A simple reading of statements by both sides points to a return to the status quo ante President Trump’s 2018 departure from the JCPOA. How things unfold in the months ahead, however, may not be quite that straightforward as the context of the nuclear deal has changed since 2015 when it was agreed. To shed some light on an admittedly complicated topic, we examine some of the issues on both sides.
The Biden Administration will include a number of advisors from the Obama Administration, under which the JCPOA was agreed. So, it is not surprising that there would be some interest in returning to the status quo ante Trump, essentially repudiating the Trump policy towards Iran and returning to the Obama policy. But that is an overly simplistic way of looking at the Biden approach. Since 2018 and the departure of the U.S., Iran has also stopped complying with the agreement. The most egregious noncompliance has been increasing the volume of enriched Uranium by as much as 12 times more than allowed by the agreement and lifting enrichment from close to 3% to 4-5% and indicating a goal to increase enrichment to 20%. Weapons-grade enrichment is around 90%. Iran may also have a covert enrichment activity. So, nuclear weapons experts believe Iran has reduced the time it would need to build a nuclear weapon should it choose to do so – a so-called “breakout.”
Against this backdrop, returning quickly to the JCPOA is seen by the Biden team as the fastest way to constrain Iran’s nuclear weapons development capabilities and closely monitor any attempted breakout. This primary objective is juxtaposed alongside two secondary objectives. The first is to stop or slow the expansion of Iran’s ballistic missile capabilities, which have advanced in recent years. The second is to revise the JCPOA to remove or extend its sunset provisions. Both of these objectives would require a significantly revised agreement. Critics of the JCPOA have suggested scrapping it altogether and using the existing sanctions leverage inherited from the Trump policy to fashion a brand-new agreement to address all three of these objectives, and perhaps others.
The Biden camp has finessed this difference of opinion by referring to the return to the JCPOA as a starting point for negotiations. To that end, it is likely that the Biden Administration will offer some sanctions relief from the get-go, most likely in the form of lifting secondary sanctions to allow more trade in humanitarian goods or pandemic-related supplies. Assuming Iran agrees to start negotiating a return to JCPOA, the two sides could, through a step-by-step process, lift sanctions and each come back into compliance with the accord. If one thinks of the JCPOA as a negotiating forum and not simply a hard and fast agreement, one could also imagine a path for revising the agreement. It seems the key to progress from the U.S. side would be the existence of a hefty sanctions regime that the Biden team can lift or modify as both sides move forward.
But this begs the question of how Iran will react to a process that does not lift sanctions fast or fully enough for them to be able to both see and sell progress to the Iranian public.
Both sides have indicated a desire to return to the JCPOA if the other side makes substantial concessions first. Negotiations do not generally work that way, and as described above, we would not be surprised if the Biden team made the first concession (likely humanitarian in nature) to jump start a step-by-step revision of sanctions and compliance.
This assumes, however, that the Iranians are willing to deal in a step-by-step manner that reconstitutes the JCPOA. It is not clear that Iran was content with the sanctions relief under the original agreement, and given their economic distress, the Iranians will likely want more and quicker relief, today. This position may be encouraged by internal political dynamics.
Ayatollah Ali Khamenei is in his 80s and has overseen the expansion of parliamentary power by the Iranian Revolutionary Guard Corps (IRGC), a hardline paramilitary organization that supports the Ayatollah’s clerical guardianship and his anti-Zionist views, the export of the Islamic revolution, and the maintenance of an anti-Western resistance economy. It is widely expected that an IRGC candidate will win the June 2021 Presidential election, replacing the relatively moderate President Rouhani with a hardliner.
The election of a hardline President is perceived by Iran observers as potentially moving Iran in the direction of a more militarized foreign policy. That possibility has added to the urgency of these upcoming negotiations, certainly for the Biden team, and perhaps for Iran’s current leadership too. The opportunity for an easing of Iran’s economic stress is important, and so it may behoove Iran to quickly engage in negotiations. If they do not yield substantial relief quickly, however, or if hardliners in Iran consolidate power behind a new President, then a return to the original JCPOA or a broader agreement may not be quick or even possible.
So, with regard to the oil market, something is afoot, and it may result in the gradual lifting of sanctions on Iran, including secondary sanctions on oil trade in 2021. This would mean more Iranian oil in the market. In recognition of the complex and difficult nature of relations between the U.S. and Iran, however, we caution that if negotiations get underway next spring, they may be much more difficult and circuitous than they sound today. If so, they may not yield a quick or substantial increase in Iranian oil exports. So, in trying to predict a timeline for more Iranian oil, we would err on the side of less and later.