prime minister, a change would mean tempering their own escalating campaign of “maximum resistance” to the sanctions, which Tehran regards as yet another U.S. effort at regime change.
Iran Arms Militants Across Middle East
In the struggle between Sunni and Shiite Muslims in the Middle East, Iran—a Shiite theocracy—has armed and trained Shiite militants in Lebanon, Yemen and Iraq and also backed Sunni armed groups opposing Israel in the Gaza Strip. Saudi Arabia—a Sunni theocracy—supports groups fighting Iran’s proxies. Although all Middle Eastern countries have mixed Sunni and Shiite populations, only Iran, Iraq and Bahrain are predominantly Shiite, but Bahrain is ruled by a Sunni monarch. About 90 percent of the world’s Muslims are Sunnis. Oman’s population is predominantly of the Ibadi sect of Islam but also has some Sunnis and Shiites.
Sources: Seth G. Jones, “War by Proxy: Iran’s Growing Footprint in the Middle East,” Center for Strategic and International Studies, March 11, 2019, https://tinyurl.com/y2j5xn3y; “Mapping the Global Muslim Population,” Pew Research Center, Oct. 7, 2009, https://tinyurl.com/y49kadm7
Both sides insist they do not want a war. Yet domestic political pressures, regional allies’ security concerns and Trump’s unpredictability continue to hinder diplomatic efforts to broker talks between the two countries. If the U.S.-Iran standoff persists, some analysts fear a military confrontation is inevitable, potentially sparking a wider regional war that would send world oil prices soaring and usher in a global recession.
The latest round of U.S.-Iran tensions began building in May 2018. That’s when Trump pulled the United States out of a landmark 2015 agreement between Iran and six world powers, under which Tehran had curtailed its nuclear program in return for relief from international sanctions imposed between 2010 and 2015. The sanctions sought to pressure Iran to curb its nuclear ambitions. Calling the accord “the worst deal ever negotiated,” Trump imposed much harsher restrictions, flexing America’s economic and financial muscle in an effort to make Tehran choose between economic collapse or new talks toward a more stringent accord.3
But Iran rejected any new negotiations unless Trump first returned to the 2015 agreement and lifted his sanctions. And Tehran fought back by harassing and seizing foreign oil tankers in and near the Persian Gulf, downing the U.S. drone and deliberately breaching some provisions of the 2015 accord.
Iran has been plagued by sanctions since 1979, when the United States first imposed them after Islamic militants seized the U.S. embassy in Tehran, the country’s sprawling capital, and held 52 American diplomats hostage for nearly 15 months. After the hostages were released in 1981, the United States lifted those sanctions, but reimposed unilateral trade restrictions and embargoed U.S. military sales to Iran in the 1980s and ’90s in an effort to force Tehran to stop building ballistic missiles and supporting regional militant groups Washington regarded as terrorist organizations. Since the mid-2000s, U.S. and international trade sanctions have aimed to convince Iran to limit its nuclear program.
Trump’s latest sanctions tightened restrictions on Iran’s oil sales and targeted Iranian Supreme Leader Ali Khamenei, other top political figures and Iran’s Islamic Revolutionary Guard Corps, triggering a major escalation in the standoff that jolted world oil markets. A Sept. 14 drone-and-cruise-missile attack devastated two major Saudi Arabian oil facilities, instantly cutting global oil supplies by 5 percent. Iran-aligned Houthi rebels in Yemen claimed credit for the attack as part of their ongoing war with the Saudis, but the Trump administration blamed Iran, which denied responsibility. After weeks of deliberation, Trump imposed sanctions on Iran’s Central Bank and a development fund. In addition, the president ordered a secret cyberattack on Iran’s communications system, U.S. officials say. But Trump kept a U.S. military response off the table.4
The attack on the oil infrastructure of Saudi Arabia, the world’s largest oil exporter, appeared to be primarily in response to a Trump administration vow to halt Iran’s oil exports, say Iran analysts. “If one day they want to prevent the export of Iran’s oil, then no oil will be exported from the Persian Gulf,” Iranian President Hassan Rouhani warned last in December 2018.5
Iran is being driven to take such risks by the impact of Trump’s sanctions on the country’s oil exports, a major source of Iran’s hard currency earnings, analysts say. In April of last year, just before Trump withdrew from the nuclear deal, Iran exported 2.5 million barrels a day, earning about $60 billion annually, according to Adnan Mazarei, an expert on Iran’s economy at the Peterson Institute for International Economics, an independent Washington think tank. Today, he estimates, the sanctions have reduced Iran’s oil exports to around 300,000 barrels per day, dropping its earnings to around $12 billion this year.
Correspondingly, Mazarei says, since the sanctions kicked in, Iran’s rial currency has lost about 70 percent of its value against the dollar. Inflation runs about 42 percent annually, he says, and the average unemployment rate stands at nearly 12 percent, with youth unemployment at 27 percent. The International Monetary Fund (IMF) forecasts that Iran’s economy will contract by 9.5 percent in 2019.6
Iran’s Dependence on Oil Exports Declines
In an effort to make the economy less reliant on oil exports, which are targeted by U.S. sanctions, Iran gets a growing share of its export revenue from non-oil exports.
Sources: “Merchandise trade matrix—product groups, exports in thousands of United States dollars, annual,” United Nations Conference on Trade and Development, https://tinyurl.com/y3x68yw3; Esfandyar Batmanghelidj, Bourse & Bazaar, Aug. 19, 2019, https://tinyurl.com/y6akna4c
U.S. State Department Special Representative Brian Hook is the Trump administration’s top official handling affairs with Iran.
Tasos Katopodis/Getty Images
Trump’s sanctions also have blocked international banks from conducting transactions in dollars with Iran, significantly curtailing imports of medicine and food. Although those items were exempted from the sanctions, foreign suppliers and banks have backed away from exporting them to Iran. (See Short Feature.)
Yet experts say the Iranian economy, for now, is not about to collapse, because it has diversified over the past four decades. The sanctions have not sparked mass demonstrations against the regime. Though polls show a majority of Iranians blame the Rouhani government’s economic mismanagement and corruption for the country’s fiscal woes, a growing percentage blame the United States and have rallied around their clerical leaders.7
“The regime’s narrative about why Iran faces difficulties has shifted from the things that [Iranians are] doing wrong to the difficulties outsiders have created for us,” Mazarei says. “So U.S. responsibility for the sanctions and current conditions has become far more prominent in the minds of ordinary Iranians. And that has created social solidarity.”
Driving the administration’s sanctions policy are a dozen demands that would dismantle Iran’s strong military position in the region, which the United States, its Persian Gulf allies and Israel view as a threat. Formulated last year by Trump’s hawkish then-national security adviser John Bolton and Secretary of State Mike Pompeo, the key requirements include a permanent end to Tehran’s nuclear program, as well as termination of both its ballistic missile development and its support for