Switching to ‘megaphone’ diplomacy, Iran threatens to leave nuclear deal

President Trump's attempts to tear apart the 2015 deal has made major banks avoid dealing with Iran.

Iran's Deputy Foreign Minister and chief nuclear negotiator Abbas Araqchi holds a press conference at Iran's Foreign Ministry in Tehran, Iran on July 22, 2015. CREDIT: Mohsen Shandiz/Corbis/Getty Images.
Iran's Deputy Foreign Minister and chief nuclear negotiator Abbas Araqchi holds a press conference at Iran's Foreign Ministry in Tehran, Iran on July 22, 2015. CREDIT: Mohsen Shandiz/Corbis/Getty Images.

In an about-face, Iran on Thursday indicated that it is willing to walk away from the 2015 nuclear deal if major banks continue to stay away from doing business in the country, for fear of violating U.S. sanctions that remain in place.

Reuters reports that Iran’s chief nuclear negotiator and Deputy Foreign Minister Abbas Araqchi said, “The deal would not survive this way.”

“If the same policy of confusion and uncertainties about the JCPOA (Joint Comprehensive Plan of Action) continues, if companies and banks are not working with Iran, we cannot remain in a deal that has no benefit for us. That’s a fact,” said Araqchi.

Signed by Iran, the United States, as well as Britain, Russia, China, France and Germany, the JCPOA offers Iran sanctions relief in exchange for a reduction in Iran’s stockpile of enriched uranium by 98 percent for the next 13 years, as well as reducing the number of gas centrifuges and submitting to regular and rigorous inspections by the United Nations.

Up until now, Iran had indicated that it would stick with the deal if the European partners did the same. But between recent protests that were largely tied to the country’s struggling economy and increasingly threatening rhetoric from the administration of President Donald Trump, Iran is finding itself under greater pressure to show deliverables from the deal to Iranian citizens.

President Donald Trump in January renewed sanctions waivers under the deal, but said it would be the last time he would do so. He’s already refused to recertify the deal (as the president is required to do every three months under U.S. law), which means Congress can snap back U.S. sanctions on Iran. At the Conservative Political Action Conference on Thursday, Vice President Mike Pence said that the United States would not recertify the deal in the future.

Trump has called upon the European partners in the deal to “fix” the agreement, although all of them have reaffirmed their commitment to the deal.

The president’s promises to tear the deal apart have made banks nervous, and while European companies have made key investments in Iran (despite Secretary of State Rex Tillerson’s threats), major financial institutions have largely steered clear of the country.

But will Iran pull the trigger and leave the JCPOA? Can Iran just walk away if the Europeans want to stick with the deal?

While any party to the deal could pull out at any time, explained Reza Marashi, research director at the National Iranian American Council, doing so without just cause or without going through dispute resolution mechanisms built into the agreement, would make Iran “the party at fault rather than the aggrieved party.”

“I also believe that Iran isn’t anywhere close to pulling out of the agreement,” he added. “What Araqchi was doing … was trying to light a fire under the Europeans, to say, ‘Look, the status quo is not sustainable.'”

Iran has been saying this to JCPOA European partners for months, but has now upped the ante, “Because if backroom diplomacy does not bear fruit, then eventually, you go to the megaphones, and you conduct megaphone diplomacy,” said Marashi.

While the extent of the difficulties faced by Iranians with foreign banks is now unclear, Djavad Salehi-Isfahani, professor of economics at Virginia Tech University told ThinkProgress that banks facilitate both trade and foreign investment — two things that Iran needs to maintain the growth it has achieved in the past two years.

“Without access to global banking, Iran cannot grow,” said Salehi-Isfahani.

“There was a very rapid recovery [11 percent growth] from the depths of recession in 2016 -2017,” he said, adding that, this year, the country is projected to have a “decent growth rate — half as much, maybe five or six percent.”

And maintaining that growth rate is crucial for Iran to show that it is a normal, developing country. At the same time as dealing with these sanctions, Iran is dealing with anti-money laundering regulations (it was ranked as the worst country in the world on money laundering in 2016).

“Banks have a huge risk exposure for things possibly going wrong,” said Salehi-Isfahani. “The Trump administration is very aware that prolonging this ambiguity is the most effective way to limit Iran’s potential for economic growth.”

Iran, he added, is unlikely to leave the JCPOA, as “even a 25 percent JCPOA is better than a zero percent JCPOA.”

The gains, he said, on Iran’s part, are less economic and more political. Pulling out would mean that the United States would be in a tough spot in trying to negotiate with North Korea on its nuclear program.

Additionally, leaving the JCPOA will show that in order for a country to have access to the global economy, it might have to “choose subservience” to the United States — something many countries might find unacceptable. Iranians certainly do, which is also what Salehi-Isfahani thinks is behind Araqchi’s statements: The need to sound tough in the face of mounting pressure from the United States.

After all, although the U.N.’s nuclear watchdog agency says that Iran has complied with the terms of the deal, President Trump has accused the country of violating “the spirit” of the deal, tying Iran’s compliance to the deal with its ballistic missile program and its regional role.

But Araqchi said Iran would resist tying the nuclear deal to its ballistic missile program or activities in Iraq, Syria, Lebanon and Yemen, saying attempts to expand the deal to cover those issues “not only will lose the JCPOA, but will make other issues more complicated and more difficult to resolve.” He added that losing the deal would mean the world would face “another nuclear crisis.”

For two years, the United States, Iran, and other international partners were on the same page regarding Iran’s nuclear program, Marashi explained, meaning that “the prospects for conflict were reduced.”

“If the U.S. and Iran are not on the same page with regards to Iran’s nuclear program, regardless of what the construct of the program looks like, it’s going to be a point of contention because the United States is going to use coercive measures to punish Iran for having its program,” he said.

It’s likely that Iran sees the Trump administration’s stance as an escalation and could therefore respond in kind, without doing anything as drastic as leaving the Treaty on the Non-Proliferation of Nuclear Weapons, Marashi added.

“The Iranians might do things that have nothing to do with nuclear weapons but advance the technical aspects of their nuclear programs over a long period of time,” said Marashi.

This could include building nuclear-fueled submarines, which would mean enriching uranium beyond 3.5 percent (what is used for civilian purposes). Or it could increase the research and development aspect of their current program, which is what they had put on hold under the terms of the JCPOA.