Following are excerpts of the text of the article written by Andrew Davenport: 

 

The issue of Iran sanctions is, once again, rising to the top of the foreign policy agenda as new negotiations over Iran’s nuclear program loom ahead following the inauguration of Iran’s new president, Hassan Rohani. Some argue for sanctions relief as a goodwill gesture. Others argue for continued pressure to demonstrate to Rohani the gravity of the nuclear standoff he has inherited.

 

With support for Iran sanctions possibly the most bipartisan point of agreement in today’s ultrapartisan political environment, however, it seems unlikely that real sanctions relief will be embraced – at least in the United States – any time soon. Even with Rohani’s reformist rhetoric, there is still broad agreement from both sides of the aisle that Iran’s nuclear pursuits warrant penalizing foreign companies that (cooperate with Iran). The Nuclear Iran Prevention Act of 2013, for example, recently passed the House with 400 votes in favor and only 20 against.

 

This reflects a learned view of Iran’s negotiating tactics and overall strategic objectives. Accordingly, U.S. sanctions are likely to continue and new points of leverage identified.

 

Despite the fanfare that accompanies each new round of sanctions, however, including those that went into effect on July 1, the fact is that most of these provisions are never enforced. 

 

More often than not, the only penalty that sanctions violators confront is exposure to enhanced market risks. These include so-called reputational risk, the costs of market uncertainty that come with the possibility that sanctions might, one day, actually be enforced, and, in some cases, the pressure felt by companies domiciled in allied countries to comply voluntarily with U.S. sanctions for the good of the order. 

 

U.S. government officials have leveraged these market risks… as economic and diplomatic tools to persuade companies to exit Iran. They brandish these risks as threats and sit back and hope that companies will avoid Iran out of fear or, in corporate parlance, as a function of prudent risk management.

 

After years of anemic consequences for companies that have absorbed these risks and gone unpenalized, however, the world’s corporations are now quite familiar with the lack of political will to back up sanctions threats with actual penalties.

 

Although (negatively affected), Iran’s “resistance economy” marches on. Foreign partners are still being identified, even if Tehran doesn’t always get its first choice. Not all companies… have low thresholds for sanctions-related risk. While many companies have exited Iran as a result of excessive risk exposure, less sensitive companies have stepped into the void, absorbed the risk associated with possibly – but probably not – being sanctioned by the U.S. government and picked up abandoned contracts at discounted prices.

 

AM/PA

Next >