its influence far beyond its borders. (See Graphic.)8
Trump fired Bolton in September after sharp disagreements over signs the president was straying from Bolton’s hard line and softening his position on Iran, among other issues. But even with Bolton no longer in the White House, Trump’s demands and the sanctions remain.
“If we want to get to a point where Iran’s proxies are weaker and the regime doesn’t have the resources that it needs to destabilize the Middle East, it will require economic pressure,” says U.S. Special Representative for Iran Brian Hook, the administration’s top official dealing with Tehran. “There is no other way to accomplish that goal.”
Among the Democratic candidates vying for their party’s presidential nomination, Sens. Elizabeth Warren and Amy Klobuchar and South Bend, Ind., Mayor Pete Buttigieg have said they would unilaterally return to the 2015 nuclear deal if elected. Former Vice President Joe Biden has made his return conditional on Iran’s full compliance with the agreement, while Sen. Cory Booker has said he will seek “a better deal.”9
Analysts say the administration’s policy of relying on economic sanctions, combined with Trump’s reluctance to use military force, has only encouraged greater Iranian defiance and heightened the chances of an eventual military confrontation.
“Iran is incentivized to make riskier decisions, such as conducting additional significant attacks on Saudi oil infrastructure,” according to an October analysis by the Eurasia Group, a Washington-based political risk consultancy. “Tehran could also cross, either intentionally or accidentally, Trump’s main red line: the death of U.S. service members.”10
Ryan Crocker, who served as U.S. ambassador to five Arab and Muslim countries over a 40-year State Department career, says the intractability of current tensions between the United States and Iran can be traced to Trump’s failure to observe one of the most basic equations in international security affairs: matching means with ends.
“President Trump has shown himself to be a national security minimalist who is not likely to rush to war,” says Crocker. However, he adds, “He and his team are pursuing maximalist ends by demanding the Iranians give up their nuclear ambitions, their missile program and their support cv bc for regional proxy forces. Those things are absolutely integral to the Islamic Republic’s basic essence.”
Crocker continues: “When we put things like that out there as demands, what the Iranians hear is that this isn’t about de-escalating tensions and finding common ground; it’s about removing the Islamic Republic. So they’re going to deliver a maximalist response that our minimalist president isn’t prepared to deal with.”
Amid these challenges, here are some key questions being asked about the increasingly fraught U.S.-Iran relationship:
Can Iran’s economy survive under Trump’s sanctions?
Ali Safavi, an exiled Iranian opposition figure living in Washington, D.C., insists the clerical regime in Tehran is close to collapse.
“Today, the Iranian regime is at its weakest point,” says Safavi, a member of the Mujaheddin e-Khalq, the oldest and best organized Iranian opposition group. “It is extremely vulnerable.”
He attributes the regime’s fragility largely to Trump’s economic sanctions, which ban any individual, company or country from doing business with Iran from the United States. Trump has said his goal is to block Iran’s oil exports, viewed by Washington as the lifeblood of the Iranian economy. And over the past year, Trump has steadily intensified those sanctions, targeting Iran’s Central Bank, the country’s leaders and its elite Islamic Revolutionary Guard Corps, the regime’s most powerful military organization but branded by the U.S. government as a foreign terrorist organization. Iran’s long-standing problems of corruption and malfeasance compound the impact of the sanctions, experts say.
The resulting inflation and weakening of the rial sparked widespread anti-government protests and strikes in 2017 and 2018, Safavi says, eroding the Iranian leadership’s grip on power. Videos from last year’s street demonstrations captured angry mobs hurling insults at police and chanting “Death to inflation! Death to unemployment!”11
But an NPR report from Tehran last August told a different story. “Morning Edition” program host Steve Inskeep said: “Stores are well-stocked, though prices have soared through inflation. New stores and restaurants have opened to serve the elite, even if they’re not always full of customers. New buildings are under construction, even if the progress on some has been slow.” The government appears firmly in charge, Inskeep said, and he saw no anti-government protests while he was there.12
Iran experts say the country’s economy is a mixed picture. Trump’s sanctions have hit hard, they say, denying the government billions of dollars in oil export revenues and drastically limiting Tehran’s ability to pay subsidies and fund public projects. Major foreign companies operating in Iran, such as German automaker Mercedes Benz and France’s Total gasoline company, have fled the country. The sanctions also have denied Iran access to the global financial markets, where the U.S. dollar is the premier trading currency.
Spikes in inflation and unemployment have hit ordinary Iranian households the hardest, economists add. The Peterson Institute’s Mazarei says food inflation is running at about 60 percent, significantly weakening Iranians’ ability to purchase chicken, meat and other basic food items. He says rents have risen sharply. And while salaries have gone up around 20 percent over the past year, Marzarei says, the raises offset only half of the overall inflation rate of 42 percent, resulting in a significant loss in real income.
Iranians’ View of U.S. Worsens
The share of Iranians who view the United States unfavorably rose from 71 percent in July 2014 to 86 percent in August 2019, a year after President Trump imposed new sanctions on Iran. The share of Americans who view Iran unfavorably has generally remained above 80 percent since 2001.
Sources: Colum Lynch, “After Three Years of Trump, Iranians Believe America Is a ʻDangerous Country,ʼ” Foreign Policy, Oct. 25, 2019, https://tinyurl.com/yxfkrm2v; “Iran,” Gallup, February 2019, https://tinyurl.com/y22mxs2d
“The issue now is going to be how the government finances itself and its deficit from domestic sources,” Mazarei says. “They’ve had to borrow considerably from the commercial banks and from the Central Bank. But eventually, the sustainability of this operation will require the printing of money in significant amounts, and therefore higher inflation. And that means further reduction in real income.”
Some independent analysts believe Iran’s economy risks collapsing into Venezuela-style hyperinflation and serious social unrest if sanctions continue into a second Trump term.
“If Iran has to deal with the current economic situation for another year or so, that’s one thing,” says Ariane Tabatabai, an Iran analyst at the RAND Corp., an independent think tank that works closely with U.S. policymakers. “But if Trump is re-elected and Iran has to deal with the sanctions for another five years, that’s going to be a big problem. The current economic situation is not sustainable for another five years. Eventually, the Iranians will have to strike a deal with the United States if [Iran is] going to get its economy back on track again.”
Other analysts agree the sanctions have hurt Iran badly, but question predictions that it is headed for economic collapse. Barbara Slavin, director of the Future of Iran project at the Atlantic Council, a Washington think tank, notes Tehran has roughly $100 billion in foreign currency reserves and negligible foreign debt. More importantly, she says, the regime reduced its heavy dependence on oil exports in the 1980s—from 90 percent to 30 percent today—by increasing exports