The sanctions imposed on Iran by the United States this month are designed to isolate the country economically, and to force either regime change or a dramatic shift in the regime’s behavior. American officials have called the newest sanctions – the second tranche since August – the “toughest” ever on Iran.
And yet despite the hardship the sanctions will cause for ordinary Iranians, they are unlikely to deliver the outcomes that US President Donald Trump desires.
The latest sanctions follow Trump’s withdrawal in May from the 2015 Iran nuclear deal – known as the Joint Comprehensive Plan of Action (JCPOA). Under that deal, Iran agreed to pursue nuclear technology only for peaceful purposes, in exchange for relief from all nuclear-related sanctions maintained by the United Nations and the US.
But the JCPOA never sat well with Trump, who complains that the “very bad deal” will not prevent Iran from developing nuclear weapons in the future, does not target Iran’s missile industry, and in essence ignores Iran’s “destructive” regional behavior – such as its involvement in Syria, Iraq and Yemen. Iran’s main regional adversaries, Israel and Saudi Arabia, echo Trump’s concerns.
So far, Iran’s leaders have responded to the renewal of US sanctions with defiance. They have pledged to adhere to the JCPOA (even as they strengthen Iran’s conventional military capabilities and continue to pursue regional ambitions).
Other signatories are also proceeding; leaders in Britain, China, France, Germany and Russia, as well as the European Union and the International Atomic Energy Agency, support the Iranian position and insist that Iran is fully compliant with the JCPOA’s terms.
To be sure, the US pressure has stung. While Western and Asian leaders have vowed to defy America’s extraterritorial sanctions – which target third parties that do business with Iran – foreign firms that invested in Iran after the JCPOA was signed have begun withdrawing from the country. More are certain to follow after this latest round of sanctions.
As a result, Iran’s already-fragile economy is set to be hit even harder, fueling further downward pressure on the currency and upward pressure on prices. The rapid decline in Iranians’ standard of living has already spurred public unrest, although the regime has been able to contain recent protests by blaming America.
Still, Iran’s ability to weather the sanctions should not be underestimated, especially given the regime’s strengthening of economic and trade ties with key partners, including Russia, China, and India.
In Russia’s case, bilateral engagement now extends from arms deals and strategic partnerships – particularly in Syria – to direct investments. For example, Russian energy companies are committing as much as US$50 billion to oil and gas exploration in Iran, which is also developing the South Pars natural-gas field, the world’s largest.
China, meanwhile, is providing funding and technical assistance for many projects, ranging from railways to hospitals. Last year, the Chinese state-owned investment arm, CITIC Group, established a $10 billion credit line, and the China Development Bank has promised $15 billion more. And, because China is one of eight countries exempted for six months from US sanctions, it will continue to buy as much as 11% of its oil from Iran.
Finally, India, which has also received temporary US waivers, remains committed to good relations with Iran, for two reasons. First, India imports more than 10% of its oil from Iran; replacing that supply would be costly. Second, India has cooperated with Iran to build the Iranian deep-water port of Chabahar on the Gulf of Oman, intended to help India bypass its regional rival, Pakistan, in gaining access to Afghanistan and Central Asia.
India’s stance must be particularly troubling for Trump. On the one hand, he has urged India to play a greater role in Afghanistan as part of the US exit strategy from that conflict. On the other hand, Trump cannot endorse India’s strategic engagement with Iran.
These factors – together with the EU’s determination to maintain the JCPOA, the possible resale of Iranian oil to Europe by Russia, and Iran’s financial activities in Iraq and elsewhere – will help Iran soften the sanctions’ blow.
None of this is to suggest that Iran’s leaders can breathe easy. On the contrary, Iran is facing severe financial limitations. But just as US-led sanctions on Iraq in the 1990s failed to topple Saddam Hussein, sanctions are unlikely to lead to regime change in Iran now. While the Iranian people will no doubt suffer, the regime will likely be able to whip up enough nationalist sentiment – and external support – to contain any threat to its survival.
Copyright: Project Syndicate, 2018.