90 days and count­ing

The Jerusalem Post - - OBSERVATIONS - • By EZRA FRIED­MAN

Last Tues­day, Pres­i­dent Don­ald Trump signed a Na­tional Se­cu­rity Pres­i­den­tial Mem­o­ran­dum with­draw­ing the United States from the Joint Com­pre­hen­sive Plan of Ac­tion (JCPOA), much to the cha­grin of the four other per­ma­nent mem­bers of the United Na­tions Se­cu­rity Coun­cil, the Euro­pean Union and Ger­many, the other par­ties to the nu­clear agree­ment. These states are cur­rently at­tempt­ing to stay in the deal through an in­ten­sive diplo­matic ef­fort, where Iran is look­ing for eco­nomic se­cu­rity and guar­an­tees from the UK, France and Ger­many. If the Euro­peans can sat­isfy the Ira­ni­ans con­cerns – and pock­ets – they will be able to keep the JCPOA alive.

By (il­le­gally) with­draw­ing the US uni­lat­er­ally from the agree­ment, Pres­i­dent Trump be­gan the process of bring­ing the full might of the Amer­i­can eco­nomic ma­chine and fi­nan­cial sys­tem to bear on the regime in Tehran. Trump is ac­com­plish­ing this through the re-im­po­si­tion of sanc­tions. At the end of an ini­tial 90-day pe­riod and a later 180-day pe­riod of time (also known as wind-down pe­ri­ods) US-based and foreign-based com­pa­nies, as well a foreign coun­tries do­ing busi­ness in Iran, must first wind­down their op­er­a­tions and then cease all eco­nomic ac­tiv­ity or face US-im­posed sanc­tions and po­ten­tially be cut off from the much more lu­cra­tive and larger US mar­ket.

Sanc­tions are di­vided by cat­e­gories, with two cen­tral types be­ing “snap-back” (sanc­tions which were lifted as part of the JCPOA) and “pri­mary” sanc­tions, which for­bid cer­tain eco­nomic ac­tiv­i­ties and re­voke spe­cific li­censes that are not di­rectly (though usu­ally in­di­rectly) re­lated to the JCPOA.

As of Au­gust 6, 2018 (af­ter the 90-day pe­riod), the US will have for­bid­den the pur­chase and ac­qui­si­tion of the US Dol­lar by the Gov­ern­ment of Iran as well as the pur­chase of Ira­nian sovereign debt. In ad­di­tion, Ira­nian trade in gold and pre­cious met­als or the sale, sup­ply and trans­fer of graphite, alu­minum, steel and coal, as well as in­te­grated in­dus­trial pro­cesses, will be banned. In­ter­na­tional trans­ac­tions us­ing the Ira­nian Rial or the main­tain­ing of large amounts of Ira­nian Rial out­side of Iran will also be banned. The au­to­mo­tive sec­tor will also be sanc­tioned. In ad­di­tion, Per­sian-ori­gin car­pets and food­stuffs will be banned, as well as the trade of goods and ser­vices re­lated to com­mer­cial air­craft. As of Novem­ber 4, 2018 (af­ter the 180-day pe­riod), the US will re-im­pose sanc­tions on Iran’s sea­ports, ship­ping and ship­build­ing sec­tors – in­clud­ing quasi-gov­ern­ment owned com­pa­nies such as the Is­lamic Repub­lic of Iran Ship­ping Lines among oth­ers. Trans­ac­tions by foreign fi­nan­cial in­sti­tu­tions with the Cen­tral Bank of Iran or other Ira­nian pri­vate banks will be banned. The in­sur­ance sec­tor in Iran will also face sanc­tions. But most cru­cially, petroleum-based trans­ac­tions, in­clud­ing the pur­chase or trade of petroleum, petroleum-based prod­ucts and petro­chem­i­cal prod­ucts orig­i­nat­ing from Iran will be banned.

THE LIST goes on, and the spe­cific li­cens­ing agree­ments, au­tho­riza­tions and peo­ple who will be placed on US lists and banned from eco­nomic ac­tiv­ity is truly stag­ger­ing.

Iran’s econ­omy is strug­gling. Over the last sev­eral years, im­mense amounts of US Dol­lars have flowed into the cof­fers of the regime in Tehran, but much of that money was lost to cor­rup­tion, foreign ad­ven­tures and re­gional prox­ies. The Ira­nian peo­ple are suf­fer­ing from un­em­ploy­ment and in­fla­tion. The above-listed sanc­tions tar­get cen­tral pil­lars of Iran’s econ­omy. Petroleum, met­als and min­er­als made up well over 60% of Ira­nian ex­ports in 2015.

But US sanc­tions are by no means guar­an­teed to work. Trump’s uni­lat­eral move is in stark con­trast to the Bus­hand Obama-era sanc­tions regime built up over eight years of painstak­ing diplo­macy and slow eco­nomic re­duc­tions that not only brought the Euro­peans on board but even Rus­sia and China. In the end, these sanc­tions cre­ated a sit­u­a­tion which suc­cess­fully led to the (flawed) JCPOA.

The other par­ties to the deal are cur­rently at­tempt­ing to find a way to keep the JCPOA alive. But Europe, who im­ports over $283 bil­lion of goods and ser­vices from the US and ex­ports nearly $435b., ar­guably has too much to lose over an ap­prox­i­mately $20b. mar­ket with Iran.

There is a prece­dent of the EU us­ing leg­is­la­tion to pro­tect its busi­ness in­ter­ests with Iran from 1996. The block­ing reg­u­la­tions were passed af­ter the Clin­ton ad­min­is­tra­tion also passed sim­i­lar uni­lat­eral sanc­tions which were not en­forced. To­day, this would re­quire con­sen­sus from all EU mem­ber states, doubt­ful in to­day’s po­lit­i­cal cli­mate. Other sug­gested mea­sures in­clude con­duct­ing busi­ness in eu­ros as op­posed to dol­lars, but such mea­sures would have min­i­mal im­pact, con­sid­er­ing the in­di­vid­ual size of Euro­pean pri­vate bank­ing sec­tors per coun­try.

We are al­ready see­ing the be­gin­ning ef­fects of the US sanc­tions, with the French com­pany To­tal halt­ing its nearly $2b. petroleum project. We will likely see French car com­pany Peu­geot leave Iran. Air­bus and Boe­ing stand to lose a to­tal of $39b. from the ban on com­mer­cial air­craft and spare parts, many of which are par­tially pro­duced in the US. The only po­ten­tial pro­tec­tion the Euro­pean pri­vate com­pa­nies may have is through their na­tional gov­ern­ments. But even then, the num­bers just don’t add up. The Euro­peans will fold – they have too much to lose.

China and Rus­sia will most def­i­nitely not ad­here to a US-led sanc­tions regime. This will harm its ef­fec­tive­ness, as China es­pe­cially is the largest im­porter of Ira­nian petroleum. It will also be dif­fi­cult to per­suade In­dia to ad­here to sanc­tions for the same rea­sons.

Once Iran be­gins en­rich­ing again and vi­o­lates the JCPOA, the game will change. A break­out to­ward a nu­clear weapon will change the equa­tion. Even the more au­thor­i­tar­ian pow­ers of the world have their lim­its.

Newspapers in English

Newspapers from Israel

© PressReader. All rights reserved.