New US sanctions against Iran took effect on Tuesday, and President Donald Trump, who defied Washington’s allies to impose them, pledged that firms doing business with Tehran would be barred from doing business with the United States. Iran dismissed a last-minute offer from the Trump administration for talks, saying it could not negotiate while Washington had reneged on a 2015 deal to lift sanctions in return for curbs on Iran’s nuclear program, Reuters reported.
Trump decided this year to pull out of the agreement, ignoring pleas from the other world powers that had co-sponsored the deal, including Washington’s main European allies Britain, France and Germany, as well as Russia and China.
Washington accepts that Iran has complied with the terms of the 2015 deal reached under Trump’s predecessor Barack Obama, but says the agreement was flawed because it is not strenuous enough. Iran says it will continue to abide by the deal for now, if other countries can help protect it from the economic impact of Washington’s decision to pull out.
The European countries have promised to try to mitigate the impact of renewed US sanctions to persuade Tehran to continue to abide by the deal’s terms.
But that has proven difficult. European companies have pulled out of Iran, arguing that they cannot risk the prospect of damage to their US business.
“These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!” Trump tweeted on Tuesday.
Undermining Iran’s Government
The nuclear deal is closely associated in Iran with President Hassan Rouhani, a relative moderate who won two landslide elections on promises to open up the economy to the outside world.
European countries fear that by abandoning the deal, Washington risks undermining Rouhani and strengthening the hand of his more hardline opponents, who have long argued that the West would never allow Iran to prosper. In a joint statement on Monday from Britain, France, Germany and the EU as a bloc, they said, “We deeply regret the reimposition of sanctions by the US”.
Since the sanctions were initially lifted two years ago, Iranian oil exports have risen.
But most Iranians have yet to see major economic improvement as a result of the deal, and the prospect that Washington would re-impose sanctions helped drive a collapse in the value of Iran’s currency this year, raising the cost of imports.
Market Relatively Buoyant
The sanctions reimposed on Tuesday–targeting access to US banknotes and key industries such as cars and carpets–were unlikely to cause immediate economic turmoil, AFP reported.
Iran's markets were actually relatively buoyant, with the rial strengthening by 20% since Sunday after the government relaxed foreign exchange rules and allowed unlimited, tax-free gold and currency imports.
But a second tranche coming into effect on November 5 covering Iran's vital oil sector, could be far more damaging–even if several key customers such as China, India and Turkey have refused to significantly cut their purchases.
