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What impact will US financial sanctions have on Iran?

Tuesday 7 August 2018

Dr Moritz Pieper, an expert in International Relations from the University of Salford, comments on the impact of the US re-imposing financial sanctions on Iran.

Dr Pieper said: “As some US sanctions have been re-imposed on Iran today, the US is looking to further weaken an already faltering Iranian economy. 

“The logic behind this move is to foment unrest in Iran, which the US hopes will force Iran’s leadership to negotiate with the US. Rouhani’s government, however, has ruled out to negotiate bilaterally with a US administration that previously violated a nuclear agreement – and international law – by walking away from the Joint Comprehensive Plan of Action (JCPOA).

“Unless the US recommits to the nuclear agreement, Iran is unlikely to consider additional demands put forward by the US. 

“The remaining JCPOA signatories are committed to a continued implementation of the agreement. Here, the biggest challenge for the EU is to find credible guarantees for European companies to continue to work in Iran.

US financial sanctions do not only affect Iranian entities, but also third-country entities that are US ‘subsidiaries’ or that also seek to operate on the US capital market. Forced to choose between the US and Iran, most companies will opt for the former.

“US financial sanctions do not only affect Iranian entities, but also third-country entities that are US ‘subsidiaries’ or that also seek to operate on the US capital market. Forced to choose between the US and Iran, most companies will opt for the former.

“The EU’s Blocking Statute, coming into effect today, still has to prove its worth. Private companies respond to market dynamics, and banks are naturally risk-averse. For the sake of preserving the credibility of the global nuclear non-proliferation architecture, European governments will be looking to square this circle in the coming months.”