US Withdrawal from Nuclear Agreement; Results of the Four-Month Divorce Deadline

The current religious regime in Iran is neither able nor willing to accept and implement any of the four preconditions set by the US for remaining in the nuclear agreement. As a result, Europe and Iran's Asian oil customers will have only four months to adapt to the current situation. The direct consequence of the US lifting sanctions for the last time will be the automatic reinstatement of sanctions imposed by the United States against Iran, including a gradual reduction of oil exports to European and Asian countries. In retaliation for the occupation of the US embassy in Tehran in the first year of the revolution, the first US sanctions included blocking accounts and cash assets of Iran worth about $12 billion and prohibiting arms sales to Iran. In 1995, with the approval of the so-called "ILSA" law targeting the development, production, and export of oil and gas, Washington's sanctions reached a new peak. After Iran began enriching uranium to 20% at the Fordow facility and approached the capacity to produce a nuclear bomb, global sensitivity to the Islamic Republic's nuclear activities increased. As a result of the failure of nuclear negotiations between Tehran and the European Union from 2009 to 2012, the US government passed new sanctions laws in January 2012, targeting banks, including the central banks of countries buying Iranian oil. The new US sanctions, which were quickly announced by the European Union as well, rapidly reduced Iran's oil exports and placed the country's economy in a critical situation. After Hassan Rouhani was elected as president in 2013, secret negotiations between representatives of the Islamic Republic and the US paved the way for the official negotiations between Iran and the group known as 5+1, which led to the nuclear agreement and the lifting of sanctions against Iran in July 2015. Due to the extreme sensitivity of the nuclear negotiations and the agreements made between representatives of the Islamic Republic and the Obama administration, which led the negotiations from the opposing side, the implementation of a large and significant part of the agreements was contingent upon mutual trust between the two parties, with the expectation that subsequent US and Iranian administrations would remain committed to cooperation. The unexpected election of Donald Trump from the Republican Party to the presidency of the United States changed the calculations regarding the continuation of voluntary and bilateral cooperation between Tehran and Washington within the framework of the nuclear agreement, placing it in a precarious situation. The four demands presented on January 12 by Trump as preconditions for the US to remain in the nuclear agreement reflect the new Washington administration's different perspective on the agreement compared to that of its predecessors. The current policy of the European Union regarding the nuclear agreement remains aligned with the policies of Washington during Barack Obama's Democratic administration, aiming to preserve the agreement and develop trade and economic cooperation with Rouhani's "pragmatic government." With the anticipated US withdrawal from its commitments under the nuclear agreement after the expiration of the four-month deadline, Europe can remain within the framework of the nuclear agreement and, unlike in 2012, refrain from repeating unilateral US sanctions against Iran. The major problem here is that foreign banks trading with Iran, especially those involved in financial transactions related to oil purchases, as well as insurance companies for oil shipments, will find themselves compelled to sever ties with Iran due to their similar relations with the US, in order to avoid US Treasury (OFAC) penalties, disregarding the official policies of European governments. European oil refineries that rely on Iranian oil will need three to four months to adjust their technical status to accommodate oil from other countries, and it can be imagined that they will gradually reduce their purchases of Iranian oil in a manner similar to 2012. In 2012, the US government exempted several Asian countries buying Iranian oil from unilateral sanctions, asking them to gradually reduce their purchases of Iranian oil, and this exemption also applied to Turkey regarding its gas purchases from Iran. Thus, after the US left the nuclear agreement and previous sanctions were reinstated, European countries, even if they remain in the nuclear agreement with the Islamic Republic, will not be able to continue trade and financial transactions with Iran at the current level. The issue of foreign investments, financial guarantees for projects, and the installment sale of goods and passenger aircraft to Iran, which have been considered by European and Asian countries over the past year, will also be reconsidered in the context of the situation following the US withdrawal from its commitments under the agreement. Due to the announcement of a conditional and temporary US withdrawal from the nuclear agreement, the Islamic Republic is not able to threaten a retaliatory exit until the US's exit from the JCPOA is finalized. However, due to severe dissatisfaction with the US decision to withdraw from the agreement and its unavoidable consequences, Iran's reactions will depend on accusing the US of "violating the nuclear agreement" and taking actions that have a retaliatory capacity. Zarif's reaction to Trump's statement, which was observed on his Twitter a few hours after the news broke, and Rouhani's order to build "nuclear propulsion systems" or, in other words, to produce engines for nuclear submarines and ships, which typically require fuel close to military-grade uranium, are among the reactions that can be expected to be seen more frequently in the coming days and weeks. Undoubtedly, the ruling conservatives, who originally had no agreement with the nuclear deal, will openly and covertly welcome this new development and the end of the agreement. Due to the transformed internal atmosphere resulting from the protests in December, the Islamic Republic is keen to be seen in a position of power, and thus little can be expected from the Tehran government to return to "second-line diplomacy" or political negotiations like those of 2013, even at the cost of exacerbating inflation and the economic crisis.