Over the past year, Iran has retaliated against tougher-than-ever U.S. sanctions by continuing to escalate its nuclear development activities. This approach helps Tehran build leverage for future talks, while also helping drum up Iran's domestic image as a sovereign nation that doesn't bow to pressure from the West.
An Anticipated Announcement
Iran is moving forward, as promised, with its third phase of pulling back from commitments made under the 2015 nuclear deal, known as Joint Comprehensive Plan of Action (JCPOA), to limit the development of its nuclear energy program. Iranian President Hassan Rouhani announced that starting Sept. 6, the Atomic Energy Organization of Iran would suspend all the JCPOA limits related to research and development and the testing of centrifuges, including:
- Conducting R&D in a way that does not accumulate enriched uranium.
- Limiting R&D for uranium to only the IR-4, IR-5, IR-6 and IR-8 centrifuges.
- Limiting mechanical testing of these centrifuges to two single centrifuges of each type.
- Halting research for other isotope separation technologies.
The first phase of Iran's gradual JCPOA suspension was announced in May, which saw Tehran increasing its stockpiles of low enriched uranium shortly thereafter. The second phase was then announced in July, with Iran saying it would increase its uranium enrichment beyond JCPOA limits. Tehran has warned that if Europe fails again to deliver financial relief to Iran as promised in the deal, it would take a fourth step to further reduce its nuclear commitments in another 60 days (or Nov. 5, 2019).
Why It Matters
This latest reduction of Iran's JCPOA commitments is intended to show resolve against the escalating U.S. sanctions campaign and to build up leverage for future negotiations to remove such sanctions. Upping R&D research into advanced centrifuges and other areas is a relatively mild move compared to installing and using more advanced centrifuges and boosting enrichment levels to 20 percent.
The JCPOA commitments Iran has suspended are all still reversible. But each round accelerates the country's timeline to develop a nuclear weapon.
It's also key to note that the JCPOA rollbacks Iran has so far announced this year, including this latest move, are all reversible. And indeed, Iran announced that any actions regarding centrifuges would still be monitored by the U.N.'s nuclear watchdog — signaling that Tehran still plans to remain in the deal (for now). However, any reductions to Iran's JCPOA commitments are nonetheless significant, as each one accelerates the country's timeline to develop a nuclear weapon.
Iran has continued to pressure Europe to back financing mechanisms that create some financial relief for Iran. Thus, all eyes will be on EU efforts to find a way to appease Tehran without prompting additional U.S. sanctions. It's a tall order, but there is a small window for negotiation as Washington has indicated that it still wants to avoid pushing Iran toward nuclear proliferation and more aggressive retaliation. The longer Iran goes without sanctions relief, however, the more likely Iran will be pushed toward taking such extreme measures. And should Iran continue to escalate its threats to further pull back from the JCPOA, the more it risks ultimately crossing the line with Europe and drawing even more sanctions.
France recently proposed offering Iran a $15 billion credit line in exchange for JCPOA compliance, which the United States has notably remained neutral on. But at the same time, Washington has shown no sign that it plans to let up on its maximum pressure policy against Iran and allow the establishment of such financing mechanisms.
In January, the European Union approved a payment mechanism, called the Instrument in Support of Trade Exchanges (INSTEX), to facilitate trade with Iran despite U.S. sanctions. But according to a Sept. 4 Reuters report, France has reportedly warned that INSTEX will not be set up until Iran's mirror payment instrument was deemed operational, and until its actions against terrorism financing and money laundering were deemed compliant with international standards. This French demand puts pressure on Iran to move forward with the legislative reforms on reducing terrorism financing and money laundering, which have stagnated in 2019. The Financial Action Task Force has also threatened to reimpose costly countermeasures on Iran if it does not make enough progress on such reforms.
The United States, meanwhile, has invited Rouhani to sit down with U.S. President Donald Trump at the end of September. But it's highly unlikely Iran would accept such an offer without the prospect of possible sanctions relief. This combination of being open to talks with Tehran while continuing to pile on sanctions was recently reiterated by the U.S. State Department's Special Representative for Iran Brian Hook. On Sept. 4, Hook said the United States was not considering waivers for currently sanctioned financial transactions with Iran at this time, but added he had no comment on France's credit line proposal. The probability of the United States signing off on the French-led plan, however, remains low.