If Donald Trump means what he says about his sanctions on Iran, it will mean the most brutal and pervasive exercise of raw American economic power in many decades, even including his trade war with China.
For the United States not only wishes to sanction Iran directly – a dangerous enough move – but is also proposing “secondary” sanctions on companies or countries that contract business with the Islamic republic. This will affect many of the world’s largest corporations who have resumed operations in Iran in recent years under the assumption that the Iran nuclear deal would hold for at least its 10-year duration. Now it has gone, and these companies are being asked to choose between their interests in the US and those in Iran.
The choice for all of them is obvious. In the case of the nascent Iranian car industry, for example, the companies affected include Toyota, Hyundai-Kia, Peugeot and Volkswagen. Big as they are, these large transnationals are unlikely to defy America. They will not sacrifice their sales, factories and operations in the North American market just to hang on to some relatively trivial interests in Iran. Already firms such as Siemens and Total have begun to move out of Iran. Aerospace companies refuse to sell planes to Iran Air. Others will follow. Spare parts will run out; Iranian industry, its armed forces and its oil business will suffer as a direct result, as they have under previous sanctions.
This initial round of US sanctions affects movements of US dollar bills and gold into and out of Iran, as well as the automotive sector and, an especially symbolic move, Persian carpets. The chances are that the Iranian economy, already struggling after years of isolation and mismanagement, will take another downwards turn. Worse, though, will follow.
As ever, Russia and China will stand ready to try and make up some of the shortfall, but they simply lack the critical mass and technological know-how to compensate for the mass abandonment of the country by western capitalism. The EU has made noises about compensating companies for the effects of American sanctions; but the already hard-pressed EU budget may not run to an indefinite payout to Peugeot SA to make a small number of cars in Iran and lose whatever export business it hopes for in the US. Counter-sanctions measures would also invite the White House to slap more tariffs on Russian, Chinese and EU exports to the US. Such is the bargaining power possessed by the largest economy on the planet and source of the principal global reserve currency. In that sense, Mr Trump’s sanctions will work.
Tellingly, though, the Trump administration has delayed the second phase of sanctions for three months. These will target the oil industry, obviously Iran’s biggest export, and the way it manages to pay its way in the world. That will be the point at which the sanctions bite, and when the real tensions between America and Iran will start to emerge.
Thus far, Tehran has made defiant noises; but read between the lines and, on both sides, there is still the possibility of compromise and a resumption of negotiations.
There is a pattern here. For the Americans, such crude tactics are simply the Trump way, as has been witnessed in his dealings with North Korea, the European Union, Nato and, with less success, China. The technique is to first breathe fire and fury, usually via Twitter, and then, having intimidated your opponent, you offer, magnanimously, some face-to-face dealmaking stunt. Such, the world must hope, will be the outcome of this particularly risky exercise of the Trump doctrine of America First, and before things run out of control as they so easily could when the oil sanctions hit.
The risks are, indeed, grave. American warships and Iranian oil tankers and gunboats could easily clash around the Persian Gulf, risking an easy escalation into limited naval conflict, if not war. In any case the Trump sanctions remove any incentive on the Iranians to stop their nuclear programme, and they will have taken the lesson offered by Kim Jong-un that the best way to make peace with America is form a position of strength and the possession of the weapons of mass destruction. It may not take the Iranians long to resume their experiments and develop some sort of lethal capacity. That is the longer-term danger.
The most likely immediate result will be an escalation of Iranian interference in the Middle East, and strengthening of its ties with Russia, Syria, Turkey and the Shia militias threatening to take up position on the Syria-Israeli border. The merciless informal proxy wars between the US, Israel and Saudi Arabia on one side and Iran, Russia and Turkey on the other will grind on or grow more intense in Yemen, in Lebanon, in Iraq and in Syria.
As with North Korea, Washington claims that it no longer seeks regime change in Tehran, but rather a change of behaviour. It is possible that these tough sanctions will persuade Iran to alter course, especially if the threats are accompanied by promises of US support if Iran would do so. It is also possible that the Iranian people will, for a change, blame the Ayatollah Khamenei and President Rouhani for their economic hardship, rather than the American “Great Satan”. There is some evidence that young urban Iranians in particular are growing tired of the restrictions they have to live under in the Islamic republic, from compulsory “modest” dress to limited web access to the overweening power of the revolutionary guard. They are less likely than in the past, maybe, to set fire to the stars and stripes and a crude papier mache effigy of the US president as an expression of their political views.
After four decades of religious rule and after the revolution that ended the pro-American rule of the Shah, Iran may be ready for change once again, if not revolution. Its leaders know that a conflict with the US – military or economic – is unwinnable in any meaningful sense, even though an American invasion of the country is something even President Trump would not attempt. Better for Rouhani and Khamenei to follow the example of others that Mr Trump has made a show of bullying before, and to engage in the games that the US president so obviously enjoyed. That is the hope.
Offer Mr Trump another diplomatic triumph, in other words, and abandon the nuclear programme, and America will be the Ayatollah’s biggest fan, and tolerate any scale of other abuses the regime wishes to indulge in.
It is sometimes said that standing up to a bully is the best policy; in international diplomacy it might be better to make yourself their friend. Making friends with the Great Satan may be the best way for Iran’s civilian and religious rulers to survive. It would be even better for them and the rest of the world if they made some overtures to Washington before the US navy turned up to stop the oil tankers getting through.
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