Biden Admin Must Reckon With Many Sanctions Decisions Before Rejoining JCPOA, Experts Say

The U.S.’s decision to rejoin the Iran nuclear deal and rescind Iranian sanctions would be complex and time-consuming, likely taking months of bureaucratic work and negotiations, sanctions and Iran experts said. The new President Joe Biden administration has a range of Iranian-related sanctions issues to tackle before rejoining the agreement, the experts said, such as which Iranian entities and officials to de-list, whether to endorse Europe’s INSTEX and how to address humanitarian exports to Iran.

“We didn't get to the stage where we are now overnight. It took two and a half years,” said Ali Vaez, an Iran expert at the International Crisis Group, speaking during a Jan. 28 event hosted by the Atlantic Council. “We cannot get out of it overnight, either.”

Although Biden Cabinet members said the administration wants to rejoin the Joint Comprehensive Plan of Action, they also said the move is not imminent (see 2101190060). The administration is reviewing all Trump administration policies (see 2101250049), including sanctions imposed by the Treasury Department’s Office of Foreign Assets Control, which will need to be either revoked, maintained or updated, said Brian O’Toole, an Atlantic Council sanctions expert and the director of sanctions and screening at Truist Financial.

“It all depends on what you do with the post-Trump sanctions,” said O’Toole, a former OFAC official. “If you revoke all of them, you're just delisting, and that's relatively easy. But if you're going to slice and dice it, you've got to make a decision on all those entities.” O’Toole said the Biden administration must sift through “hundreds” of designations, which could include legal reviews. “That all could take months to accomplish just from a bureaucratic perspective,” he said.

The U.S. must complete that process before determining how it will rejoin the agreement, because Iran will likely demand the lifting of sanctions on many of its most important entities, including its central bank, said Kenneth Katzman, an Iran analyst with the Congressional Research Service. “Unless Iran’s central bank is going to be allowed to again freely operate in the international banking system,” he said, “Iran is not going to accept returning to compliance with the JCPOA.” Katzman said Iran will also demand that the U.S. lift terorism designations on its oil companies.

Biden must also decide how his administration will approach INSTEX, the European payment system designed to allow countries to trade with Iran despite U.S. sanctions (see 2004010016). The Trump administration warned Europe that anyone associated with the mechanism would be subject to U.S. sanctions (see 1905300035), but Biden may view INSTEX as a useful tool to complete humanitarian trade, Katzman said, and could endorse it as a friendly “gesture” to Iran. “The Biden administration could easily shift policy if it wanted to and say we support INSTEX, we support using that vehicle, even before all the other sanctions are lifted,” he said.

Other challenges could hamper the U.S.’s efforts to rejoin the JCPOA, Vaez said, such as whether European countries decide to impose snapback sanctions on Iran if the country continues to breach the terms of the deal, which it has been doing for months 2101120022). “That would add an entire layer of complications to the current dynamics,” Vaez said.

While OFAC reviews its Iranian sanctions regime, O’Toole cautioned the agency against issuing comfort letters: written assurances to companies that their transactions won’t be subject to sanctions (see 2004100044). While those letters can be effective in authorizing certain humanitarian transactions, they can also be a “trap of convenience” and unfairly benefit certain companies, O’Toole said. “They're selective,” he said. “They essentially advantage entities and governments with more connections to the U.S. government and OFAC.” O’Toole said they should be used sparingly, adding that issuing individual comfort letters is unrealistic for an agency with just over 200 employees. “It's just not in the realm of what's actually possible,” he said.