Can the US achieve its strategic goals with its campaign of ‘maximum pressure’ on Tehran?

After 17 days of continuous negotiations, marked by sleepless nights, standoffs and shouts, the world “breathed a sigh of relief” on July 14, 2015, when Iran, the United States and five other powers announced a pact to curb Tehran’s nuclear programme.

The announcement prompted scenes of joy on the streets of Tehran, with young Iranians dancing to celebrate the promise of an end to years of punishing sanctions.

Iran called the deal “a major step forward”, while the US hailed it a step towards a “more hopeful” and “safer world”.

Just four years later, the landmark accord is in danger of unravelling, Iran’s economy is in crisis, and there are fears that hawks in Washington are trying to provoke a military confrontation between the US and Iran.

How did we get here? And what’s next?

Why did the US pull out and impose sanctions on Iran?

On May 8, 2018, US President Donald Trump withdrew from the Joint Comprehensive Plan of Action (JCPOA) negotiated by his predecessor, calling it “one-sided”, “horrible” and “defective to its core”.

Trump said the JCPOA, which offered Iran sanctions relief in exchange for limits on its nuclear programme, did not do enough to curb Iran’s ballistic missiles programme or address its support for armed groups in the Middle East. 

His administration then launched a “maximum pressure campaign” and reinstated all US sanctions against Iran – a move US officials said would force Tehran to rein in its regional activities, halt its missiles project and return to the negotiating table to discuss a new agreement.

Last week, Washington upped the ante, announcing it was deploying warships and bombers to the Middle East. It cited unspecified threats from Tehran for the move.

What sanctions did US impose on Iran?

In August last year, the Trump administration slapped sanctions on:

• the purchase or acquisition of US-dollar bank notes by Iran
• Iran’s trade in gold and precious metals
• transactions using the Iranian rial
• transactions with Iran in graphite, aluminum, steel, coal, and industrial software
• transactions related to the issuance of Iranian sovereign debt
• sale to Iran of cars and car parts
• imports to the US of Iranian luxury goods such as carpets and caviar
• sale to Iran of commercial passenger aircraft

In November, Washington stepped up the pressure, imposing sanctions on:

• Iran’s oil exports and energy sector
• financial institutions conducting transactions with the Central Bank of Iran,
• port operators, shipping and ship-building sectors
• provision of insurance and financial messaging services to Iran

And a year after exiting the nuclear deal, the US imposed fresh sanctions on Iran’s metal sector. It also revoked sanctions waivers that allowed Russia and European countries to conduct civilian nuclear cooperation with Iran.

Moreover, to date, the Trump administration has registered more than 900 individuals, entities, vessels and aircraft on a sanctions list.

That includes 50 Iranian banks and their subsidiaries, 200 persons and vessels in Iran’s shipping and energy sectors, as well as Iran’s national airline and more than 65 of its aircraft.

How have the sanctions affected Iran’s economy?

Soon after the US’s pull out and threat of sanctions against countries and companies doing business with Tehran, more than 100 foreign companies ceased doing business with Iran.

And major buyers of Iranian crude, including India and Japan, have said they will stop oil imports.

The US squeeze on Iran’s economy has caused a financial crisis, resulting in mass protests across the country. The Iranian rial lost more than 60 percent of its value against the dollar last year, while inflation is predicted to reach 40 percent this year.

The economy, which shrank by 3.9 percent last year, could plummet by another six percent, the International Monetary Fund said.

That estimate preceded the latest round of US sanctions on Iranian oil.

Iranian oil exports fell from 2.5 million barrels per day to 1 million bpd this year – the fresh sanctions aim to cut that figure down to zero.

How has Iran reacted?

Following the US’s pull out, Iran said it would continue to comply with the nuclear deal and urged the agreement’s remaining signatories – the United Kingdom, France, Germany, Russia and China – to deliver on the promised economic benefits.

But on Wednesday, Iran’s President Hassan Rouhani said Tehran would scale back compliance with some of its commitments under the deal and threatened to resume high-level uranium enrichment in 60 days if the pact’s remaining parties failed to protect Iran’s oil and banking industries from US sanctions.

In a speech on Saturday, he called for unity, saying Iran was facing “unprecedented” pressure.

His government also pledged to mobilise all resources to sell Iranian oil in the “grey market”. 

Other Iranian officials, meanwhile, have rejected Trump’s invitation for talks.

Is the US achieving its aims?

The New York-based Eurasia Group said the US’s pressure campaign “has proven successful in a tactical sense” as it has halved Iranian oil exports and deprived the government of crucial foreign currency.

However, while the fall in revenues could reduce Iran’s aid to Lebanon’s Hezbollah and militias in Iraq and Syria, “sanctions have not moved the US much closer to its ultimate goal – either Iran’s capitulation over its nuclear programme and regional actions or the regime’s collapse,” said the Eurasia Group.

Others agree. The International Crisis Group (ICG), in a report last November, said there was little to no link between Iran’s economic well-being and its regional policies. In fact, Iran intervened in the conflicts in Syria, Yemen and Iraq while it was under global sanctions.

While the economic hardship did trigger protests, with protesters rallying against corruption and mismanagement, demonstrations so far have not been big enough to threaten Iran’s government, analysts said.

Ali Vaez, director of the Iran project at the ICG, said Iran’s counterstrategy would be to “resist and survive”.

“Rather than trying to achieve the unattainable goal of Iran’s surrender, they should act to prevent another costly US war of choice,” he wrote in the Atlantic magazine.

“This would require stepping back from maximalist demands, and using sanctions as scalpel, not a chainsaw.”

How has Europe responded?

The three European Union signatory nations, as well as Russia and China, oppose the US’s withdrawal.

The EU has rejected Iran’s 60-day ultimatum and appealed against “escalatory steps”. It also said it would pursue the setting up of Instex, a new trade channel to bypass US sanctions.

Ellie Geranmayeh, a senior fellow at the European Council for Foreign Relations, said both sides should move quickly to launch the system, and European leaders should consider efforts to provide Iran with some economic relief.

That includes allowing transactions in the humanitarian sector to take place and allowing Iran to repatriate some of its own money sitting in European bank accounts, which have reportedly been blocked due to US pressure.

“If Europe treats this matter with the urgency it requires, there could be creative paths for political brinkmanship that de-escalate the current scenario,” she wrote.

What about China and Russia?

China, Iran’s biggest oil customer, “is a major factor in the effectiveness of any sanctions regime on Iran,” said Kenneth Katzman, a specialist in Middle Eastern affairs, in a report for the US Congressional Research Service.

China formally protested US sanctions on Iranian oil, but media reports say Beijing appears to have reduced its oil imports from Iran since the US moves.

The Reuters news agency, citing unnamed sources, said on Friday that Chinese companies were erring on the side of caution unless they received a government mandate to keep ordering oil from Iran.

Russia, meanwhile, blamed the US for Iran’s decision to roll back its commitments under the nuclear deal.

In December 2018, Iran signed a free trade deal with the Russia-led Eurasian Economic Union, a move Katzman said suggested a “Russian intent not to abide by reimposed US sanctions on Iran”.

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