Trump’s Iran Strategy: Hit America in the Pocketbook

Trump’s Iran Strategy: Hit America in the Pocketbook

President Trump’s decision to withdraw the United States from the Iran agreement may be the most dangerous and destabilizing move yet of his tumultuous presidency.

The Europeans face a more complex calculus. They are the most wedded to the multilateral diplomacy behind the Iran deal, and to the prospect of positive change in Iran wrought by engagement. They are also most angered by our president’s Trumpian ways. In the words of Donald Tusk, the EU president, “With friends like Trump, who needs enemies?” The French finance minister called for proud resistance: “Do we Europeans want to be vassals standing at attention to obey the decisions of the United States?” On May 18, European Commission president Jean-Claude Juncker proposed a series of measures including a “blocking statute” that would forbid EU companies from obeying U.S. sanctions law and protect them against fines and penalties, as well as a mechanism to permit member states to make direct payments to Iran for oil without using U.S. financial institutions subject to sanction. “[W]e have the duty,” he said, “to do what we can to protect our European businesses, especially SMEs.” On June 6, the EU formally updated its blocking statute to protect against U.S.-Iran-related sanctions.

The Europeans may not be able to live up to these bold promises in the face of withering U.S. economic pressure on their companies. Just this week, the three European signatories and the EU wrote to the Trump administration, urging exemptions for European firms from U.S. sanctions, though expectations for a positive response are muted. But how can it profit the United States to humiliate our closest allies with the strength of our economic might? Already, European leaders are diversifying their relationships. France’s Macron was in Moscow last week meeting with Putin, and Germany’s Merkel was in China.

In the coming weeks, the extent of economic fallout from President Trump’s rash and ill-considered decision will become clearer. European firms will have to face the reality that for most of them, the U.S. market is much more important than the Iranian market. France, for example, traded goods worth just €3.8 billion with Iran last year; with the United States, it was €1 billion per day. European leaders will have to decide how hard to push their own companies to abide by European sanctions rules and to ignore the American threats. And our other trading allies—Japan, Korea, etc.—will have to pick sides when they themselves are being pressed by the United States to accept steel and aluminum tariffs or quotas.

The only clear economic winners flowing from Trump’s decision are Russia and China. They will continue to trade with Iran, and will reap the commercial benefits that might have flowed to U.S. or European firms. Others—Turkey and India among them—will look away as their companies trade with Iran, and corruption and illicit trade will flourish. Meanwhile, Iran will continue to find enough economic sustenance from these sources to help it withstand the U.S.-imposed sanctions, even as it hardens its economy against the impact. They have suffered through worse. Finally, it will threaten a return to its nuclear program, with the rest of the world saying, “Can you blame them?”

And on top of steel and aluminum tariffs, auto tariffs, intellectual property sanctions, and the redoing and undoing of the world trading system that the United States has championed since the Bretton Woods Conference of 1944, global businesses will now have to act as private policemen enforcing sanctions against Iran that many of their own governments don’t support. In a world where markets are already frothy and profits and values are pumped up by tax givebacks and stimulative government deficits, and where famous debtors like Argentina are once more returning to the IMF for support programs, business hardly needs the further uncertainty imposed by a new and severe sanctions regime.

And—oh yes, lest we forget—Trump’s impetuous and unwarranted withdrawal will make the world less safe, the chance of regional stability in the Mideast less certain, and the risk of violent conflict higher still.

Frank G Wisner was a career foreign-service officer who served eight presidents. He was a four-time ambassador, and also under secretary of defense for policy and under secretary of state for international security affairs. He is now an international affairs advisor at Squire Patton Boggs, an international law firm.

Nelson W. Cunningham has served as an advisor to Joe Biden and John Kerry and served in the White House as special advisor to President Clinton on trade and Western Hemisphere affairs. He is the president of McLarty Associates, an international strategic advisory firm based in Washington, DC.

Image: Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., April 10, 2018. REUTERS/Brendan McDermid