The Strategist

What you need to know about US sanctions against Iran

11/05/2018 - 11:45

New US sanctions against Iran come into force On November 5. They will affect the banking and oil sectors of the country and can finally paralyze the Iranian economy. The EU is unhappy with the new US sanctions adopted after Washington left the Iranian nuclear program, which is a key element in the global security system. Here are key facts regarding US sanctions against Iran.

Michael Vadon via flickr
Michael Vadon via flickr
What sanctions against Iran are taking effect?

New US sanctions against Iran affect key sectors of the economy of this country - oil and banking. From November 5, Washington prohibits exporting oil from Iran and doing business with Iranian oil companies. US President Donald Trump called the sanctions against Iran "the toughest that ever existed." In addition to new sanctions, the previously imposed restrictive measures affecting the financial sector of Iran continue to operate. Thus, American companies are prohibited from any operations with Iranian banks, including with the Central Bank of Iran.

According to Washington’s plan, oil exports from Iran will be completely stopped after the introduction of sanctions. But even if the United States fails to implement these intentions, any restriction on the export of Iranian oil will be extremely painful for the country's economy. Oil revenues account for 80 percent of the Iranian state budget.

What is the meaning of sanctions?

According to Washington, by providing "maximum pressure" the United States is trying to force Iran to change its "malicious behavior" by abandoning its nuclear ambitions. On May 21, US Secretary of State Mike Pompeo voiced 12 demands, which the Iranian authorities had to fulfill in order to avoid the resumption of sanctions. Among other things, Iran must stop the missile program and not intervene in future conflicts in the Middle East. Washington intends to force Tehran to stop supporting terrorists in the Middle East, including the Hussite rebels in Yemen, the Shiite Hezbollah movement in Lebanon, as well as Hamas and the Palestinian Islamic Jihad.

Iran must also withdraw its troops from Syria and demobilize the Shiite military units in Iraq. The overthrow of the Iranian regime is not the official goal of the United States, but statements by a number of high-ranking officials in the US administration suggest otherwise.

How do other parties of the nuclear agreement with Iran react to sanctions?

The European Union, as well as separately Germany, France and the United Kingdom, expressed regret over the new sanctions that the US introduces against Iran.

"We deeply regret the entry into force of the new US sanctions as a consequence of Washington’s withdrawal from the nuclear deal," the EU countries general statement issued on November 2 said.

The sanctions, as well as the US withdrawal, were not approved by the other parties of the agreement - Russia and China. According to the participants of the Joint Comprehensive Action Plan, the agreement has achieved its goal of eliminating the danger of Tehran developing nuclear weapons and avoiding an arms race in the region. Iran’s behavior in the Middle East has never been part of this agreement.

In turn, the International Atomic Energy Agency (IAEA) announced at the end of August that, despite pressure from the US, Iran continues to abide by the terms of the nuclear deal.

Tehran still wants to participate in this agreement, but only on condition that it has certain advantages promised to it earlier. The Iranian Foreign Ministry said that European countries have a period of 45 to 60 days to provide guarantees to protect the interests of Iran and compensate for damages caused by the US withdrawal from the transaction. If the European participants in the transaction do not do this, Iran warns about the adoption of "forced decisions." Tehran filed for the United States with the International Court of Justice in The Hague in an attempt to get a ruling to repeal the sanctions imposed against it.

What effect US sanctions have already caused against Iran

In 2018, the Iranian currency lost 70 percent of its value, and its rate continues to fall. Inflation in the country is constantly growing. The volume of exports of Iranian oil fell by one third compared with June figures.

Foreign investors, companies and enterprises, including European ones, are leaving the country for fear of losing the American market, which is very important for them. The French energy concern Total is leaving the billion-worth gas project. The German automaker Daimler, as well as the French PSA and Airbus, also announced leaving Iran.

Import of any goods to Iran is extremely difficult. The country lacks even essential medicines, the prices of which have increased very much. Iran, which has been under the burden of sanctions for many years, announced the transition to a "resistance economy". The sanctions regime reinforces the political influence of ultraconservative forces, which are already opposed to rapprochement with the West. The US withdrawal from the agreement on the Iranian nuclear program dealt a blow to Washington’s relations with its European partners.