The P5+1 (China, France, Russia, the United Kingdom, and the United States, plus Germany) and Iran agreed on a framework for a final deal on 2 April, promising full nuclear-related sanctions relief in return for Iran's compliance to its nuclear-related commitments.
IHS perspective | |
Significance | The Iran-P5+1 framework agreement lacks clarity on the timeline for sanctions relief, which will probably be the key remaining issue ahead of the 30 June deadline for a comprehensive agreement. |
Implications | This ambiguity strengthens the position of opponents to a deal in Iran, which in turn pressures President Hassan Rowhani's negotiating team to secure some immediate sanctions relief upon signing a final agreement. |
Outlook | US congressional opposition to an agreement, along with uncertainties over the next US president, increases the risk of the fragmentation of the P5+1 coalition, resulting in uncoordinated sanctions relief. |
Under the Iran-P5+1 framework agreement, Iran will significantly scale back its nuclear programme in exchange for nuclear-related sanctions relief (see Iran: 3 April 2015: Permanent P5+1 agreement likely, increasing the risk of Saudi Arabia and Israel more aggressively confronting Iran's influence). Although there is general consensus over core issues, disagreements on the timeline of sanctions relief are a potential stumbling block.
Sanctions relief ambiguity
Under the details of the framework agreement as detailed by the US Department of State – although Iran disputes their accuracy – Iran will receive sanctions relief upon compliance with its commitments under the final agreement. Specifically, all nuclear-related sanctions under UN Security Council (UNSC) resolutions will be lifted with the completion of Iran's key commitments; namely on enrichment, Fordow, Arak, potential military dimension (PMD), and transparency.
There remains the potential for disagreement on the PMD and transparency issues, not least because the framework delegates the International Atomic Energy Agency (IAEA) – which was not party to the negotiations – to verify them.
The framework also states that all nuclear-related US and EU sanctions will be suspended following the IAEA's verification of Iran's compliance. Suspension will probably be phased, with Iran securing sanctions relief upon completing each stage of the agreement. The UNSC-mandated sanctions will probably be the first lifted, providing international legitimacy for the gradual suspension of US and EU sanctions. However, members of the US Congress are concerned that China and Russia would veto any efforts to impose renewed sanctions should Iran breach its commitments.
Meanwhile, Iran's completion of its commitments could take many months. Commitments include mothballing excess centrifuges, conversion of the Fordow and Arak facilities, eliminating the excess fissile material, and satisfying the IAEA's monitoring and verification requirements.
Can the US deliver?
A major point of concern for all parties is US president Barack Obama's ability to deliver sanctions relief, which comprises presidential Executive Orders and congressional legislation. However, although the US congress can refuse to lift congressional sanctions on Iran, most US sanction laws provide the executive branch the authority to waive or suspend them.
This authority is reflected in the framework agreement, which specifies the "suspension" of sanctions rather than their removal. In fact, Obama previously waived some congressional sanctions in the November 2013 P5+1 interim agreement with Iran. The framework also allows the US to maintain its sanctions "architecture" to ensure their "snap-back" in the event of Iran's non-performance. The inherent uncertainty of the suspension rather than removal of sanctions will probably add further concerns for businesses considering entering Iran.
Longer-term sanctions relief and permanent lifting of some sanctions would require congressional action. Congressionally mandated sanctions include restrictions on Iran's central bank, and access to international financing, shipping, underwriting, the energy sector, and trade. The US Treasury Secretary has the authority to waive a provision that restricts foreign financial institutions from engaging with Iranian banks and government. However, a confounding factor is that some provisions are jointly related to Iran's sponsorship of terrorism and nuclear programme.
Separately, the US Congress is expected to vote on a bill that would give it the power to review a final agreement with Iran and insist that congressional sanctions not be waived within 60 days of an agreement being signed. Although the administration has sought to block the bill, the Republicans will probably be able to secure sufficient bipartisan support to override a presidential veto. However, to secure Democratic support, the bill's overall language would probably be sufficiently toned down that it wouldn't endanger the deal.
Nevertheless, a perception by US partners and Iran of US inability to deliver on its sanctions-relief promises will empower the hardliners in Iran opposed to a deal. It would also raise the risks of P5+1 fragmentation, especially if the US were perceived to be prioritising domestic political concerns over the nuclear issue. This could weaken the multilateral sanctions regime and potentially prompt an uncoordinated implementation or suspension of sanctions. (see Iran: 14 March 2014: Split between US and EU likely if Congress is seen to play spoiler role in negotiations with Iran).
Khamenei's balancing act
Supreme Leader Ali Khamenei will have been kept appraised throughout the negotiations, and this tacit approval increases the prospects for his approval of a final deal (see Iran: 1 April 2015: Iranian Supreme Leader likely to agree to a nuclear deal that allows Iran to consolidate regional gains). Although direct negotiations with the US and scaling back the nuclear programme pose significant political risks for Khamenei, he has probably calculated that this is outweighed by the benefits of securing sanctions relief. Specifically, this would bolster his legitimacy among economically affected Iranians (see Iran: 19 February 2015: Khamenei's demand for "one-step deal" reflects Iran's need for early sanctions relief to secure domestic support and Iran: 6 February 2015: Iran's government has few options to compensate for reduced oil income, increasing motivation for nuclear deal), while enabling Iran to expand its influence in the region through its proxies.
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Iran's supreme leader Ayatollah Ali Khamenei at |
The hardliners and IRGC have benefited politically and economically from Iran's isolation, and need to be assured that any final agreement will not damage their position (see Iran: 10 December 2014: Iran's anti-corruption drive likely intended at forcing compliance of IRGC hardliners, but positive for investors). They believe that Iran has increased its regional influence through force, negating the need for an agreement. However, the protest rally of approximately 200 hardliners outside Iran's parliament on 8 April was condemned as illegal by the Ministry of the Interior, signalling the senior conservative faction's support for an agreement. Meanwhile, Tehran's Friday Prayer leader's endorsement of the negotiating team on 3 April probably served to appease the portion of Iran's clerical establishment who oppose the agreement on the grounds that it challenges the anti-Western basis of Iran's religious legitimacy.
Crucially, Ali Jafari, the head of the IRGC, endorsed the negotiating team's joint statement on 7 April, indicating the IRGC's continued loyalty to Khamenei, significantly reducing the risk of opposition following a final deal.
As such, Rowhani will probably secure broad domestic support for a final deal, emphasising Iran's ability to gain international recognition for its nuclear programme, maintain a full domestic fuel cycle, and win full nuclear-related sanctions relief, albeit phased.
Outlook and implications
Although there would probably be some immediate sanctions relief upon signing a final agreement, suspension of sanctions would probably be phased and drag out over a period of years. UNSC resolutions would be lifted first, followed by a step-by-step suspension of EU and US sanctions. Any failure by the US to comply with its sanctions relief promises would risk fragmentation of the P5+1 and an uncoordinated suspension of sanctions, posing significant risk of sanctions breach in multiple jurisdictions. Sanctions relief would probably gradually remove restrictions on Iran's energy sector, trade, shipping, banking, insurance, underwriting, and access to international financial institutions, with the exact timeline remaining a sticking point until the last hours of the negotiations.
Consensus on core issues in the framework agreement makes a final agreement more likely, although probably with some delay. Nevertheless, there remain sufficient outstanding issues that talks could yet fail.
A potential game changer is if Khamenei dies while the negotiations are ongoing, given the resultant political uncertainty. Moreover, regional events could alter the course of the negotiations. For example, Houthi control over Yemen, and subsequent indirect control of the Gulf of Aden and Bab al-Mandab by Iran, raises the risk of unintended escalation between Iran and the US (see Yemen: 2 April 2015: The conflict in Yemen: Marine risks).