The US is treading carefully across a minefield laid by former US President Donald Trump as it seeks a way back to the 2015 Iran nuclear agreement.
According to a Reuters tally of US Treasury activities, Trump levied Iran-related sanctions on more than 700 entities and people after abandoning the nuclear deal and restoring all the sanctions it had lifted.
Using US laws intended to punish foreign actors for promoting terrorism or nuclear proliferation, Trump blacklisted about two dozen institutions critical to Iran’s economy, including its central bank and national oil corporation.
Removing many of those sanctions is inevitable if Iran is to export its oil, the biggest benefit it would receive for complying with the nuclear agreement and reining in its atomic program.
But dropping them leaves Democratic President Joe Biden open to accusations that he is soft on terrorism, a political punch that may be unavoidable if the deal is to be revived.
The possibility has already drawn fierce Republican criticism.
“It is immoral,” Trump’s former Secretary of State Mike Pompeo said last month as he promoted legislation to make it harder for Biden to lift the sanctions on Iran.
John Smith, director of the Treasury’s Office of Foreign Assets Control (OFAC) from 2015 to 2018, described Trump’s wave of Iran sanctions as “unprecedented in scope in modern American history.”
Targeting Iranian institutions for supporting terrorism or for links to the Islamic Revolutionary Guard Corps (IRGC) has made reviving the deal much harder, said Smith, now a partner at law firm Morrison & Foerster.
“By adding global terrorism, IRGC or human rights abuses to any listing you make it incredibly difficult politically … to remove those names from the list,” he said. “You can do it, but you face much more potential blowback if you do.”
A U.S. official said Reuters’ tally of sanctions imposed by Trump was close to the Biden administration’s count, though judgment calls about what to include can yield slightly different totals.
LEGITIMATE OR CONTRIVED?
The restoration of U.S. sanctions has blighted the Iranian economy, which shrank by 6% in 2018 and by 6.8% in 2019, according to International Monetary Fund data.
Trump, a Republican, withdrew from the deal in 2018, arguing it gave Iran excessive sanctions relief for inadequate nuclear curbs, and he imposed a “maximum pressure” campaign in a failed attempt to force Tehran to accept more stringent nuclear limits.
He also said the agreement had failed to curtail Iran’s support for terrorism, backing for regional proxies in Syria, Iraq and Lebanon, and pursuit of ballistic missiles.
Biden wants to restore the pact’s nuclear limits and, if possible, extend them while pushing back against what he has called Iran’s other destabilizing activities.
U.S. and Iranian officials have begun indirect talks in Vienna seeking a way to resume compliance with the agreement, which Iran, after waiting about a year following Trump’s withdrawal, in 2019 began violating in retaliation.
Under the accord, Tehran limited its nuclear program to make it less capable of developing an atomic bomb – an ambition Iran denies – in return for relief from economic sanctions imposed by the United States, European Union and United Nations.
European diplomats are shuttling between the U.S. and Iranian delegations because Tehran rejects direct talks. Officials are trying to strike a deal by May 21 but major obstacles remain.
One of them is what to do with the Central Bank of Iran (CBI), which was banned in 2012 and had its assets frozen in the United States. These sanctions were lifted as part of the nuclear agreement, but they were reinstated after Trump pulled out.
Trump went even further in September 2019, blacklisting the CBI, accusing it of providing financial assistance to terrorist organisations and essentially excluding foreigners from engaging with it.
Other sections of Iran’s oil infrastructure, such as the National Iranian Oil Company (NIOC), the National Iranian Tanker Company, and the National Petrochemical Company, were also attacked for suspected terrorism support.
If Iran is to sell its oil abroad, sanctions lawyers say these companies must get sanctions relief, otherwise they will remain radioactive to foreign firms. U.S. firms are already barred from dealing with them under different sanctions.
Presaging a likely Republican line of attack, Elliott Abrams, the Trump administration’s last special envoy for Iran, argued that the sanctions were imposed on legitimate grounds.
“Those were legally and morally sufficient and justifiable designations,” he said. “They were not pulled out of thin air.”
FOCUS ON CENTRAL BANK
According to a senior US State Department official, the Biden administration has no plans to contest the Trump administration’s “evidentiary ground” for imposing the sanctions.
In practice, this means it would not argue that these organizations did not promote terrorism.
Rather, he said, the Biden administration has decided that returning to the nuclear agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA), is in the US national security interest, justifying the sanctions’ withdrawal.
Trump’s April 2019 decision to blacklist the IRGC, and its Quds Force foreign paramilitary and espionage arm, as a Foreign Terrorist Organization (FTO) has also complicated matters.
The action marked the first time the United States had formally labeled another nation’s military a terrorist group.
In September 2019, OFAC used counterterrorism authorities to target Iran’s central bank, which it accused of having provided billions of dollars to the IRGC, the Quds Force and Lebanon’s Hezbollah, which Washington has long deemed a terrorist group.
“What I would find particularly objectionable is any move that would change the sanctioning of the IRGC for terrorist activities because the IRGC engages in terrorist activities. It is a clear case,” said Abrams.
The Biden administration, however, does not need to strip the FTO designation from the IRGC in order to remove the related sanctions on the central bank.
The Treasury secretary can reverse any sanctions placed on the central bank under U.S. executive orders, which give the president the ability to impose, or rescind, them at will, former U.S. officials said.
The State Department has only stated that if Iran resumes compliance with the agreement, sanctions “incompatible with the JCPOA” will be lifted, without providing further information.
“The political heat is going to be very intense,” said Eurasia Group’s Iran analyst Henry Rome. “Anything containing the ‘T’ word in this case would be a ready-made talking point for those who condemn a return to the nuclear agreement,” he said, referring to ‘terrorism.’
“The political question is to say, “The designations may have been legal, but we have other foreign policy interests that need their removal.” That’ll be a difficult needle to thread, but they’ll have to do it.”