Will Iran Benefit from Lack of Coordination in Trump Administration's Multiple Sanctions?

By Nader Habibi

"The Axis of Evil"
Source: Iranian magaine Mosalas

If assuring the success of the economic sanctions against Iran is one of Trump administration's top foreign policy priorities then there must be a good explanation for why it is simultaneously engaging in trade wars and imposing sanctions on some of Iran's major trade partners. Does U.S. expect Turkey, Russia and China to cooperate with U.S. sanctions and cut back their economic ties with Iran while they are themselves being punished by tariffs and economic sanctions for various reasons?

Russia is subject to multiple sanctions despite President Trump's attempts to reduce the current U.S.-Russia tensions. Some of these sanctions have been introduced by the U.S. Congress despite President Trump's opposition. With regard's to China and Turkey, however, the Trump Administration is directly responsible for the sanctions and tariffs against these countries. Yet the U.S. is demanding a cutback in these countries economic ties with Iran and threatening their private businesses that deal with Iran.

Last week Russia, China and Turkey announced that (independently that) they will not cut off their economic ties with Iran as demanded by the U.S. - at least not to the extend that Trump administration had asked them to.  Now that the Trump administration has announced a new harsh tariff on Turkish metal exports, Turkey might be even less willing to contain its trade with Iran.

If these three countries continue to trade with Iran, the U.S. unilateral sanctions, which have already been rejected by several European governments, will become even less potent.

With respect to Turkey however, it is too early to predict how the current crisis will end and a number of diverging scenarios are likely. One possible scenario is that escalating tensions with the U.S. and nervousness of financial investors about the ability of Turkish government to service its large public debt can sharply increase the risk of a severe financial panic in the next few days. To avoid such a panic the Erdogan government might show an unprecedented effort to mend its tensions with the Trump administration.  Under these circumstances, Turkey might find itself with no other alternative but to offer more cooperation with U.S. sanctions against Iran as a component of a broader settlement of U.S.-Turkey tensions. After all, averting a major economic crisis will be a higher priority for Turkey than maintaining economic relations with Iran at current levels.

An alternative scenario is that Turkey can manage to avoid a financial crisis without resolving its tensions with the U.S.. In this case the anti-American sentiments in Turkish government and some segments of Turkish society will grow even stronger. The Turkish government will then become even more defiant in ignoring U.S. sanctions against Iran.

Under this scenario, the U.S. economic pressures on Turkey will make it even more crucial for that country to expand its economic relations with Iran and Russia. The U.S. tariffs on Turkish aluminum and steel products will cost Turkey nearly a billion dollars in export revenues and thousands of jobs. President Erdogan will have no reason to refrain from expanding Turkey's economic relations with Iran, which will welcome any opportunity for better economic ties with Turkey.

********

Yet, ironically, it might be premature to assume that refusal of so many of Iran's economic partners to join the U.S. sanctions will be a victory for Iran. These reactions are clearly a setback for the Trump administration but they do not mean an end to the U.S. efforts to confront and contain Iran in the Middle East. Economic sanctions were the least costly mechanism for the Trump administration but if they prove ineffective to alter Iran's foreign policy, the U.S. government might resort to other measures. These might include covert destabilization programs and selective military confrontations. Such policies will have an adverse effect on Iran's economic and political stability. They will also increase the risk of military escalation between Iran and the U.S and its regional allies.

About the author:
Nader Habibi is a faculty in Brandeis University. He is affiliated with the Crown Center for Middle East Studies  and the department of economics in that university.