On 14 January the E3 — Germany, France, and the UK — invoked the dispute resolution mechanism (DRM) within the Joint Comprehensive Plan of Action (JCPOA), citing Iranian violations of the agreement. 

Even though a decision had been taken in November to resort to the DRM, following Iran’s next nuclear escalation, the timing suggests that the European powers were responding to the early January military escalation between US and Iran. The DRM’s principal function is to start a new phase of engagement between the signatories to address Iran’s gradual withdrawal from its nuclear commitments.

Analysts agree that the optics of the recent decision have been very poor. First and foremost, the E3 triggered the DRM after Iran’s weakest escalation and following intense Chinese diplomacy to persuade Tehran not to escalate dramatically. Second, news emerged and was confirmed that President Donald Trump had threatened the European Union with a 25% tariff on automotive exports to the US if the DRM was not triggered. 

Interestingly, the European External Action Service had tried and failed to stop the process in order to stave off negative Iranian perceptions.

Viewed from Tehran, the E3 appears to be in a state of internal disarray. In early January, Trump had urged the E3 to abandon the nuclear agreement but their statement commits it to salvaging the JCPOA and expresses the desire to use the DRM to get Tehran to return to full compliance. At the same time, however, the UK’s Prime Minister Boris Johnson declared, ‘President Trump is a great deal maker, by his own account. Let’s work together to replace the JCPOA and get a Trump deal instead.’

The E3 has been frustrated by Iranian escalations that began in May 2019, but this is not the whole picture. After the US unilaterally withdrew from the JCPOA in May 2018, Tehran initially adopted what was referred to as ‘strategic patience,’ in the expectation that the EU would compensate it for lost economic opportunities as a result of secondary US sanctions. 

In the absence of satisfactory EU initiatives, Tehran changed gears and moved to ‘strategic resistance,’ which included five steps of gradual withdrawal from its commitments under the deal. 

According to one European diplomat who spoke to Iran Strategic Focus, Iranian recommencement of research and development related to new centrifuge technology was the primary cause of a rethink on the European side. 

Essentially, Tehran intended to compel the EU to become more proactive in supporting its economy. By early January, it had therefore lifted all restrictions on uranium enrichment and research and development activities but had not left the JCPOA. 

In other words, the JCPOA has been reduced to a framework that allows the International Atomic Energy Agency (IAEA) to monitor Iran’s nuclear activities to ensure it does not race towards developing a nuclear weapon. 

Triggering the DRM can be interpreted as confrontational, but it could also create a new space for negotiations. The mechanism was actually put in place in order to alleviate US concerns that Iran might cheat in its nuclear commitments. That is why the EU never thought of using the mechanism when the US reneged on its own commitments within the JCPOA. 

Nonetheless, the lack of European response to non-compliance in 2018 raises the question of even-handedness. Furthermore, Tehran interpreted the EU’s statement on the recent US assassination of Islamic Revolutionary Guard Corps (IRGC) commander Qassem Soleimani as confrontational move because it failed to condemn the US action but instead blamed Iran for regional insecurity. 

What happens now?

The DRM provides a mutually agreed timeline to the JCPOA signatories to address their differences and find a resolution. The process will be managed by the EU’s new High Representative for Foreign Affairs and Security Policy, Josep Borrell, who has had no role in negotiating and managing the JCPOA. 

The first step is to convene all signatories within 15 days of the announcement and determine the framework and timeline of negotiations. Considering that the deal is a very long, technical document, the process is also likely to be lengthy.

If no agreement is reached, the Iranian nuclear file will be referred back to the UN Security Council and earlier UN and EU sanctions will be re-imposed on Iran if the Council concludes that Iran is a threat to international security. It is obviously also possible that Russia and China, both permanent members of the Council, would oppose that process. 

In any case, the negotiations to resolve the issues can be extended indefinitely, and the E3 members have communicated to all stakeholders that they won’t rush the process. 

Therefore, the DRM should in fact be seen as creating the potential for revived negotiations that could attempt to bring the US back to the JCPOA table in order to address the grievances of all parties.

Risks and opportunities

Considering current domestic, regional, and international tensions surrounding Iran, the E3 need to manage the DRM process very carefully to avoid provoking a new crisis. The E3 statement triggering the mechanism itself emphasised the intention not to ‘add a nuclear proliferation crisis to the current escalation threatening the whole region.’

The clear risk is that the process could end in major disagreement that would cause the JCPOA to collapse if the parties decide not to extend the negotiations. Tehran has already announced that it would exit not only the JCPOA but also the Nuclear Non-Proliferation Treaty (NPT) if its file is sent back to the UN Security Council – though the E3 are unlikely to push for that step.

It is more likely that they will try to convince President Trump to allow US representatives to return to the JCPOA to participate in shaping a new framework for multilateral talks. This may also explain why the EU has been very tough on Iran in recent weeks, perhaps in an attempt to create some political goodwill in Washington despite Trump’s desire for the E3 to withdraw fully from the JCPOA and make way for a new deal.

Managing expectations

Evidently, simultaneously managing the DRM process and US expectations will challenge the European Union. Another challenge will be managing Iranian reaction. Although Tehran wants to sustain the bare bones of the nuclear deal, further pressure could empower domestic hardliners to push for the end of the agreement. 

Treading a fine line between cooperation and confrontation, President Hassan Rohani reacted to the European move by saying that if the current regional instability continued, not only American but also European soldiers could be ‘in danger.’ While this threat infuriated the Europeans, it was evidently designed for the hard-line domestic audience. 

Towards international audiences, the Iranian message is clear: If the Iranian file goes back to the UN Security Council and UN and EU sanctions are re-imposed, Iran will leave the NPT and thereby essentially cut all ties with the IAEA. This would put an end to IAEA monitoring and increase the risk that Iran will weaponise its nuclear programme.

That is currently unlikely. For now, moderates in the Iranian government would like to see the new negotiation process as an opportunity to get Europeans to focus on providing Tehran with some needed economic incentives to reverse some of the nuclear steps. 

The EU has not been able to offer any significant relief to Iran so far and has not even made the INSTEX payment mechanism operational. 

Avoiding the collapse of the JCPOA

The main European concern is that another nuclear escalation by Tehran will prompt the complete collapse of the JCPOA. In essence, the E3, Russia, and China would like to sustain the agreement as a legal non-proliferation construct in the hope that the next US president will return to it in due course.

Until the US exited the framework in March 2018, Tehran and Washington could use the quarterly JCPOA meetings as a channel of engagement. If the EU can persuade Trump to permit US participation at the DRM meetings, Tehran could sell the move domestically as a US return to the deal. 

That said, the political fallout from the assassination of Soleimani — along with Iran’s shift to a more confrontational stance — may limit the space for new dialogue. 

Interestingly, during his 20 January press briefing, Foreign Ministry spokesperson Abbas Mousavi asserted that the door to negotiations to resolve the dispute with world powers had not closed. While Iran rejects the prospect of negotiating a new deal — referred to in some quarters as the ‘Trump deal’ — the optimistic scenario is that DRM process will pave the way for new Iran–US engagement. 

The pessimistic scenario is that Iran will escalate its nuclear activities further and ultimately withdraw from the NPT, leading to a situation similar to that in 2011, when extensive US, EU, and UN sanctions were imposed on Iran. 

With the first DRM meetings expected in the upcoming weeks, the pendulum could swing either way. 

This excerpt is taken from Iran Strategic Focus, our monthly intelligence report on Iran. Click here to receive a free sample copy.