Nov. 19, 2018
The ripple effect of the United States sanctions on the Islamic
Republic
The U.S. sanctions on Iran, that took effect on the fifth of this month,
include, basically, the sectors of transportation, banking and energy. The
energy sanctions, whose goal is to reduce Iranian oil sales to zero, have
effectively been postponed. Eight countries, that account for some 80 percent
of Iran’s oil sales, have been “temporarily” exempted. Russia, on the other
hand has announced that it will continue to purchase Iranian oil (through
barter, if needed) for re-export to other countries. The purpose of those
exemptions is, effectively, to allow the oil market to adjust to the fall in
Iranian oil exports.
The more biting sanctions are those on the transport and
banking sectors. Iran Air and Iranian shipping vessels, as well as 50 Iranian
banks, are affected by these sanctions. SWIFT, a member-owned messaging
platform, that connects more than 11,000 banks around the world, permitting
transfers of funds between them, has been warned by the U.S. Treasury that it
will itself be subject to sanctions if it dealt with Iranian banks. The
platform has already severed its relationship with Iranian banks, thus severely
limiting their capacity to make money transfers to and from the rest of the
world.
The effects of these sanctions on the Iranian economy are
undeniably great, in spite of the postponement of the sanctions on oil exports.
The Iranian economy began to show these effects even before they were formally
imposed. This year alone the Iranian rial has lost more than 60 percent of its
value against the dollar. The inflation rate has reached over 20 percent and
economic forecasts show an expected decline in GDP of more than 4 percent next
year.
Yet Iran is not likely to respond positively to the
invitation of the United States to renegotiate the nuclear deal, although a
breakthrough could not be ruled out. In any case, and learning from the North
Korean model, the U.S. is likely to keep the sanctions until the end of
potentially long negotiations. The American demands, moreover, are difficult
for the Iranians to accept since they include a complete withdrawal from the
region and the dismantling of the militias associated with it, from the Houthis
in Yemen to the Hashd al-Shaabi (Popular Mobilization Forces) in Iraq to
Hezbollah in Lebanon. Iran also suspects that the ultimate purpose of the
Americans is regime change. So, whether or not Iran accepts to negotiate, the
sanctions will probably remain in place for the foreseeable future.
These are the direct aspect of the sanctions. But what
about their ripple effect, the collateral damage that they create. Indirect
effects are likely to prove more important than the direct ones. Here are some
of them.
First, the European Union, a signatory of the Iran deal,
did not withdraw from it and considers that its economic relationship with Iran
is crucial. But, at the same time, European companies are unwilling to break
the sanctions despite the vague promise of the EU that they would be
compensated for any damage. The EU is hard at work on a “special purpose
vehicle,” a sort of clearing house arrangement, whereby Iran’s proceeds from
selling oil to Europe will be paid for by Iranian purchases from Europe but, so
far, no European country has even offered to host this facility from fear of
falling within the American sanctions. According to the New York Times, Europe
expects that its trade with Iran will, nevertheless, fall considerably, to not
more than 40 percent of its pre-sanctions level.
But this is not the end of the story. The attitude of the
EU, declared recently the American Secretary of State Mike Pompeo, “is one of
the most counterproductive measures imaginable for regional and global peace
and security.” Thus, if the SPV proves to be effective in reducing the effect
of the American sanctions on Iran, especially that China and Russia are said to
be interested in joining it, it would not be too unlikely that the U.S. would
impose sanctions on the SPV itself, creating further rift between Europe and
the Unites States. Clear signs of the rift are already there. French President
Emmanuel Macron recently called for a “real European army’’ that helps Europe
defend itself by itself, and 10 European countries have launched, earlier this
month, a coalition of European militaries ready to react to crises near the
continent’s borders. President Trump tweeted recently that the idea of a
European force is “insulting” to the United Sates. How far the rift between
Europe and the U.S. will go is anybody’s guess but it is clear that the
differences regarding the Iran sanctions will add to it considerably.
Syria might be another area where the ripple effect of the
Iran sanctions will be felt. If the sanctions weaken the economy of Iran
considerably making it unable to support its intervention in Syria, or if the
U.S. succeeds, through negotiations, in forcing Iran to withdraw from that
country, the position of Russia there will be shaken considerably. Although
Russia turned the tide in favor of President Bashar Asad’s regime when it
intervened in Syria in September 2015, it continues to depend on Iran and its
associated militias to do the ground fighting.
The weakening of the Iranian presence will lead,
optimistically, to the acceleration of the peace process. Russia, having
realized most of its military and political objectives in Syria, is already
looking for a peace settlement to the conflict and would be even more eager to
reach an understanding with the Americans to achieve it. The pessimistic
scenario, on the other hand, would have the Americans emboldened, seeking to
oust Russia from Syria and Iran stoking the conflicts in the region.
Lebanon will also feel the ripple effect of the Iran
sanctions. It is true that Hezbollah has been under increasing American
sanctions without much effect on the economy of the country or its political and
financial stability, but this is only because the United States has made sure
that these sanctions do not have such an effect. The American sanctions on
Iran, and those more directly aimed at Hezbollah, seek, among other things, to
impoverish Hezbollah and force it to withdraw its troops, estimated at 10,000
fighters, from Syria back to Lebanon. These will be added to the 30,000 or more
troops already there, including reserves. One can only ponder the possible
outcomes of this situation on the stability of the country.
Europe’s relations with the United States, the
Russian-American relations in Syria and the outcome of the Syrian civil war, as
well as the long-term stability of Lebanon, are certainly not the only issues
that will be affected by the American sanctions on Iran. Yemen, Iraq, Bahrain,
indeed the entire Middle East will feel the ripple effect of these sanctions.
What needs to be remembered is that the sanctions are not only a bilateral
matter between Iran and the United States, their effect will be felt throughout
the entire Middle East and beyond.
Riad Tabbarah is a former ambassador of
Lebanon to the United States.
A version of this article appeared in the
print edition of The Daily Star on November 19, 2018, on page 6.
