Terry H. Schwadron
Nov. 5, 2018
The official U.S. boom fell once again on Iran yesterday, with economic sanctions aimed at getting that country to re-negotiate an end to any planned nuclear weapons development and support for militants in the Middle East.
The United States, which withdrew from the 2015 nuclear deal with European partners, Russia and Iran last year, also wants Iran to stop testing intermediate distance missiles and to treat its own citizens better. At the time, the president denounced the Obama administration for having agreed to it, saying that the deal was terrible for the United States.
Making sanctions work may prove a little more difficult than announcing them, of course.
Secretary of State Mike Pompeo said President Trump was “putting the world on noticethat the terror regime which threatens Israel through Iranian funding of Lebanese Hezbollah, that the terror regime that attempted to conduct an assassination in Denmark over that past few weeks, that the terror regime that continues to fund Houthis launching missiles into Riyadh and into Dubai, that’s going to stop. That behavior must change.”
Asked what the administration would do if the Iranians restart their nuclear program, Pompeo replied, “We’re confident that Iranians will not make that decision.”
Since withdrawing from the 2015 deal, nuclear weapons testing has started in North Korea, and Iran has said it would not be bound by the U.S. decision, indicating it could restart its nuclear weapons program at any time.
Sunday marked the end of a 180-day deadline the United States set before the second round of sanctions lifted under the 2015 deal were to resume. Although the sanctions are against the financial and shipping sectors, the most significant measures prohibit purchases of Iranian oil, which provides 80% of Tehran’s tax revenue.
The Trump administration said that as of yesterday, all countries and businesses that buy oil from Iran risk secondary sanctions from the United States, and the administration has vowed to pursue offenders aggressively. Virtually all multinational companies that had started doing business in Iran after sanctions were suspended in 2016 have pulled out.
That has helped send the Iranian rial plummeting and hurt ordinary Iranians amid spiraling prices of basic goods.
Only a handful of countries support the U.S. action, and Iranian officials have said that the re-imposed sanctions underscore how isolated the United States is. Many Middle East analysts also are skeptical that Iran will change its behavior in any way, in a show of defiance.
On “Fox News Sunday,” Pompeo defended the administration’s decision to grant temporary waivers on oil sanctions to eight nations, including some of Iran’s biggest oil customers. The secretary of state has not named the countries, though Turkey has said it has received notice and is among them. China, South Korea, Japan and India also are expected to get waivers. Pompeo said all had made significant reductions in their Iran oil purchases already but “need a little bit more time to get to zero.”
In Europe, to allow companies to trade with Iran and not face stiff US penalties, the EU plans to implement a payment mechanism, a Special Purpose Vehicle, that will enable these companies to avoid the U.S. financial system, according to the BBC. Like a bank, the SPV, would handle transactions between Iran and companies trading with it, avoiding direct payments into and out of Iran. When Iran exports oil to a country in the EU, the company from the receiving country would pay into the SPV. Iran can then use the payment as credit to buy goods from other countries in the EU through the SPV.
The EU has also updated a statute that allows EU firms to recover damages from U.S. sanctions.
To make the sanctions work, the United States must increase its secondary sanctions against these European allies or threaten loss of all business with the United States. This is tricky at best. These allies have remained believers in the 2015 nuclear weapons deal.
Many see that it will be the Iranian people, as always, who will bear the brunt of the sanctions, making it more difficult to buy everyday goods, medicines and food. We have launched another America First weapon without a pinpoint plan for where it will land.