by Dina Esfandiary
Last week, President Trump announced that he would renew sanctions waivers for Iran. But he also imposed non-nuclear sanctions and renewed his call to Congress to “fix” the deal or else. By doing so, Trump fosters uncertainty. This has the same impact on Iran as the US walking away from the deal.
Under the terms of the 2015 nuclear deal, the White House must suspend sanctions on Iran every 120 days. This was intended to bypass the US Congress, which was unlikely to approve legislation to lift US sanctions on Iran. But it has proved problematic.
President Trump believes the deal to be “the worst ever.” In October, he refused to certify Iranian compliance to the deal, despite renewing sanctions waivers a month earlier. Next week, he’s expected to re-affirm de-certification again. Trump is loathe to re-examine compliance every three months. It’s a headache and a reminder of a campaign promise he hasn’t fulfilled.
His actions and statements on the deal drew the ire of his European allies, who re-affirmed their commitment to the deal and Iran’s compliance. So has the International Atomic Energy Agency, which confirmed Iranian compliance to the deal nine times to date.
From this administration’s perspective, this dance of renewing waivers but refusing to certify Iranian compliance and slapping on additional sanctions for non-nuclear issues makes sense. Without walking away from the deal, which would have disastrous consequences for the US and its credibility, Trump continues to look tough on Iran, as promised.
And the impact on Iran is the same.
Uncertainty is the enemy of effective sanctions relief. And Iran knows this all too well. Since January 2016, when sanctions were lifted, business has been slow to trickle back into Iran. Although the Iranian market is attractive, with its large, tech-savvy, and young population, it’s also risky. Political, reputational, economic, and international risks are high, and the barriers to entry are numerous. But what’s worse is the continued uncertainty.
At first, interested businesses had to get used to the suspension of US sanctions rather than their being fully lifted. This meant accepting the continued risk of being in breach of US laws if the business had exposure to the US market—and the addition of complicated snap-back or escape clauses to potential contracts with Iranian counterparts. There are many clarification requests to the US Treasury and its sanctions arm, the Office of Foreign Assets Control, leaving it stretched thin. Licenses were slow to come by, and foreign businesses felt that US requests were put ahead of theirs.
Trump is making this worse.
He’s significantly deepening uncertainty for businesses, and doing so every 120 days. Every lead-up to a US announcement on certification and sanctions renewal makes existing chronic issues worse. It also puts a potential US change of mind on sanctions relief back on the table, meaning that companies could suddenly find themselves in breach of US sanctions.
In other words, the uncertainty has the same effect as re-imposing sanctions, or walking away from the deal.
Financial institutions and businesses won’t finalize deals or will refrain from financing them because its unclear if the deal will survive. In fact, this is already happening. France’s Total, which announced a deal to develop Iran’s South Pars gas field in summer 2017, admitted it would have to review the deal if further sanctions were imposed on Iran. Without these investments and the opening up of the Iranian economy, Iran will not benefit from the nuclear deal. The longevity and the effectiveness of the nuclear deal depend on the carrots—the benefits Iran gets—as much as the sticks. If Iran can’t feel the positive economic effects of the deal, then what incentive does it have to continue respecting it?
Last month’s protests in Iran highlight the frustrations over the unmet expectations of the nuclear deal. If Trump continues on this path, then the nuclear deal won’t survive. His policy only works if there’s a workable alternative in place. But there isn’t. And Iran will not agree to more talks or another deal after the first one wasn’t respected.
Dina Esfandiary is a fellow at the Centre for Science and Security Studies in the War Studies Department at King’s College London and an adjunct fellow at the Center for Strategic and International Studies (CSIS). Photo: Total signs agreement with Iranian and Chinese partners to develop South Pars gas zone.