Next Defense: Coercive Sanctions More Powerful than Bombs

By James Kitfield

As the ink dries on the historic “first step” agreement to freeze parts of Iran’s nuclear program, and negotiators prepare for much tougher talks on a comprehensive deal that rolls back Iranian capabilities, it’s important to remember that progress thus far is due to something rare in international diplomacy: economic sanctions that actually work.  Iran badly wants relief from them, the United States needs to sustain them for maximum leverage, and Israel and Saudi Arabia would perpetuate sanctions indefinitely as a way to weaken an implacable foe. As they slightly ease trade sanctions and unfreeze some of Iran’s currency accounts overseas as part of the “first step” agreement, Obama administration officials will need to sustain the fundamental architecture of economic sanctions that was years in the making in order to keep the pressure on Tehran and allies on-board with negotiations.

To grasp why today’s sanctions are potent yet perishable, consider how much more effective they are compared to the more unilateral sanctions that the United States imposed on the Islamic Republic virtually since its founding amidst the takeover of the U.S. embassy in Tehran in 1979. Though he was criticized for it at the time, President Barack Obama’s early willingness to engage Tehran was critical to changing the subject in international forums from U.S. stubbornness to Iran’s intransigence. Obama used Iran’s backhanded response to his outreach to painstakingly construct a layered sanctions regime over a span of years. The United Nations Security Council responded with numerous resolutions seeking to restrain Iran’s nuclear program, creating legitimate cover for those countries eager to go further.

The United States and the European Union built on that foundation, passing ever more stringent sanctions that target weaknesses in an Iranian economy that relies on oil exports to fund nearly half of government spending. Iran’s lack of oil refining capacity, and dependency on imports for 40 percent of it gasoline, were also exploited. The result has been a fifty percent decline in Iran’s oil exports just since 2011, and gas shortages that have angered the Iranian public.

Empowered by techniques and authorities designed to eliminate terrorist financing over the past decade, the U.S. Treasury Department also methodically built a wall between Iranian banks and the international financial system, country-by-country and bank-by-bank. The role of the U.S. dollar as the global reserve currency helped persuade skittish financial institutions that it was too risky to do business with Iran. As a result Iran’s currency has plummeted in value even as inflation has increased to over 50 percent, eating away at the country’s foreign exchange reserves.

“Critics claimed that economic sanctions had rarely ever worked, but over time we were able to leverage the power of the U.S. economy to convince the international financial sector it was not worth dealing with Iran because of the risks, and that steadily increased Tehran’s isolation,” said Jonathan Schanzer, a former Treasury Department official and currently vice president at the pro-sanctions Foundation for the Defense of Democracies. The group disputes the Obama administration’s estimate that easing sanctions will put less than $7 billion in Iran’s pockets over the 6-month duration of the “first step” deal, arguing that figure is closer to $20 billion. “Our greater concern is that it took years to put this sanctions regime in place, and you cannot just turn them on and off like a spigot. When we start easing back on sanctions, a lot of businesses and countries will take that as a ‘green light’ to look for opportunities to do business with Iran again, and at that point it becomes far more complicated to try and ratchet sanctions pressure back up.”

Understanding that psychology has played a critical role in sustaining the Iran sanctions regime, the Obama administration could take steps to assure allies that they remain viable. One method might be adopting even tougher sanctions proposed by Congress, but holding them in abeyance while current negotiations are underway.

“Allies like Israel and Saudi Arabia are concerned that the `first step’ deal becomes the last step, and in easing sanctions we are sending the message that they are no starting to fray and are no longer sustainable,” said Dennis Ross, formerly a senior adviser on Iran in the Obama administration, and currently counselor at the Washington Institute for Near East Policy. “To bridge that gap in perceptions, the Obama administration should stress that most of the sanctions remain in place, and any effort to evade them will come at a steep cost in reputation and be met with U.S. push-back. The administration could also adopt tougher sanctions but delay implementing them while talks are underway.”

Psychology has also played a critical role in sustaining the Iran sanctions regime, and that is where perpetuating it indefinitely becomes tricky. As long as the country was led by the Holocaust-denying firebrand and President Mahmoud Ahmadinejad, it was an easy diplomatic lift to cast Iran as the villain and international outlier. Unambiguous threats by the United States and Israel to use military force to stop Iran from acquiring nuclear weapons also fortified the consensus behind tough sanctions as a preferable alternative to war, both internationally and on Capitol Hill.

With the current Geneva talks representing an end game in this long campaign of coercive diplomacy, that psychological dynamic is shifting. Iran’s new president, the smiling and supposedly moderate cleric Hassan Rouhani, may actually represent someone who can cut an acceptable deal. As good faith he demanded an upfront easing of sanctions, however, that critics worry will prove difficult to reconstitute once Iran is seen as reopen for business. On the other hand, if the Obama administration refused it could have undermined Rouhani with hardliners in Tehran, and undercut support for the sanctions regime by convincing the international community that the United States was unwilling to take “yes” for an answer. Meanwhile, Obama’s failure to follow-through on threats to strike Syria militarily over its use of chemical weapons has convinced some interested parties that the U.S. “military option” with Iran is no longer credible, eroding another key pillar of the sanctions regime.

The Obama administration rightly realized that the moment of maximum leverage had arrived, and now should focus on insuring that the “first step” agreement is prelude to a final deal. To be credible the outline of such a deal must include a dramatic rollback of Iran’s 19,000 centrifuges, an agreement to ship most of Iran’s enriched uranium stockpile out of the country, and a halt to construction of the heavy water reactor at Arak that will offer Iran a plutonium path to the bomb. The administration must also make clear to the Iranians that the even tougher sanctions that many in Congress are demanding await the failure to reach and implement a deal.

No deal that relaxes the sanctions noose on Iran was ever going to please Israel or Saudi Arabia, who understandably view Tehran’s hegemonic aspirations in zero-sum terms. The administration could take steps to reassure its close allies that any easing of sanctions is reversible, however, and make clear that a deal that denies the Mullahs access to nuclear weapons does not amount to a rapprochment between the United States and a regime that continues to support terrorism and export instability in the region. And of course if diplomacy fails the weight of coercion will shift to the military option, at which point sustaining the sanctions regime will become moot in any case.









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