This week, the United States reimposed the first round of economic sanctions on Iran, in an anticipated move following President Donald Trump’s decision to withdraw his country from the Joint Comprehensive Plan of Action (JCPOA).
More US sanctions targeting Iran’s oil and gas industry are due to begin in November.
But what is Washington hoping to achieve by reinstating the sanctions that were lifted when it signed along with other world powers the JCPOA, also known as the Iran nuclear deal, in 2015?
“The policy is not regime change, but we definitely want to put maximum pressure on this government,” John Bolton, the US national security adviser, told Fox News earlier this week.
“And it’s not just to come back to discuss fixing a deal that’s basically not fixable, dealing with nuclear weapons aspect. We want to see a much broader retreat by Iran from their support for international terrorism, their belligerent military activity in the Middle East and their ballistic missile nuclear-related programme.”
In a Twitter post on August 7, Trump said that the move to reimpose sanctions meant that “anyone doing business with Iran will not be doing business with the United States”.
In a bid to protect Europe’s companies doing business with Tehran, the European Union, which remains in the deal with Iran along with China and Russia, has taken the unusual step of issuing a blocking statute that says firms from the continent should ignore US sanctions.
Still, car companies, drug manufacturers and many other industry giants are leaving Iran.
“If a company does business with the US and then does business with Iran, the US can cut those companies out of the US market, which is a much more important economic one”, says Al Jazeera’s Patty Culhane, reporting from from Washington, DC.
“US officials say they will be watching closely and they’ll be aggressively enforcing sanctions that are put in place.”
The sanctions will hit the Iranian economy very hard, according to Andreas Schweitzer, the managing director of Arjan Capital.
“One should take President Trump by his word that he intends what he’s doing here,” he says.
“You can also see what the damage is doing to the Iranian economy. The rial has devalued dramatically, which is not only a factor of the sanctions, but also the way the central bank has handled the foreign exchange situation – they’re trying to get it under control … there’s high unemployment, foreign companies leaving, so the morale is quite bad and the economy also.”
China, India and Turkey have said they are not willing to entirely cut off business with Iran, “so the sanctions will mostly affect European businesses”, notes Schweitzer.
“Those with the greatest amount of risk exposure to the US economy are advised to leave … So, it really depends on your exposure to the US economy. If you don’t have any, Iran is an opportunity. If you have a lot of exposure to the US, then business in Iran is a risk.”
The second phase of US sanctions, which takes effect on November 5, is aimed at blocking Iran’s vital oil sales, which drive much of the country’s economic growth.
“Trump wants to bring Iranian oil exports to nil, but that won’t happen because the Chinese and Indians will buy, and these are already very large buyers,” says Schweitzer.
“[Sanctions] waivers will probably not happen, they haven’t happened in the past and I don’t see why they’d happen now. The situation will be back to where we were in 2010-2012, so the Iranians will have to adjust again to the same measures they’ve taken then. The Iranians are also well trained in handling sanctions.”
But the return of sanctions has increased tensions inside Iran, where in recent days protests have occurred over the plummeting currency, high unemployment and soaring prices.
However, “despite the hardships, some Iranians are buying up gold, and ironically, US dollars to keep their savings safe from the impact of American sanctions”, Al Jazeera’s Zein Basravi reports from Tehran.
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