U.S sanctions on Iran could be a self-inflicted wound in the long run

 

Oil refinery on the outskirts of Tehran. Photo: Euronews

Motivated by the United States’ shift towards a pro-Israeli stance on Middle Eastern foreign policy, Israeli Prime Minister Benjamin Netanyhu held a conference at the end of April stating that Iran had “lied” about its nuclear weapons program and implored the U.S to take action.

The Trump administration has seemingly agreed with Netanyahu’s sentiment, announcing soon after that it would leave the U.S-Iran nuclear agreement put in place under the Obama presidency and impose sanctions on Iran’s oil industry.

A superficial look at Iran’s situation would suggest that these sanctions will give the U.S leverage in future negotiations with Iran and other actors in the broader Middle East region.

Iran’s oil industry is responsible for 80 per cent of the goods it sells overseas and with unemployment moving into double digits and an annual inflation rate hovering about 8 per cent, Iran cannot afford sanctions that would cripple its biggest export market.

But many of Iran’s largest trading partners are allies of the U.S, such as the European Union, who have conducted an average of €6 billion worth of trade with Iran since 2013.

The EU has sought to maintain this robust trade by signalling a desire to remain in the nuclear deal with Iran and disregard the U.S’ sanctions.

However, some analysts predict that the plethora of multinationals that operate in the EU will comply with the Trump administration’s sanctions, at least to some extent, in order to maintain good political relations within the U.S.

Consequently, in order to preserve consistent trade, Iran will seek to move away from exporting to the U.S and its allies.

Iran will have to bolster its pre-existing economic links with adversaries of the U.S, such as the al-Assad regime, Hamas and Hezbollah.

As Iran has few alternative export options, these actors will likely get a substantially better deal than they would without the sanctions, thus strengthening their economic and security position in region.