security (CNAS), help elaborate on the particulars.

In the Atlantic Council’s “Easing US Sanctions on Iran,” Kenneth Katzman, a senior Iran analyst at the Congressional Research Service, notes some significant ambiguities in the JPA between Iran and the P5+1. Firstly, the JPA states that a final deal would be implemented in reciprocal steps, meaning that promised sanctions relief would not be provided immediately. In addition, the JPA promises only the lifting of “sanctions related to Iran’s nuclear program”—leaving it to the negotiations to decide which sanctions are nuclear-related and which are related solely to Iran’s support for terrorism, its poor human rights, or other issues.

Finally, Katzman notes that the language used in the JPA leaves open the possibility that the administration, as part of a final deal, might commit only to suspend sanctions rather than a complete lifting or termination. Because of this language, Katzman concludes that the easiest way for the Obama administration to implement sanctions relief negotiated in a final nuclear deal is to exercise its waiver authority, which is available for those sanctions Iran is demanding be eased as part of the final deal.

“Iran’s main demand is that sanctions no longer apply after a nuclear deal is reached—it is less concerned with the process by which the sanctions are no longer applied,” writes Katzman. “Waiver authority is available for those sanctions that Iran is demanding be eased as part of a nuclear deal, particularly those that have restricted its ability to export oil, to repatriate hard currency held abroad, and to rejoin the international banking system.” He also notes that the expiration of the Iran Sanctions Act at the end of 2016 would satisfy many of Iran’s demands for sanctions relief.

In “Removing the Barriers: Prospects for Sanctions Relief Under a Final Nuclear Deal with Iran,” Elizabeth Rosenberg, Senior Fellow and Director of the Energy, Environment and Security Program at CNAS, points out that the biggest difficulty in delivering the promised sanctions relief is not the legal or technical work of removing sanctions, which Katzman clarifies, but the private sector’s uncertainty of whether a deal will last.

“Even in a scenario where there is a final deal reached between Iran and the P5+1, businesses and banks are likely to remain nervous about violating the sanctions that remain in place and navigating Iran’s challenging business environment,” writes Rosenberg. “Though the P5+1 may create avenues for sanctions relief as part of a nuclear deal with Iran, the P5+1 cannot direct the manner in which the private sector deals with Iran or the speed at which that will occur.”

Rosenberg notes that regardless of what sanctions relief is offered to Iran, sanctions targeting terrorism, human rights, regional destabilization, or other illicit activities will remain in place. In particular, U.S. companies and banks are not likely to see significant sanctions relief under a potential final agreement with Iran. “The U.S. trade ban will remain in place even if the P5+1 and Iran reach a nuclear deal, as the concerns that underpin this are unrelated to Iran’s nuclear activity and beyond the scope of nuclear negotiations.”

In order to ensure that the promised sanctions relief occurs, Rosenberg recommends that the P5+1 issue clear regulatory guidance about which multilateral sanctions are lifted and clarify the new trade and investment opportunities. In addition, she writes that the administration will need to conduct outreach to explain what the sanctions relief means for U.S. and non-U.S. banks and companies.

While Congress can help shape the architecture of Iran sanctions under a deal and take an active oversight role in its implementation, Rosenberg recommends that it not play a spoiler role by passing sanctions if a nuclear deal appears possible. Rather, Congress should prepare to do so in the event that talks collapse or if Iran violates the terms of a deal.

Click here to read the Atlantic Council’s “Easing US Sanctions on Iran” by Kenneth Katzman.

Click here to read the Center for a New American Security’s “Removing the Barriers: Prospects for Sanctions Relief Under a Final Nuclear Deal with Iran” by Elizabeth Rosenberg.