October 31, 2018

What Impact Will New U.S. Sanctions Have on Iran?

By Elizabeth Rosenberg

The Trump Administration is imposing new sanctions on Iran’s oil exports on November 5. What impact are sanctions likely to have on Iran? How do these sanctions differ from previous U.S. or international sanctions?

The United States will reimpose scores of sanctions on Iran that it lifted in January 2016 under the terms of the Joint Comprehensive Plan of Action (JCPOA), the Iranian nuclear deal. The targets of the upcoming sanctions will be banks, including Iran’s Central Bank, the Iranian oil company, and many other significant economic actors in Iran. This set of measures follows a set of sanctions that the United States reimposed in August. Both the August measures and the November ones are the direct result of President Donald Trump’s May announcement that the United States would withdraw from the JCPOA. At that time and subsequently the U.S. administration has made clear that it will roll out a campaign of intensive economic pressure on Iran—one that goes far beyond merely the reimposition of the August and November tranches of sanctions. The goal of this pressure campaign, according to U.S. officials, is generating enough leverage to kick-start a fresh diplomatic process with Iran covering nuclear and regional issues.

The November 5 sanctions have already had an economic effect on Iran. Since May, when they were formally previewed by the U.S., many foreign investors have walked away from Iran. All of Iran’s oil buyers have decreased their call for cargoes. The market chill has showed up in dimming Iranian growth prospects and rising inflation and unemployment forecasts. It has moved global oil prices higher in anticipation of the supply choke-off. Iran’s leaders have acknowledged that they are facing challenging circumstances. They vow to fight them head on and have been pressuring the Europeans in particular to maintain economic opportunities for Iran in order for it to stay within the JCPOA.

What is markedly different about this round of sanctions is that this time the United States is going it alone. Between 2012 and 2015, the period of intensive sanctions by the United States and its partners around the world, they acted together to pressure Iran to go to the nuclear negotiating table. None of the other parties to the JCPOA—or the traditional security allies of the United States, or the world’s major economies, or Iran’s biggest oil buyers—have joined with the United States in 2018. Undeniably, the United States has massive global financial leverage to pressure all countries and firms to stay away from Iran. But many companies also have lots of incentives to cheat. The United States will have to embrace a Herculean enforcement posture to beat back would-be evaders all over the world.

Read the full interview in the U.S. Institute of Peace's The Iran Primer.

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