Ninth Report - European Scrutiny Committee Contents


41 Restrictive measures against Iran: nuclear issues

Committee's assessment Politically important
Committee's decisionCleared from scrutiny
Document detailsCouncil Decision concerning restrictive measures against Iran (36237)
Legal baseArticle 29 TEU; unanimity
DepartmentForeign and Commonwealth Office

Summary and Committee's conclusions

41.1 This Council Decision extends the suspension of restrictive measures specified in the Joint Plan of Action, agreed between the E3+3 and Iran, until 24 November 2014.

41.2 On 24 November 2013 in Geneva, the Foreign Ministers of the E3+3 (China, France, Germany, Russia, the United Kingdom and the United States), supported by the EU High Representative, reached an agreement with Iran — the Joint Plan of Action. The 17 January 2014 EEAS Fact Sheet on the negotiations describes the Joint Plan of Action thus:

    "The Joint Plan of Action is an interim agreement setting out an approach towards reaching a long-term comprehensive solution. As a first step, it includes the implementation, by both sides, of a series of voluntary measures, for a duration of six months. This first step could be renewed by mutual agreement.

    "A Joint Commission of the E3/EU+3 and Iran will be established to monitor the implementation of these measures, with the IAEA responsible for the verification of nuclear-related measures. The Joint Plan of Action also includes elements for the final step — i.e. the common goal of reaching a final, comprehensive solution which would lead to the full resolution of the international community's concerns about Iran's nuclear programme, along with UN Security Council resolutions."

41.3 The E3+3 and Iran agreed in the early hours of 19 July to extend the JPoA for a further four months until 24 November. This amendment was agreed on 21 July and published in the Official Journal on the same day. The Minister for Europe expresses the hope that this will provide the additional time needed to conclude an agreement, and continues to believe that a deal is still possible —"we would not have agreed to an extension had this not been the case" — but also says that "reaching an agreement will be challenging", and that it is "vital both sides continue efforts to reach a comprehensive deal as soon as possible".

41.4 The Minister explains that, under the extension, both sides will continue to implement all measures agreed under the Geneva interim deal that have not yet expired, which he says means that the limited sanctions relief under the JPoA will remain in place until 24 November 2014.[174]

41.5 The Minister also makes the following points;

—  in addition to these measures, Iran has committed to convert an agreed amount of uranium oxide into fuel for the Tehran Research Reactor and to dilute its UF6 enriched up to 2% into natural uranium. In return, the E3+3 has committed to enable the repatriation of $2.8 billion in instalments over the course of the four month extension period. The IAEA will continue to be responsible for verification of all nuclear-related measures;

—  no additional sanctions have been suspended. All other EU sanctions and restrictions remain in place and in force and the Government's position remains not to encourage trade with Iran.

—  in order to achieve a comprehensive solution, "Iran has to show more flexibility and have more realistic expectations — given our concerns about break out — about the future scope of its nuclear programme, in particular on the core issue of enrichment";

—  "all parties will now need to reflect and evaluate the best way forward. We will reconvene in the coming weeks with the clear determination to reach agreement on a Joint Comprehensive Plan of Action by 24 November."

41.6 We are grateful to the Minister for his comprehensive explanation. Time alone will demonstrate whether the Iranian authorities show the increased flexibility and more realistic expectations that the Minister regards as essential to reaching the main goal, i.e. a comprehensive solution.

41.7 In the meantime, we clear this Council Decision, noting that interested Members can pursue the questions that will no doubt arise over the next six months via the many means at their disposal.

41.8 We are also drawing this chapter of our Report to the attention of the Foreign Affairs Committee.

41.9 In the circumstances, and on this occasion, we do not object to the Minister having overridden scrutiny.

41.10 However, we note that the Minister has not responded to an earlier request for further information — which we made on 30 April when he submitted them for scrutiny — concerning an earlier Council Decision amending Council Decision 2010/413/CFSP concerning restrictive measures against Iran and a related Council Implementing Regulation implementing Regulation (EU) No. 267/2012. At that time, the Minister explained that this Council Decision and Council Implementing Regulation stemmed from:

·  Safa Nicu — originally designated for being a communications firm that supplied equipment for the Fordow (Qom) underground enrichment facility — having challenged its listing at the EU General Court; on the basis of the evidence available, he had decided to support delisting; and

·  the listing of North Drilling having been annulled in January 2014, the EU Council has since decided to relist North Drilling on the basis of new evidence and on a different criteria.

41.11 In a separate letter, the Minister explained that, due to the risk of a damages claim in the case of Safa Nicu, and the risk of asset flight in the case of North Drilling, the EU Council needed to agree these measures within a very short space of time, and apologised for the consequential override. We did not take issue with this.

41.12 But we agreed with the Minister on the importance of maintaining the effectiveness of the sanctions regime (which has implications for all such "listings-based" regimes). We also noted that, although judgment was not anticipated until around June 2014, on the basis of the evidence available the Minister had decided to support delisting. We therefore asked the Minister to explain what the evidence was that had thus persuaded him. Pending receipt of the Minister's response, we retained the documents under scrutiny.[175]

41.13 We are puzzled by the fact that, not only has the Minister not responded, but records in his Explanatory Memorandum that he has not done so. We now ask him to respond forthwith.

Full details of the documents: Council Decision 2014/480/CFSP of 21 July 2014 amending Decision 2010/413/CFSP concerning restrictive measures against Iran: (36237), —.

Background

41.14 As the Committee's previous Reports illustrate in detail, the EU has been engaged since December 2006 in a "dual track" strategy — with both engagement and restrictive measures — regarding Iran's nuclear activities, not simply implementing in the EU, but also strengthening in that context, successive UN Security Council Resolutions (UNSCRs).

41.15 UNSCR 1929 of 9 June 2010 imposed a number of further restrictive measures which in broad terms:

—  reaffirmed that Iran shall cooperate fully with the IAEA;

—  banned new Iranian nuclear facilities and banned Iranian nuclear investment in third countries;

—  banned exports of several major categories of arms, and further restricted Iran's ballistic missile programme;

—  froze the assets of 40 entities, including one bank subsidiary, several Islamic Revolutionary Guard Corps companies, and three Islamic Republic of Iran Shipping Lines subsidiaries, which had been involved in multiple sanctions violations cases;

—  froze the assets of, and banned travel by, one senior nuclear scientist;

—  implemented a regime for inspecting suspected illicit cargoes and authorising their seizure and disposal;

—  placed restrictions on financial services, including insurance and reinsurance, where there was suspicion of a proliferation link;

—  banned existing and new correspondent banking relationships where there were proliferation concerns;

—  established a Panel of Experts to advise and assist on sanctions implementation; and

—  reaffirmed the dual track strategy (of pressure and diplomacy).

Council Decision 2010/413/CFSP

41.16 As well as implementing the measures contained in UNSCR 1929, the EU imposed additional EU sanctions in the following areas:

—  the energy sector, including the prohibition of investment, technical assistance and transfers of technologies, equipment and service;

—  the financial sector, including additional asset freezes against banks and restrictions on banking and insurance;

—  trade, including a broad ranging ban on dual use goods and trade insurance;

—  the Iranian transport sector in particular the Islamic Republic of Iran Shipping Line (IRISL) and its subsidiaries and air cargo; and

—  new visa bans and asset freezes, especially on the Islamic Revolutionary Guard Corps (IRGC).

41.17 Council Decision 2010/413/CFSP was adopted by the 26 July 2010 Foreign Affairs Council, together with a Regulation (Council Regulation (EU) 961/2010) extending the list of entities and individuals subject to an assets freeze.

41.18 A further package of EU sanctions was adopted by the 15 October 2012 Foreign Affairs Council. The Committee cleared the relevant Council Decision on 31 October 2012. The Council Regulation required to implement the October package was adopted on 21 December 2012. It includes:

·  Finance: a financial cut-off, prohibiting all but specifically licensed trade with a notification system for humanitarian payments up to €100,000 and other payments (€40,000); a full listing of the Central Bank of Iran except to permit channels for the provision of liquidity and repayment of debts; a full ban on the public provision of export credit guarantees (adding short term to the already prohibited medium and long term);

·  Energy sector: a gas embargo: a further ban on exporting equipment for the Iranian Energy Sector; a ban on construction of oil tankers;

·  Trade: bans on exporting graphite and metals that can be used in Iran's nuclear programme; naval equipment for ship building and maintenance; software for integrating industrial processes;

·  Transport: bans on the flagging and classification of Iranian oil tankers and cargo vessels; and on the leasing/chartering of vessels for the transport or storage of Iranian oil; and

·  New Designations: the Council Decision and Council Implementing Regulation imposed an asset freeze on further Iranian companies and updated the entries for three already listed entities.

The Minister's Explanatory Memorandum of 6 August 2014

41.19 In his Explanatory Memorandum, the Minister for Europe (Mr David Lidington) recalls that The Joint Plan of Action (JPoA) was agreed by the E3+3 and Iran in November 2013 and implementation began on 20 January 2014.

41.20 He continues as follows:

"The first step measures included in the JPoA were that Iran would halt all key aspects of its nuclear programme, and in some cases roll it back. Specifically, the agreement sets out that as a first step Iran would;

·  "Eradicate stockpile of 20% enriched uranium in its most concerning form (UF6) (currently 196 KG) by diluting half (to less than 5% enriched) and converting half to oxide;

·  "Suspend above 5% enrichment everywhere in Iran, including at Natanz and Fordow;

·  "Not install further centrifuges at Natanz, and will only replace existing centrifuges with centrifuges of the same type (i.e. not install or bring into operation advanced centrifuges);

·  "Not produce centrifuges, except to replace damaged existing machines (and only replace like-for-like);

·  "Limit the stockpile of less than 5% enriched uranium in its most concerning form (UF6) by converting newly enriched UF6 into oxide;

·  "Not establish new locations for enrichment;

·  "Halt fuel production for the Heavy Water Research Reactor at Arak (which could potentially offer Iran a plutonium route to a bomb) and not install remaining components (i.e. control room equipment; refuelling machine; and reactor cooling pumps);

·  "Not develop a reprocessing facility (i.e. to extract plutonium);

·  "Allow enhanced monitoring and transparency (which includes some of the requirements under the Additional Protocol) of its nuclear facilities.

"In return, the US and EU agreed proportionate and meaningful sanctions relief, although the bulk of the sanctions measures remained in place. In summary:

·  "The US will pause efforts to reduce crude oil sales to Iran's oil customers;

·  "The US will agree to repatriate an amount to be agreed amount of oil revenue held abroad;

·  "The EU and US will suspend oil-related insurance and transport costs. (i.e. EU's P&I measures);

·  "The EU and US will suspend sanctions on petrochemical exports; and sanctions on imports of gold and precious metals;

·  "The US will suspend sanctions on the auto industry; and allow licensing on the civil aviation sector;

·  "No new nuclear-related sanctions to be implemented by the UN, EU and US Administration;

·  "The US will establish a financial channel to facilitate humanitarian and legitimate trade, including for payments to international organisations, and for Iranians studying abroad;

·  "The EU will increase the thresholds for authorisation of financial transactions for humanitarian and non-sanctioned trade."

41.21 The Minister then recalls that these measure were suspended for six months — from 20 January 2014 to 20 July 2014 — to allow time for comprehensive negotiations on the Iranian nuclear issue.[176]

41.22 The Minister then continues as follows:

    "During that time talks have been productive and both sides have worked hard on a draft text, but more time is needed to bridge the differences that remain, in particular on enrichment, and to agree the details of how an agreement would be implemented.

    "The E3+3 and Iran agreed in the early hours of 19 July to extend the JPoA for a further four months until 24 November, which is exactly one year after the JPoA was agreed. This Council Decision amends the 'end date' of EU sanctions from 20 July 2014 to 24 November 2014. We hope this will provide the additional time needed to conclude an agreement. We believe that a deal is still possible - we would not have agreed to an extension had this not been the case - but reaching an agreement will be challenging. It is vital both sides continue efforts to reach a comprehensive deal as soon as possible.

    "Under the extension, both sides will continue to implement all measures agreed under the Geneva interim deal that have not yet expired. This means the limited sanctions relief under the JPoA will remain in place until 24 November 2014.

    "In addition to these measures, Iran has committed to convert an agreed amount of uranium oxide into fuel for the Tehran Research Reactor and to dilute its UF6 enriched up to 2% into natural uranium. In return, the E3+3 has committed to enable the repatriation of $2.8 billion in instalments over the course of the 4 month extension period. The IAEA will continue to be responsible for verification of all nuclear-related measures.

    "No additional sanctions have been suspended. All other EU sanctions and restrictions remain in place and in force and the Government's position remains not to encourage trade with Iran.

    "In order to achieve a comprehensive solution, Iran has to show more flexibility and have more realistic expectations — given our concerns about break out — about the future scope of its nuclear programme, in particular on the core issue of enrichment. All parties will now need to reflect and evaluate the best way forward. We will reconvene in the coming weeks with the clear determination to reach agreement on a Joint Comprehensive Plan of Action by 24 November."

41.23 The Minister concludes by noting that the draft Council Decision was agreed by written procedure on Monday 21 July 2014.

The Minister's letter of 6 August 2014

41.24 The Minister recalls that he wrote to the Committee on 14 July about the likelihood that we would need to extend the Joint Plan of Action by way of an amendment to Council Regulation (EU) No. 267/2012[177] — this extension to enable the EU to continue providing Iran with some limited sanctions relief in exchange for actions by Iran that would address the international community's most important proliferation concerns. He then explains that:

    "Since then, the Council has concluded that an amendment to the Decision is now required and that the extension can be agreed through an amendment to Council Decision 2010/413/CFSP concerning restrictive measures against Iran."

41.25 He then says:

    "The E3+3 and Iran agreed in the early hours of 19 July to extend the JPoA for a further four months until 24 November, which is exactly one year after the JPoA was agreed. This Council Decision amends the 'end date' of EU sanctions from 20 July 2014 to 24 November 2014. This amendment was agreed on 21 July and published in the Official Journal on the same day. We hope this will provide the additional time needed to conclude an agreement. We believe that a deal is still possible — we would not have agreed to an extension had this not been the case — but reaching an agreement will be challenging. It is vital both sides continue efforts to reach a comprehensive deal as soon as possible.

    "Under the extension, both sides will continue to implement all measures agreed under the Geneva interim deal that have not yet expired. This means the limited sanctions relief under the JPoA will remain in place until 24 November 2014.

    "In addition to these measures, Iran has committed to convert an agreed amount of uranium oxide into fuel for the Tehran Research Reactor and to dilute its UF6 enriched up to 2% into natural uranium. In return, the E3+3 has committed to enable the repatriation of $2.8 billion in instalments over the course of the 4 month extension period. The IAEA will continue to be responsible for verification of all nuclear-related measures.

    "No additional sanctions have been suspended. All other EU sanctions and restrictions remain in place and in force and the Government's position remains not to encourage trade with Iran.

    "In order to achieve a comprehensive solution, Iran has to show more flexibility and have more realistic expectations — given our concerns about break out — about the future scope of its nuclear programme, in particular on the core issue of enrichment. All parties will now need to reflect and evaluate the best way forward. We will reconvene in the coming weeks with the clear determination to reach agreement on a Joint Comprehensive Plan of Action by 24 November."

41.26 The Minister concludes by expressing his regret that he had to agree to the adoption of this Council Decision before the Committee has had an opportunity to scrutinise it.

Previous Committee Reports

None, but see (35964) — and (35965) —: Forty-seventh Report HC 86-xlii (2012-13), chapter 11 (30 April 2014) and (35712) 18163/13: Thirty-first Report HC 83-xxviii (2013-14), chapter 15 (22 January 2014), and the earlier Reports referred to therein.


174   See the "Background" section of this chapter of our Report for full information on the EU sanctions regime against Iran and the changes brought in earlier this year. Back

175   See (35964), - and (35965), -: Forty-seventh Report HC 86-xlii (2013-14), chapter 11 (30 April 2014). Back

176   The Committee cleared the relevant Council Decision on 22 January 2014: see (35712), 18163/13: Thirty-first Report HC 83-xxviii (2013-14), chapter 15 (22 January 2014) for full background. Back

177   Council Regulation (EU) No. 267/2012 of 23 March 2012 implements additional restrictive measures against Iran imposed by Council Decision 2012/35/CFSP of 23 January 2012 and Council Decision 2012/152/CFSP of 15 March 2012. Regulation 267/2012 consolidates the pre-existing measures and the newly enacted measures into a single legislative text. A list of targeted "petrochemical products" is included in Annex V. The Council also prohibited the supply of specialized financial messaging services to any financial institution subject to the EU's Iranian sanctions (including the Central Bank of Iran, Bank Tejarat and Bank Melli: thus, with effect from March 17, 2012, SWIFT disconnected these institutions from its financial messaging services, effectively blocking any international wire transaction to the affected banks, regardless of the jurisdiction of the parties involved in the transaction). Regulation 267/2012 also prohibits any direct or indirect trade in gold, precious metals and diamonds with the Government of Iran, its public bodies, corporations and agencies, any person, entity or body acting on their behalf or at their direction, or any entity or body owned or controlled by them; this prohibition includes any form of financial or technical assistance related to these goods. Back


 
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Prepared 19 September 2014