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U.S. Snapback Sanctions on Iran Kick In

A reeling Iranian economy faces a new wave of U.S. sanctions having lost a bid to regain $400 million in cash from a bank in Germany.

Iranians walk by mural painting of the founder of the Islamic Republic Ayatollah Ruhollah Khomeini on the wall of the former US embassy in the Iranian capital Tehran on August 7, 2018. (Getty Images)

by Joseph Braude*

On August 7, a new round of U.S. economic sanctions went into effect against Iran. They stand to strictly curtail Iranian purchase of American currency and issue sovereign debt. They also make it harder for Iran to trade with other countries in steel, aluminum, gold, and other precious metals, and isolate the country’s airline and automotive industries.

President Trump reminded Americans Monday that he was merely restoring sanctions that had been lifted in the course of a “horrible, one-sided deal” that did not stop Iran’s nuclear program but nonetheless “threw a lifeline of cash to a murderous dictatorship that has continued to spread bloodshed, violence, and chaos.” In a Tuesday tweet, he added, “These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level … Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!”

The United States and Iran have been increasingly at odds over Iran’s growing political and military influence in the Middle East from Yemen to Syria and tensions between Tehran and Israel since Trump took office in January 2017.

Since the 1979 hostage crisis, the U.S. has imposed sanctions on Iran intermittently. The 2015 Joint Comprehensive Plan of Action, or JCPOA, paused sanctions in exchange for curbs and regular checks on Iran’s nuclear program. The deal – which was negotiated by the Obama administration with the U.K., France, Germany, Russia and China – has been sharply criticized by Trump since he was a candidate for president. The renewed sanctions were among those lifted under the 2015 deal. Trump abandoned the deal in May. Heavier U.S. sanctions, aimed at Iran’s oil sector, are due in November.

A European Union joint statement with the foreign ministers of France, Germany, and Britain said the parties “deeply regret” the reimposition of sanctions, and pledged to develop a “blocking statute” to reduce their impact on European businesses. In 2017, EU trade with Iran was valued at $23 billion, with more than 75 percent related to energy deals, according to the European Commission.

The sanctions “snapback” coincided with a significant step toward sanctions compliance in the German financial sector: The country’s central bank issued an order to freeze a $400 million cash transfer from the Hamburg-based, Iranian-owned European-Iranian Trade Bank to Iran. The U.S. embassy in Berlin Tweeted, “Close partnership = results. Thank you to our German counterparts for acting to stop Iran’s activities.”

A worker secures heavy lifting equipment at the Iran Aluminium Co. (Iralco) plant in Arak, Iran, on Tuesday, June 19, 2018. As OPEC oil ministers meet in Vienna, President Trump fired another twitter-shot across their bows, but his decision to slap sanctions back on Iran that is the real driving force behind the rising price of oil. (Getty Images)

Within the United States, critics of the Trump Administration’s Iran policy marked the occasion of snapback sanctions with denunciation. “President Trump should not have ripped up a functioning agreement,” Tweeted Democratic Congresswoman Chellie Pingree, who sits on the House Armed Services Committee. “This misguided decision against risks putting Iran back on the nuclear weapons development track and further distances us from our allies.”

But National Security Adviser John Bolton insisted in an August 6 television interview that the administration’s policy was firm but measured: “Our policy is not regime change, but we want to put unprecedented pressure on the government of Iran to change its behavior, and so far, they’ve shown no indication they’re prepared to do that.”

Bolton said the sanctions were already working, deterring European companies: “The European governments are still holding to the nuclear deal, but honestly their businesses are running from it as fast as they can so that the effect of the American sanctions really is proceeding regardless.”

Few American companies do much business in Iran so the impact of sanctions mainly stems from Washington’s ability to block European and Asian firms from trading there.

Among large European companies that have suspended plans to invest in Iran are France’s oil major Total and its big carmakers PSA and Renault.

“We have ceased our already restricted activities in Iran in accordance with the applicable sanctions”, said German car and truck manufacturer Daimler.

Looking ahead to potential further sanctions Tuesday, Tzvi Kahn, a senior Iran analyst at the Foundation for the Defense of Democracies, proposed that the White House consider sanctioning Abdolreza Rahmani Fazli, the country’s interior minister, noting that Fazli bears responsibility for a range of repressive measures taken in response to popular nationwide protests in recent months, in addition to complicity in electoral fraud. Kahn suggested the step would signal to all Iranian officials that following orders comes at a high price.

Iran’s rial currency has lost half its value since April under the threat of revived U.S. sanctions. The currency’s collapse and soaring inflation have sparked sporadic demonstrations in Iran against profiteering and corruption, with many protesters chanting anti-government slogans.

Iran has already seen unrest since last December over a poorly-performing economy. Rising food prices, unemployment and even poor water supplies have led to protests in a number of cities.

Demonstrations in Tehran in June were said to be the capital’s biggest since 2012.

*Middle East specialist Joseph Braude is the author of Broadcasting Change: Arabic Media as a Catalyst for Liberalism (Rowman & Littlefield). He is Advisor to the Al-Mesbar Center for Research and Studies and tweets @josephbraude.

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