News : Sanctions
- Published: Tuesday, 18 December 2018
By Mahmoud Hakamian
Since US President Donald Trump withdrew from the Iran nuclear deal in May, there have been open questions as to whether the administration would be successful in convincing its allies and the broader international community to participate in the re-imposition of economic sanctions, or even to comply with those sanctions or generally accept a strategy of greater pressure on the Islamic Republic.
These questions arguably became more imperative in early November with the return of the last of the sanctions that had been suspended under the nuclear deal. Many international businesses severed trade ties with the Islamic Republic ahead of that date, but other entities including the leadership of the European Union have maintained a defiant tone, even swearing to defy the sanctions.
On Monday, Iran and key ally Russia both made statements boasting of that defiance and arguing that the US government’s commitment to an assertive Iran policy was on the verge of causing sharp devaluation in the value of the American dollar in foreign markets. “Long-term faith in the dollar is undermined,” said Russian Foreign Minister Sergei Lavrov. “Today everyone starts thinking of how to get rid of the dependence on the dollar.”
According to Newsweek, Iranian Foreign Ministry spokesman Bahram Qasemi delivered very similar remarks, apparently referring to the efforts by some of Tehran’s partners to engage in trade with local currencies in order to evade the traditional role of the US dollar as a global reserve currency. Lavrov and Qasemi were also presumably making boastful reference to the EU’s still-development plan to implement a “special purpose vehicle” to facilitate transactions with the Islamic Republic which would evade the re-imposed US sanctions.
The extent of the EU’s commitment to this project has nonetheless been called into question by such factors as the international body’s difficulty in finding a member state that is willing to put itself at risk of US penalties by hosting the SPV. And even since France and Germany stepped forward to ostensibly fill that role jointly, their willingness to support Iran’s position has been challenged by conflicts between Iran and the West over such matters as the ongoing development and testing of Iranian ballistic missiles – a program that is at odds with United Nations Security Council Resolution 2231.
In the wake of that conflict, it was recently reported that EU member states were considering downgrading the function of the SPV and using it to facilitate transactions dealing with food and humanitarian goods but not all-important Iranian oil exports. Nevertheless, for the time being the Islamic Republic is presenting an image of confidence regarding the EU’s supposed willingness to work with the Iranian regime and defend its position against American pressure.
This is evidenced by Tehran’s persistent willingness to seek European intercession to improve its own prospects for economic gain, especially economic gain under the terms of the nuclear deal, which remains in force between Iran, the United Kingdom, France, Germany, Russia, and China. On Monday, Reuters reported that the Islamic Republic had urged the EU to put pressure on American authorities to allow the delivery of commercial aircraft that had been ordered when sanctions relief went into effect but cancelled by the US Treasury following Trump’s withdrawal from the Joint Comprehensive Plan of Action.
Although the majority of the requested aircraft are manufactured by the French-headquartered Airbus, their export to Iran is dependent upon US waivers because more than 10 percent of their components are American made. Orders from the American company Boeing were cancelled before they were made official, and Boeing officials have professed to no longer be pursuing the deal.
In spite of this, Iran may enjoy somewhat inflated confidence regarding the prospects for waivers, not only because of the European Union’s defense of the JCPOA but also because the US has supposedly backed down on waivers issues in the past. Prior to the re-imposition of oil and banking-related sanctions last month, the Trump administration insisted that it would grant no exemptions for partner states that were particularly dependent upon Iranian oil and gas, as the White House strategy was to bring Iranian oil exports to zero. Ultimately, though, some waivers were granted, albeit contingent upon sharp reductions in relevant imports.
However, the Islamic Republic may be in danger of overestimating the significance of such compromises. US pressure may be going a long way toward keeping the importation of Iranian oil and other goods quite low, even in spite of sanctions. This was perhaps the implication of simultaneous reports on Monday regarding purchases of Iranian oil by South Korea and by India.
In the first place, Reuters reported that South Korea had not even taken advantage of the waivers in the month of November, instead keeping its loadings of Iranian oil at zero for the third month in a row. It is expected that this trend will continue through December, as well, with the lucrative Asian market beginning to take limited quantities of Iranian oil once again in January or even in February.
In the second place, another Reuters report indicated that India had reduced its Iranian oil imports by 41 percent between October and November, thereby substantially changing the overall rankings for which oil producing states hold the most power in the South Asian market. Whereas Iran had been India’s fourth largest oil supplier in October, it was only the sixth in November.
Such figures may have a limiting effect on Iran’s confidence regarding international support for its financial interests. Conversely, they may inspire greater confidence in the US regarding the prospect for success of its increasingly assertive Iran strategy. But on the other hand there are concurrent stories that lend credence to at least some of the rhetorical Iranian and Russian statements about governments and businesses trying to free themselves from American currency in the face of US pressure.
According to Radio Free Europe / Radio Liberty, for instance, the central banks of Iran and Iraq are reportedly engaged in joint discussions aimed at setting up credit arrangements for trade involving the two countries’ national currencies. This could make upwards of eight billion dollars in Iranian exports relatively impervious to US sanctions enforcement. The implementation of the plans could also come soon after the expiration of the 45-day period during which Iraq was scheduled to receive waivers from those sanctions.
Of course, ignoring the sanctions would entail walking away from US business at a time when a large delegation from Washington just visited Iraqi officials. It is not at all clear that this the Iraqi government is willing to accept this loss; and yet Iranian influence over Iraqi government and society is increasingly a challenge to US influence over the same. But this is only further incentive for pressure on Tehran by the Trump administration, which has made a priority of impeding Iranian expansionism in the broader Middle East.
Bilateral talks between Iran and Iraq are taking place in parallel with similar talks between Iran and Syria. Tehran Times reported on Monday that Hossein Jaberi Ansari, Iran’s negotiator on the Syrian crisis, had met with Syrian President Bashar al-Assad one day after hosting the Russian special envoy for Syria, Alexander Lavrentiev. This week, representatives of Iran, Russia, and Turkey are expected to meet with United Nations special envoy for Syria Staffan de Mistura, potentially formalizing aspects of Iran’s position there.
The Islamic Republic appears poised to in some sense declare victory in Syria. According to Al Monitor, Iranian officials pointed on Sunday to a visit to Syria by Sudanese President Omar al-Bashir as evidence that Arab nations – including members of Saudi Arabia’s anti-Iran coalition – are accepting the “reality” of the Iran-backed dictator’s persistent hold on power in Syria at the end of the eight year civil war.
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