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Themes to Watch: Iran, EU, World Economy

Brunswick Geopolitical helps companies understand the complexities and risk in key markets around the world, enabling them to better anticipate, prepare for and react to significant geopolitical events that affect their businesses. Authored by Dominick Donald, former foreign affairs and defence editorial writer at The Times, our “Events to Watch” looks at some of emerging global themes over the coming months

Themes to watch

All change in Tehran?

The re-imposition of US sanctions on Iran on 4 November is officially aimed at getting Tehran to renegotiate the 2015 JCPOA nuclear deal, whose terms the Trump administration deem too lax. Unofficially, it seems aimed at forcing the regime's collapse; in the words of US Secretary of State Mike Pompeo, speaking at the beginning of November, 'We want to restore democracy there. We think the Iranian people want that same thing.' 

But if overthrowing Ayatollah Khamenei or the Iranian Revolutionary Guard Corps is the objective, it seems unlikely to be achieved. Partly it is because the regime will manage to get around at least some of the sanctions. To begin with, these are unilateral rather than multilateral measures; this means that in the eyes of every jurisdiction but the US it will still be legal for Iran to sell oil, whereas the combined US and EU sanctions that applied before the JCPOA deal was signed made almost all Iranian oil sales illegal. Many EU companies will observe the sanctions for fear of being shut out of the US market, but others – not to mention firms from Japan, China, South Korea and Russia – may not. Secondly, the oil trade can continue. Product can be bought by single-transaction shell companies or firms doing no business in the US, and paid for in currencies other than the dollar, or by barter; it can then be shipped in tankers that turn off their tracking systems so are hard to monitor, and which dock at their destinations under new names and flags. Tehran is already moving perhaps 600,000 barrels per day, and is likely to manage 1,000,000 bpd in a few months' time, by these illicit means – only 40% of its exports before US sanctions, but still significant. 

Thirdly, while Iran faces a major recession, and perhaps nation-wide unrest as a result – after all, many Iranian cities have already seen significant protests this year, mostly at the regime's economic incompetence and petty tyrannies – the regime can take it. The theocracy is politically resilient, denying oxygen and legitimacy to anyone trying to operate outside the parameters it sets. It retains significant coercive power, which begins with street block-level monitoring of citizens' conduct, moves up through the militias that act as its extra-legal enforcers, to the police, military and intelligence services, and culminates with the Islamic Revolutionary Guard Corps (IRGC) – a state within a state, with its own armed forces, media, and business empire. The regime has stood firm against systematic unrest before; the huge pro-opposition protests of 2009-10 were suppressed effectively and achieved none of their objectives. Finally, it probably believes time is on its side. It is going to be reluctant to return to the negotiating table if all the other signatories insist the deal still holds, and if there is a strong chance that the 2020 US presidential elections will see Trump replaced. And its regional position has just been significantly strengthened by the Khashoggi affair, which has delegitimised and undermined Saudi Arabia’s campaign against Tehran. This bonus could last until 2020 too, if Iran does not overplay its hand – though given that the weakening of the Saudi position creates opportunities for Tehran, it may not be able to resist...

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