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US Renews Sanctions as Iranian Government Struggles

Leo Timm
Leo Timm covers China-related news, culture, and history. Follow him on Twitter at @kunlunpeaks
Published: November 15, 2018
The Iranian government is maintaining a hardline attitude toward international demands even while its currency falls and businesses close (Image: Julia Maudlin via Flickr CC BY 2.0)

On Nov. 5, the U.S. government re-imposed what, a few days earlier, the White House termed “the toughest sanctions regime ever” on Iran’s theocratic government, mainly targeting the country’s petroleum exports.  

The sanctions also targeted Iranian shipping and shipbuilding, as well as its banking system. More than 600 individuals were subjected to financial sanctions. The sanctions provide for a handful of exemptions, including Iran’s major customers of China and India.

Iran, a regional power in the Middle East that has opposed the United States and Israel since the 1979 rise to power of its current Islamic Republic, has incurred international pressure for its use of terrorist proxy organizations, as well as its stubborn pursuit of nuclear weapons and ballistic missiles.

In 2015, the United States and several other powers entered a nuclear deal with Tehran, the Joint Comprehensive Plan of Action (JCPOA), which delayed Iran’s capacity to build a nuclear weapon until 2026 in exchange for sanctions relief.

But the deal allowed the Islamic Republic to continue most aspects of its nuclear program, with the notable exception of a weaponized core. The JCPOA did not cover ballistic missile development or uranium enrichment, both key aspects in building a nuclear weapons arsenal.

This May, Washington announced that the United States would pull out of the 2015 deal, with President Donald Trump saying that it had lifted prior sanctions “in exchange for very weak limits on the regime’s nuclear activity.”

The 2015 Iran nuclear deal did not cover ballistic missile development or uranium enrichment, both key aspects in building a nuclear weapons arsenal. (Image: The Israel Project via Flickr CC BY-SA 2.0)

The 2015 Iran nuclear deal did not cover ballistic missile development or uranium enrichment, both key aspects in building a nuclear weapons arsenal. (Image: The Israel Project via Flickr CC BY-SA 2.0)

Trump also criticized Tehran for its “sinister activities — that is, support for terrorist organizations and militants — in Syria, Yemen, and other places all around the world.”

Last year, the Iranian government said that it would boost military spending by 150 percent over a 5-year period.

In response to Trump’s calls to end the nuclear deal, Iranian President Hassan Rouhani said the Islamic Republic would find ways to sell its oil despite “economic war” by the United States. Iran has also claimed that U.S. actions were backfiring by alienating the other powers — the United Kingdom, France, Russia, China, and Germany — that signed the deal.

The Nov. 5 sanctions on Iran — which include exemptions for eight countries that do business with Tehran — appear to be a first step in the U.S. government’s goal to end all trade of crude oil from Iran, which fuel a third of its government revenue.

Reuters cited energy consultancy Wood Mackenzie as saying that Iranian oil exports peaked in April, then fell by 1 million barrels per day (bpd) to 1.8 million bpd, and are expected to reach a low of 1 million bpd.

The last time the United States imposed sanctions, under President Barack Obama in 2012, Iranian oil exports dropped by three-fifths. The 2012 sanctions included exemptions for 20 countries to continue trade with Tehran.

While maintaining pressure on Iran, the Trump administration has also taken various measures to drive down oil prices, including negotiations with Saudi Arabia and the United Arab Emirates (UAE) that have seen the two oil-rich countries expand daily production.

Between Oct. 3 and Nov. 1, oil price dropped from US$86 per barrel to around US$73.

“Even with some oil being sold out of Iran, the amount the Iranians will get paid is substantially less,” said Phil Flynn, senior analyst with the Price Futures Group, in a Nov. 2 report.

While the sanctions permit trade of humanitarian commodities, such as food and medicine, Iran’s economy is already in bad shape and political unrest is rising. This year and last, multiple protests shook the regime. Thousands of demonstrators and rioters have been arrested in relation to these incidents and several have died in custody. In September, terrorists attacked a military parade, killing dozens of people.

While the sanctions permit trade of humanitarian commodities, such as food and medicine, Iran’s economy is already in bad shape and political unrest is rising. (Image: Kamyar Adl via Flickr CC BY 2.0)

While the sanctions permit trade of humanitarian commodities, such as food and medicine, Iran’s economy is already in bad shape and political unrest is rising. (Image: Kamyar Adl via Flickr CC BY 2.0)

 

Iran’s currency, the rial, has lost a quarter of its value against the U.S. dollar since 2017. According to Reuters, prices of rice, bread, cooking oil, and other staples have soared. Local media say that 70 percent of small businesses have shut down due to a lack of raw material and hard currency.

The Iranian government has maintained its defiant stance and claims that it will not be fazed by the new sanctions. On Nov. 4, government-organized demonstrators burned American flags and chanted anti-U.S. slogans.

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