The Return of U.S. Sanctions on Iran: What to Know

In Brief

The Return of U.S. Sanctions on Iran: What to Know

The United States has reactivated sanctions against Iran that could trigger the collapse of the multilateral Iran nuclear deal.

The United States has reimposed sanctions on Iran that it lifted just two years ago. President Donald J. Trump withdrew from the multilateral deal, known as the Joint Comprehensive Plan of Action (JCPOA), for “disastrous flaws” that he said posed a security threat. The return of U.S. sanctions is intended to restrain Iran’s behavior beyond nuclear controls but runs the risk of reviving a program to develop atomic weapons, experts say.

What's Happening?

More From Our Experts

The Trump administration’s withdrawal from the JCPOA on May 8 reinstates two sets of sanctions.

More on:

Iran

Iran Nuclear Agreement

Sanctions

The first, coming into effect August 7, includes restrictions on:

  • Iran’s purchase of U.S. currency;
  • Iran’s trade in gold and other precious metals; and
  • the sale to Iran of auto parts, commercial passenger aircraft, and related parts and services.

The second set of sanctions, which comes back into force on November 4, restricts sales of oil and petrochemical products from Iran.

More From Our Experts

The Trump administration has so far rejected requests by foreign governments and companies that would allow them to continue to conduct business with Iran.

European signatories of the JCPOA are reported to be preparing a package of economic measures to try to salvage the deal. Additionally, the European Union will activate, effective August 7, a law “to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions," said a joint statement from EU members of the JCPOA.

More on:

Iran

Iran Nuclear Agreement

Sanctions

A newspaper with a picture of U.S. President Donald J. Trump on the front page in Iran’s capital, Tehran.
A newspaper with a picture of U.S. President Donald J. Trump on the front page in Iran’s capital, Tehran. ATTA KENARE/AFP/Getty Images

What’s the Immediate Impact?

The U.S. moves have already contributed to a run on the rial and triple-digit inflation as Iranians scramble for the safety of U.S. dollars and gold. They also come amid months-long protests in Iran over deteriorating economic conditions and charges of corruption and mismanagement. Protesters have targeted the government of President Hassan Rouhani, who championed the nuclear deal as a way of boosting the economy, as well as more hard-line parts of the regime, such as Supreme Leader Ali Khamenei, who has criticized the JCPOA.

<span>$</span>39 billion
in Boeing, Airbus contracts at stake
Source:
WaPo

Other Factors to Watch

Some estimates say Iran’s oil exports, valued at $36 billion in 2016, could drop by up to two-thirds this year with the reinstatement of sanctions. That could have ripples beyond Iran as global oil markets cope with supply strains.

U.S. aircraft manufacturer Boeing and European corporation Airbus are set to lose contracts worth $39 billion.

The overall value of EU trade with Iran in 2017 was about $23 billion, with three-quarters of it related to energy deals.

If other parties to the JCPOA are unable to continue their revived business with Iran, Iranian leaders are expected to walk away from the deal.

The Big Picture

Prospects for diplomacy to resolve the dispute over Iran’s nuclear program appear remote. U.S. Secretary of State Mike Pompeo has laid out conditions Iran must meet to ease sanctions, including ending destabilizing actions in the region, such as its support for Houthi rebels in Yemen and Hezbollah. Iranian officials, however, regard these demands as tantamount to seeking regime change.

Trump said he is willing to meet with Rouhani without preconditions, but Iranian foreign ministry officials rejected the offer as insincere.

Before too long, warn experts such as CFR Senior Fellow Philip H. Gordon, “the United States could face the dilemma the JCPOA was designed to avoid: allow the [nuclear] program to continue to expand in the absence of international monitoring or use military force to stop it.”

Creative Commons
Creative Commons: Some rights reserved.
Close
This work is licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) License.
View License Detail
Close

Related Reading

The Preeminent Challenge,” by Reuel Marc Gerecht and Ray Takeyh, Weekly Standard.

Trump reimposes sanctions on Iran. Now what?,” by Ishaan Tharoor, Washington Post.

Iran nuclear deal: EU shields firms from US sanctions law,” BBC.

Top Stories on CFR

Trade

President Trump doubled almost all aluminum and steel import tariffs, seeking to curb China’s growing dominance in global trade. These six charts show the tariffs’ potential economic effects.

Ukraine

The Sanctioning Russia Act would impose history’s highest tariffs and tank the global economy. Congress needs a better approach, one that strengthens existing sanctions and adds new measures the current bill ignores.

China Strategy Initiative

At the Shangri-La dialogue in Singapore last week, U.S. Secretary of Defense Pete Hegseth said that the United States would be expanding its defense partnership with India. His statement was in line with U.S. policy over the last two decades, which, irrespective of the party in power, has sought to cultivate India as a serious defense partner. The U.S.-India defense partnership has come a long way. Beginning in 2001, the United States and India moved from little defense cooperation or coordination to significant gestures that would lay the foundation of the robust defense partnership that exists today—such as India offering access to its facilities after 9/11 to help the United States launch operations in Afghanistan or the 123 Agreement in 2005 that paved the way for civil nuclear cooperation between the two countries. In the United States, there is bipartisan agreement that a strong defense partnership with India is vital for its Indo-Pacific strategy and containing China. In India, too, there is broad political support for its strategic partnership with the United States given its immense wariness about its fractious border relationship with China. Consequently, the U.S.-India bilateral relationship has heavily emphasized security, with even trade tilting toward defense goods. Despite the massive changes to the relationship in the last few years, and both countries’ desire to develop ever-closer defense ties, differences between the United States and India remain. A significant part of this has to do with the differing norms that underpin the defense interests of each country. The following Council on Foreign Relations (CFR) memos by defense experts in three countries are part of a larger CFR project assessing India’s approach to the international order in different areas, and illustrate India’s positions on important defense issues—military operationalization, cooperation in space, and export controls—and how they differ with respect to the United States and its allies. Sameer Lalwani (Washington, DC) argues that the two countries differ in their thinking about deterrence, and that this is evident in three categories crucial to defense: capability, geography, and interoperability. When it comes to increasing material capabilities, for example, India prioritizes domestic economic development, including developing indigenous capabilities (i.e., its domestic defense-industrial sector). With regard to geography, for example, the United States and its Western allies think of crises, such as Ukraine, in terms of global domino effects; India, in contrast, thinks regionally, and confines itself to the effects on its neighborhood and borders (and, as the recent crisis with Pakistan shows, India continues to face threats on its border, widening the geographic divergence with the United States). And India’s commitment to strategic autonomy means the two countries remain far apart on the kind of interoperability required by modern military operations. Yet there is also reason for optimism about the relationship as those differences are largely surmountable. Dimitrios Stroikos (London) argues that India’s space policy has shifted from prioritizing socioeconomic development to pursuing both national security and prestige. While it is party to all five UN space treaties that govern outer space and converges with the United States on many issues in the civil, commercial, and military domains of space, India is careful with regard to some norms. It favors, for example, bilateral initiatives over multilateral, and the inclusion of Global South countries in institutions that it believes to be dominated by the West. Konark Bhandari (New Delhi) argues that India’s stance on export controls is evolving. It has signed three of the four major international export control regimes, but it has to consistently contend with the cost of complying, particularly as the United States is increasingly and unilaterally imposing export control measures both inside and outside of those regimes. When it comes to export controls, India prefers trade agreements with select nations, prizes its strategic autonomy (which includes relations with Russia and China through institutions such as the Shanghai Cooperation Organization and the BRICS), and prioritizes its domestic development. Furthermore, given President Donald Trump’s focus on bilateral trade, the two countries’ differences will need to be worked out if future tech cooperation is to be realized.