US President-elect Donald Trump recently branded the deal lifting sanctions against Iran as “horrible” and has instead suggested doubling the sanctions already in place. With the President-elect’s inauguration next week, what power does he have to follow through on these remarks?

A lot, as it turns out – but it would have a number of consequences.

President Obama implemented the Joint Comprehensive Plan of Action (JCPOA) sanctions relief using executive orders because he was unable to get the changes through the US Congress, which voted against them. Presidents are generally free to terminate or cancel sanctions imposed by executive orders and as such Trump will be able to reverse part or even all of the relief from US sanctions provided under JCPOA,

Douglas Maag, senior counsel at law firm Clyde & Co told IJGlobal: “He can take such action on the first day of his presidency if he so desires. He will not need any support or approval from congress to do so.”

The JCPOA agreement saw the US waive or terminate the secondary sanctions that targeted non-US companies, including those working within the energy, shipping, financial and other sectors – meaning other countries are mostly free to trade with Iran. US businesses are still not allowed to, although their foreign subsidiaries can engage in most deals.

In return Iran agreed to reduce or eliminate its stockpiles of low- and medium-enriched uranium, as well as limit the scope of its nuclear programme.

Consequences of scrapping JCPOA

It’s unclear exactly what Trump plans to do about the sanctions but his tweets reflect his view on the deal that was eventually struck:

“What a rotten deal we made with Iran. We get nothing (except laughter at our stupidity). They get everything,” he wrote in November 2013 when an initial interim agreement was struck. He was similarly unimpressed when the final agreement was reached in April 2015, tweeting: “The Iran nuclear deal is a terrible one for the United States and the world.”

Towards the end of December 2016 he denounced the deal as “horrible”, writing: “January 20th is fast approaching!”

Trump’s tweets suggest that he may take a harder line towards Iran – he has mentioned increasing or doubling the sanctions a number of times. But tearing up the agreement or making changes will have consequences; the JCPOA is a multilateral agreement and is not just between the US and Iran, Maag says.

“Before taking any steps to change or re-negotiate the JCPOA, I would expect the Trump administration to take into account how such steps would be perceived by US allies and other world powers who committed to the deal.”

In particular, if Trump were to re-impose the secondary sanctions on Iran, that would severely limit non-US companies’ ability to work simultaneously with the US and Iranian economies.

And besides the international fallout of breaking an agreement that took years to create, it may not be too beneficial for the US.

“It's hard to envision what better deal Trump might try to seek from Iran. It is the US, not Iran, that prohibits US companies from trading with Iran,” Maag says. “Perhaps a pragmatic President Trump will decide that further relief should be granted so that US companies can benefit from more trade with Iran.”

Trump could also consider tighter restrictions and increased monitoring to ensure Iran’s nuclear program remains peaceful, or try to negotiate a longer-term for the deal, Maag adds.

Another aspect of the JCPOA was that hundreds of Iranian entities on the US list of Specially Designated Nationals (SDN) were removed, allowing non-US businesses to work with them.

If Trump wanted to avoid making other JCPOA signatories seeing the imposition of additional sanctions as a unilateral transgression of the agreement, he could instead try to expand the number of Iranian entities on the list of SDNs, according to Henry Smith, director of global risk analysis at political, security and integrity consultancy Control Risks.

“If Trump seeks to guard the JCPOA in its current form, while also putting pressure on Iran, then it is likely that these sanctions will be limited to additional designations of Iranian entities and individuals,” Smith says.

“This would add to the number of sanctioned entities that foreign companies need to avoid in Iran to achieve sanctions compliance, though not put in place the restrictions that were suspended as part of the JCPOA. We think this is a best case scenario at this stage for companies considering business in Iran.”

What’s the deal?

If Trump does make changes to the agreement, what affect will this have on deals that have already been made? Since the secondary sanctions were lifted in January last year, a number of companies have made inroads into Iran.

French oil major Total and China National Petroleum Corp signed an agreement in principal to develop the South Pars gas field in Iran in November last year, and Shell signed a memorandum of understanding exploring cooperation with the National Iranian Oil Company (NIOC).

There are also 29 international firms prequalified to develop 50 oil and gas fields in Iran in a tender being run by NIOC.

“US sanctions apply prospectively, for conduct engaged in on and after they are imposed,” Maag says. However, it has not been US practice to exempt pre-existing deals from the effect of newly imposed sanctions either – so companies that have already signed for deals could be exposed to sanction penalties if they continue with them.

“Thus, companies are often in a very difficult position when sanctions come online, as continuing with an agreed transaction may then present dire sanctions exposures,” Maag says.

“Donald Trump” image cropped and provided courtesy of Gage Skidmore.