Donald Trump and his advisers have a consistent record of confronting and threatening Iran, most prominently by withdrawing from the nuclear deal. But on Tuesday, Trump expanded the threats against Iran to all those who do business with the country, declaring on Twitter they “will NOT be doing business with the United States.”
If taken literally, this would mean a new front in America’s economic battle with the Europeans, who have remained in the nuclear agreement—not to mention many other countries around the world determined to do business in Iran.
There’s already discord among the United States and the other parties to the accord—China, France, Germany, Russia, the United Kingdom, and the European Union—over a range of issues beyond the Iran deal. These include trade and tariffs (China and the EU), defense spending (EU members of nato), climate change (China, Russia, and the EU states), and sanctions (Russia). While the Trump administration might view these issues as distinct from the Iran nuclear issue, these countries and their publics will almost certainly see them as part of a larger confrontation with the United States over how Trump views the world. It’s also not clear the U.S. can get other countries—including its allies—to do its bidding. U.S. companies and the largest foreign firms will leave Iran under the threat of sanctions, but smaller firms and those with limited U.S. exposure could continue to seek opportunities in the Islamic Republic, ensuring the U.S. sanctions won’t have the intended impact, and certainly won’t be “the most biting sanctions ever imposed.”
“I think that the easiest way for them to circumvent the sanctions comes from the way in which we’re implementing them, which is by dividing our own partnership,” said Richard Nephew, the former deputy coordinator for sanctions policy at the U.S. State Department who was on the U.S. team that negotiated the Iran deal, in a conference call. “The fact that we are not working with Europe but rather confronting Europe means that we won’t have an EU-wide system of sanctions that we’re working with them. Instead it’s going to be all about who has benefit in the United States and who doesn’t, who has economic interests in the United States and who doesn’t. And that’s a bad way to have sanctions work, especially with our closest partners. And I think it’s going to just breed loopholes, even amongst some of our closest allies.”
Barack Obama’s administration succeeded in putting together coordinated international sanctions on Iran. Those restrictions sunk Iran into a recession and ultimately drove it to negotiations with the international community that resulted in the Joint Comprehensive Plan of Action (JCPOA), as the Iran deal is formally known. Trump’s sanctions, strong though they are, are unlikely to have the same impact, primarily because they don’t have the same kind of international cooperation. But Trump administration officials have met with their counterparts from more than 20 countries to discuss the sanctions, working to build a coalition against Iran. “What I can tell you very specifically is that we have made it very clear that we’re going to aggressively enforce this executive order and the other authorities that we have pursuant to statute,” a senior administration official said in a background call to reporters Monday. “We will work with countries around the world to do so, but make no mistake about it, we are very intent on using these authorities.”
France, Germany, and the U.K. have criticized the U.S. withdrawal from the JCPOA. They say, and indeed Trump administration officials concede, that Iran is complying with the accord. The Trump administration says the Obama-era agreement does not go far enough to stop Iran’s regional meddling, its missile program, and the threat it poses to Israel. The deal’s other signatories—including China, Russia, and the EU—say the JCPOA was meant only to address the threat of Iran’s nuclear program, which it did.
The U.S. sanctions that were announced Monday targeted Iran’s industrial sector, transactions involving U.S. dollars, Iranian rial, and the issuance of Iranian sovereign debt. The strictures also punish Iran’s civil-aviation sector and, more significantly, auto manufacturing. Iran’s economy, long hobbled by international sanctions, will almost certainly be adversely affected—though the most severe U.S. sanctions, which target Iranian oil exports, will go into effect in November. The United States says the goal of its sanctions is to pressure the Iranian regime into talks with the U.S. on all issues, including the nuclear program; its political and military involvement in Syria, Yemen, Lebanon, and Iraq; its threats against Israel; its ballistic-missile program; and its dismal human-rights record. But Iran says it will not talk to the United States while under sanctions and while the U.S. is outside the JCPOA.
The EU, which wants to preserve the nuclear deal, has come up with its own so-called blocking mechanisms that would penalize European companies that comply with the U.S. sanctions. But EU officials concede that there is little they can do to compel the largest European companies, whose business operations span the globe and which rely heavily on the U.S. dollar for the international transactions, to defy the Trump’s administration’s measures. Ultimately, the prospect of a loss of access to the U.S. market is far more daunting than the potential loss of Iranian consumers. But what the EU could do is encourage its smaller firms that have limited exposure to the U.S. to do business in Iran. Although those firms will be unable to provide the financial windfall that the JCPOA promised the Islamic Republic, they will allow the EU to say that it is keeping with the spirit of the agreement, which ensured economic and political benefits to Iran in exchange for a freeze on its nuclear program.
Meanwhile, although the JCPOA might have provided Iran with limited economic benefits, the U.S. withdrawal from the accord has provided the Islamic Republic with the sort of political benefit it could have hardly dreamed of. For possibly the first time since the 1979 Islamic revolution that mostly cut Iran off from the West, the world’s powers, with the exception of the United States, say they believe Tehran is in compliance with its commitment to an international agreement—while it is the U.S. that has violated it.
The other parties to the JCPOA also say they want to save the deal. Russia and China have close political and economic relationships with Iran and may be altogether more difficult for the U.S. to persuade to abandon transactions with the Islamic Republic. Russia and Iran are allied in Syria where their militaries have all but ensured that Bashar al-Assad emerges victorious in the civil war. China is Iran’s largest purchaser of oil and has significant energy and infrastructure investments in the country.
Then there are those countries that aren’t party to the JCPOA, but have significant interests in Iran: India, which relies heavily on the Islamic Republic for its energy needs; Turkey, a regional power with deep business and cultural relations with Iran; and Japan, a net-energy importer that relies heavily on Iranian supplies. Many of these countries are likely to seek waivers from the United States to continue their dealings with Iran. Jarrett Blanc, the Obama-era State Department coordinator for the nuclear deal, said on the same conference call as Nephew that Iran’s future business dealings will likely lie outside Europe.
“The Europeans have a role to play here, but it’s by no means the largest role,” he said. “And that’s part of the reason why I think it’s very difficult for those of us and those of you on the outside to really track what’s going on, because whatever negotiations are taking place now between, for example, Tehran and Beijing, Tehran and New Delhi, are going to be more opaque to us than conversations that are taking place with Europe.”
But Trump administration officials maintain that their goal is to end all Iranian oil imports. “We are not looking to grant exemptions or waivers,” a senior administration official told reporters Monday, “but we do and are glad to discuss requests and look at requests on a case-by-case basis.”
How that fits in with the president’s tweet Tuesday morning is unclear, but, in the president’s words, “the Iran sanctions have officially been cast.”