Course correction in US-Iranian relations: A road map for the Biden administration

Joe Biden has vowed to re-enter the Iran nuclear deal. In a recent report for Friederich Ebert Stiftung, Ellie Geranmayeh looks at what concrete steps can be taken by the United States, Iran, and Europe to bring all parties to the nuclear deal back into full compliance, noting that time is of the essence.

Deputy Director, Middle East and North Africa programme
Senior Policy Fellow
Ted Eytan CC BY-SA

Phase one: Interim freeze agreement, by mid-February 2021 

The first phase of the road map should ideally begin immediately after Joe Biden’s election victory in November. The E3 (France, Germany, and the United Kingdom) and the European Union can intensify nuclear diplomacy with Iran starting in November, during the transition in the United States. This European effort should focus on exploring the parameters of an agreement for Iran to freeze its nuclear activities that exceed the limits of the Joint Comprehensive Plan of Action (JCPOA). The goal would be to have this interim deal in place by mid-February, making it more viable for the Biden administration to re-enter the JCPOA. Iran will only accept an interim freeze deal, however, if the Biden administration simultaneously provides it economic relief and formally initiates a process of re-entry into the JCPOA. 

The freeze on nuclear activity could require Iran to halt and roll back low uranium enrichment that exceeds 3.67 per cent, as outlined in the JCPOA, suspend enrichment activities at the Fordow facility, and stop installing advanced centrifuges. Iran may accept such measures if it can hold on to its increased stockpile of low-enriched uranium, which will provide it with some leverage going forward. The International Atomic Energy Agency (IAEA) can verify this process.

Immediately following Biden’s inauguration, the E3 should begin coordinating positions with the US – with the aim that, by end of this first phase, the US formally submits a request to the Joint Commission to reinstate its participation in the JCPOA. In parallel, the Biden administration should appoint a senior aide, such as a former senior JCPOA negotiator, to reach out to the Iranian mission in New York, to begin a process of discreet direct diplomacy. It should also provide Iran with tangible economic incentives by the end of the first phase, as part of a synchronised set of measures. The incentives would be in return for reaching an interim freeze deal, and would signal the seriousness of the United States’ intent to rejoin the nuclear deal. They would also build confidence with Tehran.

Biden can take the following confidence building measures in January, with little domestic political cost: 

  • Removing, as part of Biden’s commitment to lift the ‘Muslim ban’, the Trump travel restrictions affecting Iranian nationals. 
  • Working with the EU and the E3 to boost the volume of humanitarian trade with Iran through the Instrument in Support of Trade Exchanges–Special Trade and Finance Instrument (INSTEX–STFI) mechanism. In the context of covid-19, the Biden administration could also endorse INSTEX.
  • Providing a reliable framework for humanitarian trade with Iran by reducing uncertainties surrounding General License 8. In particular, the US should remove impediments to Iran’s purchase of medical goods and equipment, given the precedent of covid-19.
  • Easing some of the sanctions that Trump’s executive orders have imposed on senior Iranian officials since the US withdrawal from the JCPOA. This should include those against Foreign Minister Mohammad Javad Zarif, who will likely remain Iran’s chief nuclear negotiator or transition to playing a major role in building internal buy-in for diplomacy. 
  • Returning travel restrictions introduced by the Trump administration to the status quo ante for Iranian officials visiting their UN mission.

A more concrete economic package that can be offered to Iran by the end of the first phase in exchange for an interim freeze agreement includes: 

  • Issuing executive waivers that ease restrictions on Iran’s ability to access its foreign revenues frozen in offshore banks (especially in China, Europe, India, Japan, South Korea, and Iraq) for non-sanctioned trade. 
  • Reissuing waivers to certain countries for the limited purchase of Iranian oil, in effect returning the sanctions environment to pre-May 2019. Here, China will be key. A waiver for South Korea will also be important, so it can purchase condensates from Iran. The utilisation of condensates, a natural gas by-product, is key to maintaining output growth at the South Pars field – which is, in turn, sorely needed for domestic economic activity. While oil waivers can be issued to European countries that previously imported Iranian crude oil, such as Greece and Italy, commercial actors from these countries are unlikely to re-enter the Iranian market in the foreseeable future.

Phase two: Full and mutual JCPOA implementation, by June 2021 

By the end of the second phase, both the US and Iran should, in a synchronised series of steps, come into full compliance with the JCPOA. Given the experience of implementing the JCPOA – which entailed a complex series of measures between July 2015 and January 2016 – with enough political will on both sides, it should be feasible for Iran to reverse its nuclear activities that exceed the JCPOA caps and for the US to put in place sanctions easing steps by July 2021. Iran will need to reduce its stockpile of low-enriched uranium, dismantle advanced centrifuges at Natanz, and halt steps on research and development that go beyond the JCPOA, among other measures.

It will be important to cement the full implementation of the JCPOA prior to the June presidential election in Iran, thereby rendering it more durable regardless of who succeeds the Rouhani administration. Moreover, the US re-entry into the JCPOA by June could help boost the political momentum in Iran in favour of continued diplomacy with the West.

This will also be the time for confidence building. First and foremost, both sides have to cool military tensions of the type witnessed under the Trump administration in the Middle East. The E3 can promote an understanding between Iran and the Biden administration during this delicate phase that neither side will engage in provocative actions. While major political progress on regional conflicts is unlikely at this stage, Tehran could moderate its rhetoric on the US and its regional partners. Moreover, the US and Iran could continue mutually releasing detainees, which the Swiss government facilitated during the Trump administration.

Iran has consistently noted that, as part of a re-entry into the JCPOA, the US will need to ‘compensate’ it for the economic hardship resulting from Trump’s decision to reimpose sanctions at a time when Iran was fully compliant with the agreement. It is also a reality that secondary sanctions provide the US with an extremely powerful tool that can be deployed much faster than Iran can expand its nuclear programme. Iran will no doubt want this disparity addressed.

While it is highly unlikely that the Biden administration will agree to an explicit compensation package, given existing domestic pressure against diplomacy with Iran, there are some creative measures that it can take as part of a confidence-building process to shore up the JCPOA. The administration should also be prepared to exercise flexibility in providing the Rouhani administration with ammunition to sell the notion of follow-up talks with the US through the following measures:

  • Working with European partners to expand the scope of trade taking place under the INSTEX-STFI mechanism, to step in where international banks are reluctant to facilitate transactions involving Iran (this can go beyond humanitarian trade to cover areas that will be exempt under the US sanctions framework once JCPOA implementation is complete). 
  • Undoing executive order sanctions issued under President Donald Trump against Iran’s metals and mining sector, including those under Executive Order 13871 and Executive Order 13902. 
  • Issuing waivers for companies such as Boeing and Airbus to transfer civilian aircraft, spare parts, and related technology to Iran. 
  • The US and UK can coordinate to allow the transfer of a £400m debt owed by the British government to Iran for the sale of tanks (concluded decades ago but never delivered). This debt payment has been delayed due to banking and political issues. 
  • Stepping up outreach by the Office of Foreign Assets Control and the State Department with European commercial actors and banks with respect to the eased US sanctions posture. This could include the designation of one or two European banks as so-called ‘clean banks’ for transactions with Iran. 
  • Agreeing, if pressed by other parties to the JCPOA, to abolish the veto-proof ability (as per Resolution 2231) of any JCPOA participant to snap back UN sanctions – and replacing it with a requirement of a simple majority vote of permanent Security Council members in favour (thus effectively requiring that the US obtain the support of France and the UK). In return, the Biden administration could push for a series of arrangements with the permanent Security Council members to restrict Iran’s export and import of specific sophisticated arms following the expiration of the UN arms embargo in October 2020.

Phase three: More-for-more nuclear talks, late 2021–August 2023 

Whereas the first two phases focus on stabilising the JCPOA and averting a short-term crisis over Iran’s nuclear programme, the third phase looks to build on the JCPOA as part of a more-for-more formula from which all JCPOA parties can benefit. It is unlikely that the political optics in Iran will allow President Hassan Rouhani to advance to this third phase, so world powers will need to wait to move this forward with a successor Iranian government. 

The Biden administration can utilise the last months of the Rouhani administration to privately make the case for why Iran’s supreme leader, Ayatollah Ali Khamenei, should green-light further negotiations. It may be most realistic for these talks to begin through a discreet channel. For this process, the Biden administration can appoint a special envoy for diplomacy with Iran, selecting a figure who has deep knowledge of the Iran file and is well respected among members of Congress. Greater engagement between senior Iranian and US officials in multilateral forums such as the United Nations and the IAEA can be useful in widening the diplomatic aperture.

For a more public stage of talks with the US on a more-for-more deal, Tehran is likely to require a multilateral framework, especially in light of the domestic backlash against the US following the Trump administration’s assassination of Qassem Soleimani. The P5+1 framework and the Joint Commission will remain the most viable theatres for discussions with Iran over the nuclear issue. 

The Biden administration and the E3 will be eager to lock in follow-up nuclear commitments from Iran with respect to areas that expire from October 2023, the current ‘transition date’ under the JCPOA. Moreover, the knowledge that Iran has obtained through expanded research and development activities will create imbalances in the original JCPOA that the E3 will want to address in this phase. To make this process more effective, the US and the E3 should gain a degree of buy-in from Russia and China, which could otherwise act as spoilers. Moreover, early consultation and messaging to partners in the Middle East, such as Israel and Saudi Arabia, can help reduce the inevitable resistance from these countries to diplomacy with Iran.

It remains unclear whether Iran is willing to extend its nuclear commitments beyond the terms outlined in the JCPOA – or, indeed, whether the new Iranian president can deliver on such diplomacy. What is certain is that, in return for such steps, the Biden administration will need to be prepared to offer Tehran greater sanctions easing, such as the following: 

  • Providing Iran with some access to the US dollar. This could entail reissuing a general licence for U-turn transactions with Iran (revoked in 2008) to allow international banks to process and clear US dollar transactions relating to Iran business. As part of this, the US could also offer to ease measures restricting dollar-denominated trade with Iran. 
  • Easing primary US sanctions in specific sectors important for Iran’s economic rehabilitation, such as energy and manufacturing. 
  • Endorsing the more-for-more deal as a treaty or a legislative and executive agreement. Given the fate of the JCPOA, as a way to reduce the risk of a future US president undoing the follow-up arrangement, the Biden administration can try to obtain congressional backing for the deal. Both Tehran and the Biden administration should, however, be prepared for this attempt to fail, depending on the political environment in Congress. Moreover, Iran will need to accept that such an agreement could still be undone by a future Congress, especially if passed with narrow Democratic support.

While Iran is likely to insist throughout on the removal of the Islamic Revolutionary Guard Corps from the US list of foreign terrorist organisations, a designation applied to it by the Trump administration in 2019, it is difficult to see Biden having the political space to do so as part of the nuclear talks. This matter can be more appropriately dealt with under the separate, parallel track of negotiations with Iran over regional issues.

This article appeared originally in October 2020 as part of Friederich Ebert Stiftung’s A return to diplomacy collection.

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of its individual authors.

Author

Deputy Director, Middle East and North Africa programme
Senior Policy Fellow