The Empty Threat of Iran Sanctions

Let's try actually enforcing the sanctions against Iran, for a change.

Iran's president-elect, Hassan Rouhani

Iran's president-elect, Hassan Rouhani.

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The past several sanctions and Iran-related legislative initiatives have passed Congress overwhelmingly. The Nuclear Iran Prevention Act appears headed for similar success. Consistent with previous rounds of sanctions, however, this bill does not require the president to enforce its sanctions measures and penalize violators without exception.

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There is little doubt what the implications of this are, given the history. These and other sanctions provisions are unlikely to be consistently enforced. They may be leveraged as a diplomatic tool. They may be leveraged to reinforce the reputational risk associated with certain types of business behavior. They may even cause enhanced market anxiety and persuade responsible companies to withdraw. But they will not be actually implemented and will likely not lead to harsh penalties on Iran’s most important business partners. Iran may incur some additional economic and financial strain as a result, but its “resistance economy” would likely soldier on.

Assuming for a moment that, despite what many hope, Rouhani fails to meaningfully curtail Iran's nuclear program, the race for new sanctions approaches will continue as it has for multiple decades. Yet, actually enforcing existing sanctions policy has hardly been tried. Doing so would be a far more meaningful policy approach than pointing an empty gun at yet another sector of the Iranian economy and banking on the benefit associated with Iran trading good corporate citizens for bad ones.

Andrew Davenport is chief operating officer of RWR Advisory Group, an economic and geopolitical risk consultancy.

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