President Trump’s decision on Tuesday to pull the U.S. out of the Iran nuclear deal and reimpose strict sanctions on the Islamic republic’s economy will begin a weekslong process to untangle the agreement.
The announcement fulfilled a key campaign promise Trump made at the very beginning of his bid for the White House: to “rip up” the 2015 agreement that was negotiated by Obama administration officials and was said to have closed Iran’s path to a nuclear weapon for at least the next decade.
“We cannot prevent an Iranian bomb under the decaying and rotten structure of the current agreement,” the president said in remarks from the Diplomatic Room Tuesday afternoon, claiming the original deal was predicated on the “giant fiction” that Iranian leaders sought a only a peaceful weapons program.
In addition to exiting the agreement, known as the Joint Comprehensive Plan of Action, Trump announced his intention to begin gradually reimposing nuclear-related sanction on Iran’s oil sector. White House national security adviser John Bolton later denied that the president’s decision in any way signaled a broader plan to invade Iran, describing such speculation as “badly mistaken.”
According to a document provided by the Trump administration, here is how the next few weeks will play out as the president takes steps to pursue American withdrawal from the JCPOA, barring any major actions by Iran.
‘Wind Down’ Period
The State Department and Treasury will establish a 90-day and 180-day grace period for businesses that need time to wind down their activities in Iran. This is to prevent violations of the sanctions once they’re reimposed by the administration’s two self-imposed deadlines: Aug. 6 and Nov. 4 of this year.
According to the White House, U.S. officials will reinstate sanctions against Iran’s gold and precious metals, on sales of semi-finished metals like aluminum, coal and steel, and the country’s automotive industry beginning or after Aug. 6. The Trump administration will also revoke current sanctions waivers that allow Iranian carpets and certain foods to be imported to the U.S. and enable a variety of financial transactions.
By Nov. 4, the government will reinstate sanctions on Iran’s shipping services, banking, and insurance transactions with the country’s central bank, and on its energy sector.
The administration will also re-impose sanctions on specific individuals who had previously belonged to the Treasury Department’s Specially Designated Nationals and Blocked Persons List but were removed on Jan. 16, 2016 as a stipulation of the nuclear deal.
During this period, the U.S. will also work with its allies to mitigate the impact renewed sanctions could have on European companies.
“Non-U.S. or non-Iranian persons are advised to use these time periods to wind-down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period” on Aug. 6 or Nov. 4, the administration said Tuesday, noting that companies who have payments due after those deadlines will still be eligible to receive the money they’re owed as long as the payment is consistent with U.S. sanctions.
OFAC Review
The Office of Foreign Assets Control will be tasked with reviewing instances in which U.S.-owned or controlled foreign entities wish to delivery goods to Iran or extend loans to Iranian counterparties after economic sanctions have been reimposed. Such exemptions will be granted on a “case-by-case basis” by OFAC officials, according to the administration.
If a company chooses to pursue new business between now and the end of the grace period, rather than winding down transactions with Iran, OFAC will factor that into its decision-making process on subsequent exemption requests.
The financial enforcement agency may also impose secondary sanctions on individuals or companies who continue to do business with persons on the SDN list, or pursued transactions with such individuals during the wind-down period.
“OFAC recommends that a person conducting activities in Iran or with Iranian persons during the wind-down periods exercise due diligence sufficient to ensure that it is not knowingly engaging in transactions with persons on the SDN List,” the administration said.
Oil Sales
The Trump administration will also take steps following the 180-day wind-down period to reduce Iran’s oil sales and overall export revenue, and in the meantime encourage countries who purchase oil from Iran to minimize their imports. State Department officials will consult with those countries between now and November to determine the best route forward so they are not severely impacted by the sanctions.
Sanctions on Iran’s oil exports were first implemented by the Obama administration in 2012 to cripple Iran’s economy and pressure the regime into negotiations with U.S. officials and the Europeans over its nuclear weapons program. The sanctions halved the number of barrels per day Iran was exporting, causing the country’s currency, the rial, to plunge and the country to lose billions in revenue.
Currently, there is no guarantee that European countries who buy Iranian oil and encouraged Trump to preserve the nuclear agreement will work with the U.S. to reduce their purchases.
“In 2012, we saw a dip in Iranian exports, then a rebound, then we saw a huge drop-off after people came to realize the global effort. That took months of diplomacy to persuade the Indians and Chinese and others to reduce purchases, and it may be hard to get the same amount of pressure this time,” former White House energy adviser Jason Bordoff told Foreign Policy magazine on Tuesday.
