Will U.S. Sanctions On Iran Be Effective Without Reinforcement From Allies?
AILSA CHANG, HOST:
Overnight the U.S. began reimposing sanctions on Iran. These are sanctions that had been lifted when the U.S. was still a participant in the Iran nuclear deal. Now the Trump administration says these renewed sanctions will pressure Iran to renegotiate a broader deal, one concerning its nuclear program and its actions in neighboring countries. But unlike the previous time these sanctions were imposed, the U.S. is going it alone without the support of other countries.
With us now to talk about when sanctions work and when they do not is someone who had a hand in making decisions about sanctions during the Obama administration. Former Treasury Secretary Jack Lew, welcome.
JACK LEW: Good to be with you, Ailsa.
CHANG: You have argued in the past that sanctions only work under specific circumstances. What are those circumstances?
LEW: You know, if you look at when sanctions have been most effective, they've been most effective when they have reflected the U.S. working with the world, having the global community put maximum pressure on a target, when it's been done in a way where it's been clear what the objective is so that the country being sanctioned can change its policy. And it's really important to remember the purpose of sanctions is not just to cause pain. The purpose is to have the pain lead to a change of behavior. And then when the behavior changes, there has to be a recognition of that change of behavior, and sanctions have to be lifted.
CHANG: All right, so the U.S. has decided unilaterally to reimpose sanctions on Iran, hoping other countries will eventually fall into line. How do you see that going?
LEW: You know, I think that for the short term, you look at the relative size of the U.S. market versus the market in Iran. It is likely that many will comply in order not to lose access to the U.S. and U.S. markets. At the same time, I think you're going to see a maximum energy put into diverting activity to what are called cutouts, businesses that are not doing business in the United States or using the dollar so that they're not subject to sanctions. I think you're going to see a diversification of business practices for the future and probably more cheating than we saw the last time around when there was broad international buy-in.
CHANG: But how viable is the survival of that diversification of business - because as you say, the U.S. is the world's largest economy. I mean, the economic realities for companies are clear even in the long run, aren't they?
LEW: If you take a long-term view, it's not a good thing if you create incentives to move more business activity and - away from the United States and out of the dollar. I don't think that it's something that could change overnight or on a dime, but it is an enormously powerful benefit the United States has. And acting unilaterally in a way that many of our traditional allies do not think is well-founded is a bad signal in terms of future behavior.
So I'm not going to say this is going to change instantaneously, but I do think that it's important that the United States be seen as acting in a principled way. If it starts to look as if the United States is acting kind of outside of the principles that it has laid out, that will lead others to wonder, do they need to diversify their exposure?
CHANG: But how much is the U.S. signaling it's acting capriciously and unilaterally in all cases? I mean, with respect to North Korea, for example, the U.S. does seem to want multilateral sanctions.
LEW: Yes, the U.S. wants multilateral sanctions, and we worked hard to get multilateral sanctions both in the case of Iran and in North Korea. And, you know, China came along with the U.N. Security Council resolution at the end of 2016. I think the tough talk at the beginning of the Trump administration probably got China to cooperate some more. That part is a good thing.
The thing about the Iran deal is it was never a deal beyond the nuclear issues. It was a nuclear deal. Now, you can question whether there should have been a nuclear deal, and obviously the current administration has. But the idea that you have a sanctions regime that the whole world agrees to accomplish a result, the result accomplished and then you broaden the scope to be much, much wider, that raises concerns about whether countries in the future will respond the way you would want in changing their behavior in order to get relief from sanctions.
CHANG: Former Treasury Secretary Jack Lew, thank you very much.
LEW: Pleasure to be with you.
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