Trump imposes Iran sanctions: What now?

Trump imposes Iran sanctions: What now?

Donald Trump signs a document reaffirming the sanctionsimage rights
Reuters

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Donald Trump has signed a document that reinstates sanctions against Iran

The reintroduction of the full range of sanctions against Iran lifted under the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement marks a highpoint in President Donald Trump's foreign policy.

He had long objected to the agreement, which was seen by most analysts as one of the most important foreign policy achievements of his predecessor Barack Obama.

Now, the Trump government's goal is to put maximum pressure on the Iranian regime to rethink and change what the Americans consider malicious behavior in the region.

So what measures will be exactly reintroduced and what likely effects will they have? Will this be the final end of the JCPOA? And what is the real US strategy behind sanctioning efforts? Not all of these questions have clear or definitive answers.

The sanctions that are being re-imposed are most damaging to the Iranian economy – they target oil sales, the broader energy industry, shipping, banking, insurance, and so on. These are broadly what is known in the trade as "secondary sanctions" by putting pressure on other countries to prevent them from trading with Tehran.

They should be prevented from buying Iranian oil, which accounts for a large part of Iran's revenue. In addition, sanctions are imposed on hundreds of named entities and individuals.

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Reuters

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UN inspectors say Iran under Hassan Rouhani has upheld the 2015 agreement

There will be no sudden slump in Iranian revenues. In fact, a lot of damage has already been done.

The pressure has been building since President Trump's initial announcement last May. US officials claim that Iran's daily oil exports have dropped significantly since then – by more than a third.

In fact, foreign companies had to decide what was more important to them: doing business with Iran or doing business with the United States. Many big players have already announced the termination of projects in Iran.

In view of the imminent sanctions many companies have already made their decisions.

Several Iranian customers may continue to buy oil and are likely to refrain from doing so by the United States. In the past – under the Obama administration – these were referred to as "significant mitigation waivers" and indeed meant that if countries promised to significantly reduce their oil purchases from Iran, the government would not seek to punish them for trade ,

This made sense because it helped US allies such as Taiwan, South Korea, and Japan tackle their energy problems, while at the same time being in line with the overall direction of US policy. India also got exceptions, and China reduced its purchases under a slightly different agreement.

The Trump administration has already signaled that it is ready to grant such waivers to countries like India and some others. National security adviser John Bolton said this week, "We want to get maximum pressure on Iran, but we do not want to hurt friends and allies."

Earlier, the Trump government had insisted that oil imports from Iran should be reduced to zero.

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The Washington Post about Getty

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Mr. Trump (photographed at the 2015 event) has been a vocal opponent of the JCPOA since signing

China's behavior – Beijing is an important trading partner for Tehran – will be decisive. It will likely continue to buy Iranian oil without sanctions.

There is a logic here. Will the US really hit Beijing with harmful secondary sanctions, which would actually mean an economic war, given the difficult state of expanded trade relations between the two countries? Probably not.

Uncertainty ahead?

The US must also be more concerned about the stability of the international oil market, given the political uncertainties in Saudi Arabia. Indeed, it is expected that the Saudis will pump more oil to offset the savings on Iranian crude oil.

Another source of uncertainty stems from the European Union's efforts to strengthen the nuclear deal with Iran by trying to protect its own businesses from US sanctions. There is also talk of setting up an alternative payment system that does not involve the dollar or the US banks. Experts in Washington – even those critical of the Trump administration's approach – are still very skeptical that the EU's efforts will make a huge economic difference in the short term.

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Reuters

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National security adviser John Bolton has made his rhetoric against Iran particularly strong

The general view is that most of the EU's remarks were intended to send a strong political signal to Tehran that they have spoken out against President Trump's position. This does not mean that they would not want restrictions on the Iranian missile programs or a change in Tehran's regional behavior. However, they believe that the JCPOA (remember that France, Germany, the United Kingdom and the EU are all signatories) remains a useful restriction on Iran's nuclear activities and should not be easily overthrown.

So is the JCPOA doomed to failure? Not necessarily. Some experts believe that if China and other clients such as India continue to buy a reasonable amount of Iranian oil, and if the EU retains its political support for the agreement, Iran may initially stick to it. However, as soon as sanctions start that may cause more economic turmoil, the fate of the JCPOA depends on the complex political struggle between moderate and hardline people in Tehran.

All this begs the question: what is the Trump administration's aim in all of this? Allegedly, Iran should be brought back to the negotiating table to get a better and more comprehensive deal.

However, many analysts believe that such a move away from Tehran is highly unlikely, and the US demands suggest that the real purpose of the Trump government is to bring about a regime change in Tehran.

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media labelingMohammad Javad Zarif praises the European efforts to maintain the nuclear agreement

An expert critic of the Trump policy told me: "At the end of the day, the problem is that the administration has no real plan, they know how to use an instrument, sanctions, but they seem to lack a broader vision of strategy . " Jarrett Blanc, a former Obama era official who has dealt with the implementation of the JCPOA, argues that "the US has lost its ability to make credible pledges" by rejecting the agreement.

So for the immediate future, there will be a confusing situation in which Iran is trying to overcome the pressure of sanctions: oil sales will be significantly reduced, but some of its customers will remain. The US will stick to its current approach of isolating Tehran, but without the broad international support that the sanctions regime had taken before the JCPOA negotiations.

Few analysts believe that Iran's foreign policy in the region will change significantly. They claim they are based on strategic and ideological concerns, not just economic ones, and their activities in Lebanon, Syria and the Gaza Strip are certainly not expensive enough to surpass these other priorities.

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EPA / SANA HANDOUT

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Iran is an important supporter of Syria and its leader, President Bashar al-Assad

Nevertheless, the Trump government is determined to increase pressure on Tehran. In particular, it wants to stifle the financing of the Iranian Revolutionary Guard Corps, which is responsible for carrying out many of Iran's overseas operations abroad.

If you wish, it is part of a broader containment policy that includes Israel (through its actions in Syria) and Saudi Arabia (through its campaign in Yemen). But Israel is already encountering problems with Russia, and the future of the Saudi Arabian war in Yemen is facing a big question mark.

So much remains uncertain about the Trump approach. If he can win allies, can he actually impose sanctions on the countries that trade with Iran, and how long do the oil-buying exceptions actually last? What influence will Iranian society and its politics have? And can the JCPOA survive in this whirlpool in any meaningful way?

But there is also a broader long-term question about US policy, which refers to Washington's growing recourse to the instrument of economic sanctions. Many believe that they are overused and that the threat of secondary sanctions runs counter to other US targets.

It's not just Europeans: Russia and China are also talking about the development of alternative international payment systems.

We could look back – maybe a decade from now – and say that was the moment when the benefits of US economic sanctions as a diplomatic weapon began to erode.

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