Can Uncle Sam’s Economic Wars Pave Way for Nuclear Peace?

In May 2018, President Trump’s administration shocked the global community by unilaterally pulling out of the three-year-old Iran Nuclear Deal. The Joint Comprehensive Plan of Action (JCPOA), under which Iran traded its nuclear ambitions for economic growth and stability, was signed between Iran, the United States, Britain, China, Germany, Russia, and France in 2015. In November, after Trump’s conditions for re-forging a deal were left unattended, the U.S. government responded with a ballistic package of severe economic penalties against Iran. The Trump administration called it the biggest sanctions action the United States had ever undertaken against Iran. Iran’s president called it an act of “economic war” and said that his country would win.

The diplomatic history between Iran and the U.S. is littered with the repetitive and hostile imposition of sanctions by the American government. The first of the many sanctions came in 1979. This was in response to the Iran Hostage crisis wherein citizens and diplomats were held hostage at the US embassy by extremist groups. Citing Iranian support for international terrorism as the reason, the Reagan administration reinforced sanctions in 1987. Thereafter, between 1995 and 1997, the US banned “involvement with petroleum development in Iran”, and later “virtually all trade and investment activities with Iran, by US persons”. After another series of sanctions in 2010 and 2011, the landmark Joint Comprehensive Plan of Action (JCPOA), popularly known as the Iran Nuclear Deal, was signed in 2015. In this multilateral deal, Iran’s nuclear programme was subjected to periodic checks in exchange for relief from economic sanctions.

Despite such a long-drawn battle for peace, the Trump administration wasn’t too content about the current state of matters. “The Iranian regime supports terrorism and exports violence, bloodshed and chaos across the Middle East. That is why we must put to an end Iran’s continued aggression and nuclear ambitions. They have not lived up to the spirit of their agreement,” Trump said in October 2017. In the following May, his government set out 12 predicaments for Iran to follow, to prevent sanctions from being imposed. These included providing the IAEA (International Atomic Energy Agency) with unqualified access to all sites throughout the entire country, ending support to Middle East “terrorist” groups, such as Hezbollah, Hamas and Islamic Jihad, withdrawing all forces under Iran’s command throughout the entirety of Syria, and ending its military support for the Houthi rebels and work towards a peaceful, political settlement in Yemen among others.

Others argue that Trump has abandoned this deal, much like he was abandoned all the other deals of his Democrat predecessor, Barack Obama. From the Trans-Pacific Partnership to the Paris Agreement, Trump seems intent on killing the achievements of the former government. Another reason for his withdrawal involves Trump’s bigger motives in the Middle-East. As he looks to build stronger ties with Saudi Arabia and Israel, sacrificing control over Iran’s nuclear plans seems like a small price to pay. Mr. Trump won strong backing from Saudi Arabia and Israel, whose leader, Prime Minister Benjamin Netanyahu, hailed him for a “historic move” and “courageous leadership.”

When those twelve demands were left unmet, the U.S. waged a full-scale economic war: hegemon style. The administration threatened to penalize buyers of Iranian oil. This was part of its stated goal to reduce Iran’s petroleum exports to zero. It blacklisted 50 Iranian banks and subsidiaries, more than 200 people and ships, Iran’s national airline and more than 65 Iranian aircrafts. Under such sanctions, the United States can seize assets under its jurisdiction that are owned by blacklisted people and entities, and has forbidden all commercial relations with such persons or entities.

Although the Iranian President promised to take up arms against, and even defeat the U.S., the state of the Iranian economy suggests otherwise. The banking and services sector has taken a major hit since the imposition of the sanctions. The Iranian currency was already faltering, and has gone on to weaken further. Most importantly, its main source of revenue is being dangerously encroached upon. Initially, it was stated that Iran’s biggest petroleum customers, like China and India, would not be penalized, at least for six months. Now, as the sixth month draws to a close, and waivers for India and China have not been extended, the severity of these sanctions will be felt by Iranians, in full effect.

The first big question is: who will take Iran’s place in the crude oil market? Although Iran has stated that it remains irreplaceable, many expect Saudi Arabia, Iraq, and the U.S. to fill in the void. Petroleum prices are expected to surge in the global markets, as supply is bound to fall. The surge will be even more dramatic as India and China have been forced to abandon the Iranian crude reserves.

Currently, the U.S. is the only country to have withdrawn from the agreement. Iran, China, France, Russia, the U.K., and Germany are still parties. However, if Iran continues to bear the brunt of the sanctions, the deal might eventually collapse altogether. This means that Iran will be at liberty to construct its own nuclear weapons and missiles. It has said it could restore its uranium-enriching capability quickly, but this could isolate it from Europe.

One diplomatic sword that Iran has already flashed is its Afghani refugees. Iran hosts an estimated three million documented and undocumented Afghans, including an estimated one million refugees that the United Nations High Commissioner for Refugees (UNHCR) describes as “one of the largest and most protracted urban refugee populations worldwide”. During a May 8th interview on the state television, Iran’s deputy Foreign Minister for political affairs, Abbas Araghchi, warned that Iran may be forced to “ask our Afghan brothers and sisters to leave” if the economic crisis, spawned by sanctions from the United States, continues to squeeze the economy. Essentially, Iran pointed out to European leaders that unless sanctions are lifted, it would push out the Afghani refugees, and this would stir more trouble into the brewing refugee crisis in the continent.

In 2012, there may not have been a clear agreement among the United States and its allies about how to handle Iran’s nuclear ambitions, but there was an agreement that something had to be done. Today, the other parties to the JCPOA (China, Russia, France, Germany, the United Kingdom, and the European Union) are of the view that the agreement is working and Iran is upholding its end of the bargain. Facing an extraterritorial sanctions threat from the United States, the European Union could look at reintroducing the “blocking regulation,” which is a European Council regulation from the 1990s that was designed precisely to shield European firms from American sanctions on Cuba.

Right now, it is impossible to predict what could unfold as a consequence of these economic sanctions. In the short term, when looking at the oil and energy markets, especially those of India and China, they are bound to face some turbulent times. However, in the long run, the EU has to take its stand, keeping in mind its own interests and those of the United States. That will further determine whether or not the Iran Nuclear will sustain at all. If not, world security will be greatly compromised as a strong player of West Asia will transform into a major nuclear power.


Ashima Makhija

I am pursuing Economics (Honours) from Shri Ram College of Commerce, University of Delhi. I spend my time solving fictional murder mysteries and avoiding real-life mysteries (seriously, when did I last open my course book?).

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