In remarks at the U.N. Security Council last week, U.S. Secretary of State Mike Pompeo warned that "time is drawing short" to continue restricting Iran's military program, which is covered by a U.N. arms embargo until October 2020.[1] This embargo is one of a number of restrictions contained in U.N. Security Council resolution 2231, which also endorses the nuclear agreement with Iran, or Joint Comprehensive Plan of Action (JCPOA).

Despite the U.S. withdrawal from the JCPOA in May 2018, the United States continues to highlight Iranian violations of the agreement and resolution 2231 from its permanent seat on the Security Council. This contradiction has created an unusual situation: The United States is no longer part of the JCPOA and the bodies created to manage the agreement's implementation, but it retains a prominent role in implementation through the Security Council, which is the ultimate arbiter of the agreement and related resolution.

This incongruous U.S. position appears to be complicating international efforts to manage Iranian nuclear-related procurement and nuclear transfers permitted by the agreement and resolution 2231. Countries and firms may be increasingly reluctant to participate in licit nuclear trade with Iran for fear of flagging such transfers to the United States and thereby facing the threat of expansive U.S. sanctions.

Nuclear Procurement Channel Slows

Among their other goals, the JCPOA and resolution 2231 sought to end illicit nuclear transfers to Iran by creating an above board procurement channel through which Iran could obtain items controlled by the Nuclear Suppliers Group and non-listed items with nuclear applications. Under the terms of the JCPOA, states are required to submit a proposal for the transfer of all "items, materials, equipment, goods and technology […] for Iran’s nuclear program […] or other non-nuclear civilian end-use" to the Security Council.[2] From there, proposals are sent for review to the Procurement Working Group, a body overseen by the JCPOA’s Joint Commission that includes representatives from all parties to the agreement. This group advises the Joint Commission and Security Council on the proposals, which are ultimately approved (or rejected) by the Security Council.

Since its withdrawal from the JCPOA, the United States is no longer a member of the Joint Commission and does not review procurement proposals as part of the Procurement Working Group. Nevertheless, as a permanent member of the Security Council, the United States continues to influence what Iran is authorized to import through the procurement channel. Furthermore, the United States has access to information on the countries, firms, and technologies involved in proposed transfers to Iran. This may deter foreign firms from considering sales to Iran and governments from putting forward such proposals to the Security Council for fear of being swept up in the ever-widening U.S. sanctions net.

While the channel was never used as heavily as expected, there has been a decline in its use since the United States withdrew from the JCPOA and reimposed sanctions. Through last June, 44 proposals had been submitted: 29 were approved, five rejected, nine withdrawn, and one is under review.[3] According to biannual reports published by the U.N. Secretary-General and the Facilitator of resolution 2231, only two requests (one rejected and one under review) were submitted during the most recent sixth month reporting period, down from a high of 13 between December 2017 and June 2018.[4]

Many of the procurement proposals processed thus far are not destined for Iran’s nuclear program; they involve the transfer of machine tools, measurement devices, and electrical equipment to Iran's automotive, construction, manufacturing, pharmaceutical, packaging, and petrochemical industries, among others.[5] The United States has sanctioned many of these industries in recent months as part of its "maximum pressure" campaign. And most U.S. sanctions target not only Iranian entities and sectors of Iran's economy directly, but also "foreign parties facilitating transactions for" these entities and sectors.[6] These secondary sanctions create enormous exposure to U.S. financial penalties for any firm doing business in these sectors in Iran that also has a presence in the United States.

Meanwhile, the United States continues to highlight possible Iranian violations of the procurement channel at the United Nations and to make the most of the U.N.'s limited mandate to investigate alleged violations. In April 2018, weeks before withdrawing from the JCPOA, the United States informed the Security Council about the undeclared transfer of aluminum alloys and carbon fiber to Iran. The United States assessed that these materials met the criteria for control by the Nuclear Suppliers Group and thus required approval by the Security Council. According to the United States, at least 500 tons of aluminum alloys were shipped to Iran in 2016 and 2017, and the carbon fiber was sent in 2017.[7] These allegations prompted a months-long U.N. investigation, including queries to supplier and transit countries. The United Nations was unable to confirm that the transfers should have passed through the procurement channel, although this conclusion is based on information provided by the countries involved rather than a direct inspection of the materials by U.N. investigators.

Conflict between Nuclear Notifications and Sanctions Waivers

The JCPOA allows specific nuclear-related items to be transferred to Iran without passing through the procurement channel in order to support nuclear energy production and the reconfiguration of proliferation-sensitive nuclear plants. Exceptions to the channel include light-water reactor technology and related reactor fuel, imports to modify the Arak heavy water reactor and the Fordow Fuel Enrichment Plant, and trade in natural and low-enriched uranium (LEU) to help Iran maintain a 300 kg cap on LEU.[8] Such transfers still must be reported to the Security Council. As a permanent member of the Security Council, the United States therefore receives notifications of these nuclear-related transfers.

While U.S. sanctions have long targeted Iran's nuclear infrastructure, a series of sanctions waivers issued as part of the JCPOA had allowed the specific work listed above to go forward with limited risk that the entities involved would be sanctions targets. This work is widely seen as sustaining the nonproliferation benefits of the agreement.

In recent months, however, the United States has reversed course and revoked some of these sanctions waivers. Foreign parties contributing to the expansion of the Bushehr Nuclear Power Plant beyond its existing light-water reactor unit are now exposed to U.S. sanctions, as are entities that support the exchange of enriched uranium from Iran for natural uranium and the import and storage of Iranian heavy water.[9] Thirty-eight notifications have been submitted to the Security Council since 2016; they include transfers of light water equipment and technology and of enriched uranium in exchange for natural uranium.[10]

Waivers related to the reconfiguration of Arak and Fordow remain in place, as does the waiver for work on the existing reactor unit at Bushehr. These waivers were renewed in May and again earlier this month, but for 90 days rather than 180 as in the past.[11] They can be modified or revoked at any time[12] and some members of Congress have called on the Trump administration to do so.[13] Biannual U.N. reports on the implementation of the JCPOA and resolution 2231 indicate regular transfers to support the modification of centrifuge cascades at Fordow, as well as one transfer related to Arak.[14] Entities participating in this work or involved in transferring related items might become subject to sanctions if the waivers are revoked.

Looking Forward

If the JCPOA remains in force despite the U.S. maximum pressure campaign and Iran's violations of the agreement's core nuclear restrictions, use of the procurement channel – already very low – may decline further. Countries and companies with exposure to U.S. sanctions are growing ever-more reluctant to participate in any trade with Iran, even trade and transfers that are expressly permitted by the agreement. This may further encourage Iran to rely on its well-established black market supply network of brokers and firms around the world. The limited use of the channel has already raised concerns that it is being bypassed in this manner.[15]

If the JCPOA falls apart – and the procurement channel with it – whatever limited nuclear trade now passing through the channel could move underground. German government reporting suggests that instances of Iranian illicit nuclear procurement in Germany – a primary participant in the channel – have declined since the implementation of the agreement in 2016. According to a June 2019 intelligence report, there were "fewer indications of Iranian attempts to acquire proliferation-sensitive material for its nuclear program" in 2018.[16] Conversely, a report published in 2016 noted that illicit Iranian procurement "persisted in 2015 at what is, even by international standards, a quantitatively high level" and that "this holds true in particular with regard to items which can be used in the field of nuclear technology."[17]

In the meantime, the United States seems able both to exert maximum pressure through sanctions from outside the agreement and track and influence the limited nuclear trade allowed by the agreement from the Security Council.