May 9, 2018 | New York Post

Trump now needs to bring Iran’s economy to its knees

President Trump’s declaration Tuesday that he would exit the 2015 Iran nuclear deal was more than just a fulfillment of a campaign promise; it was a much-needed shift in US foreign policy. The message to the world: The era of appeasement is over.

The Joint Comprehensive Plan of Action was among the worst deals negotiated in modern times. In exchange for the suspension of America’s toughest economic sanctions, Iran needed only freeze its nuclear program for a limited amount of time — keeping its nuclear capabilities on standby while perfecting its missile arsenal, increasing support to terrorism and expanding its military footprint throughout the Middle East.

By withdrawing from the agreement, Trump unshackled America’s most powerful economic weapons and restored US leverage to push back on the entire range of Iran’s malign activities. Trump must now implement a new strategy that forces Iran to withdraw from Syria and Yemen, verifiably and irreversibly dismantle its nuclear and missile programs, end its sponsorship of terrorism and improve its human-rights record.
Sustained political warfare, robust military deterrence and maximum economic pressure will all be necessary. Pressure will build steadily as our re-imposed sanctions take hold.
Under the laws passed by Congress before the nuclear deal, banks throughout the world risk losing their access to the US financial system if they do business with the Central Bank of Iran or in connection with Iran’s energy, shipping, shipbuilding and port sectors. Companies providing insurance and re-insurance for Iran-connected projects face US sanctions as well, as do gold and silver dealers to Iran.
Iran will see its oil-export revenue decline as importers are forced to significantly reduce their purchases. Worse than anything for the regime, Iran’s foreign-held reserves will be on lock-down. Money paid by its oil customers must sit in foreign escrow accounts. Banks that allow Iran to repatriate, transfer or convert these payments to other currencies face the full measure of US financial sanctions.
What happens to a country that is cut off from hard currency and faces declining export revenues? In 2013, we saw the result: a balance-of-payments crisis. What happens, however, when these sanctions are imposed amid a raging liquidity crisis while the Iranian currency is in free-fall and the regime is drawing down its foreign-exchange reserves? The Trump administration is hoping for a situation that makes the mullahs choose between economic collapse and wide-ranging behavioral change.

The strategy just might work, but it’ll take a lot more than just re-imposing sanctions to succeed. Sanctions are only effective if they are enforced. The sooner the Trump administration identifies a sanctions-evading bank and cuts it off from the international financial system, the sooner a global chilling effect will amplify the impact of American sanctions. The same goes for underwriters and gold-traders.

Beyond enforcement, the Trump administration will need key allies to fully implement this pressure campaign. The Saudis, under attack by Iranian missiles from Yemen, should be a willing partner in the effort to drive down Iran’s oil exports — ensuring Saudi production increases to replace Iranian contracts and stabilize the market. Saudi Arabia, the UAE and Bahrain should also combine their market leverage to force European and Asian investors to choose between doing business in their countries or doing business in Iran.

Trump will also need Europeans to act on one key issue which, given their opposition to his withdrawal from the deal, may present a diplomatic challenge. Under US law, the president may impose sanctions on secure financial messaging services — like the Brussels-based SWIFT service — if they provide access to the Central Bank of Iran or other blacklisted Iranian banks.

In 2012, when Congress first proposed the idea, the European Union ordered SWIFT to disconnect Iranian banks, which closed a major loophole in US sanctions. Now that Trump has left the deal, SWIFT must once again disconnect Iran’s central bank. If SWIFT refuses, Trump should consider imposing sanctions on the group’s board of directors.

Trump’s Iran pivot from appeasement to pressure offers America the best chance to fundamentally change Iranian behavior and improve our national security. If his administration implements the strategy effectively, the Iranian regime will have a choice: meet America’s demands or face economic collapse.

Richard Goldberg is a senior adviser at the Foundation for Defense of Democracies. Follow him on Twitter @rich_goldberg

Follow the Foundation for Defense of Democracies on Twitter @FDD. FDD is a Washington-based nonpartisan research institute focusing on national security and foreign policy.


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