Documents considered by the Committee on 4 November 2015 - European Scrutiny Contents


1 Restrictive measures against Iran in connection with its nuclear programme and the Joint Comprehensive Plan of Action (JCPOA)

Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; recommended for debate on the floor of the House together with other related documents already recommended for debate (decision reported 9 September 2015) concerning Restrictive measures again Iran
Document details(a)  Council Decision (b) Council Regulation (c) Council

Implementing Regulation

Legal base(a) Article 29 TEU, unanimity; (b) Article 215 TFEU, QMV; (c) Article 46 of Council Regulation (EU) No. 267/2012, QMV
DepartmentForeign and Commonwealth Office
Document Numbers(a)  (37192) —; (b) (37193) —; (c) (37194), —

Summary and Committee's conclusions

1.1 On 14 July 2015, the E3+3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States), supported by the EU High Representative for Foreign Affairs and Security Policy (HR; Federica Mogherini), reached an agreement with Iran — the Joint Comprehensive Plan of Action (JCPOA). In a Joint Statement in Vienna, EU High Representative Mogherini and Iranian Foreign Minister Zarif said:

—  the JCPOA will ensure that Iran's nuclear programme will be exclusively peaceful, and mark a fundamental shift in their approach to this issue;

—  they anticipate that full implementation will positively contribute to regional and international peace and security;

—  under no circumstances will Iran ever seek, develop or acquire any nuclear weapons;

—  the JCPOA includes Iran's own long-term plan with agreed limitations on Iran's nuclear program, and will produce the comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions related to Iran's nuclear programme, including steps on access in areas of trade, technology, finance, and energy;

—  the JCPOA is a balanced deal that respects the interests of all sides, and is also complex, detailed and technical;

—  the JCPOA is "not only a deal but a good deal. And a good deal for all sides — and the wider international community";

—  the JCPOA "opens new possibilities and a way forward to end a crisis that has lasted for more than 10 years"; and

—  they were "committed to make sure this JCPOA is fully implemented, counting also on the contribution of the International Atomic Energy Agency".[1]

1.2 On 20 July 2015, the United Nations Security Council voted unanimously to adopt Security Council Resolution (UNSCR) 2231 (2015), endorsing the JCPOA. In a statement issued on that day, the UNSC said:

    "The Council, through the 104-page text, including annexes that detailed the sanctions-related provisions and listings, requested the International Atomic Energy Agency to undertake verification and monitoring of Iran's compliance. It reaffirmed that Iran should cooperate fully with the Agency to resolve all outstanding issues. Upon receipt of a positive report from the Agency, the Council would terminate sanctions set out in resolutions adopted between 2006 and 2015.

    "Furthermore, the Council decided that the resolution's provisions should, pending confirmation of implementation, expire 10 years after its adoption, and with that, it would remove the Iranian nuclear issue from its agenda. At the same time, the text outlined the process for automatically reinstating the sanctions in the event of non-compliance."[2]

1.3 Council Decision (CFSP) 2015/1336 of 31 July 2015 and Council Regulation (EU) 2015/1327 of 31 July 2015 transposed the UNSCR into EU law. They were considered by the Committee on 3 September.[3]

1.4 The JCPOA also required the Council to amend the existing Decision (2010/413/CFSP) and Regulation ((EU) 267/2012) on, or before, "Adoption Day" on 18 October 2015.

1.5 This further Council Decision, Council Regulation and Council Implementing Regulation, which were adopted on 18 October, introduced the necessary derogations to the existing restrictive measures to allow Iran to meet its obligations under the JCPOA (see "Background" for details of the existing restrictive measures).

1.6 The Minister for Europe (Mr David Lidington) explains that the amendments implement sanctions relief by terminating the implementation of nuclear-related economic and financial sanctions, in accordance with the JCPOA (see "Background" for details). However, this sanctions relief will take effect only when the International Atomic Energy Agency (IAEA) has verified that Iran has completed the agreed steps on its nuclear programme.

1.7 The Minister also:

—  explains that the JCPOA required the Council to adopt the amended Decision and Regulation as specified in the UNSCR, i.e., 90 days after the UN Security Council Resolution endorsed the agreement, or earlier by mutual consent of the JCPOA participants;

—  underlines how important it was "that the EU legislation captured the spirit and effect of the JCPOA and translated this accurately into a detailed legal text";

—  says this "[i]ntensive and highly technical work continued on the attached documents into October 2015" until they were finally agreed for adoption on 18 October;

—  notes that, "due to the need to agree the documents by 'Adoption Day' to meet our JCPOA obligations, there was insufficient time to follow the normal scrutiny procedure"; and

—  regrets that "the need for the override was, on this occasion, unavoidable".

1.8 Finally, looking ahead, the Minister says:

    "Although the amending legislation was required to be in place when the deal comes into force on 'Adoption Day', the sanctions relief will not be triggered until 'Implementation Day'. This will occur only when the IAEA verifies that Iran has completed the agreed actions on its nuclear programme. We expect 'Implementation Day' to occur in early 2016, but until the IAEA verifies that Iran has completed the agreed activities the exact date will not be clear."

1.9 Our previous relevant Report contains the background on earlier stages of the negotiations, full information on the JCPOA, and reaction to it. This included the US representative at the UN stressing that implementation was "everything," that the tasks were far from over and that the resolution included a "snap-back" system triggering reinstatement of the sanctions in the event of non-compliance.[4]

1.10 At that time, one commentator described "the idea that sanctions can come crashing quickly down again" as "over-optimistic".[5]

1.11 Writing two months later, the Prime Minister, the President of France and the Chancellor of Germany said:

    "Iran will have strong incentives not to cheat: The near certainty of getting caught and the consequences that would follow would make this a losing option."[6]

1.12 For our part, in considering the first post-JCPOA amendments, on 9 September, we noted that, nearly two months having passed since the heady days of mid-July, there had been time for further consideration of the JCPOA and its possible repercussions; that the time was ripe for the House to have a further opportunity to debate these matters; that a debate should take place immediately after the House returned from the "conference" recess; and that it should be held on the floor of the House.[7]

1.13 It is now early November, and the debate has not yet been arranged. We urge the Government to do so forthwith.

1.14 In the meantime, in the circumstances and on this occasion, we do not take issue with the Minister having agreed to the adoption of these EU measures ahead of scrutiny. Nonetheless, the documents remain under scrutiny, pending the holding of the debate, of which they should form part.

Full details of the documents: (a) Council Decision (CFSP) 2015/1863 of 18 October 2015 amending Decision 2010/413/CFSP concerning restrictive measures against Iran: (37192), —; (b) Council Regulation (EU) 2015/1861 of 18 October 2015 amending Regulation (EU) No. 267/2012 concerning restrictive measures against Iran: (37193), —; (c) Council Implementing Regulation (EU) 2015/1862 of 18 October 2015 implementing Regulation (EU) No. 267/2012 concerning restrictive measures against Iran: (37194), —.

Background

1.15 As our predecessors' previous Reports illustrate in detail,[8] 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).

1.16 In broad terms, UNSCR 1929 of 9 June 2010:

—  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

1.17 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).

1.18 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.

1.19 A further package of EU sanctions was adopted by the 15 October 2012 Foreign Affairs Council. 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.[9]

1.20 On 18 October 2015, EU High Representative Federica Mogherini and Iranian Foreign Minister Javad Zarif issued the following Joint Statement:

    "Today is Adoption Day of the Joint Comprehensive Plan of Action (JCPOA) related to the Iranian nuclear programme.

    "This is another important milestone that brings us a step closer to the beginning of implementation of the JCPOA, to which we are strongly committed.

    "We have respected the timetable set out in the JCPOA, which demonstrates our collective will to stick to its provisions.

    "Iran will now start the implementation of its nuclear-related commitments with the objective of full and effective completion. The International Atomic Energy Agency (IAEA) will make the necessary preparations for the monitoring and verification of these steps.

    "The EU today adopted the legislative framework for lifting all of its nuclear-related economic and financial sanctions.

    "It will take effect on Implementation Day, simultaneously with the IAEA-verified implementation of agreed nuclear measures by Iran.

    "The United States is taking action today to cease application of nuclear-related statutory sanctions on Iran effective on Implementation Day when the IAEA has verified implementation of agreed nuclear measures by Iran, as specified in the JCPOA; and is directing all appropriate additional measures be taken to implement the cessation of application of sanctions, including the termination of Executive Orders and the licensing of activities, as specified in the JCPOA.

    "The Joint Commission foreseen under the JCPOA will now convene for its first meeting at the level of Political Directors on 19 October in Vienna, in order to further advance preparations for implementing the Joint Comprehensive Plan of Action.

    "All sides remain strongly committed to ensuring that implementation of the Joint Comprehensive Plan of Action can start as soon as possible. To this end, we will make all the necessary preparations."[10]

The Council Decision, Council Regulation and Council Implementing Regulation

1.21 In his Explanatory Memorandum of 29 October 2015, the Minister notes that:

    "The UNSC voted unanimously to adopt UNSCR 2231 endorsing the JCPOA. The amendments to the Council Decision and Regulation will allow the initial sanctions relief agreed under the JCPOA."

The Government's view

1.22 The Minister continues his analysis as follows:

    "Whilst full implementation of the JCPOA will permit the flow of certain goods and services, it will also impose strict limits and inspections on Iran's nuclear programme. The IAEA will have unprecedented access to verify Iran's adherence to these restrictions, giving the international community confidence that Iran's nuclear programme is, and will remain, exclusively peaceful.

    "The JCPOA, if fully implemented, will eventually entail the comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions related to Iran's nuclear programme."

1.23 With respect to the details of the changes, the Minister says:

    "The EU will terminate all provisions of the EU Principal Regulation, as subsequently amended, implementing all nuclear-related economic and financial sanctions, including related designations, simultaneously with the IAEA-verified implementation of agreed nuclear-related measures by Iran as specified in Annex V, which cover all sanctions and restrictive measures in the following areas, as described in Annex II:

a)  "Transfers of funds between EU persons and entities, including financial institutions, and Iranian persons and entities, including financial institutions;

b)  "Banking activities, including the establishment of new correspondent banking relationships and the opening of new branches and subsidiaries of Iranian banks in the territories of EU Member States;

c)   "Provision of insurance and reinsurance;

d)   "Supply of specialised financial messaging services, including SWIFT, for persons and entities set out in Attachment 1 to Annex II, including the Central Bank of Iran and Iranian financial institutions;

e)   "Financial support for trade with Iran (export credit, guarantees or insurance);

f)   "Commitments for grants, financial assistance and concessional loans to the Government of Iran;

g)   "Transactions in public or public-guaranteed bonds;

h)   "Import and transport of Iranian oil, petroleum products, gas and petrochemical products;

i)   "Export of key equipment or technology for the oil, gas and petrochemical sectors;

j)   "Investment in the oil, gas and petrochemical sectors;

k)   "Export of key naval equipment and technology;

l)   "Design and construction of cargo vessels and oil tankers;

m)   "Provision of flagging and classification services;

n)   "Access to EU airports of Iranian cargo flights;

o)   "Export of gold, precious metals and diamonds;

p)   "Delivery of Iranian banknotes and coinage;

q)   "Export of graphite, raw or semi-finished metals such as aluminium and steel, and export or software for integrating industrial processes;

r)   "Designation of persons, entities and bodies (asset freeze and visa ban) set out in Attachment 1 to Annex II; and

s)   "Associated services for each of the categories above."

The Minister's letter of 29 October 2015

1.24 The Minister explains that:

—  The JCPOA required the Council to adopt the amended Decision and Regulation on "Adoption Day", 90 days after the UN Security Council Resolution (UNSCR) endorsed the agreement, or earlier by mutual consent of the JCPOA participants;

—  however, sanctions relief will only take effect when the IAEA verifies that Iran has completed the agreed steps on its nuclear programme;

—  the UN Security Council voted unanimously to adopt UNSCR 2231 on 20 July 2015;

—  it "was extremely important that the EU legislation captured the spirit and effect of the JCPOA and translated this accurately into a detailed legal text";

—  "Intensive and highly technical work continued on the attached documents into October 2015";

—  they were finally agreed for adoption on 18 October, "Adoption Day"; and

    "Unfortunately, due to the need to agree the documents by "Adoption Day" to meet our JCPOA obligations, there was insufficient time to follow the normal scrutiny procedure.

    "I am aware of the Committee's interest in documents relating to the EU sanctions regime against Iran, and I take the responsibility to keep your Committee informed on these issues extremely seriously. I regret that the need for the override was, on this occasion, unavoidable."

Previous Committee Reports

None, but see (36973), —; (36974), —; (36975), —; (36981), —; (37030), —; (37032), —; (37031), —; (37033), —: Third Report HC 342-iii (2015-16), chapter 5 (9 September 2015); also see (36568), —: Twenty-eighth Report HC 219-xxvii (2014-15), chapter 6 (7 January 2015); and (36529), —: Twenty-fifth Report HC 219-xxiv (2014-15), chapter 15 (10 December 2014); and (36237), —: Ninth Report HC 219-ix (2014-15), chapter 41 (3 September 2014); also 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.


1   See Joint Statement, which includes the full text of the Joint Comprehensive Plan of Action and its five annexes: Annex I Nuclear related commitments; Annex II Sanctions related commitments; Annex II Attachments; Annex III Civil nuclear cooperation; Annex IV Joint Commission; and Annex V Implementation Plan.  Back

2   See UN Statement for full details. Back

3   See (36973), -; (36974), -; (36975), -; (36981), -; (37030), -; (37032), -; (37031), -; (37033), -: Third Report HC 342-iii (2015-16), chapter 5 (9 September 2015). Back

4   See UN Statement for full details. Back

5   See "The Times" of 15 July 2015. Back

6   See Cameron, Hollande and Merkel: Why we support the Iran deal, in the Washington Post of 10 September 2015. Back

7   See (36973), -; (36974), -; (36975), -; (36981), -; (37030), -; (37032), -; (37031), -; (37033), -: Third Report HC 342-iii (2015-16), chapter 5 (9 September 2015). Back

8   See those cited at the end of this chapter of our Report. Back

9   For the full background, see the European External Action Service (EEAS) Fact sheet on the European Union and Iran.  Back

10   See Joint Statement. Back


 
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Prepared 13 November 2015