By Stephen Howard
On the 14th of July, 2014 the United States, Russia, France, China, UK, and Germany agreed to a plan of action which removed sanctions from the Islamic Republic of Iran in return for Iran ceasing, and dismantling, its nuclear program. On May 8th, 2018 US President Donald Trump exited that agreement, and unilaterally re-imposed sanctions on the state of Iran.
I am not writing this article to re-litigate the merits of the JCPOA, nor engage with the foresight, or lack thereof, of withdrawing from that agreement. What’s done is done, and it is what comes next that now matters to us. Therefore what I am writing this article to discuss is the impact that the withdrawal from the JCPOA will have on Iran, the United States, Middle East and wider world.
Nicholas Hayen has provided the final summary paragraph.
Effects in Iran
Instability and uncertainty are the killers of economies, and being sanctioned by the most powerful country in the world is certainly an uncertain and unstable place to be. While it is true that states and some companies (probably out of China and Russia) will take advantage of the situation to create stronger ties with Iran, most businesses around the world still do have ties to the US. Those businesses will not want to work with Iran for fear that secondary sanctions will impact them. The Iranian economy is still struggling to move upward from the depression that the original sanctions created in Iran, and with the new sanctions it’s a good bet that Iran will experience an economic depression again.
Iran’s people, like any country, take out the frustration they have with the economy on the elected officials. When the first sanctions regime created a depression in Iran, it fell squarely on the shoulders of Mahmoud Ahmadijiad, temporarily discrediting the conservative/populist elements in Iran. The new sanctions are bound to do the same, except that instead of a conservative populist in charge to blame, it will be a moderate who is blamed for the downturn in economic fortunes. Make no mistake that the moderates are the largest sector of the Iranian political scene, with the conservatives second largest and the “reformers” coming in third. What this leads to is another resurgence in Iranian hardliner authority. These hardliners are the ones who support the direct attacks against their enemies, and see any easing of tensions as a capitulation. Further these are the people who see supporting insurgent groups in the region as a good way to divert the attention of opposing powers – like they do with the Houthis in Yemen.
Importantly, the JCPOA was not universally popular in Iran. Many hardliners, who control the Revolutionary Guards, Justice ministry, Supreme Leadership, and other vital organs of state thought that the deal disadvantaged Iran (or even worse by their count, made proponents of détente with the West look good). When the first JCPOA was enacted, President Rouhani in fact had to make personal appeals to the Supreme Leader Ayatollah Khamenei to get the plan adopted in Iran. Even though Khamenei signed off on this measure, he reportedly did so with great reluctance, as he didn’t trust the Americans to follow up on their word. Basically, the current president of Iran put his political fates on the line for this agreement, and with it being shot down so hard, it is difficult to see a situation where the hardliners do not regain lots of their political clout due to the feeling of betrayal among the moderates and reformers in Iran. Further, a crazed populist president like Ahmadinejad or even worse, a competent hardliner like al Raisi, may now have the strength they need to come back to power. It is even harder to see how any figure of any stature could so much as suggest coming back to the table with the US in the foreseeable future without considerable concessions to Iran – it’d be political, and maybe even physical, suicide.
The current Iranian administration, with its political fortunes being tied to an abrogated agreement based on trust with a country they were told couldn’t be trusted, now will have to perform diplomatic acrobatics. Supreme Leader Ayatollah Khameini has already stated that Iran will pursue nuclear energy at an accelerated rate now, and Iranian Foreign Minister Javad Zarif has stated that Iran will pull out of the JCPOA itself if the US does so. On May 8th Zarif softened his tone, writing on twitter that “In response to US persistent violations & unlawful withdrawal from the nuclear deal, as instructed by President Rouhani, I'll spearhead a diplomatic effort to examine whether remaining JCPOA participants can ensure its full benefits for Iran. Outcome will determine our response.” Rouhani has also affirmed that this is the current position of the Iranian government.
The Iranian people, like Americans, are proud and will put up with sanctions if they feel like they have been wronged. As Peter Frankopan notes in The Silk Roads, sanctions on Iranian oil with the intent of forcing Iran to accept the Anglo-Persian Oil Company in 1951 had the opposite effect than intended. “Instead, they simply strengthened resolve in Iran, to the point that by the end of 1952 the British were no longer so confident that the tactic of using sanctions would pay off.” Of course this led to the infamous 1953 coup deposing Mossadegh. None of this bodes well for any renegotiation.
Effects on the EU
Certainly, the effects of the Iran deal are nowhere near as visible in the EU as in Iran itself. Still, the EU, mainly Germany and France, have been put in a very tough position due to President Donald Trump’s actions. Here are two countries that not only negotiated the original JCPOA deal with the United States, but also were huge supporters of it. In recent months, both Angela Merkel and Emmanuel Macron have, as the New York Times put it, made pilgrimages to Washington to try to convince Donald Trump of the merits of his plan. Both were pursuing a plan of side deals to try to alleviate some US concerns. Now, with the re-imposition of sanctions and secondary sanctions, they are going to be expected to follow the US lead and re-impose sanctions themselves.
This is complicated by the aforementioned statements by Rouhani and Zarif that Iran will consider staying in the JCPOA, based on the responses of the rest of the P5+1 negotiating team. This leaves the EU with two options: 1) follow the US’s suit and try to get new sanctions on Iran, or 2) assuage the Iranian concerns about how they will act on sanctions and keep the JCPOA. Both routes have pitfalls.
If the EU decides to follow the US, they not only lose the negotiations which they believe can forstall Iran’s pursuit of nuclear weapons, but they also look like they’ve been bullied by the United States into doing what it wants without any regard for them. This sounds petty, but can be a potent domestic political issue, as sovereignty always is in the EU.
If they decide to back Iran, then they risk angering their most powerful ally. Whether they still see the current US administration as a dependable ally is debatable, but the risks of upsetting it further are not. Embargoes can be placed, financial markets can be closed, aid streams can be stopped, and imperiling so many other issues based on securing the JCPOA is costly.
Effects on China/Russia
Both China and Russia probably will have the easiest time with President Trumps unilateral revocation, because neither state really wanted to impose sanctions on Iran in the first place. The US was able to cajole both states into actually enforcing the sanctions on the nuclear program implemented in 2008 by quid-pro-quo in 2011. This also has the effect of making the US look like an untrustworthy and unreliable partner while also driving a wedge between the US and its main allies.
US Plan of Action
First, as the initializing actor, the US plan of action going forward now bears logical scrutiny given the previous effects.
Gauging from what President Donald Trump stated in his address immediately before signing a directive to re-imposition sanctions and secondary sanctions on Iran was that this was the beginning of a process. That process was going to be a rebuilding of the former sanctions regime that was implemented over two presidencies by former presidents Bush and Obama, which completely choked off any financial dealings with Iran, decimating the Iranian economy. This would then lead to Iran coming back to the table to re-negotiate its position in the world. There are several problems with this.
First, the re-imposition of sanctions on Iran is going to be a monumental task. The sanctions regime can be thought of in three separate parts. First, there is the need to have the United States itself implement the sanctions on the country in question, which honestly won’t be too hard. As noted in a previous essay, sanctions are the United States’ bread and butter – they can be worked out efficiently and quickly.
Second, the United States needs to convince other states to stop trading with Iran. This is where the trouble begins. In 2008 the United Nations Security Council was able to pass resolution 1803, which imposed broad sanctions against Iran due to its nuclear program. The key two states in this agreement were not of the West, but instead China and Russia. Both state oppose most cases of sanctions unless the sanctions are watered down to the point where they have no effect, but with these sanctions trade with Iran was restricted from almost all major economies. Currently, the United States is in a self-declared trade war with China and cold war with Russia, which will make getting these states on board politically very problematic. Further, not even the other security council members are sure locks to vote for new sanctions, unless Iran does something deliberately provocative in regards to their nuclear program.
Lastly, the US has threatened secondary sanctions on Iran – meaning sanctions on anyone who does business with Iran. These are going to be very politically tricky to implement, even though they were implemented in the previous sanctions regime. The reasoning for this comes from the fact that previously, the vast majority of state actors were onboard with the sanctions, meaning that the secondary sanctions imposed by the United States had little chance of impacting allies or aggravating other neutral states. With the other states not yet on board though, there is a chance that the net of secondary sanctions could hit states or enterprises that harm our relations with other countries. This, for sure, isn’t a sweeping case of “any country not signed onto sanctions will get swept up in the net!”, because the power of the US economy combined with the fact that the JCPOA has been teetering for the past several months. This means that the instability it has caused in decision making regarding financial situations in Iran have tended to the conservative side. For example, there has been unwillingness to invest in Iran because no one knew what the US would do. The second factor is by far the most damning to getting a strong set of sanctions put back on Iran. If the US government cannot pull its weight, what may come about will be a Cuba situation. This is where only the US and regional antagonists impose sanctions (although Iran, being on the other side of the world, will not be nearly as bound to those sanctions as Cuba would be). In this, secondary sanctions will be by far the most powerful weapon that the US brings to the table. However, the world is constantly diversifying away from the US economic system due to the knowledge that it can be weaponized by the US. So there are many emerging companies who don’t do business with the US, and will be based out of countries who will refuse to re-impose sanctions. China and Russia, as noted, will almost certainly be among those states.
Summary
So in all, there are few winning strategies that can realistically be gained from withdrawal from the JCPOA. The United States comes away looking like an unreliable negotiator and bully on the world stage, while Iran actually looks like a reasonable actor to the world stage. America's allies are all put in a tough position because they either expose the glaring divides between America and its allies by keeping the JCPOA in place, or they submit to American pressure and look weak by going back on their word too. The JCPOA is certainly flawed, but there are many different strategies that could have been pursued to better achieve America's interests without completely trashing a deal on which nearly the entire West had staked its reputation. Unfortunately, the reputation of the Liberal International order doesn't seem too important to the current leader of it.