London School of Economics:

Christian Emery is a Lecturer in International Relations at the University of Plymouth. He completed his PhD at the University of Birmingham and was a Fellow in the Department of International Relations at the London School of Economics between 2010 and 2013. 

The strategy of nuclear blackmail is flawed because it is based on an unrealistic expectation of what Europe can do to protect the Iranian economy.  The EU well understands that Iran needs economic incentives to maintain its JCPOA obligations, but it can’t force European corporations to trade with Iran if that means they are blacklisted from the US financial system. A so-called Blocking Statute that in theory forces European companies to ignore certain US sanctions, and lets them seek compensation for lost trade in EU Courts is not being enforced. Even it was, the legislation doesn’t actually penalise corporations that comply with sanctions and companies can cite all kinds of other reasons for ceasing operations in Iran such as concerns about security or money-laundering. Few expect INSTEX, a financial mechanism designed to enable European companies and Iranian companies to trade without any direct financial flows, thereby bypassing US jurisdiction, to provide more than symbolic benefits. It also doesn’t apply to third parties, so it’s not open to Chinese or Indian companies (and major differences on compliance standards means it probably never will).

The strategy of attacking oil tankers is flawed for a number of reasons. Firstly, the EU is unlikely to take more risks to support the Iranian economy if it’s simultaneously attacking member states’ shipping. Secondly, Iranian forces could easily miscalculate and provoke a much stronger reaction than they anticipated. It’s fair to say that basing a policy of controlled escalation on a settled understanding of Trump’s thinking is ill-advised. Trump may know that a war would wreck his chances of re-election, but it’s easily possible that Trump could win in 2020 and renew his confrontation with Iran with far less restraint.

Can Tehran wait out Trump?

Trump may have also booby-trapped any future attempt to revive the JCPOA. Secondary sanctions, those that attempt to coerce non-US actors by denying them access to the US financial system, are effective but blunt and inflexible instruments. Their implementation relies on the diligence of thousands of smaller decision-makers all the way from CEOs of multinational companies to individual compliance officers. When sanctions are revoked, there’s no shortage of willing investors, but it takes years for the big financial organisations to gain sufficient confidence to lend them the capital required for major projects. The ease with which the US has bullied customers and investors out of the Iranian market, and enacted new sanctions targeting organisations that are big players in the Iranian economy, means a culture of risk-aversion will linger in the financial system for years.

Trump’s Iran policy shows that American economic power still predominates in the world but that it is no substitute for diplomatic competence or a set of achievable aims. Having failed to force Iran back to the negotiating deal, he clearly has no idea what he’s now trying to achieve. A sensible leadership would de-escalate the situation by ruling out military strikes and quietly allowing states to buy Iranian oil. Iran has zero interest in disrupting tanker routes when its own oil and gas must travel through the Strait of Hormuz. For its part, Iran could buy time by agreeing to at least discuss a broader deal that addressed concerns about the sunset clauses that limit Iranian nuclear enrichment and military transfers to pro-Iranian groups in Syria and Lebanon. In the end, keeping Iran within, or close to within, the JCPOA until there is a new administration in Washington is undoubtedly the best hope for a peaceful outcome.

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