The Iran Sanctions Hangover Is Not a Liability

Image: Flickr/U.S. State Department.

America should use the lifting of sanctions to pursue dialogue with Iran. 

Paul Pillar asserts that the complex nature of U.S. sanctions, such as those imposed on Iran, can reduce the leverage the U.S. enjoys in coercing target states. He argues that the complex structure of the sanctions regime has made dismantling it difficult, and this has consequently slowed the thaw in trade relations between Iran and a Europe wary of breaching U.S. regulations. Therefore, if the United States is to maintain its leverage in sanctioning events going forward, it must recognize that facilitating sanctions relief may be as important as the sanctions themselves.

While the process of removing the sanctions has indeed been slow, Pillar provides no logical reasons for why this takes away from U.S. leverage. Instead, he bases his argument on a wager: if future sanctions targets believe they will not realize substantial and immediate sanctions relief upon compliance with the demands of the sender, they will be unlikely to change their offending policies.

This view is mistaken for several reasons. First, it is unclear why a target state would choose more onerous sanctions, or the possibility of war, over slow but steady sanctions relief. Second, a lag between the lifting of sanctions and an increase in foreign trade and investment does not fundamentally change the nature of a sanctions regime. Pillar treats sanctions imposition and sanctions relief as distinct policies, an understandable position. However, as part of an overall sanctions strategy, the “sanctions hangover” does not counteract the coercive power of the sanctions, but augments it by increasing the time-horizon of a sanctioning event.

Moreover, this extended time-horizon serves to increase Washington’s leverage in several ways. As noted by multiple studies, the act of threatening sanctions is often more effective than their imposition. If target states understand that noncompliance with a sanctioner’s threat will lead not only to the imposition of sanctions, but further economic and reputational damage upon the lifting of those sanctions, they may be more willing to settle before sanctions are imposed.

If sanctions are imposed, the period after the lifting of the sanctions can also provide an opportunity for the United States to strengthen diplomatic relations with the former target and attempt to steer their economic policies in a direction amenable to U.S. interests and those of its allies. As the sanctions are but one of the reasons Iran has struggled to gain access to Western financial markets, the slow dismantling of the sanctions regime can be seen as an opportunity for engagement with Iran. The United States has indeed been active in working with European financial institutions concerning ways to avoid coming into conflict with U.S. regulations, demonstrating to the Iranian regime its commitment to encouraging economic engagement with Iran, as far as is currently possible.

Further, Washington and its European allies surely wish to see Iran come into compliance with modern money-laundering and terrorist-financing laws. Increasing its engagement with Iran, in the form of consulting Iranian firms and the Iranian government on how best to attract foreign investment and trade in foreign markets, and pressing the government to make the necessary legal changes can therefore increase U.S. influence in the region while serving U.S. economic interests and national-security interests.