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BARJAM UPDATE - INSTEX "made operational"
Update: Potential for EU to trigger dispute-resolution mechanism in JCPOA.

In recent days there are reports that the EU is getting close to triggering the formal dispute resolution mechanism of paragraph 36 of the JCPOA. The EU has not done this yet but it seems this is likely to occur at the end of the next 60-day deadline if Iran enriches uranium to 20% for example.

How would this work and what would this entail?

1) First, a party (e.g. the UK/France/EU) would formally refer the issue of non-compliance to the Joint Commission. The Joint Commission is made up of the EU+3 (now EU+2) members and Iran. The Joint Commission would have 15 days to resolve the issue (unless extended by consensus).

2) After these 15 days if the issue is not resolved, any party (including Iran) can request that an Advisory Board (3 experts - one appointed by Iran, one by the party that referred the issue to the JC and a third independent member) issue a non-binding opinion within a further 15 days.

3) Then, the Joint Commission would consider the opinion of the Advisory Board for a further 5 days.

4) If after this 35 day process the EU is still not satisfied with Iran's compliance, it can refer the issue to the UNSC where they will have a further 30 days to pass a resolution confirming the JCPOA. Obviously, the UK/France (and US) could veto such a resolution and thus guarantee that this could not be done. If this is not done after 30 days, all prior UNSC sanctions against Iran would be re-imposed.

So the bad news is that after 35 days the US would veto any UNSCR and effectively ensure full re-imposition of UNSC sanctions. But the good news is that Iran would have 35 days to take steps to prevent the EU from taking the extreme step of referring the issue to the UNSC (this is the worst case scenario for Iran). 

Iran must play a delicate game now of continuing to take steps to encourage the EU to deliver economic benefits to Iran, but not take steps that would force the EU to refer the issue to the UNSC and thus re-impose all UNSC sanctions against Iran (and the US could block them being lifted again). Especially so close to the 2020 US election where there is a good chance that a pro-JCPOA President could beat Trump (Biden, Bernie and Elizabeth Warren are best candidates for Iran).
"European officials say that none of the steps Tehran has taken so far significantly reduce Iran’s breakout time—the amount of time it would take Iran to amass enough fissile material for a nuclear weapon. They also acknowledge Iran’s claims that the steps it has taken to expand and further enrich its stockpile of uranium can be easily reversed, and say this isn’t the time to escalate tensions between Europe and Iran but to pursue diplomacy.

“It is not yet time to trigger” the dispute mechanism, said one senior European diplomat Friday. “The conditions are not there yet.”

A second senior European diplomat stressed that Iran’s actions have been carefully calibrated so far. In particular, while Iran has breached the 3.67% threshold in the nuclear deal for enriching uranium, it had only enriched up to 4.5% as of July 9. That is well below the 20% enrichment some Iranian officials had threatened and that Iran was conducting before the nuclear accord. Weapons-grade uranium is around 90%. The dispute resolution mechanism was designed to be used “where all other means of consultation” had failed, the diplomat said. There is still time to discuss violations among the nuclear deal participants before any action is taken, the person said."

One key date the Europeans are awaiting is Aug. 2, when the U.S. must decide whether to roll over its final sanctions exemptions connected to the nuclear deal. Those exemptions allow Russia, China and Europe to work on two of Iran’s nuclear facilities to make them less capable of producing nuclear fuel. U.S. officials have discussed killing off those exemptions in a bid to pressure Tehran to stop all enrichment activities."

I predict next point of tension will centre around Arak and in August 2nd if US revokes waivers for other countries to work on Arak's re-design (to produce less plutonium).
Iran notified the EU on August 5th that the third phase of Iran's countermeasures will take place on September 5th if European parties do not find a way to preserve the deal.

Current proposals include a $15 billion credit line to facilitate oil trade via INSTEX, negotiations on this proposal are ongoing between France/Germany and Iran.

Third phase of Iran's countermeasures are likely to include reversing plans to redesign Arak reactor so that it doesn't produce plutonium and enriching uranium at a higher enrichment level (up to 20%).

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