(Bloomberg) -- President Donald Trump is threatening Iran with additional sanctions on Monday, but there’s not much left for the U.S. to target because most of the Islamic Republic’s economy has been crippled by earlier penalties.
The U.S. is already sanctioning significant sectors including oil, banks and steel, leaving smaller targets including certain exports and government officials. Trump could also hit Iran’s central bank with secondary sanctions, at the risk of hurting humanitarian trade.
“The Trump administration has already hit most of Iran’s cash-earning exports and pushed the country into a deep recession this year,” said Peter Harrell, a fellow at the Center for New American Security, a Washington-based research group. “A lot of exports to Iran have dried up because of risk aversion and all the banking sanctions.”
Trump announced plans for major sanctions on Saturday, following his abrupt cancellation of planned air strikes against the Islamic Republic for shooting down a U.S. Navy drone on Thursday.
More than 80% of Iran’s economy is under sanction today, U.S. Secretary of State Mike Pompeo said Sunday before heading to Saudi Arabia and the United Arab Emirates to rally a front against Iran. The new sanctions “will be a further effort to ensure that their capacity not only to grow their economy but to evade sanctions becomes more and more difficult,” Pompeo said.
Tensions have spiked in the Gulf since May, when the Trump administration revoked waivers on the import of Iranian oil, squeezing its economy a year after the U.S. walked away from the landmark 2015 deal meant to prevent the Islamic Republic from developing a nuclear weapon. Since then, a spate of attacks on oil tankers near the Strait of Hormuz shipping choke point have raised the specter of war and pushed up oil prices. The U.S. has blamed the attacks on Tehran, which has denied any wrong doing.
On Monday, Trump questioned in comments on Twitter why the U.S. was protecting the shipping route on behalf of other countries.
Trump Questions U.S. Defense of Oil in Strait After Iran Attacks
Iran’s Foreign Ministry said the new penalties won’t force the country to negotiate or capitulate.
“Are there any other sanctions left for the U.S. to impose on Iran?” ministry spokesman Abbas Mousavi said Monday, according to the official Islamic Republic News Agency. The Trump administration “knows full well that if pressure and sanctions were the answer, they would have yielded results much earlier.”
Iran’s navy chief warned earlier that other drones would be downed if U.S. intrusions into Iranian airspace continue. The U.S. says the aircraft was in international airspace.
The U.S. has applied sanctions to nearly 1,000 Iranian entities, including banks, individuals, ships and aircraft. In May, the Trump administration prohibited the purchase of Iranian iron, steel, aluminum and copper.
The U.S. has also revoked waivers that had allowed eight countries including India and China to import Iranian oil despite American sanctions. Trump seeks to drive Iranian oil exports to zero to force Tehran to abandon support for militant groups in the Middle East and renegotiate the 2015 nuclear accord the U.S. quit a year ago. Observed crude flows from Iran dropped to 190,000 barrels a day in the first half of June, less than 10% of the volume shipped in early 2018.
Forecasts from earlier this year show Iran’s GDP set to contract 6% this year after declining 4% in 2018.
Exceptions to U.S. sanctions on Iranian oil sales will be made for humanitarian purchases such as for food and medicine, though it’s not clear how those would be determined or approved.
The U.S. Treasury Department has also sanctioned Iran’s central bank governor and another senior official in the bank for allegedly providing support for terrorist activities.
The moves so far haven’t been enough for at least one Republican lawmaker. Representative Michael McCaul of Texas, the top GOP member of the House Foreign Affairs Committee, on Sunday egged on the Trump administration’s efforts.
“We want them to be more desperate,” McCaul said on CBS’s “Face the Nation” news program. “We want them to have their economy crippled” so Iranian leaders will negotiate, he said.
But with little left to sanction, added punishments would be mostly symbolic and “risk Iran escalating in retaliation,” Harrell said.
Iranian authorities have already said new sanctions show that Trump’s call for negotiations -- repeated over the weekend -- was hollow. On Monday, President Hassan Rouhani’s adviser Hesameddin Ashena suggested the U.S. needs to offer incentives to Iran if it wants concessions.
(Updates with Iran spokesman in sixth, seventh, navy official in eighth, Rouhani adviser in 16th.)
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