Sanctions on Iran Will Isolate the United States

Recent actions by the Trump Administration and Congress on Iran could jeopardize U.S. political and economic interests. The president’s decision to decertify the Iran nuclear deal under the Iran Nuclear Agreement Review Act and the House’s bipartisan bill passed last Thursday to impose sanctions on Iran for its ballistic missile program could isolate the U.S. by jeopardizing American companies’ access to new markets, and by causing a rift between the U.S. and European allies over economic interests. Aerospace and energy are two sectors in particular where American companies are at risk of losing massive amounts of business.

Boeing’s sale to Iran is not insignificant to the American economy or employment. The combined value of its deals is around $20 billion  based on list prices. The largest deal would provide 50 narrow-body 737s and 30 wide-body 777s, valued at around $16.6 billion, to Iran Air. The company claims that this sale would supply 100,000 American jobs. Another deal with Aseman Airlines for 30 narrow body 737 MAX jets, valued at $3 billion, would support an additional 18,000 American workers. Both sales might have to be forfeited if Congress withdraws from the Iran nuclear deal and imposes more sanctions, potentially jeopardizing hundreds of thousands of American jobs.

Preventing U.S. companies from conducting business in Iran would leave room for other international aircraft providers, such as Airbus, to step in and fill Iran’s desperate need for commercial aircraft. Airbus has much to gain if Boeing is unable to stay in its deals with Iran Air and Aseman Airlines. Already, the European company has struck profitable deals. Its sale to Iran Air alone for 100 A320s, A330s, and A350s has a list price of $19 billion. Airbus is also selling 45 A320neos to Airtour Airlines, and 20 A320neos and eight A330neos to Zagros Airlines. Airbus is already pulling ahead, as it has begun to deliver on its deals, whereas Boeing is not slated to deliver its first aircraft until April 2018.

Another significant market that could isolate the U.S. is energy, both traditional and renewable sources. Since sanctions were lifted in 2015, many European companies have begun investing in Iran. France’s Total signed a $5 billion deal to develop Iran’s South Pars gas field. The Norwegian company Saga Energy has invested 2.5 billion to build solar panels in Iran’s desert regions in partnership with the Iranian company Amin Energy Developments. 

Norway’s ambassador to Iran stated “Norway is fully committed to JCPOA and this is proof that we have taken the lifting of the sanctions very seriously. We will see more investments within the near future.” Such investments are not only examples of a lucrative market that American companies could be barred from, but also reasons why European allies may not follow the U.S. and reimpose sanctions against Iran.

Europe may not be willing to risk economic growth or prevent access to new markets when Iran has not explicitly violated the nuclear agreement. As any first-year economics student could tell you, sanctions are not as effective unless the sanctioned party is isolated by a wide and united front. Reinstating sanctions without European support makes the U.S’ move less aggressive and puts tension on various partnerships.

Withdrawing from the Iran nuclear deal and imposing more sanctions against the Islamic Republic will isolate the U.S. from its Western allies and foreign markets, weakening its role as a global leader. The benefits do not outweigh the costs, as the Administration is risking political and economic loss though the nuclear deal has not been violated. Top officials throughout the government, including Chairman of the Joint Chiefs General Dunford, Defense Secretary Mattis, and Chairman of the Senate Foreign Relations Committee Bob Corker (R- TN) have all stated that Iran is in compliance with the nuclear deal.

Leaving the deal on the grounds that it does not address every security risk posed by Iran does not make the situation any more secure. One common argument is that the Islamic Revolutionary Guard Corps (IRGC) receives much of its funding from Iran’s oil sales. However, if sanctions are reinstated, and foreign investments are no longer possible, the IRGC will take over Iran’s energy projects once again, as it did when sanctions were first issued in 2012. This would increase the Corps’ revenue, allowing it to dominate Iran’s most lucrative market, and counteract the intentions of the U.S’ move.

Instead of attacking the existing deal for being imperfect, the Administration should channel its efforts into improving the security situation through other means. For example, Trump’s national security team should work with allies to restrict Iran’s ballistic missile program independent of the existing nuclear deal. Continuing to support our regional allies’ missile and air defenses through foreign military sales will also help secure the region against Iran’s security threats. Reinstating sanctions against Iran will hurt U.S. companies and alliances, and do very little to rectify the security situation.

Rathna K. Muralidharan is a program director at the Lexington Institute with a focus on global security and regional politics. You can follow her at @RathnaKM and the Lexington Institute @LextNextDC.