Will a Campaign Promise Overturn the Iran Nuclear Deal?

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A popular political pastime these days is speculating on how the new Trump administration will handle policies with controversial headwinds; central among these is the Iran nuclear deal.

Putting politics aside, gaining international support for dismantling the Iran nuclear deal – an objective set forth by President-elect Trump during his campaign – would prove to be an extremely difficult task. The Wall Street Journal reported that international commitment to the deal remains strong and that the major powers have pledged to promote it. Indeed, on Monday the 13th, the European Union reiterated its “resolute commitment” to the Joint Committee Plan of Action (JCPOA) and called for the upholding of commitments by all sides.

Over the last year, European and Asian energy, construction, telecommunications and financial services firms have taken steps to restart commercial relationships with Iran. The push towards economic reintegration will make any U.S. effort to reconstitute the pre-accord sanctions coalition more complicated and likely unpopular, absent strong evidence that Iran has materially breached its nuclear commitments.

Alternatively, and absent international support to scrap the JCPOA, the Trump administration could resort to a step up in unilateral sanctions against Iran and enforcement of sanctions programs outside the scope of the JCPOA (human rights, terrorism and ballistic missiles).

Let’s also not forget that Iran will unlikely sit idly by should the new U.S. administration be successful in ramping up economic pressure. Iranian supreme leader Ayatollah Ali Khamenei has said that if the U.S. tears up the agreement, “we will light it on fire.” Nonetheless, an Iranian approach that largely honors its JCPOA commitments, irrespective of US policy, almost certainly would stiffen European resolve to stay the current course.

Financial institutions and corporates that have reentered the Iranian market post-JCPOA may need to reevaluate assumptions on US sanctions risk exposure as the Trump administration reveals its policy vis-à-vis Iran and the JCPOA.