U.S. sanctions on Iran

Arm-twisting tactics

Print edition : December 07, 2018

At a demonstration on the anniversary of the U.S. embassy seizure, in Tehran on November 4. Iran’s Supreme Leader, Ayatollah Khamenei, said fresh sanctions on the country would only serve to make it more self-sufficient. Photo: Ali Mohammadi/Bloomberg

Iranian President Hassan Rouhani at the inauguration of the first phase of the Chabahar port on December 3, 2017. India tried hard to get Chabahar exempt from sanctions as it has a stake in the port’s development. Photo: AFP/Handout

During an air defence drill in an undisclosed location in Iran on November 5 soon after the sanctions went into force. Among the Trump administration’s demands is that Iran give up its missile defence programme. Photo: AFP

U.S. Secretary of State Mike Pompeo (left) and Treasury Secretary Steven Mnuchin present details of the new sanctions in Washington on November 5. Photo: J. Scott Applewhite/AP

The unilateral sanctions imposed against Iran by the United States kick in, but major European Union countries are looking for alternative ways of trading with Iran.

The draconian sanctions that were reinstated by the Donald Trump administration against Iran came into force in the first week of November. Trump administration officials described it as the “biggest sanctions action ever” the United States government has implemented against Iran so far. The new sanctions specifically target more than 700 Iranian entities. They include banks, companies, the national carrier Iran Air, Iranian shipping, and high-level officials and businessmen.

Iran’s President, Hassan Rouhani, described the U.S. action as “an act of war” from which his country would emerge triumphant. He vowed that his country would not succumb “to the language of force, pressure and threats” even as he expressed confidence about Iran’s ability to defeat “the economic war” being waged by the U.S. Soon after the sanctions went into force, Iran test-fired a barrage of new short-range missiles. It was part of a large military exercise and a signal of Tehran’s defiance. Among the Trump administration’s demands is that Iran give up its missile defence programme.

Mike Pompeo, the U.S. Secretary of State and a long-standing Iran baiter, said that the only option Iran had was “to either do a 180 degree turn” from its current policies or see “its economy crumble”. Pompeo said Washington would continue with its policy of “maximum pressure” until Tehran bowed to the diktats of the Trump administration. The other key demands from the U.S. are that Iran end its support to the Syrian government and the Hizbollah in Lebanon.

The European Union (E.U.) and some of the U.S’ close allies have been critical of President Trump’s decision to scuttle the landmark U.S.-Iran nuclear deal of 2015. The nuclear agreement, as the Iranians point out, was signed not just by the U.S. but also by five other countries—Britain, China, Russia, France and Germany. All these countries stand solidly behind the accord and have criticised Trump’s decision to scrap it. The United Nations Security Council had also approved unanimously the U.S.-Iran nuclear deal. Iranian Foreign Minister Mohammad Javad Zarif said the reimposition of sanctions would only lead to the further isolation of the U.S. in the international community.

The U.S. has alternately threatened and cajoled key countries to stop all oil imports from Iran by the unilateral November deadline it had set. Top Trump officials such as Pompeo and Secretary of Defence James Mattis had paid visits to New Delhi in order to persuade India to adhere to the sanctions, including the purchase of oil and gas. India’s National Security Adviser, N.K. Doval, was in Washington recently to meet senior Trump administration officials to plead for a “special waiver”. The U.S. had also threatened to impose sanctions against India on the purchase of the S-400 missile defence systems from Russia. India and China are the two biggest buyers of Iranian oil.

Six-month waiver

The Trump administration finally gave “a six-month waiver” to both countries along with South Korea, Japan, Turkey, Italy, Greece and Taiwan. Under the terms of the waiver, all these countries have to start progressively reducing the import of Iranian oil during the six-month period. Pompeo, while announcing the granting of the temporary waiver, said Washington was determined to bring down Iranian oil exports to “zero” in the near future. He also said the countries that were given waivers had already slashed their oil imports from Iran. According to him, countries that had been given waivers had promised to further cut down oil imports from Iran in the coming months.

Pompeo, however, admitted that an important reason for the waiver was to avoid a spike in global oil prices. Pompeo and U.S. Treasury Secretary Steven Mnuchin bragged to the American media that because of U.S. sanctions more than 200 foreign firms had ceased to do business in Iran and around 20 nations had stopped the import of Iranian oil even before the sanctions took effect. Iranian oil exports have, in fact, fallen by 40 per cent. Oil is the main source of foreign exchange for Iran. In the past couple of months, the Iranian currency has lost more than 50 per cent of its value. The U.S. has not yet imposed sanctions on the Society for Worldwide Interbank Financial Telecommunications (SWIFT). It wants all Iranian banks to be excluded from SWIFT.

China said it would not be bulldozed into complying with the U.S. sanctions against Iran. Russia’s Energy Minister, Alexander Novak, said Moscow considered the U.S. sanctions on Iran illegal. India, on the other hand, drastically cut its oil imports from Iran. All the privately owned Indian companies were quick to comply with Washington’s demands. Most observers, however, are of the view that India and China will never completely stop buying Iranian oil.

The Iranians had politely warned the Indian side that there would be a price to pay if it completely capitulated to the Trump administration. Cooperation in the Chabahar port, which India and Iran are jointly developing, could have been a casualty. According to reports, the Indian side had to work overtime to gain the “waiver” on Chabahar. The Afghan government, too, lobbied with Washington to exempt Chabahar from sanctions. New Delhi and Kabul, according to the reports, were successful in convincing the Trump administration that Chabahar was India’s gateway to Central Asia and an access to Afghanistan via Iran.

Gateway to Central Asia

India and Iran are not only bound by a shared history and culture. Iran is the gateway for the lucrative Central Asian market and beyond. Iran will have a key role to play in the events unfolding fast in Afghanistan and in the wider region. The country shares a long border with Pakistan. Relations between Tehran and Islamabad have got a little tense following the recent serious terrorist incidents in Iran. Iran has blamed Sunni insurgents who have a base across the border in Pakistan for the incidents. It is in India’s national interest to maintain good relations with Iran, which shares borders with both Afghanistan and Pakistan. Iran is also a leading member of the Non-Aligned Movement.

India should have adopted a much tougher stance against the Trump administration’s unilateral and foolhardy decision on Iran, like the Europeans did. Major E.U. countries such as Germany, France and Britain are looking for alternative ways of trading with Iran. There are reports that a special clearing house designed to allow European companies to trade with Iran is being set up. This will allow them to bypass the U.S. sanctions against Iran. The clearing house, known as a special purpose vehicle (SPV), is being created specifically to assure Iran that the Europeans continue to support the nuclear deal and will go on expanding business ties with the country. The Iranians want the Europeans to accelerate the setting up of the SPV.

Many European firms such as Total and Airbus, meanwhile, pulled out of deals they had signed with Iran, citing fears of secondary U.S. sanctions. Many European governments felt that the imposition of secondary sanctions by the U.S. government in pursuit of its foreign policy goals was a clear illustration of economic imperialism. The E.U’s Foreign Affairs chief, Federica Mogherini, said that trade between the E.U. and Iran was “a fundamental aspect of Iran’s right to have an economic advantage in exchange for what they have done so far, which is being compliant with all their nuclear-related commitments”. The International Atomic Energy Agency (IAEA) has reiterated that Iran has been in full compliance with the terms of the nuclear deal it signed in 2015.

In a joint statement, the E.U. Foreign Policy chief, along with the Foreign and Economic Ministers of Britain, France and Germany, said that they “deeply regret” the reimposition of U.S. sanctions on Iran and that they would set up an SPV soon. The statement pledged to implement the nuclear deal, saying that it was a question “of respecting international agreements and of our shared international security”. On the Iran issue at least, the Europeans seem to be working in tandem with Russia and China. Russia has said that it will continue to buy and sell oil from Iran to third countries.

Fake terrorism plots

Meanwhile, moves are afoot in Europe to drag Iran into “false flag” terror acts. The Israeli intelligence agency, Mossad, is working overtime to implicate Iran in fake terrorism plots. The government of Denmark, without providing any convincing evidence, said that Iran was involved in the hatching of an assassination plot against a leader of an Arab separatist group living in that country. In September, the Daesh (Islamic State) had carried out a terrorist attack in Khuzestan province in Iran, killing 30 people. The Arab separatist movement, whose leader is based in Denmark, had initially claimed credit for the September 22 terrorist attack. Iran’s Foreign Ministry had summoned the Ambassadors of Denmark, the Netherlands and Britain in Tehran after the attack. Iran’s Foreign Ministry said “it was unacceptable” that members of terrorist groupings were given safe haven there.

The French government provides sanctuary to many leaders of the Iranian group Mujahedin-e-Khalq (MEK). Although it is still on the terrorist list of many Western governments, it has become a favourite of the Trump administration. Trump’s National Security Adviser John Bolton has been very close to the group for decades and has featured as a keynote speaker in many of its international conferences. The MEK these days is being projected by the Trump administration as an alternative to the Islamic government in Tehran.

The new sanctions have already adversely impacted the poorer sections of Iranian society. Life-saving drugs and medical equipment are once again in short supply. Firms manufacturing life-saving drugs are reluctant to do business with Iran fearing the reach of the U.S. government. But the Iranian government is confident that it will be able to weather the sanctions this time too.

The last round of sanctions did not inhibit the exercise of its foreign policy. The U.N. sanctions on Iran lasted from 2006 to 2015. These sanctions in that period had broad international support but did not inhibit the spread of Iranian influence in the region. This time the U.S. is isolated as even its North Atlantic Treaty Organisation allies are trying to salvage the Iran deal known as the Joint Comprehensive Plan of Action (JCPOA).