Iranians will wake up on Monday morning with the gloom of the U.S. sanctions reinstated on the country. These sanctions, imposed by the Donald Trump Administration are hard-hitting and have cast a wide-net so as to bring Iran's economy to the knees and in turn, Tehran to the negotiating table.
"On November 5th, the United States will re-impose sanctions that were lifted as part of the nuclear deal on Iran's energy, shipbuilding, shipping, and banking sectors," US Secretary of State Mike Pompeo said on the eve of the imposition of sanctions. Under the JCPOA deal, Iran stopped its nuclear weapons programme in relief for sanctions.
Iran’s government has remained defiant, saying it is confident it can weather the impacts, and that the U.S. will fail to bring down Iranian oil imports to zero. But ordinary Iranians, wary of the fluctuations of the currency and the rising prices of goods, are anxious.
What sanctions have gone into place?
More than 700 individuals, entities, vessels and aircraft will be put on the sanctions list, including major banks, oil exporters and shipping companies.
According to US Treasury Secretary Steve Mnuchin, "This (list) includes hundreds of targets previously granted sanctions relief" under the nuclear deal, "as well more than 300 new designations," he said. "This is substantially more than we have previously done."
Mnuchin also said the list of banks will be "substantial longer" than those previously sanctioned before the Iran nuclear deal was put in place. A final list of institutions will be released on Monday, the secretary said.
Some estimates say Iran’s oil exports, valued at $36 billion in 2016, could drop by up to two-thirds this year with the reinstatement of sanctions.
Mnuchin said Swift, a messaging service used by global banks for money transfers, may face penalties if it fails to cut off the designated Iranian institutions. "Swift could be subject to sanctions," Mnuchin said. "Swift is no different than any other entity." Being disconnected from Swift would almost completely isolate Iran from the international financial system.
Transactions tied to humanitarian services will still be allowed under the sanctions agreement, but Mnuchin warned institutions to be "very careful" that they are not disguised financial transactions.
What is the impact?
The impacts of the new blanket sanctions are particularly high among Iran’s health sector. A group of respected Iranian mental health professionals signed a letter saying that Iranian people’s access to life-saving medication and medical supplies is getting “seriously jeopardised”.
“Given the indirect toll on human well-being, economic sanctions can hence be regarded as a sugarcoated but full-fledged war with the caveat that people die not because of bombs and bullets, but rather as a result of a reduction in access to health care,” they wrote.
“Ordinary Iranian people are the ones who are most seriously suffering from the crippling US-imposed sanctions, which has created a grave burden on their sense of wellbeing and mental health.”
The sanctions have hit the value of Iran’s currency, the rial. The rial has lost approximately 75 percent of its value since the beginning of 2018. In September it fell to a low of 1,70,000 to 1 USD.
Similarly, Iranians involved in the business of exports and imports that depend on a stable currency to conduct their trade have been badly impacted. Fluctuations in currency have hit students studying abroad especially hard.
Given the scope of US sanctions, any international business house or country found doing business with Iran will also face sanctions. EU trade with Iran in 2017 was about $23 billion, with three-quarters of it related to energy deals. The EU moved to protects its business ahead of the sanctions but most of the companies have chosen to pull out of Iran.
In a joint statement, the foreign ministers of the UK, Germany and France, and EU foreign affairs chief Federica Mogherini said they "deeply" regretted the U.S. decision to restore sanctions.
"We are determined to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231," they said.
U.S. aircraft manufacturer Boeing and European corporation Airbus are set to lose contracts worth $39 billion.
However, along with the sanctions Mike Pompeo announced 12 demands of the Iranian government, if complied to would lead to the cessation of the sanctions. These include ending support for militants in the Middle East and completely stopping its ballistic missile development.
Pompeo also said that eight jurisdictions being granted exemptions for energy related sanctions were on the list because they had "made important moves to get to zero crude oil importations." He said they will be named on Monday. These are most likely to include Japan, South Korea and India. The US State Secretary said these countries are getting waivers "only because they have demonstrated significant reductions in their crude oil, and cooperation on many other fronts, and have made important moves towards getting to zero crude oil importation." He added that "these negotiations are still ongoing."
According to Pompeo, six of the jurisdictions will import Iranian crude oil at "greatly reduced levels" and two will completely end their imports.
Iran has been among India’s top crude oil suppliers for the past few years. After the lifting of sanctions under Barack Obama’s government, Iran overtook Venezuela to become the third-largest oil supplier to India in 2016-2017. Iran retained its spot as the third-largest supplier to India in 2017-2018, too.