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The Biden Administration is close to negotiating the re-entry of the US into the Iran Nuclear agreement leading to a long-term confrontation with Congress, with sanctions relief at the epicenter.
The Biden administration is finalizing a deal that would provide the Islamic Republic of Iran with relief from US sanctions in exchange for curbs on Iran’s nuclear program. When the Administration lifts sanctions, some estimates indicate that Tehran will gain access to an estimated $86.1 billion to $130.5 billion in foreign assets that currently are not fully accessible and readily available.
The key clash between deal supporters and opponents will come over specifically which sanctions are suspended, or designations rescinded because of any nuclear agreement reentry. Congressional Republicans, who are aligned on these issues, will oppose the deal with Iran. Many congressional democrats and the Biden Administration will be the supporters of the agreement. Some moderate democrats may break ranks with the Biden Administration, but it will likely be insufficient to prevent the Administration from carrying out its policies in the immediate term. If the House or Senate, or both, flip to Republican control, the conflict and efforts to stymie the agreement will likely intensify.
There are indications that terrorism sanctions designations may be rescinded or weakened. This includes several sectors of Iran’s economy that are reportedly permeated by the Iran’s Revolutionary Guards Corps and/or help finance Iran’s sponsorship of terrorism. Any sanctions relief provided to these sectors – including the rescission of Executive Orders, the removal of sector designations, or the issuance of national security waivers pursuant to various Iran sanctions laws – could complicate the efforts of foreign banks and companies to reestablish their presence in Iran. These sectors include the energy and petrochemical sector, construction sector, the automotive sector, and the mining, mineral and metals sector.
Any company or financial institution that ultimately engages directly or indirectly with these sectors could find itself exposed to reputational risk at the very least, so companies should be prepared to respond to inquiries as to whether they engage in certain business with links to Iran.
The Iran Nuclear Agreement Review Act of 2015 (INARA, P.L. 114-17) is emerging as a key point of contention between the Administration and Congress. The law contains a mechanism that enables the Majority Leader and the Minority Leader of either chamber to introduce legislation expeditiously reviving sanctions on Iran and blocking future sanctions relief during specific recurring periods. The current window opened on February 13, 2022, for 60 days, closing on April 13, 2022. If legislation is introduced during that period, it is subject to privileged floor rules that guarantee simple-majority votes without any dilatory or procedural hurdles.
The term “agreement” in INARA was defined very broadly and includes any possible new deal. INARA defines “agreement” as “an agreement related to the nuclear program of Iran that includes the United States, or commits the United States to take action . . . whether it is legally binding or not.” This agreement includes any deal entered into or made between Iran and any other parties, and any “additional materials related thereto, including annexes, appendices, codicils, side agreements, implementing materials, documents, and guidance, technical or other understandings, and any related agreements, whether entered into or implemented prior to the agreement or to be entered into or implemented in the future.”
However, it is uncertain as to whether the Administration will submit the agreement to Congress for review or as an amendment to the original Iran nuclear agreement. They will likely argue that the agreement is meant to bring all parties back into compliance with the Iran nuclear agreement, a deal that has already gone through the process of Congressional review.
The Administration could also submit an “amended” Iran nuclear agreement, which requires only that any amendments be reported to the appropriate committees, and not subject to expedited consideration for disapproval in the House and Senate.
This is where certain Members of Congress will argue that an amended agreement amounts to “reaching an agreement” and triggers INARA’s transmittal and review requirements, particularly after the prior Administration withdrew from the agreement. Opponents of the agreement may also argue that the separate agreement to reenter the Joint Comprehensive Plan of Action (JCPOA) also constitutes a separate agreement under INARA’s definition. Even supporters of this agreement may be critical of the administration if it decides not to submit the agreement for review.
This may go so far as litigation by certain Members of Congress. Filing suit against the Administration for injunctive relief would raise the agreement’s profile even more and draw attention to sanctions relief provided to Iran to include companies directly or indirectly engaged with Iran.
Opponents and supporters of the Iran nuclear agreement are planning a considerable amount of outreach to the private sector, including the financial services sector, both in the US and abroad. As you are preparing your sanctions policies and engagement with policymakers, be prepared for outreach by both proponents of the agreement in the Administration and Congress, and by opponents principally in Congress on sanctions on Iran as well.