US elections unlikely to offer relief to Iran as sanctions come into force

Keeping trade with Russia and Turkey alive is important for Iran but it is unclear how much of an economic effect those and other outlets will have.
Sunday 11/11/2018
Iran’s Minister of Petroleum Bijan Zangeneh speaks to journalists at a hotel in Vienna, last June. (AP)
Painful time ahead. Iran’s Minister of Petroleum Bijan Zangeneh speaks to journalists at a hotel in Vienna, last June. (AP)

ISTANBUL - Losses for US President Donald Trump’s Republican Party in congressional elections bring little comfort for Iran with fresh US sanctions gripping the country’s economy.

The elections, in which Democrats gained control of the US House of Representatives and Republicans added to their majority in the US Senate, were two days after Trump’s latest wave of sanctions, which target the Iranian oil and banking sectors, kicked in.

Iranian Foreign Minister Mohammad Javad Zarif accused the United States of waging an “indiscriminate assault” on Tehran. “The US administration appears to believe that imposing illegal draconian sanctions on Iran will bring about such pain to our nation that it will force us to submit to its will, no matter how absurd, unlawful or fundamentally flawed its demands are,” Zarif said.

If Tehran had been hoping that the vote for House members in the United States would temper Trump’s aggressively anti-Iran approach or foreshadow a defeat for him in the 2020 run for the White House, the election results offer no such indications.

“The midterms do not give certainty or a strong indication as to whether Trump will be re-elected,” said Ali Fathollah-Nejad, a visiting fellow at the Brookings Doha Centre.

A defeat for Trump would not mean that Iran was off the hook, Fathollah-Nejad added. “Concerns about Iranian behaviour are bigger than the Trump administration. Those concerns are bipartisan and they will outlive Trump. So, Iranian expectations regarding the midterms and their ramifications for the future of Trump are overblown.”

The United States and its European allies disagree about whether to stick to the 2015 nuclear agreement with Iran but they share criticism of Iran’s roles in Iraq, Syria and elsewhere in the region, of Tehran’s hostility towards Israel and of the Iranian missile programme. US House Democrats are unlikely to press for a softer stance.

Trump’s Syria envoy James Jeffrey said the administration was focusing on putting financial pressure on Iran and “secondly contesting more actively Iran’s activities, particularly in Iraq, Syria and Yemen.”

Trump himself has done much to undermine international agreement on Iran. While the United States and its international partners pressured Iran with sanctions before the 2015 nuclear deal, Trump’s unilateral decision in May to leave the agreement and reimpose sanctions against Iran split the international community. “Unlike in the 2012-15 sanctions phase, there is no broad international support for US policies on Iran, so Iran is not as isolated,” Fathollah-Nejad said.

In a sign of how fractured the response to Trump’s latest move has been, two key regional players backed Iran after the start of the new sanctions regime. Russia and Turkey, Iran’s political partners in the so-called Astana process to bring peace to Syria, said they would continue to trade with Tehran.

Russian Energy Minister Alexander Novak told the Financial Times that Russia would continue to engage with Iran. Under a $20 billion agreement that runs until next year, Russia has been helping to move Iranian oil to market and Iran buys Russian goods in exchange.

Turkish President Recep Tayyip Erdogan also slammed the United States. “These sanctions aim to destroy balance in the world. We don’t want to live in an imperialist world,” Erdogan said. Turkey has lowered its oil imports from Iran but the eastern neighbour continues to be Turkey’s main supplier, accounting for about half of overall imports.

Washington granted Turkey a waiver from the new sanctions, allowing Ankara to buy Iranian oil at least for another six months but Erdogan had made it clear that Ankara would ignore the US measures no matter what the Trump administration did.

Keeping trade with Russia and Turkey alive is important for Iran but it is unclear how much of an economic effect those and other outlets will have.

Iran was already in the grip of an economic crisis. The value of its national currency, the rial, has sunk to 150,000 to one US dollar from about 40,500 last year. Economic chaos and widespread corruption sparked mass anti-government protests in the last year, resulting in nearly 5,000 reported arrests and at least 25 deaths. Sporadic demonstrations erupt from time to time, some of them sparked by environmental crises, such as a scarcity of drinking water.

“The context of the new sanctions is different from the one in 2012,” Fathollah-Nejad said. “Iran’s establishment is under pressure at home. The Islamic Republic is facing a triple crisis — socio-economic, political and environmental. The reimposition of sanctions makes things worse.”

US Special Representative for Iran Brian Hook said the sanctions had cost Iran billions of dollars in oil revenues. Hook said the sanctions resulted in 1 million barrels per day of Iranian oil being taken off the markets. “That alone has reduced the regime’s revenues by more than $2 billion,” he said.

The sanctions have taken a toll on Iranian citizens, who are reeling from the effects of sky-high inflation and steeper costs. “Check the shops here one by one, there are no customers,” Tehran store owner Hossein Ahmadi told the Associated Press. “People have kept their money for rainy days out of fear of sanctions while rent of the shop has gone up.”

Fathollah-Nejad said the worsening situation could lead to new street protests. “We could see the re-emergence of protests because of the triple crisis but repression will remain high,” he said in response to a question of how Iran is likely to look in one year from now.

“The [Islamic] Revolutionary Guard [Corps] is likely to be emboldened, both because of their role in domestic security and because of their increasing economic role given the resurgence of black market activities under the sanctions,” Fathollah-Nejad said. “Iran will probably survive but the question is how the country will look like then.”