Putting US sanctions on Iran in context

On Aug 7, the United States re-imposed a wave of tough unilateral sanctions against Iran bringing back into effect harsh penalties that had been lifted under a historic multi-party nuclear agreement that was abandoned by President Donald Trump in May. The first of two rounds of US sanctions target Iran's access to Iranian bank notes and key industries including cars and carpets.

Given this current trajectory, three perspectives stand out. Firstly, the anti-Iran rhetoric which has been flowing from the US for the last nearly two years is now taking policy shape and implementation stage. And this is a continuation of what we have been heard for quite some time – that Iran is the source of trouble for much of the problems which America is facing in Middle East along with its allies Israel, Saudi Arabia and the United Arab Emirates. So there is a new alliance in the region, along with the US which is trying to target Iran for its alleged activities undermining American interests and its allies' strategic interest in Iraq, from Syria to Yemen to Bahrain and various other places, including Lebanon. They want Iran to change its behaviour or to withdraw its interference in the Arab arena, something Saudi Arabia has been clamouring for.

Secondly, Iran has been for quite some time thinking of switching over from the dollar to the Euro and the Chinese Renminbi (popularly known as Yuan) for its oil trade, something the central bank of China has been pushing for. So Russia, China, Iran and some other countries are seen as trying to undermine the American dollar, which dominates the oil trade. China is trying to popularise the Yuan as the global currency vice-versa.  Although the economy of Iran is very small, but the fact is that this is an entry point to start this kind of campaign that Yuan becomes a global currency.

Thirdly, Iran has built up military capability over the last couple of years despite US sanctions, UN sanctions; EU sanctions so on and so forth. And, it has seen as major military threat not only by the United States but also its allies Israel and Saudi Arabia. So, in that way the political, economic, military and strategic emergence of Iran as a regional power beyond its reach what they see is seen to be contained in a systematic manner. This was seen as a first step.

Turbulent times ahead

Simply put, the immediate impact of sanctions falls on the fields of science and technology. Iran has been seeking Airbus and Boeing Jets for their ageing fleet for some. A few air disasters have also taken place due to the country's inability to procure spare parts. A significant amount of advanced technology is also required for the oil sector and will undoubtedly hamper LNG exports. There is also the matter of the larger reconstruction and development support Iran was expecting United States, much of which is not available from China, Russia or even in Europe.

It will even become difficult to get foreign exchange to finance imports. It will even affect Iranian students who go abroad for their studies.

Beyond the economic aspect, Iran will also face the strengthening of the American presence in the Gulf, which is already quite widespread, from Bahrain to Kuwait to Oman. What we are seeing is an attempt by the US, Israel and Saudi Arabia to contain Iran to their presence in Afghanistan and Central Asia and to rollback their influence as much as possible. This Iranian presence in the Arab world is the result of continuous military, political and other threats from the US since at least 1979. As such these sanctions may only result in Iran redoubling efforts to maintain their prominent position in the region, including parts of Syria, from where they are very near to Israel's Golan Heights.

The factors that matter

Many political and security experts in the US and elsewhere are of the opinion that US President Donald Trump is satisfying his voters and is implementing his manifesto. They say he is pleasing the Israeli lobby by following their dictates even though there is no direct threat to the US from Iran at any stage. Trump is now not only threatening Iran, he is also threatening its partners in the world, tweeting that whoever does business with Iran cannot do business with the United States. He is taking this maximalist position to try and avert a serious blockade as Israelis are definitively the beneficiaries of the arrangement and feel they are at existential threat from Iran. That explains the sudden vacillation from Trump's threats to his sudden call for talks.

It is a strategic ploy: a month back US rhetoric was full of provocative statements, then a week ago they were speaking of a summit and then a day ago they impose sanctions.

It is a clear indication that the US administration under Donald Trump is quite dangerous, especially compared to a previous administration that would use dialogue and diplomacy as a measure to open a dialogue with Iran. That administration negotiated a deal with Iran and the 5+1 that was very hard-earned. When the 2015 deal was signed, it had the backing of many US allies. But now those same allies can hardly be seen in Washington after Trump unilaterally withdrew from the Iran nuclear deal (JCPOA).

Finally, it is important to remember that Russia, on the other hand, has strongly supported Iran and says it will not abide by these unilateral sanctions. Similarly, China has been very vocal about it and said they will not cut down the oil – an important point because the nation is the chief destination of Iran oil exports. But much also depends on the US's allies and partners in Europe and how much they will abide by the US's threats and whether they will be able to move away from the American sphere of influence. The rhetoric from both Iran and the US is heightened at this point, but it will not do to discount the possibility of the trade conflict escalating to a military one. In the end we could see America going on another Middle Eastern adventure, as it did in Iraq.