The Return of U.S. Sanctions on Iran: What to Know

The United States has reimposed sanctions on Iran that it lifted just two years ago. President Donald J. Trump withdrew from the multilateral deal, known as the Joint Comprehensive Plan of Action (JCPOA), for “disastrous flaws” that he said posed a security threat. The return of U.S. sanctions is intended to restrain Iran’s behavior beyond nuclear controls but runs the risk of reviving a program to develop atomic weapons, experts say.

What's Happening?

The Trump administration’s withdrawal from the JCPOA on May 8 reinstates two sets of sanctions.

The first, coming into effect August 7, includes restrictions on:

• Iran’s purchase of U.S. currency;
• Iran’s trade in gold and other precious metals; and
• the sale to Iran of auto parts, commercial passenger aircraft, and related parts and services.

The second set of sanctions, which comes back into force on November 4, restricts sales of oil and petrochemical products from Iran.

The Trump administration has so far rejected requests by foreign governments and companies that would allow them to continue to conduct business with Iran.

European signatories of the JCPOA are reported to be preparing a package of economic measures to try to salvage the deal. Additionally, the European Union will activate, effective August 7, a law “to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions," said a joint statement from EU members of the JCPOA.

What’s the Immediate Impact?

The U.S. moves have already contributed to a run on the rial and triple-digit inflation as Iranians scramble for the safety of U.S. dollars and gold. They also come amid months-long protests in Iran over deteriorating economic conditions and charges of corruption and mismanagement. Protesters have targeted the government of President Hassan Rouhani, who championed the nuclear deal as a way of boosting the economy, as well as more hard-line parts of the regime, such as Supreme Leader Ali Khamenei, who has criticized the JCPOA.

Other Factors to Watch

Some estimates say Iran’s oil exports, valued at $36 billion in 2016, could drop by up to two-thirds this year with the reinstatement of sanctions. That could have ripples beyond Iran as global oil markets cope with supply strains.

U.S. aircraft manufacturer Boeing and European corporation Airbus are set to lose contracts worth $39 billion.

The overall value of EU trade with Iran in 2017 was about $23 billion, with three-quarters of it related to energy deals.

If other parties to the JCPOA are unable to continue their revived business with Iran, Iranian leaders are expected to walk away from the deal.

The Big Picture

Prospects for diplomacy to resolve the dispute over Iran’s nuclear program appear remote. U.S. Secretary of State Mike Pompeo has laid out conditions Iran must meet to ease sanctions, including ending destabilizing actions in the region, such as its support for Houthi rebels in Yemen and Hezbollah. Iranian officials, however, regard these demands as tantamount to seeking regime change.

Trump said he is willing to meet with Rouhani without preconditions, but Iranian foreign ministry officials rejected the offer as insincere.

Before too long, warn experts such as CFR Senior Fellow Philip H. Gordon, “the United States could face the dilemma the JCPOA was designed to avoid: allow the [nuclear] program to continue to expand in the absence of international monitoring or use military force to stop it.”