An Economist’s Fix to the Iran Deal

    Reza Ansari, Dalibor Rohac

    Security, Middle East

    Malta-flagged Iranian crude oil supertanker

    The new sanctions regime would give much less leeway for Iran to act like a rogue state.

    In his speech at the Heritage Foundation, the U.S. Secretary of State Mike Pompeo set out clear conditions under which the United States would lift its sanctions against Iran. After the withdrawal from the Joint Comprehensive Plan of Action (JCPOA), the thrust of U.S. strategy seems to consist of building up the pressure of re-imposed sanctions to change Iran’s behavior. It seems unlikely that will happen anytime soon. Fortunately, there is a better alternative, which does not require the United States to engage with Iran’s regime directly but to strike a grand bargain with other permanent members of the UN Security Council (UNSC).

    But first, here is what’s wrong with the 2015 ‘Iran Deal’. Once the JCPOA’s restrictions on uranium enrichment and deployment of advanced centrifuges expired, the crisis was bound to re-emerge in a radically worsened form. With advanced centrifuges, Iran would be able to re-enrich its stockpile of uranium to weapons-grade levels in no time, reaching the brink of a nuclear breakout. Moreover, as the world learned painfully in Syria, the agreement did nothing to keep Iran’s regional ambitions in check, nor did it limit the country’s ballistic missile program, which would provide the means of delivery for a future nuclear arsenal.

    The United States is now restoring sanctions established by the Iran Sanctions Act of 1996 and expanded later, including by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. Those include a ban against almost any activities by American and non-U.S. persons who facilitate foreign business with Iran, by providing shipping services, insurance, opening lines of credit, and processing payments.

    The re-imposition of sanctions has prompted a strong adverse reaction from Europe. The European Union (EU) is now reactivating a “blocking statute” that aims to shield EU businesses from U.S. sanctions. In addition, the EU is enacting a measure to involve EU governments indirectly transferring money to the Central Bank of Iran, so that any U.S. sanctions against the processing of payments would necessarily have to be enforced against sovereign European states. That is unfortunate since Europeans and Americans agree that a change in Iran’s behavior, as outlined by Secretary Pompeo, is desirable. Here’s how that agreement can be translated into a common transatlantic strategy.

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