Six months have passed since President Donald Trump withdrew the United States from the multilateral agreement that capped Iran’s nuclear program in exchange for the lifting of economic sanctions against that country. During that time, the U.S. has tightened its squeeze on the Iranian economy to force Tehran to renegotiate a deal that Trump denounced as ineffective in its main purpose — ending Iran’s nuclear ambitions — and too limited in scope: it did not address the entire range of Iranian behaviors that he wants changed.
New sanctions went into effect on Sunday that target Iran’s oil sector — its main source of revenue — and its financial institutions. Because the U.S. imports little Iranian oil, and does little business with Iran in general, effective sanctions must change the calculus of non-U.S. companies that do the bulk of trade with Iran. In other words, the U.S. is picking a fight with allies and partners that continue to comply with the Joint Comprehensive Plan of Action (JCPOA), as the deal is officially known. It is a dangerous strategy since there is no indication that Iran is prepared to knuckle under and allied cooperation is essential to the success of any sanctions. Indeed, there is little sign of U.S. strategy at all.
For the Trump administration, the Iranian regime is the source of many, if not all, of the problems in the Middle East. In addition to Tehran’s nuclear ambitions, it is charged with supporting proxy wars, destabilizing neighboring governments and backing terrorists around the world. The U.S. has 12 demands of the Iranian government, ranging from the complete and verifiable end of its nuclear program to ending support for all groups fighting in the region and halting all threatening behavior toward neighboring countries. As Trump explained last week, “Our objective is to force the regime into a clear choice: either abandon its destructive behavior or continue down the path toward economic disaster.”
The other countries that are party to the JCPOA recognize that Iran is a bad actor, but they prioritized the nuclear problem and signed a deal that offered the best possible solution to it. They too wanted a more comprehensive agreement, but they concluded, as did the Obama administration, that the JCPOA was the best workable solution and they were not going to let the perfect be the enemy of the good. They also believed that implementation of the JCPOA would build confidence with Tehran that would allow the parties to eventually address the wider range of issues.
This divergence of views has pitted the Trump administration against its partners in Europe and Asia — the other signatories are Britain, China, France, Germany, and Russia — as much as Iran. To ease that conflict, imposition of U.S. sanctions unfolded in two stages: some measures were put in place in August and a second round of more damaging sanctions against oil exports was imposed this week. The delay gave those countries time to prepare for the cutoff and develop alternative sources of supply.
Washington has reportedly agreed to give eight countries still more time to prepare for the cutoff. While that list has not been made public, it is said to include Japan, South Korea, Italy, India, Turkey and China. The waiver is for just six months, however, and the affected countries are expected to get their imports from Iran down to zero by then. Still, it will be of real help to Japan, the seventh largest importer of Iranian oil. This country imported 5.3 percent of its oil from Iran in 2017, an amount that had been steadily declining since 2010.
More problematic is Iran’s relationship with China, Iran’s largest trading partner. China imported about 25 percent of Iran’s oil last year, and the two countries’ bilateral trade reached €23.8 billion in 2017. Beijing instinctively recoils from the use of sanctions — out of principle and self-interest, concerned that acquiescing to their imposition in one case will legitimate their use against Beijing in another — and its decision to continue to trade with Tehran could be a fatal blow to U.S. efforts to change Iranian behavior.
Two real dangers are now possible. The first is that Iran will not be intimidated by the U.S. action and will intensify behaviors that the U.S. wants changed. Tehran could increase support for terror groups or its proxies, or even abandon the nuclear deal. If that occurs, then the prospect of conflict mounts. All signs from Tehran are that it is in no mood to compromise. The second danger is that U.S. secondary sanctions against Chinese companies intensify the battle between Beijing and Washington over the rules and norms of the global trading system. Moscow is likely to side with China in this dispute, compounding the split among countries that are expected to provide global leadership in both economic and security affairs. This breakdown in global governance would be every bit as damaging as a real war.
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