Trump Won't Certify Iran Deal, Injecting Uncertainty Into Business and Diplomacy

President Donald Trump is changing the United States' Iran strategy and injecting uncertainty into an already precarious scenario.

The president on Friday declared his intention not to certify Iran's compliance with the Iran deal signed by his predecessor, Barack Obama. He will stop short of unraveling the accord or rewriting it and instead put in Congress' hands what to do about sanctioning Iran. What happens in the days and weeks to come will be watched closely in global diplomatic and business circles.

Trump announced that he will not certify to Congress Iran's compliance with the Joint Comprehensive Plan of Action (JCPOA) by the October 15 deadline. That will open up a window for Congress to move legislation re-imposing sanctions on Iran in an expedited fashion or establish certain trigger points for doing so. Doing so would blow up the agreement.

"I am announcing today that we cannot and will not make this certification," Trump said on Friday at the White House. "We will not continue down a path whose predictable conclusion is more violence, more terror and the very real threat of Iran's nuclear breakout."

Iran was given moderate sanctions relief in early 2016 under the conditions of Iran nuclear accord, orchestrated under Obama the year prior, after international inspectors concluded the country had followed through on promises to dismantle sections of its nuclear program.

U.S. companies are still largely barred from doing business in Iran, but European and Asian companies have been cautiously testing the waters there. French energy giant Total SA (TOT) in July inked a major development deal in Iran. Boeing (BA) , with the Treasury Department's blessing, reached a $3 billion to sell 30 of its 737 Max plans to Iran Aseman Airlines in April.

"This decision is highly disruptive for foreign businesses that can do business in Iran legally," said Christopher Swift, partner and litigator at Foley & Lardner LLP. "If the United States does withdraw from the Iran nuclear accord, then many of the European and Asian companies that rushed into the Iranian market or after the Geneva accords may be subject to US sanctions once again. These sudden changes in the sanctions regime can create significant risks for companies that are not prepared."

Secretary of State Rex Tillerson said in a briefing with reporters on Thursday evening that Trump's decision "should not have any effect" on companies who have licenses they've applied for to do business in Iran.

"We continue to follow the U.S. government's lead in all our dealings with approved Iranian airlines‎ and will remain in close touch with U.S. regulators for any additional guidance," said Boeing spokesman Gordon Johndroe in an email.

Total representatives did not immediately return a request for comment.

"This should be a wake-up call call to both businesses and to our allies and other countries that it can't be business as usual with Iran, regardless of what you think about the Iran nuclear deal," said Mark Wallace, CEO of United Against Nuclear Iran and former U.S. ambassador to the United Nations.

Other signatories of the Iran deal are not immediately affected by Trump's action, and the U.S. will remain a signatory despite its failure to certify. But if the U.S. does re-impose sanctions, that opens the door for a complaint from Iran and the possible dissolution of the agreement. Congress could also alter legislation requiring the president's certification.

The Trump administration argues that the Obama administration focused too heavily on Iran's nuclear program "to the exclusion of the regime's many other malign activities," the White House said in a summary issued Thursday evening. It holds that the U.S. has neglected Iran's expansion of proxy forces and terrorist organizations in the Middle East.

"I am directing my administration to work closely with Congress and our allies to address the deal's very serious flaws," Trump said on Friday.

Tillerson said the White House has been in contact with Capitol Hill lawmakers about what to do next on Iran but a decision is not a "slam dunk." Trump will suggest Congress consider a "third pathway," he said, that puts "more teeth" into Iran's obligations to receive sanctions relief "or let's just forget the whole thing and we'll walk away and we'll start all over."

"I think the real question is can there be a bipartisan consensus, which I hope there can," Wallace said. "What we got in [Trump's] strategy was a strategy related to Iran that I think we haven't seen for a very long time."

The Treasury Department on Friday also hit Iran's Revolutionary Guard Corps with more sanctions as Trump spoke at the White House.

Whether this approach will create conditions for a better deal is up for debate.

"That approach might work if we had an ongoing dialogue with Iran, which we don't," Swift said. "And it also assumes that our allies are willing to support the strategy, which they aren't. The result is reckless posturing without any sort of diplomatic or strategic plan. This suggests the president is being driven by domestic politics and a desire to appear tough, rather than national security imperatives."

Trump's decision to decline to certify the Iran deal comes at a time when Congress' calendar is already packed.

Republican lawmakers continue to insist they can pass tax legislation by the end of the year and also have a number of other items on the agenda, including funding the government by December 8, recertifying the Children's Health Insurance Program and, thanks to Trump's Thursday decision to stop funding cost-sharing reduction payments for Obamacare, deciding whether and how to shore up healthcare markets.

"With Congressional Republicans eager to get points on the board with taxes (House wants to pass a bill out of House by Thanksgiving), neither the Obamacare CSR cancellation OR Iran Deal help with the calendar," wrote Cowen analyst Chris Krueger in a note on Friday. "There are 32 legislative days left in the year and now Iran sanctions and a more complicated December 8 showdown will be competing with taxes."

-- Updated with comments from President Trump.

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