Biden’s sanctions dilemma as Russia likely to follow Iran’s lead – OpEd – Eurasia Review
By David Reaboi*
US President Joe Biden returned this week from an embarrassing and gaffe-filled trip to Europe to address the war in Ukraine. There, he heightened tensions between Russia and the West by calling for the overthrow of President Vladimir Putin.
It may look like a serious crisis in the relationship, but Russia’s actions in Ukraine don’t seem to be derailing everything.
Despite harsh rhetoric and unprecedented economic sanctions for the brutal war on Ukraine, Biden administration diplomats are showing far more deference in their negotiations with the Russians in Vienna.
It is impossible to overstate the incongruity of tone between Biden’s vocal belligerence over Russia and his administration’s silent desperation to secure a new deal with Iran. Tehran and Moscow both know Biden won’t take a negative answer and is determined to bring back whatever he can call a “deal.”
Whatever happens in Vienna will greatly affect the ability of the United States to maneuver diplomatically with regard to Ukraine, as well as in Europe and Asia.
Rather than directly negotiating a new (albeit admittedly dangerous) nuclear deal with the Iranians, Washington has given far more careful and skilled Russian diplomats the power to manage the mullahs’ portfolio. If this sounds familiar, it should: Obama alumni like National Security Advisor Jake Sullivan and Assistant Secretary of State Wendy Sherman have, as they did in Syria in 2015, bolstered Russia again as a decisive player in the Middle East.
Aside from a bad new deal with Iran that would remove sanctions on Islamic Revolutionary Guard Corps terrorists, drain the regime of cash, and put Iran within months of gaining nuclear capability, the Biden’s insistence on Russia and Iran joining will hurt the United States in two ways. This will strengthen Russia’s power at a time when it is both diplomatically isolated and economically excluded from key markets, giving it more clout; and it will further alienate America’s allies in the region, who have already begun to recalibrate what a more hostile (but declining) United States would mean for the region and the world.
Due to the corruption of the media in the West, observers in the Middle East might be the only ones with a vantage point to clearly see how these two issues are linked. While American and European news consumers have focused on gruesome images of Russia’s brutal war in Ukraine, Riyadh or Jerusalem, one eye is still on the expansionist and threatening regime in Tehran.
Even as the United States touts its efforts to punish Moscow for its war in Ukraine with harsh economic sanctions, it might be time to reassess the effectiveness of sanctions elsewhere. Last week, the Wall Street Journal reported on Iran’s underground financial network and its success in circumventing trade and financial bans in response to sanctions that have made the Shia theocracy a global pariah.
In addition to harming Iran’s ability to procure materials for its nuclear program, economic sanctions were meant to be a non-kinetic means of influencing the foreign policy of the Islamist theocracy, hopefully forcing it to to prevent its terrorist proxy armies from wreaking havoc in Syria, Lebanon, Yemen and Iraq. With its plummeting currency and faltering national economy, the mullahs should choose to prioritize guns or butter.
According to documents obtained by The Wall Street Journal, the scheme worked like this: Iranian banks that serve companies barred by US sanctions from exporting or importing hire affiliates in Iran to handle the sanctioned trade on their behalf. These companies establish companies outside of Iran’s borders to serve as proxies for Iranian traders. Proxies trade with foreign buyers of Iranian oil and other commodities, or sellers of goods to be imported into Iran, in dollars, euros or other foreign currencies, through accounts opened in banks foreign.
Some of the revenue is smuggled into Iran by smugglers who transport cash withdrawn from the proxy company’s accounts overseas, officials told the Wall Street Journal. But much of it remains in bank accounts overseas, according to Western officials. Iranian importers and exporters exchange foreign currency with each other on records held in Iran, according to Iran’s central bank.
Using this elaborate scheme, Iran was able to circumvent its currency’s collapse and blunt US efforts to control its adventurism in the region. Tehran made its fortune “from exports of petrochemicals, metals, auto parts and other goods”, reported the Wall Street Journal, “while financing the import of industrial machinery, oil services and electrical components essential to the functioning of its businesses and its economy.”
This story is also a cautionary tale about the Biden administration’s sanctions against Russia. At first, sanctions appear to cripple or harm a country’s economy. But their products or their natural resources will eventually end up on the market, even clandestinely. While the president’s official Twitter account triumphantly touts the collapse of the Russian ruble and the damage to Moscow’s economy, Iran’s experience in disregarding sanctions shows that it won’t be long before that Russia does not put in the ground a good part of its export economy.
Of course, the elaborate plan to evade sanctions is not available to most Russians or Iranians; ordinary people without resources will continue to suffer financial hardship. Whether these people blame their leaders and overthrow their governments or side with them is a gamble.
When it comes to sanctions, the United States has a choice: it can apply them comprehensively, leveraging its financial crimes infrastructure and empowering it to stamp out violations like Iran’s; or he may admit that, as a tool of soft power, sanctions are not as effective in altering state policy as many had hoped.
- David Reaboi is a longtime national security and political warfare consultant and fellow at the Claremont Institute. He writes to Late Republic Nonsense.