Sanctions

Coronavirus will likely be far more effective than sanctions in inducing internal changes in North Korea.

Kitaneh Fitzpatrick is an intern for Middle Eastern history and geopolitics at the Council on Foreign Relations in New York. She is pursuing a master of arts in Near Eastern studies at New York University.  In November 2019, hundreds of Iranian intelligence reports were leaked that shed light on Tehran’s success in bolstering Iranian influence throughout the region. Syria and Iraq featured heavily in the reports and are usually the focus of international attention on Iran’s foreign influence. But the Islamic Republic’s reach extends far beyond the Middle East. Recently, Iran has turned its attention to Africa. Faced with crippling sanctions and diplomatic isolation, Iran has developed a close partnership with South Africa. South Africa has long been a cornerstone of Iran’s South-South strategy, which aims to strengthen ties with African and South American states. Strongly promoted by President Ahmadinejad, the South-South strategy intends to boost Iranian international credibility and promote trade. The Islamic Republic was one of the first countries to resume trade with South Africa following the end of apartheid, and the two countries have enjoyed strong relations ever since. Trade has been an integral element of this relationship, with Iranian officials estimating the value of Iranian Foreign Direct Investment in South Africa in 2018 at roughly $135 billion.  South Africa has proven to be an unlikely ally, calling the U.S. withdrawal from of the Iran Nuclear deal “regrettable” and publicly reaffirming its commitment to building an Iranian-South African relationship. South Africa has also advocated for Iranian interests at the UN, siding with Iran on critical issues at the UN Security Council and the International Atomic Energy Agency. South Africa’s commitment to maintaining diplomatic ties with Iran in the sanctions era has allowed the two countries to engage in joint business-tech forums, scientific cooperation, and tourism. Operating within the framework of the South Africa-Iran Joint Commission of Cooperation established in 1995, Iranian and South African foreign ministers meet frequently to discuss enhancing cooperation.  South Africa has become an important defense partner. Tehran has sought to leverage its longstanding relationship with South Africa to support Iranian naval expansion outside of the Middle East, and has conducted limited out-of-area naval operations in South Africa, according to a recent U.S. Defense Intelligence Agency report. Iran and South Africa have also signed basic military cooperation agreements, and Iran’s deputy minister of defense met with South Africa’s chief of defense force staff in Tehran this May to discuss “the development of defense cooperation [that would achieve] long term and strategic engagement.” While deepening defense ties with South Africa is important to projecting Iranian military might, Iran’s navy frequently faces maintenance issues and its deployed forces are largely symbolic. However, naval expansion to South Africa is still a powerful demonstration of Iranian political influence in spite of economic hardship and domestic unrest.  South Africa is part of Tehran’s effort to offset the cost of U.S. sanctions and increasing diplomatic isolation from the West. The relationship still has room to grow, but it and others will provide an essential lifeline to Iran and will undermine U.S. pressure.

Jennifer Davis, an American anti-apartheid activist, passed away on October 15. Among her many legacies, she mobilized public pressure on the U.S. Congress to overturn President Ronald Reagan’s veto of the Comprehensive Anti-Apartheid Act of 1986. Born in Johannesburg and a graduate of the prestigious University of the Witswatersrand (Wits), she and her husband eventually moved to New York. Soon after, she became a naturalized U.S. citizen. Like other white, highly-educated anti-apartheid activists, she was strongly influenced by the racism of Nazi Germany and the subsequent holocaust.  From 1981 to 2000 she was the director of the American Committee on Africa that coordinated NGO opposition to apartheid and made it a mass movement. She went beyond the Sullivan Principles, which called on American companies doing business in South Africa to treat their South African employees the same as they treated their employees in the United States. She pushed for Americans to boycott South African goods, and for Americans to divest from companies that profited from apartheid.  Within the governing African National Congress, there is frequent criticism that the United States came late and only half-heartedly to the anti-apartheid struggle. Jennifer Davis is a reminder of the important role played by civil society in heightening public awareness in the United States of apartheid—which eventually led to real legislative action—and that the international anti-apartheid movement acquired significant American support.

As Iran slowly untethers itself from the Iran nuclear deal’s central constraints on enriched uranium, signaling the deal’s potential collapse, President Trump is proving that U.S. unilateral power remains paramount on the global stage.  Trump’s policy to kill the 2015 deal has been prevailing against the objections of the remaining signatories, perhaps the most powerful global counter-coalition possible — China, Russia, Germany, France, the United Kingdom and the European Union. It has been prevailing despite that Iran had until very recently been abiding by the deal following the U.S. withdrawal last May. But without an endgame strategy on Iran that includes an exit ramp off the escalatory ladder of tensions and a solution to the nuclear problem, Trump’s victory will be a Pyrrhic one. Throughout the Cold War and after, it was dogma that the United States needed partners in order to make sanctions work. With Iran, Trump has shown that the U.S. alone remains a preeminent power that can implement an unprecedented “maximum pressure” campaign of primary and secondary sanctions.  U.S. unilateral sanctions, and the threats to retaliate against companies doing business with Iran, have effectively crippled the Iranian economy, isolating it from international financial markets, drying up foreign investment, cutting its oil exports to 1.1million barrels per day (bpd) and below, stifling its economy (which is projected to shrink by 6 percent in 2019) and causing its currency to lose 60 percent of its value against the U.S. dollar.  But Trump’s assertion of U.S. unilateral power, through the use of sanctions, is a disruptive power and not an end in itself. To date, U.S. efforts to strengthen the Iran nuclear deal have been counterproductive to enhancing U.S. security. By withdrawing from the deal, Trump has provoked an Iranian reaction that could lead to the deal’s collapse while providing no alternative constraints on the Iranian nuclear program. The Iran Deal had resulted in a rollback of the Iranian nuclear program that included the removal of 98 percent of its enriched uranium, decreasing its enrichment capabilities to very low levels of 3.67 percent — far below weapons grade — and subjecting its program to robust international inspections. As the deal unravels, the Iranian program will be able to continue unfettered, adding once again to the destabilizing challenges in the region, not reducing them.  Furthermore, as the president recently increased the sanction pressure — including tightening sanctions on Iran's oil exports, sanctioning Iran’s supreme leader and placing its elite military, the Islamic Revolutionary Guard Corps (IRGC), on the terrorist list—Iran has adopted a more aggressive response and tensions have escalated across the region. The U.S. and Iran came very close to open conflict as the confrontation spilled into the Persian Gulf. And the chances for conflict are only accelerating as tit-for-tat reactions continue to disrupt the shipping lanes in the gulf. U.S. sanctions also have enabled the IRGC and Iran’s conservatives to tighten their control over Iran's economy and politics. And U.S. rejection of the Iran deal has turned the Iranian public against negotiations with the West, particularly on its nuclear program, further constraining Iran’s president, Hassan Rouhani’s; 72 percent do not think Iran should negotiate with the West because it is untrustworthy.  The challenge before Trump is whether he is willing and able to convert U.S. power into an endgame strategy that results not in war by design or miscalculation, not in Iran building nuclear weapons, but in his stated goals of a nuclear weapons-free Iran with a better nuclear deal and an Iran that, as Secretary of State Mike Pompeo put it, behaves like “a normal nation.” Meeting that challenge won’t be easy, especially for an administration that is short-staffed on the national security cabinet level on down, and a president who is dismissive of coordinated approaches to strategy and policy. Trump, nonetheless, did lay the groundwork for progress earlier recently when he offered to talk to the Iranians without pre-conditions. If this offer is more than just a hat tip to a U.S. domestic constituency, there needs to be a comprehensive strategy with clear goals, objectives and options. Time is of the essence as Iran moves away from the constraints on its nuclear program. To be successful, a strategy would need to include as incentives something very similar to what the president appears to be offering North Korea: broad-based sanctions relief and security guarantees reinforcing the president’s claim that he is not pursuing regime change in Iran.  Although the Iranian leadership has rejected the president’s offer, the Iranians should reconsider their response. The Iranian strategy is inappropriately focused on pressuring the other signatories to fulfill the trade and investment requirements of the Iran nuclear deal with threats of incremental violations every 60 days. This strategy does not fully recognize how the U.S. has checkmated the other signatories on this issue.   If the U.S. is going to go it alone on Iran, it must implement a strategy that leverages U.S. economic power into opportunities for a diplomatic solution that makes the U.S. more secure.

Neither Iran nor the United States likely wants war, but the possibility of a miscommunication is considerable, risking a dangerous escalation.

With significant risks now looming over global energy markets, the United States should be careful in evaluating any future oil sanctions, Amy Myers Jaffe writes in the following Q & A which first appeared on CFR.org.  Oil prices ticked up a few percentage points after the announcement. Do you expect prices to remain higher, or is there enough supply in the market to cover a drop in Iranian exports? U.S. sanctions had already curbed Iran’s oil production substantially earlier this year. The Trump administration’s tough stand on waivers could remove an additional five hundred thousand barrels per day or more from the market in the coming weeks. This would come on top of production cuts planned by the Organization of the Petroleum Exporting Countries (OPEC) and ongoing production and export problems in Libya and Venezuela. Oil prices will continue to be sensitive to any supply disruptions, despite expectations of rising U.S. oil production and possible production increases from Saudi Arabia. Should prices begin to rise precipitously, the Trump administration could make sales from the United States’ strategic petroleum reserve. How has the United States’ growing role as a major crude oil exporter changed its attitudes when it comes to sanctions?  There is no question that rising U.S. oil production has emboldened U.S. policy regarding oil sanctions. U.S. crude oil exports reached record levels, above 2.5 million barrels per day, in recent weeks and are expected to rise further this year. However, the administration should take care not to impose too many complex sanctions in the oil market at once because surprise events such as hurricanes, accidents at major oil fields, or geopolitical strife can create sudden disruptions in oil supplies and leave markets more vulnerable to price spikes. U.S. crude oil production is still less than 12 percent of the total global crude oil supply. It can only go so far in hedging against the multiple risks now looming in the market. Iran has threatened to stop the flow of oil from other big suppliers via the Strait of Hormuz. Could it do that? How exposed is the U.S. economy to oil disruptions in the Middle East? The Strait of Hormuz is more than twenty miles wide. It would be extremely difficult for Iran to close it completely for an extended period of time. There is the question of whether Iran could use asymmetric warfare tactics, such as swarming speedboats and missile attacks, but the possibility of a decisive international military response led by the United States makes such an endeavor extremely risky for Iran and its military. Iran would likely use more clandestine approaches, such as cyberattacks on neighboring state oil facilities. Saudi Arabia and the United Arab Emirates have alternative pipeline routes that can bypass the Strait of Hormuz. In the case of Saudi Arabia, upward of 6.5 million barrels per day in exports could bypass the Persian Gulf. The U.S. economy is less exposed now to oil price shocks than in past decades due to the lower oil intensity of the U.S. economy. Still, high gasoline prices can derail consumer spending, especially on durable goods such as cars. At the same time, an oil price shock in the developing world could cut into countries’ appetites for U.S. goods and services. China is the largest purchaser of Iranian crude. How do you expect it to respond to the Trump administration’s decision? China said that Iran’s discounted oil was too cheap to pass up, and it has been increasing its purchases of Iranian crude in 2019, reaching over seven hundred thousand barrels per day this month. In the past, China attempted to circumvent these sanctions by purchasing Iranian crude on a barter basis or by promising to pay Tehran once sanctions are lifted. In the end, the United States and China have many bilateral issues of greater salience, so both sides will be reluctant to fight over Iran policy. What will this additional pressure on Iran achieve? Iran has little incentive at this point to negotiate with the Trump administration so close to the U.S. presidential election cycle. Iran has a policy it calls strategic patience, which is simply waiting to see if a new administration might reinstate the Iran nuclear agreement or take a less aggressive posture. The International Atomic Energy Agency maintains that Iran has continued to comply with nuclear inspections set up by the deal, which is still being honored by European signatories.

Since Russia’s 2014 invasion of Ukraine, Western powers have hit Moscow with economic sanctions, hoping to put a stop to President Vladimir Putin’s aggression. Have they worked?

With significant risks now looming over global energy markets, the United States should be careful not to go too far with oil sanctions.  

Iran appears increasingly boxed in by intensifying U.S. sanctions, the latest of which will effectively cut it off from its main oil customers.

Trump must not play security card in China trade war.

A move to block sanctions relief has been defeated, averting a likely spike in global aluminum prices but also spotlighting the tough road ahead for Congress in shaping policy on Russia.

Earlier this week Secretary of State Mike Pompeo announced that India, along with seven other countries, would receive an exemption from the newly-imposed U.S. sanctions on oil imports from Iran. This was a significant announcement. India is the second-largest importer of oil from Iran after China, and due to the volume of oil trade from Iran to India, it was always going to be hard to meet the Donald J. Trump administration’s demand that countries “go to zero” imports by November 4. The exemption recognizes this challenge, and acknowledges that India had already made “significant reductions” in its imports from Iran. The significant reductions exemption was good news from the perspective of U.S.-India economic ties, at least for now. The exemption isn’t permanent, of course, and just postpones for another six months the possibility of a confrontation over what the Indian government sees as unilateral sanctions (longstanding Indian policy recognizes only UN sanctions). This exercise will come around again in 180 days for a reevaluation, so the issue—and potential for bilateral tension—will linger.    The State Department further announced that India would receive a waiver for its continued work with Iran to develop the port at Chabahar. The language the the State Department provided to the press recognized that the Chabahar port serves as India’s bridge to Afghanistan and that the port is “vital” for India’s “ongoing support of Afghanistan’s growth and humanitarian relief.” Given that the Trump administration’s South Asia strategy formally calls upon India to scale up its economic assistance and development activities in Afghanistan, the sanctions exemption for Chabahar will keep this channel alive, although as C. Christine Fair has noted, the overall economic viability of Chabahar depends on a transport market to use this port. The exemption provides for strategic alignment between the Trump administration’s South Asia strategy and its Iran policy, and puts to rest what had been a hovering uncertainty about how the administration would approach the port. That’s the good news. In the not-so-great news, the trade dialogue with India appears to be hitting rougher waters. Washington and New Delhi have long had a laundry list of trade and economic frictions that have persisted over the years and are not easy to resolve. The Trump administration has added to that laundry list with new creations: tariffs on steel and aluminum leading to the prospect of Indian retailiatory tariffs, held in abeyance for now; a focus on trade deficit reduction; ending a series of trade preferences under the Generalized System of Preferences (GSP); and a bizarre presidential fixation on Indian tariffs on Harley Davidsons. These new frictions build upon an ongoing set of trade and economic challenges with India that any current or former U.S. government official would recognize well. As it turns out, these challenges have remained impervious to recent efforts to find solutions, and as a result, the U.S. trade representative (USTR), Robert Lighthizer, will not be traveling to India as earlier anticipated for the Trade Policy Forum (TPF), the standing dialogue between the USTR and his Indian counterpart. (The State Department had earlier issued a “Free and Open Indo-Pacific” calendar of meetings that slotted the TPF for October 31.) Press accounts at best put the possibility of a TPF convening in December or even January, due to the lack of progress in advancing issues prior to this dialogue. It’s worth remembering that, at the conclusion of last year’s TPF, Lighthizer decided to issue a statement commenting on “differing views that could not be resolved immediately” rather than sign onto a more typical joint statement, however anodyne. Previous administrations struggled to overcome big trade hurdles with India on a mind-numbing array of subjects—just look at the last U.S.-India joint statement from the final TPF convened with the Barack Obama administration. But at least the trade principals met regularly, and kept meeting. Economic issues with India are tough and won’t get any easier by postponing dialogue.   My book about India’s rise on the world stage, Our Time Has Come: How India Is Making Its Place in the World, was published by Oxford University Press in January. Follow me on Twitter: @AyresAlyssa. Or like me on Facebook (fb.me/ayresalyssa) or Instagram (instagr.am/ayresalyssa).