The Risks of Maximising Pressure on Iran

The U.S. decision on 22 April to end sanctions exemptions for Iran’s remaining oil customers, following on an earlier designation of the Islamic Revolutionary Guard Corps as a Foreign Terrorist Organization (FTO), significantly escalates the Trump administration’s coercive campaign against Tehran. The intent is clear: bankrupt Iran into acceding to unilateral U.S. demands or, even better, imploding its regime. But while there is little doubt that the policy of "maximum pressure" has inflicted considerable economic duress – and stands to push Iran’s economy into further decline by starving it of a key source of external revenue – it is far less certain that it will achieve its strategic objectives.

First of all, the strategy’s success now depends more on China, India and Turkey – Tehran’s remaining key oil customers – than either the U.S. or Iran.

Historically, China dislikes unilateral sanctions, which could one day target its own economy. Beijing also has little interest in facilitating regime change in the only country in the energy-rich Gulf region where Washington lacks a foothold. India is in the middle of a general election. Prime Minister Narendra Modi has little interest to take steps that would increase fuel prices or depict him as subservient to U.S. whims. For its part, Turkey appears loath to alienate a neighbour with whom it has had four centuries of peaceful relations in favour of an unreliable ally, which supports Syrian Kurds affiliated with the PKK (Ankara’s arch enemy) and threatens to cut off the sale of F-35 fighter jets if Turkey purchases and deploys the S-400 Russian missile defence system.

Of course, Washington can try both persuasion and – if necessary – pressure to compel the trio to fall in line. The former requires credibility and apt diplomacy, which have been rare commodities with the current occupants of the White House. The latter could backfire. Under U.S. law, the Trump administration can sanction any company or bank engaged in energy-related purchases with Iran’s Central Bank. This could derail U.S. trade negotiations or sour relations with these three major countries; or push them to channel their transactions with Iran through banks that would not mind being sanctioned, as China did in 2012 with Kunlun bank. They could also join the European special purpose vehicle, or establish a new one, to bypass U.S. restrictions through a barter system using credits from Iranian exports to pay for exports of goods to Iran without requiring monetary transfers.

Washington’s present approach makes possible two scenarios, neither of which is promising: either Iran digs in, prompting a frustrated White House to double down yet again on measures that alienate key allies and risk regional escalation; or Iran calculates that it has little left to lose – especially if its remaining oil customers toeing Washington’s line – and decides to restart its nuclear program to increase its leverage or challenges the U.S. and its regional partners across one of the many tense flashpoints scattered across the region. In other words, between present realities and the idealised outcome of Iranian capitulation wished for by the Trump administration lies a fraught and dangerous path. 

Saudi Arabia and the United Arab Emirates’ explicit support for cutting off Iran’s oil exports by flooding the market entails risks too. By encouraging and abetting Trump’s maximum pressure policy they are aiming not only to weaken their regional rival but to turn a neat financial profit, as the oil price rises along with their exports. But as Iranian leaders, both pragmatists and hardliners, have repeatedly warned, Iran is not going to sit on its hands and starve. Options for disturbing an already tense oil market abound. As Sadollah Zarei, a prominent Iranian strategist and advisor to Qassem Soleimani, the commander of Iran’s elite Quds force, recently wrote, Iran could push militants to disrupt Saudi and Emirati oil shipments to Europe through the Bab al-Mandab and the Red Sea, without closing the Strait of Hormuz, through which Iran ships its own oil to Asia. This could not only rattle the markets, but also result in a military clash between the U.S. or its allies and Iran (which, of course, could be the outcome some Iran-hawks in Washington and some of their regional allies seek). Cyber-attacks on Saudi and Emirati oil facilities is another possibility. Neither of these scenarios is far-fetched and both have precedent.

U.S. strategy might make sense if a quick and easy win were assured. But if past is prelude, Iran will not negotiate with Washington unless it has a strong hand, for which it likely would have to restart its nuclear program to accumulate leverage. This means that only a nuclear crisis could lead to a return to the table. But Iran’s abandonment of the nuclear deal is more likely to trigger war than diplomacy given the mood in the U.S. and Israel. In the same vein, there is a long track record of Iran pursuing regional policies it deems critical to its national security, regardless of its economic well-being. And finally, even in the unlikely event that the Islamic Republic collapses, there is no guarantee that a pax Americana emerges from the ruins of the Iranian economy and its shattered middle class. If this is the expectation, then the lessons of Iraq may have been lost on the architects of the 2003 invasion, some of whom are once again in the saddle in Washington.

Unfortunately, history shows that Washington’s response to a policy that fails to deliver is often to double down on it.