On November 5, the United States will reimpose an array of powerful sanctions on the most important economic institutions in Iran, including its central bank and national oil company. This is the result of President Trump’s decision in May to withdraw the United States from the Iran nuclear agreement and snap back U.S. sanctions that strike at Iran and global firms that do business with Iran. The economic measures will stifle Iran’s economic growth and links to the global financial system. They have already caused governments and companies around the world to distance themselves from Iran to avoid devastating U.S. sanctions. Though the United States has the economic power to compel Iran’s economic isolation, the end result of this policy remains unclear, but it is more likely that Iran will cease abiding by the nuclear agreement than it is to come back to the table for a new deal on the administration’s terms.
Although the re-imposition of these sanctions are an escalation in the U.S. pressure strategy—and the administration has hyped this date as a defining moment—countries have already begun significantly curtailing oil imports. U.S. government officials have also indicated they may be willing to issue wavers to permit a slower wind down of Iranian imports, rather than slam down punishment on those countries that continue to buy oil after the November 5 deadline. That would have the effect of not spiking oil prices too high for global consumers, and forestalling the need to punish allies like India, Japan, and South Korea, who are scrambling to find alternative oil supplies. The end result will be that the full economic effect of these sanctions will take hold over more months.