100 days of the JCPOA or Iran Deal; What have proven to be the obstacles?
It is now 100 days since the Iran nuclear deal or the Joint Comprehensive Plan of Action to lift sanctions against Iran went into effect. During this time, however, obstacles facing the successful implementation have come to light.
A more restraining issue that will jeopardize the successful implementation of JCPOA over the next 10 years is limitations imposed by the US that prevent Iran’s economic partners from undertaking US dollar transactions.
In other words, due to the risk of sanctions, major European banks have refused to exchange previous Iranian frozen assets abroad from Indian, Japanese, Chinese, Omani and South Korean currencies to the US dollar or even euro. This exchange needs to have access to the US financial system, but Americans refuse this due to primary sanctions.
What Are Primary Sanctions?
Iran Sanctions Act, which is now proving to be a major obstacle to the full implementation of the JCPOA, dates back to 1995 when the Clinton administration introduced a round of sanctions against Iran.
The Clinton administration banned Iran from any U-Turn transactions and later in 1996 the US Congress passed a bill named after Republican senator D’Amato, which banned any investment of over $40 billion in Iran and eventually in 1997 “Prohibiting Certain Transactions with Respect to Iran” added new limitations to bank transactions.
However, under pressure from Iran’s European partners, the US had to issue so many “waivers” that made those sanctions ineffective outside the US. Iranian banks as a result could get involved in US dollar transactions and U-Turns only until 2008.
In April 2006, the US Congress passed a stricter version of the D’Amato bill and shortly afterwards the US Treasury Department imposed sanctions on Bank Saderat of Iran under terrorism support allegations that prohibited access to the US banking system and U-Turn transactions.
Other Iranian banks, however, had access to those services for two years following those sanctions. In November 2008, the Treasury Department extended those sanctions to all Iranian banks and financial institutions.
Following the United Nations Security Council Resolution 1929 (June 2010) which is one of the harshest resolutions of the last 70 years in the UN, the United States imposed the unprecedented sanctions regime (July 2010) known as the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA).
The sanctions were mainly connected to Iran’s nuclear program but also covered other conflicts with Iran and targeted all financial transactions related to activities the US categorized as sponsoring terrorism.
Possible Legal Solutions
Using the conflict resolution system within the JCPOA and increasing collaboration between Iran and European partners can add pressure on the US to issue new waivers to help resolve the problems in the short term but there are other long-term solutions as well:
As the first potential solution, the matter can be referred to the Iran-United States Claims Tribunal. Financial sanctions imposed by the US as of 1995 are based on the 1979 trade embargo that was introduced over the 1979 takeover of the US Embassy in Tehran by students and the following hostage-taking, and was lifted after the hostages were released.
Iran can possibly request these sanctions be lifted based on the Algiers Accords, claiming that imposing new rounds of those sanctions is against the US commitments under the agreement.
Besides, parties to the JCPOA (the US, Britain, France, Russia, China and Germany) are World Trade Organization members and can use the lever of the right to free trade and the fact that restricting Iran from access to U-Turn transactions can interfere with their rights to negotiate with the US side to lift the financial sanctions.
EU foreign policy chief Federica Mogherini supported the idea of giving Iran access to the US financial systems in her most recent visit to Tehran.
Even though Iran’s access to the US financial system is not a clause of JCPOA, unnecessary restrictions limiting the financial benefits of JCPOA for Iran not only could undermine Tehran’s compliance in future, but could also negatively affect Iranians’ view on negotiation with western countries, particularly the US.
Banks and financial institutions, penalized by the US under the CISADA for involvement in transactions allegedly related to terrorist activities, agreed to pay fines outside courts of law to avoid lengthy processes and prosecutions.
Those financial institutions and companies [as what US plane-maker Boeing did) can simply request licenses to collaborate with Iran through the US Treasury and avoid overcompliance with unnecessary restrictions.
US sanctions against Iran after 2010 gained legitimacy from the UN Security Council resolutions against Iran, but after the nuclear agreement and the adoption of Resolution 2231 by the Security Council to endorse the deal, all previous resolutions against Iran are annulled and a new round of collaboration with Iran has commenced. In other words, those sanctions have lost their legitimacy now.
All these obstacles have come to light over the first 100 days since the enforcement of JCPOA, which is supposed to have a lifespan of 10 years. The first anniversary of the agreement (January 16, 2017) will fall during tenure of the next US president.
The current situation shows the importance of Iran joining WTO and getting access to its conflict resolution system as a result, which has been a major demand by Iran in negotiations with the three EU powers, namely Britain, France and Germany, since 2005.