With the latest round of sanctions, the Iranian economy has received the equivalent of a body blow. Despite the assurance that the economy would benefit from the Joint Comprehensive Plan of Action (JCPOA), the reality is that the mismanagement of Iran’s economy by the regime means that there would be no benefits for the Iranian people.
Now that the U.S. has pulled out of the JCPOA, the renewed sanctions are having an even greater impact on an already crippled economy. On November 5, the U.S. reinstated the sanctions that effect the energy and banking sectors of Iran. The regime leaders must decide whether the Iranian people eat or they continue their course of terrorist activities and the instability they created within the region.
U.S. Secretary of State Mike Pompeo advised that the U.S. would do everything it could to help the Iranian people to survive during the sanctions. The focus is to create change in the regime’s malign behavior.
“The leadership has to make a decision that they want their people to eat…that’s the Iranian government’s choice on how to use Iranian wealth. If they choose to squander, if the Iranian leadership chooses to spoil it, if they choose to use it in a way that doesn’t benefit the Iranian people, I’m very confident the Iranian people will take a response that tries to fix that for themselves as well,” said Pompeo.
It should be noted that the rial continues to devalue, while the Iranian middle class has been virtually wiped out during the last few years, even though many sanctions were not in place.
The goal of the Trump administration is to reduce Iran’s oil exports to zero, and bring the regime back to the negotiation table. However, the regime remains defiant, despite the increasing protests and fear of an uprising by the Iranian people.
Exemptions Limited to Eight Countries
The Trump administration was quick to point out that their goal meant few countries would receive waivers to continue to buy Iranian oil. In fact, the U.S. only issued eight such waivers, but the countries who received them will have to demonstrate that they are working to reduce their Iranian imports by significant levels to retain the waiver.
Many of the countries have been working with the U.S. to find alternative sources of oil without negatively impacting the oil market and sending prices skyrocketing. Those countries are China (whose Kunlun Bank is not accepting payments from Iran); India; South Korea; Taiwan; Japan; Greece; Italy; and Turkey.
“We have been very careful about applying maximum economic pressure (on Iran) without lifting the price of oil and we have done that successfully. We are going to be continuing our path to zero. We do want to achieve maximum pressure without harming friends or allies and we don’t want to life the price of oil…We have calibrated this very well,” said U.S. Special Representative on Iran Brian Hook.
Iran’s oil exports have continued to fall and are now almost 1 million barrels a day lower than they were in April of this year, which was before the U.S. pulled out of the JCPOA. It is clear that countries are taking the sanctions seriously and began to reduce or eliminate their dealings with Iran throughout the summer.
The U.S. Treasury Department is also targeting the escrow accounts that are holding revenues relating to Iran’s oil. This is meant to ensure that the funds are not used to purchase illicit goods.
Another Impact is Iran’s Military
While the U.S. continues to put pressure on Iran financially, it is also focusing on contesting Iran’s activities in Syria. Ambassador James Jeffrey also indicated that Iran’s activities in Iraq and Yemen, as well as Syria, demonstrate its broad influence in the region. He indicated that Iran needs to withdraw their militias and forces from Syria.
The hope is that financial pressure will also slow the Iranian militias as well, because their funding will be limited. The U.S. also wants to cut Iran off from the global financial system, including SWIFT.