Iran reopens black market as Trump imposes oil sanctions
With President Trump finally pulling the trigger on tough economic and financial sanctions, Iran is gearing up to revive a black-market oil export operation that kept the regime afloat the last time Washington engineered an international embargo on Iranian crude.
The battle of wills could determine a critical piece of the Trump foreign policy as the U.S. seeks to impose its will on Iran and on its leading international partners to force a major change of behavior in Tehran. Iranian leaders said last week that the pressure campaign won’t work.
“We have to make the Americans understand that they must not use the language of force, pressure and threats to speak to the great Iranian nation — they must be punished once and for all,” President Hassan Rouhani told a Cabinet meeting in the Iranian capital.
While the sanctions on Iran’s oil, shipping and banking sectors mark the most aggressive move Mr. Trump has made against the Islamic republic since pulling the U.S. out of the 2015 Iran nuclear deal, regional analysts warn that the sanctions may take a smaller bite than the administration predicts.
Iran, they say, has been subjected to energy-sector sanctions so often over the past three decades that it has developed highly refined techniques to sell bootleg oil and launder the profits — despite Western efforts to stop such activities.
“They have endured so many years and types of sanctions that they have better coping mechanisms than other countries,” said Ahmad Majidyar, who heads the Washington-based Middle East Institute’s Iran Observed project.
“While sanctions could hurt them down the road, they do not see this is as an existential threat that will topple the regime,” Mr. Majidyar said in an interview. “They are hoping the Trump administration is a one-term presidency and they can survive this out.”
Without vigilant global enforcement, including potential ship interdictions on the high seas, the sanctions will fall short of stripping the Iranian regime of its cash.
“The U.S. now has the legal and economic architecture in place to properly execute its maximum pressure campaign,” said Behnam Ben Taleblu, a sanctions analyst with the Foundation for Defense of Democracies. “But as is the case with all coercive policies, follow-through matters, especially when the Iranians are bragging that they will ‘proudly’ bust sanctions,” he said in an analysis last week.
With Russia, China and key European allies all saying they remain committed to the 2015 nuclear deal, it remains to be seen whether the U.S. penalties force them to comply or drive their companies away from Iran. Some, including France and Germany, have gone so far as to establish a “special payment vehicle” to finance deals with Iran while bypassing the American financial system.
Iranian officials, meanwhile, will continue scrambling to prop up a national economy hit badly by an earlier round of U.S. sanctions, and the U.S. Treasury Department’s terrorism and illicit finance enforcement teams will hunt Tehran’s efforts to trick them.
Dodgy ways to dodge sanctions
There is already evidence that Iranian oil sector operatives are implementing tried-and-true evasion tactics that allowed some of the country’s oil to move on the global market prior to the Obama-era easing of sanctions under the nuclear deal three years ago.
One major challenge for the U.S. is the size of the market that must be policed. Worldwide, 4,500 oil tankers carry 2 billion barrels of crude per year over almost 140 million square miles of ocean, according to industry and intelligence agency estimates.
Monitoring such vast quantities of oil, ships and area is impossible, analysts say, allowing for a wide range of smuggling endeavors, including blending Iranian oil with other liquid exports that are not sanctioned. Tankers are also painted and regularly change their flags.
Most notoriously, “ghost tankers” turn off their geotransponders and disappear from the world’s satellite tanker tracking matrix, essentially vanishing into the millions of miles of open ocean.
Ellen R. Wald, a nonresident senior fellow with the Atlantic Council think tank’s Global Energy Center, noted reports of ghost ships “turning off [their tracking devices] for longer periods” and paving