Heinz-Peter Bader / REUTERS An Iranian flag flutters in front of the United Nations headquarters during an International Atomic Energy Agency (IAEA) board of governors meeting in Vienna, March 2015.

The Path to Renewed Oil Sanctions on Iran

How Trump Can Significantly Reduce Tehran's Exports

On August 5, the Trump administration reinstated a first set of U.S. sanctions on Iran that had been suspended under the Joint Comprehensive Plan of Action (JCPOA) nuclear deal. But the bulk of U.S. sanctions on Iran will not come back into force until November 5, 180 days after Trump’s initial May 8 announcement that Washington would withdraw from the agreement. On that date, all of the U.S. sanctions suspended by the JCPOA will be reinstated, including the most important of all: the sanctions on Iran’s oil exports.

Sanctions on oil exports have the potential to be economically devastating to Tehran. Iranian Deputy Oil Minister Habibollah Bitaraf said in June that Iran’s government took in an estimated $50 billion from the sale of oil in fiscal year 2017 and that oil and petroleum products made up 70 percent of Iran’s total exports. With the value of Iran’s currency already falling 50 percent since Trump pulled the United States out of the JCPOA and street protests spreading against Iran’s government, cutting off Tehran’s biggest source of cash has the potential to dramatically hit Iran’s already ailing government.

If they play their hand well, Trump officials can secure large reductions in Iran’s oil exports. But doing so requires the administration to navigate both complex global oil markets and a multilevel diplomatic game involving both governments and global companies. Trump will have to manage deft diplomacy with Iran’s largest customer, China, which has made decisions on Iranian oil within the broader context of rising U.S.-Chinese trade tensions. He will have to maintain a relentless campaign against Iranian sanctions evasion. And he will have to deal with the fact that unilateral U.S. sanctions on Iran’s oil purchases may hasten global efforts to build a mechanism that foreign countries can use to conduct trade despite U.S. sanctions in the future.

MINIMIZING MARKET IMPACTS

The first challenge the Trump administration must navigate in reimposing Iran’s oil sanctions is minimizing

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