May 26, 2018
President Trump has taken the hardest line he possibly could on sanctions by re-imposing every single US sanction that was lifted in January 2016 by his predecessor.
The day after the announcement, the rial lost another 4.3 percent of its value on the black market in Tehran, falling from 64,500 rials to the dollar before Trump spoke to 67,300 the next day.
Trump even canceled the permits issued to allow Iran Air to buy passenger jets from Boeing and Airbus. That was surprising because it will eliminate tens of thousands of American jobs—a curious move for a man who pledged to be “the jobs president.” The decision means Iran will have to buy Russian jets for its passenger fleet.
Probably more importantly, Trump also re-imposed “secondary sanctions,” that is sanctions on foreign companies that do business with Iran. Such sanctions infuriate Europeans of all political stripes. The EU may adopt policies designed to protect its businesses, but that will in turn further damage relations with the US.
The first major contract to be impacted will be Total’s deal signed last year to develop Phase 11 of the South Pars gasfield. Total has said it will withdraw from Iran if Trump does not give it an exemption from sanctions. The United States has said there will be no exemptions.
Trump also canceled the right of Iran to sell foodstuffs and carpets in the United States. Iran has exported little in the way of foodstuffs to the United States, but has said that America last year once again became the single biggest market for its carpet exports. The Trump decision will likely have a major impact on Iran’s carpet industry, which is a major source of income in many villages, where hundreds of thousands are employed weaving carpets.
The sanctions do not take effect immediately. Trump’s order provides time for firms doing business with Iran to wind down their business so as not to become overnight violators of US sanctions. Some of the sanctions will resume after 90 days (August 6) and the remainder after 180 days (November 4, which just happens to be the anniversary of the 1979 seizure of the US embassy in Tehran).
Imports of Persian carpets and the export of aircraft will end as of August 6. Iran has said it will try to get some planes delivered by Airbus before then.
All of the Iranian people, business firms and government agencies that were previously sanctioned for involvement in Iran’s nuclear program will see those sanctions re-imposed no later than November 5. Others sanctioned for terrorist activities, aiding Iran’s missile program, violating the human rights of the Iranian people and destabilizing activities in the Middle East never saw their sanctions lifted under the nuclear deal and will remain sanctioned.
The sanctions generally bar those people from receiving US visas, from doing business with Americans and provide for freezing any assets they have in the United States. These sanctions are largely symbolic as few Iranians who fit in these categories are likely to vacation in the United States or invest there. In fact, the sanctions have not found any personal assets in the United States of the hundreds of people sanctioned.
A major aspect of the re-imposed sanctions from Iran’s standpoint will be the renewed effort to block sales of Iranian crude oil around the world. The previous effort, which began in 2012, cut Iran’s crude exports from an average of 2.5 million barrels a day to just 1.1 million, a reduction of about 55 percent. The sanctions to punish buyers of Iranian oil will be re-imposed November 4.
As before, the State Department will allow imports of Iranian oil by countries that “significantly reduce” the volume of Iranian crude they are buying. In 2012, the biggest reductions came as a result of the EU decision to forbid all EU firms from buying Iranian oil. That is not likely to happen this time.
Other major buyers of Iranian oil, such as South Africa and Sri Lanka, stopped all purchases in 2012 and have never resume purchases since the sanctions came off 28 months ago. The others who continued major purchases after 2012—China, India, Japan, South Korea and Turkey—increased their buys after sanctions came off in January 2016. A key question now is whether they will reduce their purchases to the 2012-15 level again.
Trump does not appear to realize that the sanctions throttled Iran in 2012 only because the EU had run out of patience with Iran and agreed to join the United States in a full range of sanctions. Trump is able to re-impose US sanctions, but not EU sanctions, so the Trump action will not face Iran with the same pain it faced in 2012.
In fact, the Trump action may not produce a higher level of confrontation with Iran so much as new hostility and friction between the United States and Europe. Many in the government of the Islamic Republic fully understand that. They want to promote and exploit that friction. As a result, they oppose Iran dumping the nuclear deal and resuming a higher level of uranium enrichment—a move that would infuriate the EU and put Iran back in its crosshairs.
Hardliners, on the other hand, are quite happy to see Iran estranged from all Western countries. Thus, the next few months can expect to be dominated by a contest between hardliners and others over how to respond to the Trump action.
Trump’s May 8 speech on Iran lasted only 11 minutes and was almost entirely comprised of rhetoric a) assailing the regime for dishonesty, b) denouncing Barack Obama for agreeing to the deal in the first place and c) lauding the Iranian people—a clear effort to portray his actions as anti-regime rather than anti-Iranian.
Here are the concluding paragraphs of Trump’s speech in which he addressed the Iranian people.
“Finally, I want to deliver a message to the long-suffering people of Iran.
“The people of America stand with you.
“It has now been almost 40 years since this dictatorship seized power and took a proud nation hostage. Most of Iran’s 80 million citizens have sadly never known an Iran that prospered in peace with its neighbors and commanded the admiration of the world.
“But the future of Iran belongs to its people. They are the rightful heirs to a rich culture and an ancient land, and they deserve a nation that does justice to their dreams, honor to their history and glory to God.
“Iran’s leaders will naturally say that they refuse to negotiate a new deal. They refuse, and that’s fine. I’d probably say the same thing if I was in their position. But the fact is, they are going to want to make a new and lasting deal, one that benefits all of Iran and the Iranian people.
“When they do, I am ready, willing, and able. Great things can happen for Iran. And great things can happen for the peace and stability that we all want in the Middle East. There has been enough suffering, death, and destruction. Let it end now. Thank you. God bless you. Thank you.”
In the mid-1990s, the Clinton Administration picked up on the fact that the Islamic Republic was saying that the US government hates the Iranian people and not just the government of the Islamic Republic. It began adding words of praise and support for the Iranian people in public statements. That practice has been continued by the George W. Bush, Barack Obama and Donald Trump Administrations.
The bulk of Trump’s speech—seven of the 11 minutes—was a screed against the “murderous” Islamic Republic—but even more a screed against the Obama Administration for agreeing to the deal with Iran. He even said of Obama, “A constructive deal could easily have been struck at the time, but it wasn’t.” He labeled the agreement as “decaying and rotten.”
Only a few sentences buried in the speech actually announced what action he was taking—and those sentences contained no detail. The Treasury Department later issued a single-spaced 10-page document that described the new policy in detail.
The day after Trump’s speech, Secretary of State Mike Pompeo left North Korea with the three Americans the North Koreans had been holding prisoner. But the new Trump policy appears to sentence the Americans Iran is holding to further confinement.
Trump said not a word about the eight Americans held in Iran in his May 8 speech, although he often charged during his 2015-16 campaign that President Obama was just allowing American citizens to rot in Iran. The number of Americans in Iran has increased by two during Trump’s time in the White House.
