Published daily by the Lowy Institute

A year after US withdrawal from the nuclear deal, Iran digs in

The Trump administration calls it “maximum pressure” but Washington’s ability to further squeeze Tehran is constrained.

Iranians are caught between their own government’s malfeasance and a hostile US (Photo: Fatemeh Bahrami via Getty)
Iranians are caught between their own government’s malfeasance and a hostile US (Photo: Fatemeh Bahrami via Getty)

Nearly a year after the Trump administration unilaterally withdrew from the Iran nuclear deal, it is loudly proclaiming the harsh impact of reinstated US secondary sanctions on the Iranian economy.

As a result of reduced revenues, US officials assert that Iran is under increasing pressure to scale back its support for proxy groups that have widened Iran’s regional reach.

Tehran appears to be digging in, prepared to wait out Trump in hopes that he will be a one-term president.

But although Iranians are clearly suffering from high inflation and unemployment, there are no signs that their government is willing to talk to Trump officials about a “better” deal or that it is abandoning long-standing regional partners. Instead, Tehran appears to be digging in, prepared to wait out Trump in hopes that he will be a one-term president and that a successor administration would return to the 2015 nuclear agreement.

Iran has undoubtedly taken notice that half a dozen Democratic candidates for president have pledged to return to the Joint Comprehensive Plan of Action (JCPOA) if elected in 2020. Meanwhile, pro-JCPOA analysts at US think tanks are already providing road maps for resumed US compliance and new negotiations on a “more-for-more” agreement. (The Brookings Institution is the latest.)

The Trump administration has described its policy on Iran as “maximum pressure”. But US ability to further squeeze Iran in the next 18 months is constrained by a number of factors.

While sanctions have cut Iran’s oil exports by about a million barrels a day and are causing obvious pain to the Iranian population, Iran is still selling enough oil – about 1.2 million barrels – to get by and has the benefit of about $100 billion in hard currency reserves unfrozen after implementation of the JCPOA in 2016.

In May, the Trump administration must decide whether to renew waivers to a half dozen countries permitted to buy Iranian oil without threat of US sanctions. A failure by the administration to renew waivers to key importers such as China and India risks spiking global oil prices at a time when Venezuelan crude exports are also restricted by US sanctions. In recent weeks, oil prices have flirted with $70 a barrel – a level that appears to worry President Donald Trump.

It is also unlikely that the US will seek to punish the European Union for trying to maintain minimal economic ties with Iran. The EU has come up with a mechanism called INSTEX to facilitate trade in food and medicine with Iran. The Europeans are waiting for Iran’s parliament to pass anti-money laundering legislation before activating INSTEX later this year.

The US must also balance conflicting interests with regard to Iraq, which shares a long border with Iran and relies on Iranian natural gas for nearly half its electricity. The Trump administration recently renewed waivers for Baghdad to keep importing Iranian natural gas for another three months. The last thing the US wants to see is more unrest in Iraq this summer because of electricity shortages and climate change-goosed high temperatures.

US Secretary of State Mike Pompeo speaks to the press alongside Lebanon’s Foreign Minister Gebran Bassil (Photo: US State Department/Flickr)

On a recent visit to the Middle East, Secretary of State Mike Pompeo urged Iraq to clamp down on Iran-backed Shi’ite Muslim militias that took part in the campaign to defeat the Islamic State group. Iraq has instead put these militias on the government payroll. A US decision to declare Iran’s Revolutionary Guards as a terrorist group – reportedly being pushed by Pompeo – would put Iraq in an extremely difficult situation given the guards’ strong ties with Iraqi militias and politicians. It could also put the few thousand US troops in Iraq at greater risk.

In Lebanon, which Pompeo also visited on his recent tour, he harshly attacked Hezbollah, Iran’s oldest regional partner, as a terrorist organization that “stands in the way of the Lebanese people’s dreams” and whose “foot soldiers serve at Tehran’s bidding”.

However, Lebanon’s foreign minister, Gebran Bassil, contradicted Pompeo’s view. Standing next to the American chief diplomat, Bassil told reporters, including Americans covering Pompeo, “Hezbollah is a political party … it is not terrorist” and it has “huge political support” in Lebanon. Indeed, supporters of the group won 70 of 128 seats in the Lebanese parliament in elections last year.

The Trump administration claims to be building a global coalition against Iran’s “malign” activities. But while many Western countries would like to see Iran pull back from regional interventions, curb its ballistic missile program and treat its own citizens better, US policy is strongly supported by only a handful of Iran’s rivals in the Middle East. In an interview on 28 March, Pompeo acknowledged:

We’ve got the Gulf states and Israel sharing our view of the threat from the Islamic Republic of Iran.

Even that coalition is shaky because of the nearly two-year-old blockade of Qatar by Saudi Arabia and the United Arab Emirates, which has forced Qatar to deepen ties with Iran. In Washington, the Saudis are increasingly unpopular not just because of the embargo but the murder of journalist Jamal Khashoggi and a seemingly unending war in Yemen. The US Congress has demanded accountability for Khashoggi’s gruesome death in the Saudi consulate in Istanbul and majorities in both houses oppose continued US support for the Saudis and Emiratis in Yemen, now the world’s worst humanitarian disaster.

Ordinary Iranians are caught between their own government’s malfeasance and a hostile Washington. They are angry at their government’s poor performance, as evidenced in poor preparation for recent floods, but derive little comfort from an aggressive US propaganda campaign that seeks to blame every problem on Iranian officials.

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