Iran’s Toughest Sanctions

Why is the United States imposing the “toughest sanctions in history” on Iran?

In 2018 November the United States re-imposed full sanctions on the Islamic Republic of Iran following Donald Trump’s withdrawal from the Iran nuclear accord back in May. The US has vowed to impose and maintain the “toughest sanctions in history” on Iran.

For its part, the Iranian president Hassan Rouhani has struck a defiant tone vowing to “break” the sanctions. But the reality is Iran is facing an economic siege which threatens to create instability with potentially far-reaching social and political consequences.

Realistically, there are three potential scenarios at this stage. First is that Iran hunkers down to manage the embargo by using innovative ways to evade some of the sanctions. The Iranians will be hoping to out-last Trump, whose first term expires in January 2021. However, this strategy falls apart if (as it looks increasingly likely) Trumps secures a second term in office.

The second scenario is that Iran caves in and agrees to negotiate a new deal on Trump’s terms. As Trump has repeatedly made clear the US is seeking a new deal which not only radically renegotiates the terms and conditions of the existing deal – known as the Joint Comprehensive Plan of Action (JCPOA) – but expands it to include restrictions on Iran’s ballistic missiles programme and changes to its regional policy.

The third (and worst) scenario is that tensions do not remain at the sanctions or economic level, but that they escalate, leading to indirect and possibly even direct clashes between Iranian and American forces in the Middle East. In this scenario the provocative actions of Washington’s key allies, notably Israel and Saudi Arabia, is crucial. Iran may strike these countries directly if it perceives an intolerable provocation or it comes to believe it can force an American retreat by striking at its allies.

But how did we get to this place in the first place?

History of Iran-US relations

Prior to the 1979 Iranian revolution, the United States and Iran were allies and Washington looked to Iran to maintain peace and stability in the Persian Gulf arena. But following the revolution the new revolutionary regime in Tehran found itself at odds with the US and relations rapidly deteriorated.

The climax came with the seizure of the US embassy in Tehran by revolutionary students in November 1979 under the pretext that the embassy was a “den of espionage” and to that end it was actively working against the Iranian revolution.

The real reason relates to the US decision to grant entry to the former Shah of Iran whom the revolutionaries wanted extradited to stand trial in Tehran. There was a real fear back then that the US would attempt to reinstall its former ally by overthrowing the Iranian revolution.

This fear brought back memories of the August 1953 coup (orchestrated by the CIA and Britain’s MI6) which overthrew Iran’s first democratically elected government – led by the nationalist Prime Minister Mohammad Mosaadegh – and reinstalled the Shah who had fled to Rome (Italy).

The August 1953 coup which overthrew Mossadegh was a pivotal moment in Iran’s modern history. Mossadegh was not only democratically elected but more importantly he was an icon of Iranian nationalism and was admired by nationalists across the region and beyond. It was Mossadegh’s decision to nationalise Iran’s oil industry – which had hitherto been in the clutches of the British “Anglo-Iranian Oil Company” (later renamed British Petroleum) – which had set him on a collision course with the Western powers led by Britain.

Mossadegh’s overthrow, followed by the instalment of Mohammad Reza Pahlavi as Shah, set the stage for the Iranian revolution 25 years later. It was based on this history – i.e. the US role in reinstalling the Shah and helping him to consolidate his rule for the next quarter of a century – that the Iranian revolutionaries staked out an oppositional stance vis-à-vis the United States.

Following the seizure of the US embassy in November 1979 bilateral relations were severed and the US began the long process of sanctioning virtually every aspect of the Iranian economy. The first sanctions targeted Iranian imports into the US. In addition, the US government froze $12 billion in Iranian assets. Hitherto these funds remain frozen and Iran not only seeks their return but also wants 40 years of interests to be taken into account as well.       

The next round of big sanctions came into effect 15 years later during the presidency of Bill Clinton. The latter sanctioned Iran’s oil industry by preventing US companies from investing in the Iranian oil and gas sector. A year later in 1996 the US congress went further by passing a law targeting foreign firms which invested more than $20 million a year in the Iranian energy sector.

This was the first time the US was using its clout to target non-US entities who did business with Iran. As such it was a significant escalation in America’s economic war against Iran and in hindsight it prepared the groundwork for today’s far-reaching sanctions regime.

The next round of sanctions was multilateral in nature in so far as they were prompted by United Nations Security Council (UNSC) resolutions targeting specific features of Iran’s nuclear programme, notably uranium enrichment. The UNSC imposed its first round of sanctions – mostly targeting the nuclear sector – in December 2006.

But the US imposed additional sanctions on top and used the opportunity created by international concerns over Iran’s controversial nuclear programme to widen and deepen its own sanctions regime against the Islamic Republic.

Indeed, in October 2007, the US directly sanctioned Iran’s powerful Islamic Revolutionary Guards Corps (IRGC) by designating its expeditionary wing, known as the Qods (Jerusalem) force as a terrorist organisation.

Moreover, in June 2010, the US exploited the international climate following the UNSC’s imposition of the fourth round of sanctions on Iran, to further target Iran’s energy and banking sectors. Then in January 2012 Washington went a step further by sanctioning Iran’s central bank.

Following the signing of the landmark nuclear deal in July 2015, much of the complex web of unilateral and multilateral sanctions that had been imposed on Iran since December 2006 were gradually eased but never fully lifted. However, the US kept in place its non-nuclear related unilateral sanctions, including wide-ranging sanctions against the IRGC on account of its alleged support for “terrorism”.

By withdrawing from the nuclear deal, the US is not only seeking to reimpose full sanctions, but is in fact going a step further by pledging to reduce Iranian oil exports to “zero”. This is a massive provocation and if the US comes anywhere near to achieving its goal then a confrontation with Iran is guaranteed.

Do Iran and America talk directly?   

In view of this bitter 40-year history, viewers would be excused in thinking that Iran and the United States rarely (if ever) talk directly. Whilst it is true that the two powers broke off diplomatic relations in late 1979 and have had no direct diplomatic representation on each other’s soils, nevertheless direct talks and even deals have materialised intermittently.

The best early example was the “Iran Gate” scandal of 1986 when the US government illicitly sold arms to Iran (in violation of its own arms embargo on the Islamic Republic) so as to secure the release of US hostages in Lebanon. The scandal had an additional illicit layer as the funds from the deal were transferred to the “Contras” rebels in Nicaragua who were fighting the leftist Sandinista government led by Daniel Ortega.

More recently Iran and the US engaged in secret talks in Muscat (Oman) in 2013 on finding a way out of the impasse presented by Iran’s nuclear programme. These secret meetings soon gave way to direct bilateral meetings between Iranian foreign minister Mohammad Javad Zarif and his former US counterpart John Kerry.

It is also worth noting that Iranian and US envoys met directly in Baghdad in July 2007 to agree to a de-escalation in the Iraqi arena. At the time Iran was accused by the US of arming anti-American militants who were resisting the US-led occupation. Although this meeting didn’t produce a breakthrough, nevertheless it showed that even under the most adverse circumstances – when Iran and the US are fighting each other indirectly via proxies – they can still meet with a view to de-escalation.

Why talks are unlikely now

Donald Trump has called for direct talks with Iranian leaders, notably President Hassan Rouhani, on several occasions. On each occasion the Iranians have publicly rebuffed his outreach on the grounds that it is spurious and insincere.

Iran’s position is clear: namely that the current nuclear deal (JCPOA) is fit for purpose and consequently Iran will not be forced to renegotiate its terms and conditions. Moreover, the 12 list of demands issued by the US secretary of state Mike Pompeo back in May are effectively a call for surrender as compliance would mean Iran effectively giving up its independent foreign policy.

Amongst other demands, Pompeo wants Iran to fully withdraw from Syria, stop supporting Hezbollah and cease playing a role in the Yemen conflict. Clearly the Iranians will never agree to these terms and to that end Pompeo’s list of demands was an incitement to confrontation as opposed to a credible negotiating position.

Will Iran and the US go to war?

To many observers it is surprising that given the depth of hostility between Iran and the US, as reflected by the events of the past four decades, the two sides have not gone to war yet. It is worth noting that the two sides have clashed militarily but stopped short of declaring war.

The most intense clash occurred in April 1988 when in the course of one day – during Operation Praying Mantis – the US destroyed a quarter of the Iranian navy. This operation was part of a broader US effort to pressure Iran into accepting a ceasefire with Iraq in the long-running Iran-Iraq War.

The power differential between the US and Iranian militaries is one of the factors that military analysts cite to explain Iran’s reluctance to engage the US militarily. But Iran has come a long way since the late 1980s and the Iranian armed forces – in particular the IRGC – have developed a wide range of asymmetric capabilities and tactics which could be used to great effect against superior military powers.

Iran’s asymmetric capabilities – in addition to the Islamic Republic’s extensive reach and influence across the Middle East – makes the US reluctant to engage Iran militarily for fear of unintended consequences.

Nevertheless, despite both sides’ reluctance to go to war, a conflict could still break out either as a result of the cumulative effect of tensions or a mistake or misunderstanding which escalates suddenly and without warning.

The next two years are the most crucial yet in the 40-year standoff between Iran and America.