Iran Sanctions 101

August 14, 2018

President Trump signing an executive order, titled “Reimposing Certain Sanctions with Respect to Iran.” (Official White House Photo by Shealah Craighead)

 

Three months after President Trump withdrew the United States from the JCPOA (commonly known as the Iran Deal), the Trump administration reinstated the first of two rounds of sanctions against Iran. These sanctions are a prelude to harsher sanctions set to renew on November 4th of this year. The reinstatement of sanctions against Iran paired with President Trump’s inconsistent approach to foreign policy raises questions about what the Trump administration wants from Iran - and what might happen between now and the next round of sanctions.

 

The sanctions reimposed last Monday target a range of materials and industries. Trade in coal, metals, and industrial software will all be subject to economic penalties from the United States. The sanctions also target some of Iran’s commercial industries, including cars and planes. Iranian citizens will feel the impact via rising prices due to these changes and sanctions on the trade of U.S. dollars.

 

While experts say this round of sanctions will not cripple the Iranian economy, it does send a global message. Firstly, any hopes that the United States’ threats to Iran were a political bluff by the Trump administration have been dashed. It is clear that the Trump administration is committed to its decision to violate the JCPOA. Renewed sanctions also signal to foreign investors and businesses in Iran that now is the time to get out of the country. Some companies have already pulled their investments out of Iran, including American corporations like General Electric, Boeing, and Honeywell. Boeing alone lost a $20 billion contract from licenses to sell aircraft to Iran being revoked. Finally, the reinstated sanctions start the clock for future sanctions set to apply in November of this year.

 

The second round of sanctions is intended to hit Iran where it hurts - oil exports. The sanctions will restrict U.S. imports of Iranian oil, while also pressuring other countries to do the same. The Trump administration has said it hopes to reduce Iran’s revenue from oil to zero. Even if Iran maintains some of its oil trade relations, the impact of this second round of sanctions will be devastating. Some estimates say Iranian oil exports could fall by half a million barrels per day - roughly 17% of their current export rate. Iran’s economy is already in steep decline, meaning the sanctions set to reinstate in November could trigger a serious economic crisis.

 

The Trump administration claims that the sanctions are part of an effort to change Iran’s “threatening, destabilizing behavior,” but critics cite President Trump’s own behavior as a sign of a lack of strategy. There is no doubt that the president’s recent approach has been dizzying: President Trump has both threatened Iran with an all-caps tweet and stated a willingness to meet without preconditions. The administration's decision to withdraw from the Iran Deal and implement sanctions have set the U.S. on a path to confrontation with both Iran and traditional allies in Europe.


The sanctions reinstated Monday will have a modest impact on Iran’s economy, but send a powerful signal to leaders in Iran and beyond and set the stage for what is to come. President Trump has threatened Iran militarily and with economic collapse. In doing so, the United States has put it itself at odds with its traditional allies and with the country it is trying to “reintegrate.” The world will be watching for a reaction from Iran - or whether the country’s leaders bide their time to see if the U.S. midterm elections produce a House of Representatives that is more partial to diplomacy over war threats.

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