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US reimposes sanctions on Iran: What does that mean?

Posted in 07 August 2018

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Trump administration has reimposed the first tranche of sanctions on Iran, isolating Washington as much as Tehran. A second round of US sanctions in November will target Iran's energy sector.

The first round of renewed US sanctions on Iran entered into effect on Tuesday as part of Washington's strategy to apply "maximum pressure" on Tehran over its alleged malign activity.

US President Donald Trump took to Twitter to warn that "anyone doing business with Iran would not be doing business with the US."

The unilateral US sanctions reimposed on August 7 prohibit Iran's purchase of US dollars and precious metals, part of a larger move that attempts to cut the country off from the international financial system. Broad sanctions on Iranian industry, ranging from carpets and health care to the automotive sector are also being reimposed.

In addition to prohibiting US persons and entities from doing business with Iran, the sanctions are also extraterritorial. This means that non-US firms and financial entities that do not comply with the sanctions could face fines and be cut off from the American-dominated global financial system.

The Trump administration pulled out of the 2015 nuclear deal signed between Iran and world powers in May, despite the UN repeatedly confirming that Tehran is living up to the accord.

Under the terms of the deal known as the Joint Comprehensive Plan of Action (JCPOA), punishing international sanctions on Iran were lifted in exchange for Iran dismantling its nuclear program and subjecting it to international inspections.

"It was never just the nuclear question alone that was important to the Americans," Henning Riecke from the German Council on Foreign Relations told DW. "The Trump administration is hoping the regime in Tehran will collapse under the economic pressure ... it is a very risky and naive policy."

The Trump administration's decision to pull out of the nuclear deal despite European entreaties has added strain to trans-Atlantic ties. In July, the US rejected a request from European allies for waivers and exemptions for companies doing business with Iran in sectors including health care, finance, automotive and energy.

The EU has sought to shield its companies from extraterritorial sanctions, but so far its actions have failed to stem a steady withdrawal of major companies from the Iranian market.

A second tranche of US sanctions on Iran's oil and gas sector are set to go into effect on November 4. This second round is likely to have a bigger impact on Iran's coffers, with insurers reportedly already halting cover for shipments.

Among others, Turkey, India, China and EU states are seeking waivers or ways around the energy-related sanctions - including alternative payment mechanisms. China and Turkey have flat out said they will not comply with US energy sanctions.