Today the European Union announced an escalation of their sanctions against Iran. According to the new guidelines, the 27 member nations will end any oil contracts with Iran by July 1st and any assets held by the Iranian central bank within the EU will be frozen, with a limited exemption to continue legitimate trade. While this new oil embargo will go a long way in satisfying European public opinion, it is unlikely that it will have the desired effect on the Iranian regime and, most importantly, has huge potential to backfire.
The range of possible outcomes include the following:
- The EU oil embargo holds and the Iranian economy takes a huge hit hurting the Iranian middle class and the Green Movement more than the regime;
- Iran closes the Strait of Hormuz prompting a US military response and potentially a military exchange between the US, NATO, and Iran;
- Iran refuses to give in causing a spike in oil prices that cause the price of gas and food to soar in the US and EU;
- The oil embargo is successful and Iran abandons its nuclear program.
Obviously the fourth option is the one that the EU is hoping for; however, it is the least likely and the other three possible outcomes should be of great concern to the US, Europe, and NATO. The driving force behind Iran’s nuclear ambitions lies in its desire to assert regional hegemony in the Middle East and build the strategic power necessary to counter US influence in Iraq and Northern Africa. Giving into the pressure of sanctions would destroy the image of military strength and political influence that the Iranian regime has attempted to cultivate over the past ten years. At the same time, Tehran has been very clear that they are willing to, and capable of, closing the Strait of Hormuz; recent military exercises in the Strait should be considered a clear indication that interference with their oil exports will result in the closing of the most strategically important trade route for the West
If Tehran decides that it does not want to risk a war over the Strait of Hormuz, we could be left with a combination of outcomes one and three, both of which hurt middle class, working citizens of Iran and the EU more than anyone else. In some EU countries 12-30% of the imported oil comes from Iran. An abrupt cessation of that trade would cause a huge shortage and therefore, an increase in the price of oil for EU citizens. This leads to price increases in heating oil, gasoline, transportation, food, and the general cost of living. In the already troubled and depressed economies of the EU, this could lead to even more public discontent and economic volatility. While EU officials have said that they would be able to replace Iranian imports, they have not described their alternatives with specificity. New agreements involving oil often require lengthy negotiations and the increased output necessary from potential suppliers like Saudi Arabia and Russia may incur new costs of their own. Also, Russia has been an ally to Iran and it is not inconceivable that they would refuse to supply the extra oil to the EU in an effort to pressure them to reverse the sanctions.
In Iran, where the government subsidizes energy prices along with bread, sugar, medicine, cooking oil, rice, and other necessities, a drop in government revenue could mean that these essential items are no longer available to those who need them. Furthermore, a worsening of the Iranian economy due to actions by the European Union only bolsters the regime who will spin the issue to convince the public that the development of a nuclear weapon and the bargaining power and deterrence ability that follows is essential to Iran’s national security and sovereignty.
Iran has consistently claimed that its nuclear program is for civilian purposes only. While IAEA inspectors have reported that Iran does have the capability to create a nuclear weapon within a short period of time, they have found no evidence of Iran actually weaponizing uranium. Also, despite bellicose statements about Israel, Iran has been careful to avoid suggesting it would actually detonate a nuclear weapon if it did possess one. Discounting the power of diplomacy could severely hinder the possibility of a peaceful solution with Iran. The first step in this process should not be an increase in sanctions, but a diplomatic effort to convince Iran to stop producing highly enriched uranium and stick with low-enriched uranium which is sufficient for energy production but not easily weaponized.