By Leah Cerilli
On Sunday, November 4th, the White House reinstated economic and trade sanctions on Iran, effectively ending the United States’ participation in the Joint Comprehensive Plan of Action. These sanctions specifically target Iranian oil, which makes up 70% of Iran’s economy.
Commonly dubbed the “Iran nuclear deal”, JCPOA was forged in 2015 between Iran, UN Security Council members, Germany, and the European Union. This recent move is a reflection of President Trump’s promise to pull out of the deal, which he says is “horrible” and “one-sided”. Secretary of State Mike Pompeo said the sanctions are meant to influence Iran into renegotiating the deal. The Trump administration has also justified the sanctions as a means to condemn Iran’s poor human rights record, support for terrorist organizations, and destabilizing actions within the Middle East. JCPOA lifted previous sanctions held on Iran since 1979, in exchange for limiting and monitoring its nuclear program.
The American sanctions predominantly target Iran’s banking, shipping, and petroleum sectors. They stipulate that countries that do business with Iran without U.S. waivers will face hefty fines or may be prevented from doing business with the United States. Eight countries have been given temporary waivers: China, India, Greece, Italy, Taiwan, Japan, Turkey, and South Korea. The waivers are supposed to last for six months and are intended to allow the granted countries enough time to eliminate their Iranian imports as well as avoid disruption of global oil markets. The importing countries must deposit Iran’s earning into an escrow account, which Iran can only spend on a limited range of humanitarian items. Although humanitarian goods can still be traded with Iran, the sanctions will likely make the purchase more expensive.
The US will be able to globally enforce these sanctions given that the majority of international transactions are made in US dollars. Any transaction that is made in US dollars or passes through American banks is subject to American sanctions.
Iranian Foreign Minister Mohammad Javad Zarif said the sanctions will backfire on the US. He claims the sanctions will only make the US more isolated, as the international community will oppose the sanctions. Both the European Union and China have criticised the sanctions.
However, the European Union is indicating that it may shift sides and pivot closer to the United States. Both France and Denmark have recently uncovered Iranian intelligence plots in their respective territories. Denmark suspects Iran of trying to carry out an assassination on its soil in October. France has concluded Iran’s intelligence ministry was behind a plot to attack Iranian exiles protesting in Paris this past June. Both countries have said they are considering sanctions at an EU-wide level as a result of the attempted operations.
The EU is also exploring a loophole that would allow continued trade with Iran. Their proposal is to create a “Special Purpose Vehicle” - a third party institution that would process transactions between Iran and businesses seeking to trade with them. Under the SPV, the deals would be subject to EU law, not international law.
Iran has threatened to abandon the deal if the EU does not protect its trade and financial benefits.