Newswise — The 2015 Iran nuclear agreement is breaking apart, raising the risk not just of Iran accelerating its nuclear program, but also of a military clash in the Persian Gulf. Under the agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), Iran dismantled much of its nuclear program and gave international inspectors extensive access to its facilities in exchange for relief from economic sanctions. President Donald J. Trump withdrew the United States from the agreement in May 2018, saying it failed to address Iran’s ballistic missile program and its role in regional wars. The United States reimposed sanctions and moved to wipe out Iran’s oil exports. Iran has responded by resuming some of its nuclear activities, leaving the deal in a tenuous state.

What are the terms of the JCPOA?

The JCPOA, which was signed in July 2015 and went into effect the following January, imposes restrictions on Iran’s civilian nuclear enrichment program. China, France, Russia, the United Kingdom, and United States—the five permanent members of the UN Security Council—negotiated the agreement alongside Germany; together they were known as the P5+1. Over nearly two years of negotiations, the Obama administration said its intent was to set back Iran’s nuclear program so that if Iran were to pursue a nuclear weapon, the amount of time it would need to produce enough fissile material—an indicator known as “breakout time”—would be at least a year, up from just a few weeks. (To achieve a nuclear weapon, it would also need the technology to turn this weapon into an explosive device capable of fitting on a warhead.)

 Nuclear restrictions on Iran. To extend that breakout time, the agreement requires that uranium enrichment at Fordow and Natanz be restricted and a heavy-water reactor, at Arak, have its core rendered inoperable; its plutonium byproduct, the P5+1 countries feared, could have been reprocessed into weapons-grade material. These facilities are now being repurposed for research, industrial, or medical purposes, and they are subjected to inspections by monitors from the UN nuclear watchdog, the International Atomic Energy Agency (IAEA). The accord imposes limits on the numbers and types of centrifuges Iran can operate, as well as the size of its caches of enriched uranium. Mined uranium has less than 1 percent of the uranium-235 isotope, and centrifuges increase that isotope’s concentration. Uranium enriched to 5 percent is used in nuclear power plants, and at 20 percent it can be used in research reactors or for medical purposes. High-enriched uranium, at some 90 percent, is used in nuclear weapons. The JCPOA’s inspections regime also aims to guard against the possibility that Iran could develop nuclear arms in secret at undeclared sites.

Many of the JCPOA’s nuclear provisions have expiration dates. After ten years, for example, centrifuge restrictions will be lifted, and after fifteen years, so too will limits on the low-enriched uranium it can possess, as well as the IAEA’s access to undeclared sites. Other provisions have no end date.

Monitoring and verification. Among the open-ended provisions, Iran is bound to implement and later ratify an “additional protocol” to its safeguards agreement with the IAEA, which gives IAEA inspectors unprecedented access to Iran’s nuclear facilities. (As a signatory to the Nonproliferation Treaty, or NPT, Iran has committed to never pursue nuclear weapons, but it is entitled to pursue nuclear technology for peaceful purposes.) The agency issues quarterly reports to its board of governors and the UN Security Council on Iran’s implementation of its nuclear commitments. The agency’s late director-general, Yukiya Amano, described the arrangement as “the world’s most robust nuclear verification regime.”

A body known as the Joint Commission, with includes representatives of all the negotiating parties, monitors implementation of the agreement. Chaired by EU foreign policy chief Federica Mogherini, it is charged with dispute resolution, and the vote of a majority of its members can gain IAEA inspectors access to undeclared sites they consider suspect. The body also oversees the transfer of nuclear-related or dual-use materials.

Sanctions relief. The European Union, United Nations, and United States all committed to lifting their nuclear-related sanctions. While the United States only suspended extant nuclear sanctions, it pledged in the JCPOA to remove specified entities from sanctions lists and seek legislation to repeal the suspended sanctions within eight years, as long as the IAEA concludes that Iran’s nuclear activities remain peaceful in nature.

Other U.S. sanctions [PDF], some dating back to the hostage crisis in 1979, remained even after the JCPOA took effect. They cover matters such as ballistic missile production, support for U.S.-designated terrorist groups, and domestic human rights abuses. Though the United States committed to lifting its sanctions on oil exports, freeing Iran to trade on international markets again, its restrictions on financial transactions remained in place, deterring much international trade with Iran.  Many banks and other companies, including foreign subsidiaries of U.S. businesses, remained wary of doing business in Iran for fear of incurring fines or being barred from dealing on Wall Street.

New Security Council resolutions are periodically needed to keep UN sanctions suspended, so, by alleging a major violation, any one of the P5 members can veto a new resolution. This “snapback” mechanism is set to remain in effect for ten years, after which point the UN sanctions are set to be repealed.

Have the parties upheld their obligations?

In January 2016, the IAEA certified that Iran had met the nuclear agreement’s preliminary requirements, including taking thousands of centrifuges offline, rendering the core of the Arak heavy-water reactor inoperable, and selling excess low-enriched uranium to Russia.

The day of that certification, known as Implementation Day, the United States, European Union, and United Nations all repealed or suspended their sanctions. In quarterly reports since then, the IAEA has certified Iran’s ongoing compliance. Most significantly, the United States stopped enforcing secondary sanctions that targeted the oil sector, which allowed Iran to ramp up its oil exports to nearly the level it had been prior to sanctions. The United States also unfroze certain funds seized from Iran.

Trump ran for president criticizing the agreement, and the expectation that the United States would withdraw from it discouraged trade and investment. EU-Iran trade reached more than twenty billion euros a year before the U.S. withdrawal, but fearing U.S. sanctions, many large European firms kept out of Iranian markets.

Iranian officials accused the administration of acting in bad faith, claiming that by sowing doubt over its commitment to the agreement and obstructing economic benefits to Iran, the United States was in violation of the agreement. U.S. officials have discouraged foreign governments and companies from trading with or investing in Iran, Foreign Minister Mohammad Javad Zarif charged, and the U.S. Treasury under Trump has not licensed the sale of any aircraft or spare parts to Iran.

Trump formally withdrew the United States from the agreement in May 2018, reinstating the banking and oil sanctions. They apply not only to U.S. nationals, who generally cannot transact with Iran in any case, but to foreign nationals as well. To deal in Iranian markets, they would give up access to far larger American ones, as well as access to the world’s predominant banking system.

Announcing the withdrawal, Trump objected to the agreement’s failure to address Iran’s ballistic missile program or its proxy warfare in the region, and he claimed that the sunset provisions would enable Iran to pursue a bomb in the future.

Iran accused the United States of reneging on its commitments, and Europe of submitting to U.S. unilateralism. In a bid to keep the nuclear agreement alive, France, Germany, and the United Kingdom launched a barter system, known as INSTEX, to facilitate transactions with Iran outside of the U.S. banking system, but it is only meant for food and medicine, which are already exempt from U.S. sanctions.

Following the U.S. withdrawal, several countries, U.S. allies among them, continued to import Iranian oil under waivers granted by the Trump administration, and Iran continued to abide by its commitments. But a year later, the United States ended the waivers. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” the White House said.

This was the tipping point for Iran, which said it would no longer be bound to its commitments as long as the other parties to the JCPOA were in breach of theirs. In July 2019, Iran exceeded the agreed-upon limits to its stockpile of low-enriched uranium, and then began enriching uranium to the higher concentration used in medical isotopes, still far short of the 90 percent purity required for weapons. Zarif said that these incremental breaches of the JCPOA were reversible but would continue absent European compliance. The European signatories reiterated their commitment to the JCPOA, and Mogherini said that INSTEX will be opened to additional countries, and that its shareholders were considering using it to trade oil.

How is Iran’s economy performing?  

The end of sanctions waivers on oil exports have significantly cut into a vital source of national revenue. Iran began exporting more than 2.1 billion barrels per day after the JCPOA took effect, approaching levels from before 2012, when the oil sanctions were originally put in place. With the restoration of U.S. sanctions and the end of waivers, these exports have plummeted to three hundred thousand barrels per day or less. The International Monetary Fund projects Iran’s gross domestic product will decline by 6 percent in 2019, following a 4 percent contraction in 2018.

The decline in oil exports compounds the damage to an already hurting economy. Iran never experienced the economic recovery that it had hoped for. Major European firms, uncertain that the JCPOA would hold up, were wary of investing in the Iranian market even after the deal was finalized.

So too did a wide range of U.S. sanctions unrelated to the nuclear program. Multinational firms feared being held liable for transacting with the numerous sanctioned entities associated with, for example, the Iranian Revolutionary Guard Corps (IRGC), which holds sway over some industries. With sanctions deterring above-board international trade, smuggling on black markets has come into greater demand, enriching the IRGC at the expense of the regular economy.

Still, factors beyond sanctions are partly to blame. Corruption, mismanagement, and aging infrastructure are widely acknowledged barriers to industry, and relatively low oil prices diminished revenues from export; oil prices remain well below the triple-digit prices per barrel they commanded for much of 2011–2014. Economic stagnation and rising inequality drove a week of widespread protests at the end of 2017. Unemployment remains high, at 12 percent, and is especially prevalent among women and young people.