An alternative Iran strategy

Most likely, a US offer to narrow down the focus of sanctions from Iran’s economy to the treasury of Iran’s gov't would be welcomed by long-suffering Iranians with overwhelming, enthusiastic support.

A pro-democracy protest by Iranians in the United States (photo credit: REUTERS)
A pro-democracy protest by Iranians in the United States
(photo credit: REUTERS)
The United States is now executing a clear strategy on Iran: to force a binary choice on the Islamist regime to either change behavior or collapse under the pressure of sanctions. The strategy aims in the right direction, but sanctions create opposing dynamics. On one hand, they add to economic discontent and mobilize the people against the regime. On the other hand, they disempower the people more than they weaken the regime. So, the unhappy equilibrium could be the continuation of the status quo: a nation that lives under economic hardship and a regime that manages to tyrannically hold the grip on power, while threatening regional stability and world peace.
An alternative strategy that puts pressure on the Islamist regime without disempowering the Iranian people would have a better chance of achieving America’s goals. Such a strategy could be developed with a sanction swap agreement between the United States and the UN Security Council. Here is how.
The United States would offer not to move on with its current plans to cut off Iran’s oil exports down to zero by November 6, to recommit to the Joint Comprehensive Plan of Action (JCPOA), and to lift its sanctions against Iran, excluding sanctions against the economic empires of the Revolutionary Guard and the Supreme Leader. Concurrently, the Security Council would exercise its authority under the UN charter to set up an international control regime for the payments of Iran’s oil exports. All sale proceeds would be taken upfront by an international fund, from which Iran would be only partially paid just enough to offset gains received by the treasury of Iran’s government from the removal of US sanctions. This revenue-neutral sanction swap could be achieved by having the International Monetary Fund set a weekly schedule for the returned or “repatriated” oil income.
Any oil income in excess of those repatriation caps would then be invested in international capital markets for the benefit of the Iranian people. The task of investing those funds, as well as brokering the sale of oil to the highest bidder, would be delegated to the World Bank. Investments would strictly follow guidelines used for sovereign wealth funds so that no discretion would be left up to the whim of UN bureaucrats.
Now, here is how the new scheme would control Iran’s behavior, especially in regard to its nuclear and missile programs. If and when Iran violated any Security Council resolution, the Security Council would freeze the payments of oil income to Iran.
The repatriation caps may also be raised by the Security Council to reward good behavior. The scheme would be terminated only when Iran was no longer deemed a threat to international peace and security. At that point, Iran would be allowed to establish unregulated sovereign control over the accumulated funds.
Cutting Iran’s oil income shouldn’t be only a one-time exercise. If this is instead an ever-present threat, it would strip Iran of its leeway to misbehave. But is that possible? The plan could be implemented without Iran’s consent, since Iran would retain control over its oil industry aside from international sales, which means that compliance by the importers of Iran’s oil would suffice to compel Iran into reluctant cooperation. So, the main question is whether the Security Council could be convinced to adopt the plan and require UN member states to abide by it.
Most likely, a US offer to narrow down the focus of sanctions from Iran’s economy to the treasury of Iran’s government would be welcomed by long-suffering Iranians with overwhelming and enthusiastic support. Iranian people’s views could be gauged by a simple opinion poll, allowing the Security Council to ignore any objections by the Islamist regime.
The whole world would benefit economically as well. First of all, there would be no limits for the sale of Iran’s oil through the World Bank. Also, Iran’s supply of oil to the global markets would likely increase, as the plan would liberate its underdeveloped energy resources from decades of sanctions. US sanctions enforced against non-US persons – the so-called “secondary sanctions” – would be also lifted once and for all. These economic benefits would especially interest China and the European members of the Security Council. The new scheme would also benefit Americans, as US businesses would finally be able to access a market that has been off limits for almost 40 years.
Why would Russia support this plan? Russia has a common interest with the rest of the world in preventing Iran from acquiring deliverable nuclear weapons. Last time around, it voted affirmatively for Security Council resolutions that imposed sanctions that forced Iran into JCPOA concessions.
The plan would also improve the prospects for political change in Iran, even while alleviating the Iranian people’s frustration with their economy. Due to demographic shift, there is a widening gap in the finances of Iran’s welfare programs. Given the plan’s revenue-neutral design, that gap would keep growing as before, subjecting the regime to rising risks of anti-Islamist uprisings. In this situation, the regime would be faced with a binary choice: either it would improve behavior for increased repatriation rates, or it would refuse to do so, frustrating people’s expectations and turning more of them into anti-Islamist protesters. What’s more, the promise of unregulated sovereign control over the rising balance of accumulated funds would provide the ultimate catalyst for an anti-Islamist revolution, as it would strongly motivate Iranians to rise up for their freedoms.
Finally, this alternative strategy could produce results without even being executed. As is the preference of US President Donald Trump, America’s Plan A for Iran could still be a negotiated grand bargain. But the best way to make the Islamist regime enter into such a deal is to show that the United States has a solid Plan B which could be implemented even without Iran’s active involvement. The very announcement of this strategy could be that magic that makes diplomacy work.
The author is an Iranian economist based in Washington, DC.