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The New Reality in Iran as U.S. Sanctions Return

For the Iranian people, the decision of President Trump to withdraw from the Joint Comprehensive Plan of Action (JCPOA) means that the previously waived sanctions will now be back in place. The impact on the struggling economy is expected to be considerable, as the Iranian economy was still attempting to recover despite the lifting of specific sanctions.

Trump announced he was pulling the U.S. out because of the many flaws in the agreement, including:

  • Failure to stop Iran from legally obtaining a nuclear bomb for more than 10 years
  • Failure to address other pressing issues, including human rights violations
  • Lack of international inspections on Iranian nuclear sites, especially military ones

Many Iranians would argue that the sanctions make little difference because of the level of corruption systemic throughout the regime, which means that even when the sanctions were suspended, the Iranian economy did not benefit.

“According to the Fragile State Index of 2014, Iran is amongst the most fragile countries. In other words, it is one of the most unstable, in terms of social, economic, and political factors; the inequalities between genders are also very significant, and therefore, very dangerous,” said Mosafa Moeen, a professor at Tehran’s University of Medical Sciences. “The statistics indicate that the disparity and injustice in our country is so severe and so serious; and as a result, our people are faced with many problems now.”

Not only did the Trump administration withdraw from the JCPOA, it also added more sanctions against Tehran, both for individuals and organizations. While the remaining parties of the JCPOA have vowed to remain part of the agreement, there are questions about how effective that will be, with companies who do business in Iran risking the loss of access to the U.S. financial system and its economy.

Businesses throughout Europe have already started to end deals with Iran or withdraw from talks about future agreements. The French oil major, Total, expressed its unwillingness to continue working with Iran, especially given the involvement of the United States in 90% of its trades. Simply put, they do not want to risk losing access to American currency. On Thursday, May 17, Denmark’s biggest transport and logistic company, Moller-Maersk, announced its decision to stop doing business with Iran to the sanctions.

While businesses and multi-national companies are withdrawing from Iran, the regime is trying to make it appear that the sanctions will not have as great an impact and are attempting to take a tough stance against the U.S.

There are a lot of unanswered questions regarding how Europe will be able to work around U.S. sanctions to maintain the JCPOA. Many European businesses seem unsure how the European Central Bank will be able to negate the sanctions for their companies. While Europe as a whole may initially be speaking out against the sanctions, it is more likely that they will soon cut financial ties with the regime to avoid losing access to the U.S.

The last time sanctions were imposed on Iran by the U.S., during 2012 and 2016, a handful of (mostly) Asian companies were allowed to continue limited trade with Iran, but that came with strict rules. There is little doubt that the Trump administration will not be so generous this time around.

There are roughly 3.5 million young people unemployed in Iran. Then there are an increasing number of workers who are unpaid and protesting. The explosive consequences of new sanctions on Iran could be the catalyst for real change in Iran.

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