With a nuclear deal fast approaching, one major question is what happens to all those Iranian persons and entities designated for sanctions due to their involvement in nuclear-proliferation activities. Hundreds of them are listed on OFAC’s SDN List. Yet, presuming that a nuclear settlement is reached and Iran’s program is deemed to be “exclusively peaceful” by the International Atomic Energy Agency in the months ahead, the condition precedent to their designation – i.e., involvement in WMD-proliferation activities – is seemingly undone.

So what’s to be done?

The question is not academic. While the immediate impact of a designation imposed under the authority of Executive Order 13382 is the blocking of all property and interests in property of a designee that comes within the U.S. or within the possession or control of a U.S. person, the threat that U.S. authorities may likewise sanction U.S. or foreign parties providing material support and assistance to the designee often leads to the virtual exclusion of designated parties from routine commercial interactions. Moreover, Iranian banks that have been designated for facilitating Iran’s WMD-proliferation activities are specially singled out for sanction under Section 104(c) of CISADA, where foreign financial institutions are prohibited from facilitating significant transactions or providing significant financial services to such Iranian banks. While this latter sanction can be waived pursuant to the President’s existing statutory authorities, the effect of retaining the underlying designation might cause the same problems accessing the global financial system for Iranian banks.

As a result, it is not out of the question that U.S. authorities could decide to undertake large-scale de-designation of Iranian persons and entities. We’ve seen something similar in the recent case of Burma, where U.S. authorities have provided guidance as to what steps designated Burmese parties need undertake in order to be taken off the SDN List. That process has been slow-moving and would likely need to be significantly sped up in the case of Iran, but at least there is a roadmap for how to do these kinds of things. Moreover, in the context of Iran, U.S. authorities will be able to time de-designations to the broader findings of the International Atomic Energy Agency that Iran’s nuclear program is “exclusively peaceful” – thereby establishing some order to the process.

Perhaps the major issue of contention, then, is what to do with Iranian persons and entities that were designated under the authority of Executive Order 13382 for activities related to Iran’s ballistic missiles. The U.S. and Iran have somewhat successfully managed to isolate the issue of Iran’s development of advanced ballistic missile capabilities from the broader nuclear negotiations, so the question is whether the Executive Order 13382 provides the legal authority to the President to maintain designations related to Iran’s ballistic missile activities when a solution to the nuclear-proliferation issue has been found.

The answer’s likely yes, but barely.

Under Executive Order 13382, the Secretary of State is authorized to designate foreign persons that “have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons)…”

Two questions arise: First, are ballistic missiles “weapons of mass destruction”? And second, if not, can a 13382 designation be maintained for persons or entities involved in ballistic missile-proliferation when there is no obvious WMD-related issue at hand any longer?

The answer to the first question is likely no. The plain language of Executive Order 13382 suggests that “ballistic missiles” are not regarded as “weapons of mass destruction”. Consider the fact that the Secretary of State is granted the authority to designate parties for engaging in either the proliferation of WMD or the proliferation of WMD-delivery systems, such as ballistic missiles capable of carrying WMD. If ballistic missiles were in and of themselves WMD, there would be no reason to include this second category as proliferation activities subject to designation. Indeed, by separating out WMD proliferation and WMD-delivery system proliferation as two distinct categories of activities subject to designation, Executive Order 13382 implicitly suggests that the latter is not included in the former.

Moreover, what’s regarded as a precursor to Executive Order 13382 – Executive Order 12938 – defines WMD in its preamble to include “nuclear, biological, and chemical weapons” – not ballistic missiles capable of carrying WMD. This is not dispositive evidence that the President intended the same meaning to apply to the use of WMD in Executive Order 13382, but it is clearer evidence than anything suggesting otherwise. The most likely result, then, is that ballistic missiles are beyond the purview of WMD for purposes of Executive Order 13382.

If that’s the case, then, can a 13382 designation be maintained for persons or entities involved in the proliferation of ballistic missiles capable of carrying WMD, absent an obvious and underlying connection to WMD-proliferation itself?

Here the answer’s likely yes, but you have to stretch theories of liability to see it.

The reason is that, with the advent of a nuclear deal, the U.S. will have resolved for the time being its outstanding concerns regarding the nature of Iran’s nuclear program. Especially considering the International Atomic Energy Agency is likely to find that Iran’s program is “exclusively peaceful” in the months ahead, U.S. concerns over Iran’s nuclear-proliferation activities recedes. Since the U.S. does not allege that Iran is undertaking WMD-proliferation above and beyond the nuclear program, there is no obvious WMD to fit on Iran’s ballistic missiles.

Why, then, should Iranian persons and entities involved in the development of ballistic missiles continue to be designated for these activities, despite the absence of the predicate activity: WMD proliferation itself?

I suppose the answer to that question is two-fold: First, the plain language of Executive Order 13382 permits the Secretary of State to designate persons that engage in activities materially contributing to the proliferation of WMD or their means of delivery. The “or” is key to this argument, as Executive Order 13382 provides a basis of designation for ballistic missiles merely capable of acting as a delivery system for WMD. Even absent suspected WMD-proliferation in a target State, parties engaged in ballistic missile development can be subject to designation if those ballistic missiles are capable of carrying WMD (whether or not there is any WMD to carry!).

Second, U.S. authorities could contend that, despite the newly-placed constraints on Iran’s nuclear program, the continued development of advanced ballistic missile capabilities leaves the U.S. vulnerable in the future should Iran make the decision to build a nuclear weapon. As such, Executive Order 13382 would provide a clear basis for the Secretary of State to maintain designations on Iranian persons and entities involved in ballistic missile development.

In both arguments, we’ve largely severed the issue of ballistic missiles from WMD-proliferation itself, which is indeed the object and purpose of the Order. Nonetheless, I think this reading of the Order is correct.

In the coming weeks and months, how U.S. authorities deal with this issue will be interesting to watch. As with almost all things related to Iran sanctions, I predict that it will be precedent-setting.