A return to sanctions

The effect of the Trump administration’s reckless decision to unilaterally withdraw from the nuclear deal with Iran in May are now going to start being felt as the first wave of sanctions hits Iran. US sanctions were to be imposed in two waves, with the first beginning on August 7. This first wave targets Iran’s aerospace, carpet, automobile and food industries while the second and bigger phase, which will be imposed in three months, goes after Iran’s energy industry. The purpose of these sanctions is to destabilise the government in Iran by imposing a form of collective punishment on the Iranian people. Its effects were already being felt even before the sanctions were imposed as foreign companies pulled out of Iran out of fear of being penalised by the US government. Although the European Union is still part of the nuclear deal and has said it intends to continue trade with Iran, most multinational companies have withdrawn from Iran because the US has announced its intention to punish those who continue to operate in the country. Since most companies have much larger operations in the US than in Iran, they are essentially being bullied into ceasing all economic activity in the country. Whatever small gains Iran had made after signing the nuclear deal have now been lost and the country is facing a major economic crisis.

In the run-up to the imposition of sanctions, Iranian envoys visited Pakistan and India to try and secure trade deals. Pakistan has tried to pursue the construction of a gas pipeline with Iran for more than a decade but the project was initially abandoned because of threats from the US. Iran is now keen to resume the project but how we proceed may well depend on the US. The EU ambassador to Pakistan has said that the EU has no objection to the pipeline, although the US will probably have a different view. With India, Iran wants to continue work on the Chabahar port. The port links India to Iran through Afghanistan, bypassing Pakistan in the process and so is very important to the Indians. But India’s closeness to the US means it is more likely to heed the dictates of the Trump administration. Pakistan’s political ties with the US are at a low ebb in any case – which theoretically gives the country the option to ignore Trump and proceed with the pipeline. To do so, however, may require political cover from the EU and China. The gas pipeline is a necessity given our energy crisis but the new sanctions regime could once again affect this crucial project.