Africa and the Middle East

Sanctions resume for Iran 11-03-18

Source - Economist, Nov 03, 2018: "America turns the screws on Iran"     

Trump pulled the US out of JCPOA and now sanctions are reimposed upon Iran and Iranian oil. But how will hurting Iran persuade them to change?

“Ghost” oil tankers (ship that have turned off their transponders) are making trips between China and Kharg Island, Iran’s refilling station. These ships are evading the sanctions placed on Iran by America.  In 2015, Iran entered into a deal with the US and EU in which they agreed to stop nuclear weapon research in exchange for a lifting of sanctions. Trump pulled the US out of he deal and reimposed sanctions on Iranian oil beginning this November. The last time America did this, Iran’s exports tumbled from 2.5m barrels per day (bpd) in 2011 to 1.1m bpd three years later. No one knows how far they will fall this time. They have already dropped by about a third since their peak in April of 2.8m bpd. South Korea and Japan stopped buying Iranian oil. India reduced its imports. China is harder to gauge, in part because vessels like the ghost tankers hide themselves. By year’s end, though, Iranian oil sales will be at least 1m bpd below their peak. Oil accounts for almost 70% of its exports and half of government revenue. The economy is already weak. Inflation climbed to 15.9% last month. 

Trump will not drive Iran’s oil exports down to zero, as he hopes. But he will inflict pain. The question is what he hopes to achieve; sanctions are a tool, not a strategy. Barack Obama made clear that he wanted a nuclear deal. Critics argue that his focus was too narrow. Mr Trump has the opposite problem. His secretary of state, Mike Pompeo, has a wishlist for any future agreement. It asks Iran not only to halt its nuclear program, but also to stop testing ballistic missiles, withdraw its troops from Syria and abandon regional proxies, such as Lebanon’s Hizbullah. Taken together this amounts to asking Iran to change its entire security doctrine of backing Shia militias. The Islamic Republic has maintained that posture despite decades of economic pain. It has little incentive to compromise with a president it sees as bent on regime change.