What to Watch for after Implementation Day

Foreign ministers from the P5+1 countries and Iran met on September 28 for the first time since the nuclear agreement was finalized in July.  The parties are focused on the agreement’s implementation, which should now be able to proceed following the failure of U.S. congressional opponents to pass a resolution of disapproval by a September 17 deadline.

In remarks following the meeting, European Union foreign policy chief Federica Mogherini confirmed that “implementation day” is expected early next year.[1]  On that day, Iran – notably its financial and energy sectors – will receive sanctions relief in exchange for restricting its nuclear work for a ten-year period.

Most attention in recent weeks has been on Congress and on the International Atomic Energy Agency’s investigation of Iran’s alleged past weaponization work.  But as implementation day approaches, three issues should receive more scrutiny: how any future illicit procurement by Iran will be handled; the flow of licit Iranian procurement through a newly-established “white channel”; and the agreement’s dispute resolution mechanism.

1. Illicit Procurement

Iran has well-established illicit procurement networks that have enabled it to supply its nuclear, missile, and military programs despite layers of international sanctions and national and multilateral restrictions on transfers of sensitive technology.  These networks have brought a steady flow of critical U.S. and European origin items to Iran, often using complicated arrangements involving transshipment through third countries, middlemen, and front companies.

Will Iran continue to operate these networks?  The British government reported as recently as April 2015 about “an active Iranian nuclear procurement” involving two well-known companies, both of which have been sanctioned by the European Union and the United States: Iran’s Centrifuge Technology Company (TESA) and Kalaye Electric Company.[2]  Tracking illicit Iranian procurement will be one of the most effective ways of detecting secret nuclear sites, as Iran would need to supply these sites covertly.  Like North Korea, Iran may decide to comply with the agreement at declared sites but pursue unauthorized work at undeclared sites.  Many of Iran’s now-declared sites were originally secret.

The agreement, however, is vague on the question of illicit procurement, while reportedly doing away with the U.N. structure that has been tracking Iranian procurement for nearly a decade.  The Security Council created a special committee – the 1737 Committee – to monitor the implementation of sanctions against Iran following the adoption of resolution 1737 in December 2006.[3]  This Committee’s mandate included investigating alleged violations and taking action in response to confirmed violations, including by designating additional entities for targeted sanctions.

Since 2010, the 1737 Committee has received support from a Panel of Experts charged with carrying out in-country investigations of alleged non-compliance, government outreach on sanctions implementation, and an analysis of trends and best practices regarding sanctions enforcement.  According to a U.N. fact sheet, this Panel is composed of “members with specialized technical backgrounds in relevant fields” and is intended “to provide neutral, fact-based assessment and analysis.”[4]  Its reports, which have been published annually since 2012, have included some of the most comprehensive publicly available information on Iran’s efforts to evade sanctions, as well as guidance for governments and industry to avoid contributing to these efforts.

With the termination of resolution 1737 by the new U.N. Security Council resolution on Iran (2231) effective implementation day, the future is uncertain for the 1737 Committee, as well as the Panel, which is reportedly being disbanded as a concession to Iran.  Secretary of State John Kerry confirmed in August that another, as yet undefined, U.N. body could take its place.  Would this new international body also include outside experts?  Would it be authorized to mount in-country investigations?  Secretary Kerry also said that much of the Panel’s work could be done by the United States and its allies.[5]  However, national efforts to catch and punish illicit procurement will be uneven; countries may be reluctant to mount investigations or bring enforcement cases that risk unravelling the agreement.

The deal does provide a mechanism for any party to the agreement to “refer a procurement-related activity to the Joint Commission under the dispute resolution mechanism if it is concerned that such activity is inconsistent” with the agreement.[6]  But it is unclear how this mechanism would interact with a new U.N. monitoring body.

2. Licit Procurement

The nuclear agreement establishes a dedicated “procurement channel” for authorized Iranian imports of sensitive nuclear and dual-use technology.  A Procurement Working Group, comprised of one member from Iran and one member from each of the P5+1 countries, plus the E.U. High Representative, will review and decide on Iranian requests for imports of controlled goods on a case-by-case basis within 30 days.  The procurement channel will operate for the first ten years of the agreement and will oversee all potential sales of items on the Nuclear Suppliers Group (NSG) Parts 1 and 2 lists, as well as non-listed items with nuclear applications.

According to the agreement, the E.U. High Representative will forward each proposal for a nuclear-related transfer to the Procurement Working Group for review.  Proposals will only be approved by a consensus of the Working Group: a proposal will be recommended for approval when all participants agree, or if the proposal receives no formal disapprovals within 30 working days.[7]  Otherwise, the proposal will be recommended for disapproval.  The support of two Working Group members can trigger an appeal of a disapproved proposal.  The appeal will be decided by the agreement’s Joint Commission, which will rule by consensus within 10 working days.  If a consensus cannot be reached in the Joint Commission, the dispute would be elevated to the ministerial level.[8]

The structure of the Procurement Working Group appears to establish a high bar for the approval of nuclear-related procurement for ten years.  However, the new U.N. Security Council resolution has carved out a number of exceptions: light-water reactor technology and related reactor fuel, imports to modify the Arak heavy water reactor, and trade in natural and low-enriched uranium (LEU) to help maintain Iran’s 300 kg cap on LEU.  Transfers of these goods would not require advance approval, though such transfers would have to be reported to the Security Council and to the International Atomic Energy Agency, and supplier countries would be responsible for ensuring proper end-use.[9]

What the agreement leaves unclear is what other goods, in practice, Iran will be allowed to import through this mechanism in the first ten years of the deal, and what criteria will be used to approve or deny requests.   Will Iran be allowed to procure goods prospectively – for example, to stockpile critical materials and technology that will be needed to expand the country’s centrifuge enrichment program?  Under the agreement, such an expansion is delayed for ten years, but Iran may want to start importing for the program in advance.

The deal also establishes procedures for end-use monitoring of imported goods, though it is uncertain how rigorous those arrangements will be.  The IAEA will have access to the locations of intended use of the most sensitive nuclear goods (the NSG Part 1 list).  But with nuclear-related dual-use goods (the NSG Part 2 list), the agreement will rely upon exporting countries for end-use monitoring.  The Procurement Working Group, as a condition of a sale, can “provide expertise to the exporting state, including experts, as needed, to participate in the end-use verification.”[10]  Will the Working Group rely on this option to strengthen end-use verification?  And if it does, will exporters simply disregard this “expertise”?

It is the U.N. Security Council, rather than the Procurement Working Group, that must authorize any imports of missile and military related items.  Because any Security Council member may veto a request, authorized imports are unlikely in the coming years.  Iran is prohibited from importing items on the Missile Technology Control Regime lists, both direct and dual-use technologies, for a period of eight years, unless approved by the Security Council.  Arms sales to Iran also require the approval of the Security Council and are restricted for five years.[11]  However, Iran objects to these restrictions and has declared its intention to continue advancing both its missile and military efforts, including through foreign procurement.

Both the Institute for Science and International Security (ISIS) and Project Alpha at King’s College have published reports on the role of the “white channel” and have raised concerns about how it will function.  ISIS’s report on the procurement channel questioned whether the Procurement Working Group would have sufficient resources to review transfer proposals adequately within 30 days and whether supplier states have the ability to detect and prevent illicit nuclear-related procurement by Iran.  ISIS also recommended that the Security Council extend the term of the procurement channel for an additional ten years, so that nuclear-related imports would be controlled for a total of 20 years.[12]  Ian Stewart, head of Project Alpha, also noted in an article that the likely high-volume of dual-use requests would pose a challenge for the Working Group, as would “the resource-intensive task” of end-use monitoring for many potential supplier states.[13]

3. Dispute Resolution

The nuclear deal’s Joint Commission, which will oversee the Procurement Working Group, will also act as the overall dispute resolution mechanism for the agreement.  The Commission, which will have the same eight members as the Procurement Working Group, is expected to meet for the first time “soon after adoption day” – in mid-October – according to Ms. Mogherini.[14]  With the exception of disputes over IAEA access to sites in Iran, the Joint Commission is intended to operate by consensus decision-making (that is, all parties must agree, or at least, no one formally disagree).  The Commission will adjudicate all manner of disputes, ranging from questions about sanctions relief, nuclear transfers, and other non-performance issues.  (Questions of IAEA access can be decided by a majority vote of five members out of the eight members of the Commission.)  This requirement for consensus decisions in the Joint Commission – and the multiple levels of bureaucracy involved in the dispute resolution process – could become a recipe for inaction.

Under the terms of the agreement, the Joint Commission has 15 days to reach a decision on any dispute, unless the time period is extended by consensus.  After Joint Commission consideration, any party can refer the issue to the ministerial level.  The Ministers have 15 additional days to resolve the decision, a timeframe that is also extendable by consensus.  In parallel with, or instead of, ministerial review, any party can also refer a dispute to a three-member Advisory Panel, which will have 15 days to issue a non-binding opinion.  The Joint Commission, then, would consider the opinion of the Advisory Board for 5 days, in a last ditch effort to resolve the dispute by consensus.  If, however, the issue is not resolved to the satisfaction of the complaining party, that country “could treat the unresolved issue as grounds to cease performing its commitments” under the agreement.[15]

These procedures will challenge the Joint Commission’s ability to operate efficiently – to resolve disputes before they fester and undermine the agreement.  A group of former weapons inspectors and non-proliferation experts, convened for a roundtable discussion by the Wisconsin Project in April, warned of this possibility.  While a consultative commission of some kind has been a feature of every successful arms control agreement, the group concluded that the agreement with Iran would succeed only if the Joint Commission effectively meditates disputes and resolves ambiguities or disagreement that could weaken the agreement over the long-term.

Judging from its pattern of behavior over the past decade, Iran probably will not commit a glaring violation of its commitments under the agreement.  Rather, the P5+1 countries are more likely to encounter inconsistencies, ambiguities, or selective opacity.  Iran may choose to test the limits of the agreement in minor ways that do not rise to the level of a material breach.  Resolving these ambiguities expeditiously, through the Joint Commission, will be essential for the effective monitoring and verification of the nuclear agreement.

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