Unfreezing Iran

And Doing It the Right Way

Iranians look at a list of candidates' names during elections for the parliament and Assembly of Experts, February 26, 2016. Raheb Homavandi / Reuters

It makes sense that moderates’ recent electoral triumph in Iran—early results suggest that they have won a majority of seats in the parliament and in the Assembly of Experts—will improve the chances of success for the Iran nuclear deal. Iranian moderates, who generally back President Hassan Rouhani, were an important factor in concluding the deal and are likely to support its continued implementation.

As U.S. policymakers welcome the news that the Obama administration’s signal foreign policy achievement may be on sturdier ground, however, the continued successful implementation of the deal is having important and unanticipated consequences for the United States’ ability to use biting financial sanctions to achieve its foreign policy objectives.

In particular, the nature of the sanctions relief provided as part of the Iran nuclear agreement—which seems less likely to unravel after the election—may actually undermine U.S. sanctions in the future, in part by encouraging foreign companies to re-enter Iranian markets and decrease their reliance on the U.S. financial system. It is worth taking that risk into consideration as some policymakers cheer the outcome of the election and what it may mean for Iranian politics and the future of the nuclear agreement.


Observers have focused on the role that economic sanctions played in bringing Iran to the negotiating table and ultimately signing the nuclear agreement. But the use of powerful financial sanctions has a longer history.

The United States introduced targeted measures after 9/11 to stem the flow of funding to terrorist groups. These were soon adapted for use against weapons proliferators such as North Korea and Iran. The Treasury Department, building off the framework established in the early 2000s, continued sharpening these tools and—under significant pressure from Congress, which wanted to increase the coercive pressure on Iran—began to rely more heavily on so-called secondary sanctions, that is, prohibitions on non-U.S. businesses or individuals that continue doing business with a sanctioned entity. In other words, foreign firms were given

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