Sanctions Snapback: Trump Reverses Iranian Sanctions Relief

President Trump’s snapback of nuclear-related sanctions on Iran previously waived under the Joint Comprehensive Plan of Action (JCPOA), or Iran nuclear deal, will be finalized at midnight on Monday, November 5. While a portion of the sanctions previously waived under the JCPOA came back into force on August 7, the November 5 tranche of Iran sanctions includes many of the most impactful sanctions to be levied on Iran, including those targeting:

• Iran’s port operators and shipping and shipbuilding sectors;
• Petroleum-related transactions with the National Iranian Oil Company, Naftiran Intertrade Company, and the National Iranian Tanker Company, including the purchase of petroleum, petroleum products, and petrochemical products from Iran;
• Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions;
• The provision of specialized financial messaging services to the Central Bank of Iran and certain Iranian financial institutions;
• The provision of underwriting services, insurance, or reinsurance; and
• Iran’s energy sector.

In addition, the Trump administration will re-impose sanctions that applied to persons removed from OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) and other U.S. sanctions lists pursuant to U.S. commitments under the JCPOA. This includes, for instance, the re-imposition of sanctions on most of Iran’s financial institutions, including the Central Bank of Iran.

Blowback from Snapback

The snapback of sanctions on Iran has precipitated a crisis in slow motion, threatening a range of U.S. national interests and tying America closer to the destabilizing campaigns of Saudi Arabia. The blowback from sanctions reimposition will:

Increase the Risks of an Iranian Nuclear Weapon

• Trump’s snapback of nuclear-related sanctions has eviscerated Iran’s benefit for complying with the JCPOA, increasing the risk of Iran halting its compliance with the accord and moving closer to a nuclear weapon.
• The re-designation of the Atomic Energy Organization of Iran (AEOI) threatens to disrupt international work to reduce proliferation risks at the Arak heavy water reactor and deeply buried Fordow facility.

Raise the Risk of War

• Trump’s advisors John Bolton and Mike Pompeo have pushed for war with Iran as an alternative to negotiations, as have Iran’s regional rivals who have increased sway with the Trump administration.
• A spark for a military confrontation could come from several directions in the absence of diplomacy with Iran – whether over Iran’s nuclear program, regional tensions or a naval confrontation in the Persian Gulf.

Isolate the United States

• The U.S. is in material breach of the UN Security Council-endorsed JCPOA, which all other parties to the accord – including our allies in Britain, France and the European Union (EU) – are seeking to keep alive.
• JCPOA participants and Iran are seeking to establish independent payment channels, with ramifications that could undercut U.S. dominance of the global financial system and the power of U.S. secondary sanctions far into the future.

Raise Oil Prices

• President Trump has repeatedly called on Saudi Arabia and Russia to pump more oil to offset Iranian oil that has been taken off the market, reducing spare capacity that could be key to respond to any emergency.
• Iranian oil cannot be offset forever, and a crisis risks soaring oil prices and substantial harm for American consumers.

Increase U.S. reliance on Saudi Arabia

• At a time when Saudi Arabia appears to be an increasingly unsavory partner for the U.S. after the brutal murder of Jamal Khashoggi, the Trump administration has pigeonholed itself into an approach to the Middle East that relies on Saudi Arabia.
• Overlooking Saudi Arabia’s crimes to pressure Iran bears eerie resemblance to America’s early backing of Saddam Hussein throughout the Iran-Iraq war. A more balanced approach to the region is needed.

Undercut Moderate Forces in Iran

• Trump’s Iran sanctions are likely to crush the Iranian middle class and private sector, unleashing economic desperation in the country and limiting prospects for internal moderation.
• Iran’s hardliners have been vindicated by Trump’s decision to violate the JCPOA and snap back sanctions, and will benefit from sanctions that crush forces for moderation while leaving them relatively unscathed.

Trigger a Humanitarian Crisis in Iran

• Sanctions on Iran under the Obama administration triggered shortages of key life-saving medicines and contributed to the impoverishment of ordinary Iranians by depressing the economy and increasing the cost of basic goods. Similar effects are already being felt from Trump’s snapback.
• The Trump administration has already targeted private Iranian financial institutions that facilitated humanitarian transactions, raising the risk of further humanitarian crises in the months ahead and more damage to American credibility.