Congress should delay action on new sanctions against Iran

The claim that sanctions never work is a common refrain in Washington. And for the most part it is a true statement. A recent exception is the case of economic sanctions against Iran. They appear to have pressured the Iranians to enter into negotiations on their nuclear program. 

Historically, effective sanctions have three key characteristics: (1) They are supported, applied and enforced by multiple countries; (2) enough political will exists among the sanctioning countries to continuously update them; and (3) the target country’s economy is dependent on export trades that the sanctions are designed to affect. As the U.S. Senate mulls tougher sanctions against Iran, lawmakers should consider these factors before voting for them.

So far, the first two components of effective sanctions are at risk of breaking down. Since the passage of the Comprehensive Iran Sanctions and Divestiture Act (CISADA) in 2010, key economic superpowers such as the European Union, South Korea and Japan have joined the U.S. in enforcing these sanctions. In fact, the European Union passed its own highly restrictive legislation shortly after CISADA became law. These laws have since been tweaked and updated every year.

The permanent members of the United Nations Security Council plus Germany (P5+1) recently agreed to an interim peace agreement with Iran as reflected in the Joint Plan of Action of November 24, 2013. The P5+1 countries have expressly agreed to roll back a few of the current economic sanctions and have implied that there will be no new sanctions in exchange for Iran’s commitment to blend down some of its highly enriched uranium, stop activities at the Arak reactor and allow more frequent inspections by the International Atomic Energy Agency (IAEA). The fact that this interim deal exists indicates that key U.S. allies are ready for a thaw in their relations with Iran, or at least for testing the possibility of a long term deal. 

Congressional action toward new sanctions against Iran now would make the U.S. appear bellicose and uninterested in a policy change on Iran’s nuclear program. If this perception were to take hold, the international sanctions regime could easily collapse.

As Congress debates new unilateral sanctions against Iran, it only need look at the effectiveness of tough yet stale U.S. unilateral sanctions against Cuba over the last 50 years. Cuba presents a classic case of trade sanctions created to punish violators with fines for specific acts, rather than offering international businesses a choice between doing business with Cuba and being excluded from the financial system (banking and insurance) in the U.S. and Europe.  

The unilateral sanctions imposed by the U.S. are a problem for Cuba, but they are not as “crippling” as the multilateral economic sanctions against Iran. Currently, Cuba trades cigars and sugar with a whole host of nations using currencies such as euros, yens, pounds and even dollars. However, under multilateral energy and financial sanctions against Iran, the country has not been able to sell even half of its two million barrels per day oil production capacity to anyone, in any currency. If the U.S. gets too far out in front of their partners with new sanctions, other countries will ignore the U.S., trade with Iran and provide it with an effective relief valve on U.S. economic pressure, just as other countries have done with Cuba.

To be effective, Congress should make any new sanctions laws prospective, meaning that they would only go into force if Iran fails to reach a final deal with U.S. and its allies on its nuclear program in the next six months. Better yet, Congress should simply keep its proposed tougher sanctions locked up in committee while still boasting about how tough and draconian the new laws are likely to be. In the meantime, if the interim deal collapses, harsh sanctions legislation such as H.R. 850, which passed the House on July 31, 2013, and the proposed Senate version being considered by the Senate Banking Committee could quickly become law. If elements of the House version became law, the current Presidential waivers that allow Iran to sell one billion barrels of crude a day would be eliminated.

This patient approach serves several purposes. First, it gives the negotiators an effective tool to pressure Iran to sign an agreement or face an even worse economic future. Second, it will help negotiators obtain tougher verification protocols for unfettered access to known and suspected nuclear facilities as part of any deal. Finally, and most importantly, threatening tougher sanctions now, but not yet executing them, will show our allies that the U.S. is sincere in trying to reach an agreement. If Iranians reject this offer, it is likely that U.S. allies will be more willing to join in enforcing new tougher sanctions. This will in turn add to their effectiveness and put the United States in a better bargaining position for forcing Iran’s return to the negotiating table. On the other hand, the waiting approach may just result in a verifiable peace deal that everyone can live with.