Trump and the Iran Deal: The U.S. Strategy Is Working

(Bloomberg View) -- It looks like the Iran nuclear deal will not survive past May 12. That is the next occasion President Donald Trump will have to end waivers on crippling sanctions against Iran, withdrawing America from the agreement. Unless European allies commit to fixing its main flaws -- the sunset provisions, lack of restrictions on Iran's missile tests and the hampered inspection process -- Trump will withdraw.

The president is already setting the stage. He replaced Secretary of State Rex Tillerson, the most vocal proponent of the deal, with one of its toughest critics, former CIA director Mike Pompeo. Then there is the new national security adviser, John Bolton, who six months ago drafted strategy for getting the U.S. out of the agreement altogether.  

There are strong arguments for following through on this course. As Israel's prime minister, Benjamin Netanyahu, likes to say, Iran gets to become a breakout nuclear power down the road by adhering to the agreement's terms for now. The limitations on low enriched uranium and prohibitions on-advanced centrifuges expire between 2026 and 2031.

What's more, the nuclear bargain -- with its secret understandings and complex structure -- is designed to spur a gold rush for America's allies to invest in the economy of the world's leading state sponsor of terrorism. This would not only normalize Iran's opaque banking system and corrupt state-owned businesses, but would create a powerful constituency inside Europe to oppose sanctions later on that would threaten the investments the nuclear bargain is supposed to make kosher. As the Israel Project's Omri Ceren argues in Commentary this month, that risk alone merits blowing up the deal.

All of that said, to withdraw from the Iran deal now would be a mistake. The U.S. and its allies now enjoy the best of both worlds: Iranian compliance without the international investment Tehran had counted on.

European banks and businesses are wary of the Iranian market at this point. U.S. officials tell me Europe is asking for further clarifications from the Treasury Department on what kinds of investment will not violate existing sanctions. Deals that appeared to be done at the close of the Barack Obama administration -- like Boeing's multi-billion dollar aircraft sale to Iran -- are now in doubt. Iran's rial has been in free fall, losing a quarter of its value in the last six months. 

There are many reasons why Iran's economy isn't attractive in 2018 to significant foreign investment. Its secret police keep arresting dual nationals on false charges; its proxies and revolutionary guard keep waging war in Syria and Yemen; and its banks won't stop laundering money for the Lebanese terrorist group Hezbollah. Add to this a new Saudi-led strategy to pressure businesses not to enter the Iranian market.

While discarding the Iran deal now would be a mistake, Trump does deserve credit for throwing its future into doubt. We all know the drill. Every six months Trump is required to waive the secondary oil and bank sanctions the agreement lifted, effectively exiting the U.S. from the deal. And every six months, he has hemmed, hawed and threatened not to do it. When Trump finally introduced his Iran strategy in the fall, he gave an ultimatum: Unless Congress and European allies commit to fixing the deal's flaws he will withdraw. This is why the May 12 deadline looms so large.

But before Trump follows through on his promise, he should take a moment to appreciate the implications of imposing the secondary sanctions the nuclear deal lifted. Kate Bauer, a former Treasury Department attaché in Abu Dhabi who worked on Iran sanctions, told me last week that the sanctions could in theory be snapped back in a matter of days. But in order for these measures to be effective, it would require a considerable amount of technical and diplomatic work.

"It would require time and resources on the technical side, such as reissuing executive orders and making decisions about licensing policy," Bauer, who is currently a scholar at the Washington Institute for Near East Policy, told me. "But also on the diplomatic side if the objective is to rebuild pressure on Iran's economy to get them to change their behavior."

What are the chances European and Asian allies would want to work closely with the U.S. to re-impose sanctions at the very moment the U.S. is negotiating with Europe to strengthen the existing nuclear agreement? Not good. This says nothing of the diplomatic strain created by Trump's decision to impose tariffs on Chinese steel, or for that matter the preparations for a North Korea summit with its tyrant, Kim Jong Un.

Of course, U.S. secondary sanctions do not require a parallel diplomatic campaign; if a bank or company pursues investment in Iran it runs the risk of being shut out of the U.S. market. But enforcement does require some cooperation. If the secondary sanctions are flaunted and the U.S. does not penalize the offender, one of America's most valuable foreign policy tools -- its ability to use its economy to scare money away from rogues -- will be proved a paper tiger.

Mark Dubowitz, the chief executive of the Foundation for the Defense of Democracies and one of the architects of the strategy to pressure allies to fix the Iran deal, said there are technical ways Trump can claim to be withdrawing from the Iran deal without implementing the sanctions right away. He called this a period of "safe harbor," where there would be six months for any banks and corporations to unwind their business in Iran. "You then prolong uncertainty and give more time for the Europeans to agree to a real fix to the deal," he said.

Perhaps this sort of escalation will be necessary at a future date. For now it is not. Some critics might say that Trump has to follow through on his promise or he will lose credibility. But he can just as easily delay his decision, point to the European negotiations, and follow through on his own promised plan to ramp up non-nuclear sanctions on Iranian entities.

What's more, he can do all this and claim success, if not victory, for his strategy to fix the nuclear bargain he campaigned against. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Eli Lake is a Bloomberg View columnist. He was the senior national security correspondent for the Daily Beast and covered national security and intelligence for the Washington Times, the New York Sun and UPI.

To contact the author of this story: Eli Lake at elake1@bloomberg.net.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.

©2018 Bloomberg L.P.