Iran’s three options for surviving US sanctions

Iran’s three options for surviving US sanctions

President Hassan Rouhani speaking during a rally in the city of Shahrud, around 400 kilometres east of the capital Tehran. (AFP)

Last week I wrote of the current impact of the US sanctions imposed on Iran. The scope of the sanctions, their effect on some economic sectors and the continuous economic decline over the past three months, as well as the swift impact of the second phase of sanctions, were all reviewed. Now I will review the options that Iran may resort to in order to mitigate the impact of the sanctions.

The first option centers on the regime adopting a strategy of escalation by several means. This includes targeting US and Western interests in the region through groups and militias affiliated to the Islamic Revolutionary Guard Corps (IRGC), such as Hezbollah, the Houthis and the Popular Mobilization Forces. This step could be taken directly by the IRGC through the harassment of oil tankers in the Arabian Gulf and by an escalation in Afghanistan or on the Israeli-Lebanese front by using Hezbollah or Hamas. This would serve as a warning to Washington to pressure it to reconsider the policies that aim to tighten the economic noose around the Iranian regime’s neck. 

The US move would be strengthened by the EU adopting a similar position on the Iranian missile program, or by imposing sanctions on Tehran, even while retaining a commitment to the nuclear pact. This option would be costly for Iran diplomatically, politically and militarily. Furthermore, the Western response may be larger than the initial action. Some countries may find that the time is ripe for them to carry out military operations against Iranian sites both inside and outside the country.

The second option for Tehran lies in maintaining its current policy of “resistance” and “resilience” domestically, while working to buy time over the next two years until it becomes clear which party will be in office in the US after the next elections in 2020. It is possible for the Iranian regime to continue exporting oil on a smaller scale, with the US granting exemptions to eight countries, allowing them to import oil during the sanctions period. This could enable the regime to endure sanctions for several years through the restructuring its economy, adopting austere economic policies, raising non-oil exports, improving the role of the IRGC’s “parallel economy” and the charitable associations linked to Supreme Leader Ali Khamenei’s office, as well as by reviving its dormant economic sleeper cells, including entities and individuals, to help the Iranian economy survive this testing period.

This option could be introduced over the short and medium terms, especially if Washington softens in the implementation of its policies. Iran’s adoption of this option would be conditional on the willingness of other regional nations, particularly its neighboring states, to help Iran circumvent sanctions. 

The third option would see Iran’s leaders conclude that the two previous options are high-risk gambles, as their economic and political costs could be too high to countenance. This would lead them, however begrudgingly, to accept the need to renegotiate the terms of the nuclear deal with the US administration, since the problems resulting from the other possible scenarios could further undermine the already unpopular regime domestically, as it faces worsening protests and demonstrations across the country.

Iran could well show some flexibility on regional and international issues that it deems to be low priority

Dr. Mohammed Al-Sulami

Due to this pressure, the regime might negotiate with the US administration to cut a deal simply to bring a swift end to the economic losses it is already incurring, particularly if the eight countries temporarily exempted from US sanctions decide instead to abide by the sanctions and cease economic dealings with Iran. The regime could gain more time by conditional negotiations, which would include the lifting or freezing of part of the sanctions.

Whilst this option is likely to be strongly opposed by the IRGC, Khamenei is likely to be more pragmatic, and President Hassan Rouhani’s government would probably support it. Iran will ultimately find itself pushed toward begrudgingly accepting this option, especially if the popular protests at home continue and the regime falls short of meeting most of its financial commitments at home and abroad.

Regarding this last option, Iran could well show some flexibility on regional and international issues that it deems to be low priority. This will not happen at the outset of any negotiations, but the regime would keep any such concessions as its trump card that it can use if the negotiations reach an impasse. In my view, this option is the most probable if the US continues to pressure Iran and works to convince its neighbors to cease cooperation with the regime to circumvent sanctions, as well as tracking all Iran’s violations, and penalizing and blacklisting firms and individuals helping Iran to evade the sanctions. 

In conclusion, the success or failure of the US strategy on Iran depends primarily on Washington’s seriousness in implementing its sanctions and the extent to which its allies are willing to cooperate. Yet it also depends to some degree on the US providing alternatives to cover shortages in the energy market, attracting countries currently importing Iranian oil, and Washington offering services better than those provided by Iran, as well as swiftly identifying and closing any loopholes in the sanctions and subjecting any agreement to continuous assessment.

  • Dr. Mohammed Al-Sulami is Head of the International Institute for Iranian Studies (Rasanah). Twitter: @mohalsulami
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