Late last month, the European Union and China announced that they intended to set up a special global payments system to allow companies to continue to trade with Iran despite U.S. sanctions. Some of the sanctions are already in place, but the bulk will to go into effect in November, thanks to the U.S. withdrawal from the Iran nuclear deal earlier this year.
The announcement marks a small but notable step toward the fragmentation of the global economic order. Friends and foes of the United States were already seeking paths away from the traditional, dollar-dominated financial system. The Trump administration’s policy on Iran provided additional incentive to those who strive to undermine U.S. economic primacy and the effectiveness of U.S. economic statecraft. Washington should take note of the danger.
In May, U.S. President Donald Trump delivered on his promise to leave the Iran deal, also known as the JCPOA, and reimpose unilateral, aggressive economic sanctions on Iran. The most forceful of these measures will snap into place on November 4, dropping an axe on Iran’s core banking institutions, oil sales, and conduits to the global financial system. The measures will prevent Iran from using the prevalent global payment system. They will also cause most of the international businesses that buy Iranian oil and conduct other commercial transactions with Iran to cease such activity.
Traditional U.S. friends and allies are angry that the Trump administration’s choice to spurn the accord includes punishing them if they continue business with Iran. “[The EU] cannot accept that the U.S. decided the regions with which European companies can or cannot do business,” Belgian Prime Minister Charles Michel said recently.
Read the full article at Foreign Affairs.