U.S. Reimposes Harsh Sanctions on Iran (to Europe’s Chagrin)

How the West was lost. Photo: Brendan Smialowski/AFP/Getty Images

The United States imposed a draconian new sanctions on Iran Monday, in a bid to force Tehran to acquiesce to American foreign-policy goals in the Middle East by imposing profound material deprivation on its people.

The new economic penalties target more than 700 prominent Iranian individuals, firms, aircrafts, and vessels — along with any firms or individuals from other countries that do business with those said Iranian people or entities. That last bit is crucial, since the United States already does precious little business with Iran, so the sanctions will only bite if they successfully chase European (and Russian and Chinese) investment out of the Iranian economy.

Europe, for its part, is still officially trying to defy Washington’s will.

Under the terms of the 2015 nuclear deal, the U.S. promised Britain, France, and Germany that it would suspend sanctions on companies and countries that did business with Iran, so long as Tehran suspended its nuclear weapons program. The Iranian regime proceeded to do just that, ditching its highly enriched uranium and tolerating an invasive inspection program. European companies, in turn, began making investments and forging business relationships in Iran.

And then, President Trump decided that preserving nuclear deproliferation in Iran — and the credibility of America’s word in diplomacy with its transatlantic partners — wasn’t worth forfeiting the opportunity to restrict ordinary Iranians’ access to food and lifesaving medications in a bank-shot effort to secure Saudi hegemony in the Middle East (and, okay, to curb Iran’s ballistic missile program, cut off funding to Hezbollah, and deter the assassination of Iranian dissidents in Western countries). So, Trump gave European corporations a choice: They could either keep doing business in Iran, or retain access to the American banking system — but not both.

European governments were incensed by Trump’s attempt to coerce them into forfeiting control over their own foreign policy, and vowed to ensure Iran’s ongoing compliance with the nuclear deal by keeping trade between Tehran and the continent open. But European companies have proven far less interested in supporting E.U. foreigh policy than protecting their immensely valuable access to the U.S. market and financial system. Nevertheless, on Monday, the foreign and finance ministers of Britain, France, Germany, and the European Union’s foreign policy chief said in a joint statement, “We remain committed to implementing [the nuclear deal] as a matter of respecting international agreements and of our shared international security, and expect Iran to play a constructive role in this regard.”

Specifically, they hope to safeguard trade between the E.U. and Iran by establishing an alternative payment mechanism that sidesteps American finance. Under the “special purpose vehicle,” the New York Times writes, “Iran’s proceeds from sales of oil and gas would be offset against Iranian purchases, a form of barter without explicit financial transactions.”

But this clearinghouse still fails to address the fundamental problem — most European firms simply aren’t interested enough in trade with Iran to run afoul of the U.S. Thus, European officials (reportedly) believe they can only preserve, at best, 30 percent of the bloc’s existing trade with Iran. It is unclear whether that would provide Tehran with sufficient incentive to maintain compliance with the nuclear agreement.

Meanwhile, the oil markets’ response to the sanctions was surprisingly tepid. While the sanctions are expected to cut global oil supplies by 2 percent, oil prices have actually declined in the run-up to the sanctions’ imposition, and did not spike significantly Monday. Two factors seem to be responsible for the relative calm: First, Washington provided temporary waivers from the sanctions to Turkey, China, Japan, and five other countries that rely heavily on Iranian oil, in order to prevent a major disruption of the global economy, and give those nations further time to find other suppliers. Second, in anticipation of a tightening oil supply due the sanctions, the U.S., Russia, and Saudi Arabia all increased production this year — and this fact, combined with slowing economic growth in China — has left some slack in the global crude market.

For the moment, then, the Trump administration’s policy is going off without a hitch: Europe is angry but ostensibly impotent, American consumers still have access to cheap gasoline, and Iran is in economic turmoil.

And yet, there is scant evidence that immiserating the Iranian people — and humiliating the (relatively) moderate president who championed engagement with the West — will cow Tehran’s hard-liners into submission.

“The extent to which the Islamic republic feels threatened or senses opportunity in its neighborhood largely defines its conduct,” the International Crisis Group wrote in an analysis this week. “Measured against that standard, the Trump administration’s aggressive policy is likelier to spur Iran’s regional activism than to curb it.”

U.S. Reimposes Harsh Sanctions on Iran (to Europe’s Chagrin)