July 14, 2016 | Monograph

The Iran Deal’s Fatal Flaws After One Year: Emboldened Iran and Diminished American Deterrence

FDD Press

Executive Summary

Executive Summary

As we mark the one-year anniversary of the announcement of the Joint Comprehensive Plan of Action (JCPOA), it is worth recalling why this deal is fatally flawed. The JCPOA provides Iran with a patient pathway to nuclear weapons capability by placing limited, temporary, and reversible constraints on Iran’s nuclear activities. These nuclear “sunset provisions,” which begin to expire in eight years and mostly disappear over a period of ten to fifteen years, leave Iran as a threshold nuclear power with an industrial-size, uranium enrichment and plutonium program; near-zero nuclear breakout capacity; an advanced centrifuge-powered clandestine sneakout capability; advanced ballistic missile and ICBM programs; access to advanced heavy weaponry; greater regional hegemony; and a more powerful economy that could be immune to Western sanctions. Even as Iran temporarily scaled back some of its nuclear activities under the JCPOA, the regime’s illicit effort to obtain proliferation-related technology continues while its other non-nuclear malign activities are expanding.

The deal (as well as the interim agreement in place during the negotiations) provided Iran with substantial economic relief that helped the regime avoid a severe economic crisis and return to a modest recovery path. The lifting of restrictions on Iran’s use of frozen overseas assets of about $100 billion gave Tehran badly needed hard currency to settle its outstanding debts, begin to repair its economy, build up its diminished foreign exchange reserves, and ease a budgetary crisis, which in turn freed up funds for the financing of terrorism.

The nuclear deal also did nothing to address the full range of Iran’s illicit activities, including ballistic missile development, support for terrorism, regional destabilization, and human rights abuses. Indeed, the weakening of missile language in the key UN Security Council Resolution and the lifting of a conventional arms embargo after five years, and the missile embargo after eight years, undermine international efforts to combat Iran’s illicit activities.

During last summer’s congressional review period, Obama administration officials pledged that the United States would continue to enforce non-nuclear sanctions and oppose all of Iran’s dangerous activities. However, many of us raised concerns that Iran would view any imposition of sanctions as a violation of the deal and grounds to “snap back” its nuclear program,  and that those threats would in effect prevent Washington from imposing new non-nuclear sanctions. This is what we called Iran’s “nuclear snapback.”

In fear of the nuclear snapback, the Obama administration has missed numerous opportunities since the conclusion of the JPCOA to push back against Iran’s malign activities, including support for terrorism, human rights abuses, and other destabilizing activities in Syria, Iraq, Yemen, Lebanon, and other countries across the Middle East. Iran also has tested nuclear-capable ballistic missiles seven times since July 2015 in violation of UN Security Council resolutions.  Yet, the administration has only issued a handful of new designations,  including an ineffectual targeting of Iran’s missile procurement networks. Tehran can easily reconstitute these networks, and the designations do not impose the kind of economic costs needed to change Tehran’s strategic calculus.

In the past weeks, reports revealed Iran’s ongoing attempts to illegally procure nuclear and ballistic missile technology and raw materials.  This activity violated UN Security Council Resolution 1929 (in place prior to January 2016), it violates UN Security Council Resolution 2231, and it violates the spirit, if not the letter, of the JCPOA. In its annual report released at the end of June, Germany’s domestic intelligence agency found that Iran engaged in a “quantitatively high level” of attempts to acquire nuclear and missile technology and equipment.  German states also released their own intelligence reports, and multiple reports noted that Iran attempted to procure goods and technology relevant to “atomic, biological, and chemical weapons” and “nuclear and missile delivery programs.”  In its coverage of these reports, The Wall Street Journal spoke with two German intelligence officers who stated that Iran’s illegal procurement efforts continued in 2016 – well after Implementation Day (January 16, 2016).  If these 2016 activities included nuclear goods and technologies, Iran would be in violation of its JCPOA obligations; for missile-related technologies, Tehran would be in violation of UNSCR 2231.

The Obama administration and its European allies have not imposed meaningful sanctions or punished Iran for its illicit activities. In fact, nuclear experts at the Institute for Science and International Security found that over the past two years, “The Obama administration has inhibited federal investigations and prosecutions of alleged Iranian illegal procurement efforts.”

The Obama administration also has failed to enforce human rights sanctions against Iran. Since the JCPOA was concluded last summer, the administration has designated no individuals or entities for human rights abuses, and has issued only three designations since Hassan Rouhani took power in the summer of 2013.  Meanwhile, Iran continues to hold hostage U.S., Canadian, and British dual nationals Bagher and Siamak Namazi, Homa Hoodfar, and Nazanin Ratcliffe as well as Nizar Zakka, a Lebanese citizen and U.S. permanent resident as well as many other individuals. This is unacceptable and inexcusable. They must be released unconditionally and immediately.

As international businesses re-enter the Iranian market, the regime continues to oppress its citizens and deny their basic human rights. The regime seems to hope that the promise of profits will blind the international community to Iran’s vast system of domestic repression.

Those of us who were critical of the deal also raised concerns that Iran would view the JCPOA not as the end of the negotiations, but as the beginning, and demand ever-greater sanctions relief, as we have indeed seen.  We have witnessed the Iranian government’s full-court press to persuade the United States to green-light Iran’s access to U.S. dollar transactions.  This significant and unilateral concession to Iran would go beyond the sanctions relief promised by the nuclear agreement,  and seemed to be under active consideration by the State Department before congressional pressure stopped it (for now).  Iran has pressured the Financial Action Task Force (FATF) to remove it from its financial “blacklist.” While FATF recently refused to do so, it did suspend mandatory counter-measures against Iran for one year and opened up the possibility for future changes in the not-too-distant future.  Iran is also seeking membership in the World Trade Organization (WTO), and enjoys the backing of some European countries. WTO membership for Iran could severely curtail Washington’s future ability to use financial and economic sanctions.

Statements by administration officials such as Secretary of State John Kerry that it is America’s responsibility to ensure that Iran “get[s] the benefits that they are supposed to get”  are very problematic. The administration is allowing Iran to hold the U.S. responsible for delivering financial and economic outcomes, and for providing ever-greater sanctions relief in order to persuade Iran to keep to the JCPOA. This is not good policy. Instead, Congress should ensure that the onus is placed on Iran. If Tehran wants more sanctions relief and wants to encourage multinational companies to enter the Iranian market, it must change its dangerous behavior.

The JCPOA lifts sanctions on Iran’s nuclear activities, but it does not preclude the United States from using non-nuclear sanctions – despite statements from Iran that it will view any imposition of sanctions as a violation of the deal and grounds to “snapback” its nuclear program.  Congress should reject that Iranian position – which amounts to a form of nuclear blackmail – and hold the administration accountable for its commitments to “oppose Iran’s destabilizing policies with every national security tool available.”  Sanctions need to be imposed to target Iran’s support for terrorism, ballistic missile program, support for the Bashar al-Assad regime in Syria and designated Shiite militias in Iraq, and human rights abuses. These steps are not a violation of the JCPOA, but rather an affirmation of the stated U.S. policy. Specifically, we recommend that Congress consider taking the following steps:

1. Protect the integrity of the U.S. dollar from Iranian illicit finance.

2. Reauthorize the Iran Sanctions Act, an important foundation of the sanctions architecture.

3. Counter the narrative that Iran is a responsible financial actor.

4. Strengthen sanctions against the Islamic Revolutionary Guard Corps (IRGC) by designating it for terrorism and expanding non-proliferation sanctions and designations.

5. Require updated reporting on IRGC penetration in sectors of the Iranian economy, along with reporting and sanctions on the sectors involved in Iran’s ballistic missile development.

6. Require the U.S. Treasury to designate companies with IRGC or Ministry of Defense beneficial ownership.

7. Require the U.S. Treasury to create an IRGC Watch List.

8. Require reporting to the Securities and Exchange Commission regarding any transactions with IRGC Watch List companies or in sectors connected to Iran’s ballistic missile program.

9. Insist on robust investigation into illicit procurement and outstanding concerns about the possible military dimensions of Iran’s nuclear program.

10. Expand human rights sanctions by imposing sanctions on Iranian state organs responsible for institutionalized human rights abuses and by linking sanctions concessions to improvements in human rights conditions.

11. Target corruption and kleptocracy for reasons related to terrorism and human rights issues.

12. Require reporting on U.S. citizens and other dual-nationals held hostage in Iran.

13. Require reporting on and expand sanctions against Iran’s support for the Assad regime and IRGC activities in Syria.

14. Require presidential certification that commercial planes are only being used for civil aviation end-use before authorizing the sale of any aircraft to Iran.

15. Prohibit any U.S. financial institution, including the Export-Import Bank, from financing any trade with Tehran while Iran remains a state sponsor of terrorism.

16. Require reporting on the use of foreign airports and seaports by sanctioned Iranian entities.

America needs a comprehensive strategy deploying all of the coercive tools of statecraft to push back against the full range of Iran’s malign activities. If Washington does not confront these activities now and at every turn, in ten to fifteen years, we may face a situation in which the president has insufficient leverage to respond to an expanding Iranian military-nuclear program, regional aggression, and global terrorism. The U.S. may have only military force left to respond to Iran’s nuclear and other dangerous activities – at which time, the Iranian regime will be stronger, and the consequences of such military action likely will be severe.


The Iran Deal’s Fatal Flaws After One Year


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