An Iranian woman holds her national flag as she walks past the former US Embassy in Tehran. Behrouz Mehri /Getty Images.
Four years since Washington and Tehran signed the JCPOA agreement, diplomatic efforts have given way to renewed hostilities and brinksmanship between the two sides. The maximum pressure campaign, the Trump administration’s replacement to the JCPOA, has had a crippling effect on Iran’s economy, but it has not achieved any policy objectives. Consequently, the U.S. should refocus its strategy by supplementing sanctions with diplomatic engagement and presenting Iran with clear conditions with which it must comply to alleviate economic pressure.
The maximum pressure campaign aims to steadily intensify both primary and secondary sanctions against Iran to achieve US policy goals. While economic sanctions have been a fixture of American foreign policy for decades, the maximum pressure campaign is different, as it seeks to use economic means to financially strangle and isolate the targeted state to the maximum possible level. This is historically unprecedented, even in the case of Iran, which has dealt with sanctions for more than forty years. Washington has never tried to drive Iranian oil exports to absolute zero, and it has never sanctioned any third party that continues to do business with Iran’s energy sector.[i] It has also never imposed such tough sanctions on Iran’s shipping and financial sectors, sanctioning involved entities and intermediaries. The severity has been described as a “form of war more detrimental than actual war… It’s the slow death of a country, the government and its people.”[ii]
The Trump administration has repeatedly claimed the maximum pressure campaign’s success, stating that “it has denied the regime more than $10 billion in oil revenue since May 2018.”[iii] When announcing the latest round of sanctions, President Trump said that “sanctions work” and that Iran is dealing with “the strongest sanctions ever put on a country.”[iv] This view, however, misses the reality of how sanctions truly work and what makes them effective. Sanctions are a tool in the repertoire of policymakers — just like diplomatic and military efforts — used to achieve a policy goal. The economic damage, inflicted through trade barriers, tariffs, embargoes, and restrictions on financial transactions, is, therefore, not an end; instead, it serves as means to change the behavior of the targeted country. For sanctions to work, the sender state must also clearly explain to the sanctioned state what actions it must adopt to mitigate or completely terminate sanctions. These actions must be reasonable for both sides and have to be coupled with verification and enforcement mechanisms.
It is undeniable that the maximum pressure policy has inflicted enormous economic pain on Iran. The country is in an acute recession: According to the IMF, inflation has soared to 40%;[v] its currency, the rial, has lost more than 60% of its value since the campaign began;[vi] and its crude oil exports have been cut by more than 80%.[vii] Iran’s trade with its neighbors and allies has also plummeted. For example, in July 2018, trade with China amounted to $3.5 billion; only one year later, it fell to under $2 billion.[viii] All this accounts for a dreadful economic situation where Iranian citizens suffer from an alarming lack of food and medication.[ix]
While the maximum pressure campaign has been economically effective, the sanctions’ success should not be measured by its economic impact but by its ability to achieve policy goals. The Trump administration presented Tehran with a list of twelve demands, including that it stops uranium enrichment and not pursue plutonium reprocessing; ends its support of Hezbollah, the Houthis in Yemen, and Hamas; and discontinues its offensive cyberattacks.[x]
To date, there is no reason to believe that Iran will comply with any of the twelve demands, indicating the campaign’s ineffectiveness. Instead, the Islamic Republic has resisted the sanctions and embarked on a campaign of provocation and escalation to aggravate the U.S. and raise the price of inflicting maximum pressure. Since June 2019, it has seized oil tankers in the Strait of Hormuz, shot down an American military drone, and attacked Saudi Arabian oil facilities. The US demands are too broad and unlikely to encourage compliance as it would entail Iran giving up its regional influence, surrendering its most important military deterrents, and abandoning support to its long-standing proxies. It is, therefore, most likely that Iran will continue to destabilize the region through its proxies and militias and will seek new sanction evasion strategies. As US sanctions intensify, so will Iran’s escalatory attacks, which push both sides closer to a military conflict that neither side wants.
The most perplexing and dangerous issue is that both sides are currently not engaged in any diplomatic talks. Sanctions work best in tandem with negotiations: the sender state must clarify what specific conditions will alleviate imposed sanctions, and the targeted state must show commitment to fulfilling these. Without this, sanctions serve only as a mechanism to inflict economic pain and not as an effective policy tool.
[i] Afshon Ostovar, “The U.S. and Iran Are Marching Toward War,” Foreign Affairs, June 28, 2019. https://fam.ag/2nxfuBv.
[ii] Liz Sly, “Trump’s sanctions on Iran are hitting Hezbollah, and it hurts,” The Washington Post, May 18, 2019, https://wapo.st/30WVXrD.
[iii] The White House, “President Donald J. Trump Is Cutting Off Funds the Iranian Regime Uses to Support Its Destructive Activities Around the World,” May 8, 2019, https://bit.ly/2J9qEpe.
[iv] Adam Taylor, “Do Trump’s sanctions on foreign countries work? The government doesn’t know,” The Washington Post, October 3, 2019, https://wapo.st/35kfRjU.
[v] Davide Barbuscia, “Iran inflation could reach 40 percent this year as economy shrinks further – IMF,” Reuters, April 29, 2019, https://reut.rs/2PCsi35.
[vii] RFE/RL, “Iran Says China Has Pulled Out Of South Pars Natural Gas Project,” RadioFreeEuropeRadioLiberty, October 6, 2019, https://bit.ly/2AYBBDS.
[viii] Benoit Faucon, “China Pulls Out of Giant Iranian Gas Project,” The Wall Street Journal, October 6, 2019, https://on.wsj.com/2ItD0GF.
[ix] Abbas Kebriaeezadeh, “U.S. Sanctions Are Killing Cancer Patients in Iran,” Foreign Policy, August 14, 2019, https://bit.ly/2Z7rqGG.
[x] Michael Gordon, “U.S. Lays Out Demands for New Iran Deal,” The Wall Street Journal, May 21, 2018, https://on.wsj.com/2IA6vsn.