At the end of 2020, the Islamic Republic of Iran was down to just $4 billion in accessible foreign exchange reserves. Its terrorist mastermind, Qassem Solemani, and the godfather of its nuclear weapons program, Mohsen Fakhrizadeh, were dead. The regime in Tehran was afraid that its nuclear and missile infrastructure might be targeted at any moment. The ayatollah had halted his climb up the escalation ladder of uranium enrichment for months.
Budgets for terrorist groups like Hezbollah and Hamas were down. The Houthis would soon be added to America’s official terrorist list while the US provided intelligence, logistics and defensive support to Gulf Arab partners working to degrade Iran’s terror proxy in Yemen.
The United States, Israel, Saudi Arabia, the UAE, and Bahrain were fully aligned in a strategy to squeeze the source of instability in the Middle East – a coordination that gave birth to the Abraham Accords while pulling Gulf Arab partners closer to the United States and farther away from China’s orbit.
In shorthand, we called this the era of maximum pressure on Iran, but it was much more than that – it was the recipe for peace and stability in a region that has struggled to sustain both for generations.
The Past Four Years
Upon taking office, President Joe Biden substituted appeasement for pressure – loosening U.S. economic sanctions to provide Tehran with tens of billions of dollars, pulling back diplomatic pressure over Iran’s concealment of secret nuclear sites, turning a blind eye to Iranian proxy attacks on American troops, allowing a UN missile embargo to expire, removing the Houthis from the US terror list, distancing Washington from Riyadh, and chasing Iranian nuclear escalation with an offer of a sweeter deal than the 2015 Joint Comprehensive Plan of Action (JCPOA) – more sanctions relief for fewer nuclear restrictions.
The results were disastrous: A seven-front Middle East war waged by a regime racing toward the nuclear weapons threshold. During the period of Biden’s maximum deference policy, Iran’s terror budgets went up. Payments to Hamas alone tripled in the months leading up to October 7.
The Houthis metastasized into a Hezbollah-like missile and drone threat that has effectively shut down international maritime traffic in the Red Sea. Saudi Arabia moved closer to China and entered a truce with Iran – a strategic pivot that refocused the Middle East on the Israeli-Palestinian conflict instead of the true source of regional instability, thereby making Saudi-Israeli normalization much more challenging.
Iran became a major energy supplier for Beijing while supplying drones and missiles to Moscow. Worst of all, Ali Khamenei grew more emboldened to attack the United States directly, launching a wave of assassination and kidnapping plots on US soil – even trying to kill Donald Trump as he ran for president – funneling money to pro-Hamas protest movements in America, and using cyber tools to meddle in the presidential election.
On the nuclear front, maximum deference encouraged Iran to produce high-enriched uranium, deploy thousands of advanced centrifuges and even begin computer modeling work for a nuclear weapon. For the first time in 17 years, the US intelligence community can no longer assess that Iran isn’t working on the weapon itself. The entirety of Iran’s stockpile of high-enriched uranium was accumulated between 2021 and present day. Maximum deference led to Iran’s present nuclear escalation, not maximum pressure.
But for Israeli military successes over the last four months in defiance of White House pressure – destroying Iran’s strategic air defense and severely degrading Hezbollah – Trump would be taking office facing an emboldened regime in Tehran on the march. Instead, Jerusalem has handed him an opening to revive his maximum pressure campaign and put the region back on a path to peace and stability.
Restoring Pressure; Restoring Peace
Waivers
To do that, he will need to direct his administration to make that campaign a priority, particularly on the enforcement of U.S. sanctions to drain the regime of resources that fund its wide-ranging malign activities. And that should start with a national security presidential memorandum issued on January 20 making clear to every department and agency of the US government that maximum pressure is back.
The first stop: Waivers, licenses, and comfort letters. These are technical terms in the sanctions business that describe legal tools to suspend or loosen the application of sanctions.
Congress passed a series of Iran sanctions laws last decade that provided the president with authority to temporarily suspend or “waive” the application of sanctions if the president determines such a move is needed for national security. The Biden administration issued a waiver to allow South Korea to transfer $6 billion to banks in Qatar for Iran’s use – ostensibly the ransom payment for the release of five American dual citizens held hostage by Tehran but in truth a down payment on an unacknowledged nuclear deal that paid the regime not to further enrich uranium to weapons-grade purity.
Another waiver, which was renewed shortly after the November election, gave Iran access to at least $10 billion in accounts in Iraq and Oman – money Baghdad owed Tehran for electricity imports but that the first Trump administration had rendered inaccessible.
Any waiver in effect that gives Iran access to cash should be canceled immediately. In the case of Iraq, the new administration should revert to its former policy: Allow Iraq to temporarily import electricity provided that any money owed be kept in an escrow account in Baghdad – but move heaven and earth to unhook Iraq from Iranian electricity dependency. Funds in Oman and Qatar should be locked down as well. And any other bank around the world still holding Iranian funds – from New Delhi to Tokyo to Beijing – should be reminded that U.S. sanctions are back in full force.
Licenses
Licenses are different. Think of these as special exceptions to US sanctions issued by the Treasury Department to narrow their scope and thus reduce their impact. Some licenses make sense: Being allowed to smuggle secure communications into Iran to help the Iranian people rise up against their torturers. Some licenses, however, are messaged in a certain way for strategic communications but carry an ulterior motive. This can happen for supposedly “humanitarian trade,” access to technology or university exchanges – where something sounds good, but the details are a backdoor to provide sanctions relief to the regime. All existing licenses should be reviewed and, where necessary, revised to increase pressure.
Comfort Letters
Comfort letters are a sanctions version of Monopoly’s “get out of jail free card.” They are not publicly available, unlike waivers and licenses, but we get hints that they exist from references inside waivers or in “Frequently Asked Questions” guidance published by the Treasury. Such letters were likely issued by the Biden administration to banks in Europe that are converting Iraqi dinars to euros for Iran, to banks operating a sanctions relief program under cover of “humanitarian channels,” and to banks in Oman and Qatar to process transactions on Iran’s behalf. All such comfort letters should be revoked.
Sanctions Enforcement: China & More
Next comes sanctions enforcement. Under the Biden administration, Iran’s oil exports skyrocketed from 300,000-500,000 barrels per day to anywhere between 1.5 million and 2 million barrels per day. Most of it goes to China. Biden made a proactive decision not to confront Beijing over this illicit trade. “Experts” tell the media that there’s little the United States can do about this trade because the Chinese Communist Party has smartly delegated the activity to so-called “teapot refineries” that are disconnected from any known Chinese state-owned enterprise.
But for anyone who knows how the Chinese system works, and for those who have coordinated Iran sanctions enforcement in the past, that claim is preposterous. Nothing of this magnitude is happening inside Xi Jinping’s China without the central government’s knowledge and support. And there’s little doubt that if you dig deep enough, you will find a bank that is financing the imports and a state-owned enterprise that ultimately stands behind their refining and distribution.
We have seen this movie before. Once during the Obama administration when a supposedly independent bank in western China that was violating US sanctions turned out to be a subsidiary of a major Chinese energy company – and again during the Trump administration when officials discovered China’s state-owned shipping conglomerate ultimately overseeing the illicit import operation.
The US is more than capable of tracking every oil tanker that leaves an Iranian port and heads to China – and a new law, the SHIP Act, gives the president authority to impose sanctions on every Chinese port that allows that cargo to land. A new administration should make clear that vessels involved in ship-to-ship transfers – a common method to evade sanctions by offloading illicit cargo on to another ship midway through the journey – will be covered by the law.
This is one of the most fundamental decision points President-elect Trump will face, which will determine whether maximum pressure succeeds or fails: He must be willing to tell President Xi that Iran sanctions policy is in a category of its own diplomatically; the U.S. will fully enforce its sanctions no matter where the breadcrumbs of evasion lead inside China. A major enforcement action will likely be necessary to prove to Xi that the American hall pass on Iranian oil imports has come to an end.
Importantly, China should know it’s not being singled out. The US should be fully enforcing oil and petrochemical sanctions against any country, including close partners who may have been given a wink and a nod by the White House over the last few years. India may very well be on the list. Transshipment enablers in the Gulf and Indo-Pacific regions most certainly should be.
To avoid negative impacts on the oil market, these moves should be tightly coordinated with Trump’s new National Energy Council, which has been tasked with making America energy dominant. A green light to American energy and an end to the global war on fossil fuels will more than mitigate any market pressure from tighter oil sanctions enforcement.
There should also be zero tolerance for financing port projects with the Islamic Revolutionary Guard Corps. Once upon a time, someone in the State Department had a big idea to encourage India to partner with Iran to build a port for land-locked Afghanistan. The port, however, is owned and operated by the IRGC, and the Taliban now control Afghanistan, making such a project a double-whammy of insanity.
Other Sanctions
While energy exports are Iran’s lifeblood, they aren’t the only priorities for US sanctions enforcement. As my FDD colleague Dr. Saeed Ghasseminejad has written, a new Trump administration can further drain Tehran’s coffers by expanding US sanctions on Iran’s metals industry to cover zinc, nickel, and lithium, and targeting Iran’s automotive sector – most particularly the Chinese car companies that are operating joint ventures in violation of US sanctions.
As the new Trump administration increases pressure on Iran itself, it should squeeze Tehran’s proxies at the same time. The Houthis should return to the foreign terrorist organization list and Treasury Department licenses issued to loosen financial sanctions on the group should be rescinded. Hamas networks across the United States and Europe should be under maximum American pressure – both from Treasury and the Justice Department.
As recent Syrian opposition gains against Bashir Assad made clear, Israel has severely degraded Hezbollah – which is an opportunity for the United States to finally smash the organization’s illicit operations in Latin America. Additionally, like Assad, Iran (and Russia’s) anti-American partners south of our border – most notably Venezuela – may be weaker than we know and vulnerable to an unexpected uptick in sanctions enforcement.
The Trump administration will also have an opportunity to implement new sanctions laws passed by Congress, like the SHIP Act, that the Biden administration largely ignored. Those include authorities to impose human rights sanctions on key Iranian officials under the MAHSA Act, crack down on Hamas and Islamic Jihad financiers and pressure their state sponsors.
The White House should keep in mind that the Commerce Department should play a meaningful role in maximum pressure: Using export controls to go after suppliers of western technology to Iran and using the department’s Entity List when meeting the evidentiary threshold for sanctions presents a challenge. Another creative policy to pursue might be the pseudo-privatization of sanctions enforcement – finding ways to incentivize whistleblowers and bounty-hunters, rather than just relying on the intelligence community.
Multilateral sanctions play a role, too, both to increase Iran’s diplomatic isolation and to create additional economic pressure. We should push Canada, the United Kingdom, and the European Union as hard as we can to designate the IRGC as a terrorist group. We should also push the UK, France, and Germany to join the United States in triggering the snapback of UN sanctions on Iran – restoring international conventional arms and missile embargoes and putting the final nail in the coffin of the old JCPOA. Most analysts underappreciate the narrative economic effect both moves would have on the regime as the market comes to terms with the death of western appeasement.
Our European allies resisted the snapback four years ago, working with Russia and China to block a US-led effort at the UN Security Council. Trump had been undermined by his own State Department, which held on dearly to sanctions waivers allowing foreign support for Iran’s nuclear program – a signal to Europeans that the JCPOA might one day return. This time around, he should make clear all nuclear waivers are dead and buried – and push his counterparts in London, Paris, and Berlin to complete the UN snapback.
A Caution
Finally, a word of caution. Maximum pressure is not the same as maximum sanctions. Sanctions are a tool, albeit a powerful one. But other tools are needed for maximum pressure to succeed. UN Ambassador-designate Elise Stefanik will need to wage political warfare against Iran at the Security Council. Accountability will be needed at the International Atomic Energy Agency (IAEA) in Vienna – declaring Iran in breach of its Nuclear Non-Proliferation Treaty obligations.
Maximum support will be needed for the Iranian people. Millions of Iranians hate their regime and many of them have never left the streets since 2009 calling “Death to the Dictator.” Women face a renewed crackdown on hijab wearing. The Mahsa Amini uprising of late 2022 exposed how vulnerable the regime really is, and the embers of that uprising are still burning strong – Khamenei’s Achilles heel. The US and key partners are well-positioned to support the Iranian people, squeezing the regime between internal and external pressures.
And, without a doubt, a credible threat of military action must be on the table – clearly communicated to Tehran from day one, and quickly demonstrated to the regime in and around Yemen should the Houthis continue attacks on the Red Sea. The regime is closer than ever to nuclear weapons capabilities. A covert breakout attempt is a real possibility. The regime may consider retaliating either directly or via proxies over US sanctions pressure. Trump will only have a free hand to squeeze Tehran economically if the ayatollah fears him militarily – and also perceive that he has given Israel his blessing to take whatever steps it deems necessary to remove Tehran’s most existential threats.
The new administration may need to hand-hold Gulf partners at the beginning, steering them back to close coordination on maximum pressure alongside increased security commitments to once again bring them away from China’s orbit. Establishing a US-Saudi Vision 2030 Strategic Dialogue – a cabinet level, interagency, biannual exchange to support MbS’s economic and political reforms – might be helpful, too.
But if Trump can pull this off – if he can restore maximum pressure on Iran and its proxies, reunite Washington with Riyadh and rebuild the regional architecture that integrates Israelis and Arabs – he will not only defeat one of America’s greatest threats, but he would also usher in a new era of regional stability and even more historic peace accords.
Source » jewishpolicycenter