Trump's Iran sanctions, the final phase of which kicked in on Monday, look like one of his signature towers.
From the outside, the Trump sanctions seem like a mighty edifice, standing strong against the lack of support from allies, that could force the Iranian economy to its knees.
But there’s a good chance that the sanctions will end up looking more like a Trump Casino, the Atlantic City properties that looked so fine to lenders on paper and mesmerized gamblers with glitz and glamour, that Trump himself dubbed “the eighth wonder of the world.” Famously, the casinos went bankrupt and Trump was out of the business.
I’ve said before that I think the sanctions have a good chance of working, but a lot depends on all the pieces fitting into place. Right now, the pieces are all there - just as they were when Trump inaugurated his Trump Taj Mahal with a laser and fireworks display and Michal Jackson in attendance.
So what are those pieces?
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1. Much of the world is observing the sanctions not related to oil.
At the level of governments, the European Union, Russia, China and Turkey, to name a few, all oppose the American sanctions. But trade and investment happen at the level of companies, not governments, and the threat of being banned from the U.S. financial system and market has terrified the companies Iran needs to revive its moribund economy.
Of all the pieces Trump needs to stay in place, this is the one that looks the firmest.
There is a lot of talk about skirting U.S. sanctions by doing deals in currencies other than the dollar or imposing fines on companies that observe it. But these are all things that will take a long time to implement, and time is something Tehran doesn’t have a lot of.
In all events, it’s not at all clear that even giant multinational companies are ready to risk American ire for the unproven rewards of doing business with Iran.
2) Trump also needs the oil sanctions to be effective.
So far that piece is perfectly in place. Even before the oil ban kicked in, Iranian exports had fallen by more than half. After spiking in the early autumn, oil prices have fallen as the traders have come to realize that there is no imminent shortage.
One reason for that is that other producers are filling the gap: Output by Russia, the United States and Saudi Arabia -- the top global producers -- rose above 33 million barrels per day for the first time, and more than three times their 2010 level.
Meanwhile, the White House is hedging its bets. On Friday it announced that eight countries are being granted waivers to continue importing Iranian energy to one degree or another. (The oil Iran is selling is “damaged goods,” in the sense that it is often discounted and sold in barter deals.)
This will be a tricky balance for Trump to maintain. Global supply and demand are pretty tight, and over the medium term production increases in the U.S. and elsewhere may not be able to make up for the lost Iranian output. Politically unstable producers like Venezuela, Libya, Iraq and Nigeria may crimp supplies.
If oil prices start rising, Trump will be in an unpleasant situation vis a vis his base. They could even push the U.S. and the world into a recession. In such a case, Trump could ease off on sanctions, but that would give Tehran valuable breathing space.
3) Trump needs Iran’s struggling economy to force its leaders to compromise or force them out of power.
This is the piece that could bring the whole Trump tower down.
Though the non-oil sanctions are being observed and the oil sanctions are reducing Iranian exports, the longer a reluctant world has to follow American dictates – the more it will find a way around them.
If Trump fails to get what he wants from Iran in relatively short order, the other pieces of the structure will come tumbling down with a thud.
So far, Tehran is playing tough, but that’s to be expected in early days. Longer term, the conventional wisdom is that Tehran won’t knuckle under to sanctions, at least no more than it did the first time around when the Obama administration imposed them.
Certainly regime change is out of the question because Iranians will more likely rally round their beleaguered leaders than overthrow them, especially if they feel it was the U.S. is to blame for their problems.
That bit of the White House’s strategy is what makes the Trump tower look like a Trump casino: The president and his team are betting that Iran will fold relatively quickly, whether it’s by agreeing to tougher nuclear terms or because the Khamenei and his cohorts are toppled.
The odds are good that the former could happen because Iran’s economy had barely recovered from the Obama sanctions when Trump put his into place. Iran is starting from a low baseline. But it’s not clear that Trump isn’t seeking the latter and may blow off the entire sanctions strategy by holding out for regime change.
Trump is no engineer (and even as a real estate developer he was never in the big leagues). But even he must know that a tower is only as strong and stable as its structural elements and design.
The president has jury-rigged this one: he is counting on the rest of the world to accede to American dictates, and is counting on Iran to surrender quickly. I’m not sure I’d buy a condo in this one.