Trump Administration's Next Iran Battle: Enforcing Sanctions on India, China and Europe

India is increasingly reliant on Iranian oil, while China and Russia will find ways to continue doing business with Tehran as long as it remains faithful to nuclear deal, pundits note

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Indian Prime Minister Narendra Modi, right, shaking hands with Iranian President Hassan Rohani after the signing of an agreement in New Delhi, February 17, 2018.
Indian Prime Minister Narendra Modi, right, shaking hands with Iranian President Hassan Rohani after the signing of an agreement in New Delhi, February 17, 2018.Credit: Manish Swarup/AP
Amir Tibon
Amir Tibon

WASHINGTON – The United States is expecting Europe to fall in line with its decision to reimpose harsh sanctions on Iran and disengage from Iran's economy, after President Donald Trump's decision to exit the nuclear deal last week. But experts tell Haaretz the administration's biggest challenge will lie not on the Continent but with countries like India and China.

Trump's national security adviser, John Bolton, told CNN on Sunday that American sanctions on Iran's economy will harm European companies that do business with Tehran. "Europeans will see that it's in their interests to come along with us," he said. "The consequences of American sanctions go well beyond goods shipped by American companies," Bolton said. "As those sanctions kick in, it will have an even broader effect." 

But Bolton may be better advised looking further afield, according to experts. 

India, for example, has a growing trade relationship with Tehran and is reliant on Iranian oil. Last Wednesday, Indian newspaper The Hindu predicted that "the impact on world oil prices will be the immediately visible impact of the U.S. decision. Iran is presently India’s third biggest supplier (after Iraq and Saudi Arabia), and any increase in prices will hit both inflation levels as well as the Indian rupee."

The newspaper also noted that "after Iranian President Hassan Rohani’s visit to New Delhi in February, India committed to increasing its oil imports from Iran," and that "New Delhi and Tehran have instituted several measures in the past few months, including allowing Indian investment in rupees, and initiating new banking channels, between them."

A Western diplomat familiar with the nuclear deal said that although Trump enjoys a strong personal relationship with Indian Prime Minister Narendra Modi, as does Prime Minister Benjamin Netanyahu, "It's a big question if those relationships will be enough to overcome India's financial interests.

"Perhaps the combination of those relationships and real pressure on sanctions could make a difference – but I doubt it," the diplomat added.

Other experts believe that no amount of American pressure could put Iran back under the "crippling" sanctions regime it faced in 2012, prior to the nuclear deal. These sanctions were imposed globally, not only by the United States and Europe, but also by the expanding economies of China and India. 

Kelly Magsamen, a former Pentagon official who served in the administrations of George W. Bush and Barack Obama, tweeted last week that "as someone who spent years of her life putting in place sanctions on Iran under Bush and Obama, I am horrified by the delusional view that we can easily regain the leverage that took years of painstaking 'sanctions diplomacy' with our allies, Russia, China, Japan and India."

Magsamen, who currently works for the Center for American Progress, added that creating the global sanctions regime on Iran required "endless meetings with Japan, Korea and India on oil sanctions."

Barbara Slavin, who manages the Future of Iran Initiative at the Atlantic Council in Washington, also predicted difficulties for the administration in getting an international sanctions regime in place.

"Many companies will bow to fear of massive fines and quit or avoid the Iranian market. But others, particularly in China and Russia, will find ways to continue to do business with Iran as long as it remains faithful to the [nuclear deal]," Slavin wrote on the website Axios.

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Since Trump's announcement last Tuesday, European diplomats have attempted to cast doubt over the administration's chances of getting Europe to pull out of business dealings with the Islamic Republic. Officials in Paris, Berlin and Brussels said their governments will work to "defend" Europe's financial interests and, with that, the very survival of the nuclear deal. Iran has also signaled that if Europe can find a way to continue doing business with the Islamic Republic despite the sanctions, this will allow the deal to stay in place.

However, some experts critical of the administration's policies believe this will be very difficult to achieve. Suzanne Maloney, an expert on Iran at the Brookings Institution, wrote last week that "Iran can muddle through a considerable amount of economic pressure and turmoil, thanks to a diversified economy as well as long experience and well-honed tactics for mitigating and evading sanctions. But the reality is that despite profound international resentment over Trump’s tactics, the re-imposition of U.S. sanctions will present much of the world with only one viable choice: to abstain or wind down trade and investment with Tehran rather than risk U.S. penalties."

According to Maloney's analysis, "European assurances to Tehran can do little to change the calculations of the private sector, especially when the upside rewards of opportunities in Iran remain modest in comparison to the potential liabilities." 

>> No longer alone facing Iran | Opinion

Joshua Landis, director of the Middle East Center at the University of Oklahoma, also expressed skepticism about the ability of Europe and other world powers to overcome the American sanctions. "Why will U.S. sanctions hurt Iran, despite EU bluster and China hedging? The World is ‘dollarized’ and becoming ever more so," Landis wrote on his Twitter account last week. "Trade is carried out in dollars, not Euros."  

The Foundation for Defense of Democracies, a think tank in Washington that was highly critical of the Iran deal and tried to fight it in Congress, has recently sent a number of policy recommendations to members of Congress on how to ensure that Europe doesn't bypass the renewed Iran sanctions.

These suggestions, first reported by The Weekly Standard, include imposing sanctions "on the first bank or company found to be in violation of U.S. sanctions. This will create a global chilling effect on further attempted violations." 

Richard Goldberg, a senior adviser at the foundation, tells Haaretz that "banks and businesses cannot outrun the risk of losing access to the American financial system. Unless you’re a black market illicit operation, attempting to evade U.S. sanctions is completely insane – no legitimate corporate lawyer would ever recommend it. And if you’re an Eastern European state that relies on the United States for protection from Russia, why would you ever support an EU Council resolution that could put that security arrangement in jeopardy?”

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