The escalating political and military tensions between the United States and Iran in the early days of the new year hit the first place on the agenda of the global markets. Considering the history of these tensions, the harsh politics between the two countries dates back to almost 40 years ago; however, it has always been on the agenda for 10 years.

In 2010, the U.S. imposed sanctions on Iran due to nuclear activities. This package of sanctions against foreign companies in cooperation with Iran’s Islamic Revolution Guard Corps was signed into law with the approval of President Barack Obama. Not content with this, the United States banned American firms from doing business with 4 construction firms owned by the Islamic Revolution Guard Corps. A few months later, the U.S. government decided to increase sanctions on Iran, the number 5 crude oil exporter in the world, and Tehran threatened to close the Strait of Hormuz if sanctions were imposed on Iranian oil. In this period, Iran’s Islamic Revolutionary Guard Corps (IRGC) launched large-scale military drills in the Persian Gulf and started long-range missile tests.

In 2013, Iran’s new President, Hassan Rouhani, delivered his first speech at the United Nations General Assembly. Rouhani said that his country’s nuclear program is entirely peaceful and that he wants to resolve the issue by negotiations. However, the nuclear program raised tensions between Iran and the United States. The nuclear program began to lose its importance month by month until 2015. Because in 2015, Iran’s nuclear program was put back on the table in Lausanne, Switzerland. After a series of positive talks between US Secretary of State John Kerry and Mohammad Javad Zarif, the P5+1 (the US, China, Russia, Britain, France, and Germany) and Iran reached a nuclear deal in July. Under the deal, Tehran agreed to reduce the number of centrifuges to be used in uranium enrichment by two-thirds, while allowing the International Atomic Energy Agency’s “controlled entry” into its military bases. Iran also allowed international observers to inspect the nuclear facilities.  It was also agreed to lift sanctions imposed on Iran in the fields of oil, gas, finance, aviation, and maritime transport.

The United States Announced its Withdrawal From the Iran Deal

Hassan Rouhani believed that the lifting of sanctions was not reflected in the Iranian economy, despite the deal signed on July 14, 2015 after the long negotiations. Rouhani made a significant statement in this period and stated that Iran would resume uranium enrichment. In 2017, Donald Trump became the 45th President of the United States. He said in his initial remarks that he wanted to terminate the nuclear deal, which he described as “one of the worst deals of the U.S.”

The hard politics between the two countries moved to a new dimension with the US President Donald Trump seeking ways to withdraw from the deal. The US Treasury decided to impose economic sanctions on Iran because of carrying out ballistic missile tests and also, on 12 institutions and 13 individuals, including the United Arab Emirates and China. The Tehran administration announced that it would retaliate against Washington as the US imposed new sanctions on Iran, while the political tension between the two countries increased steadily, and the Iranian army announced they would launch a military drill near the Strait of Hormuz for almost 1 week. Meanwhile, US President Donald Trump’s statements on Iran’s strategy and the nuclear deal were highly criticized in Europe. However, the criticism did not change the situation, and President Trump decided to withdraw the U.S. from the Iran nuclear deal. Trump sharply criticized the current deal and indicated that he will reinstate the sanctions against the Iranian regime. The U.S. Treasury Department announced that it had placed 6 individuals and one entity on the sanctions list, claiming that they are linked to Iran’s Islamic Revolution Guard Corps.

Iran’s oil exports were severely damaged by the economic sanctions imposed by the United States on Iran and the outcome worsened day by day. Besides, Iranian rial declined sharply against US dollar during this period. The Iranian people began to protest in the streets against the economic problems caused by the drastic increase in exchange rates and inflation. But the Tehran administration brutally suppressed the street demonstrations. Drawing attention, the Iranian government filed a suit against the US to the International Court of Justice on the grounds that the U.S. violated the U.S.-Iranian Treaty of Amity signed in 1955. Later, the Iran administration announced that they lifted the ban on foreign exchange sales in the free market other than the fixed exchange rate, which suffered a depreciation of nearly 50 percent during this period due to sanctions.

There have been intense political negotiations in the European Union during this period to prevent U.S. sanctions involving Iran’s dollar buying, gold trading, precious metals trading and the automotive sector, from impeding Iran – EU trade. Britain, France and Germany announced in a joint written statement that they would not impose sanctions on Iran and would support European firms trading with Iran. The European Commission updated its ‘blocking statute’ to protect European companies from sanctions imposed on Iran.

US Rejected the International Court of JusticeRuling On Iran

The International Court of Justice, the highest court in the United Nations, ruled that sanctions imposed by the United States on Iran should not affect humanitarian aid and civil aviation security. The International Court of Justice determined the limits of the sanctions enforced. The Court further decided that the dispute shall not be aggravated and that the sanctions shall not impede with “medical equipment, food and agricultural supplies” and “civil aviation security services” within the scope of the Treaty of Amity. The United States, however, was not unresponsive to this decision. U.S. Secretary of State Mike Pompeo reported that the Treaty of Amity, Economic Relations and Consular Rights between the United States and Iran was canceled. Then, the United States formally implemented a new sanctions package covering Iran’s Energy, Finance and Maritime transportation sectors. In the sanctions package announced by U.S. Treasury Secretary Steven Mnuchin, 8 countries (China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece) were granted temporary exemptions. More than 300 Iranian citizens, more than 100 institutions and over 200 ships operating in the energy transportation sectors, 70 financial institutions, 50 Iranian banks, Iran Air and 67 aircraft were included in the sanctions list issued by the Treasury Department. The list also included the Iranian National Oil Company, which said the organization’s dozens of subsidiaries operating outside Iran would also be subject to sanctions.

Economic Terrorism

President Hassan Rouhani defined the US sanctions on Iran as ‘economic terrorism’ and called on EU countries to stand by Iran, saying the Washington administration’s stance jeopardizes international stability. Later, High Representative of the Union for Foreign Affairs and Security Policy said the special purpose vehicle, which would pave the way for trade with Iran and allow the EU and Iran to trade without using US dollar would come into force. US Vice President Mike Pence sharply criticized the EU’s approach and advised European allies to ‘withdraw from the nuclear deal with Iran’. Describing it as an attempt to disrupt U.S. sanctions imposed on the Iranian regime, Pence argued that this ill-thought step would strengthen Iran.

As of April 2019, the White House announced it ended the exemptions granted to 8 countries, including Turkey, on oil sanctions against Iran. Not content with this, the United States first announced sanctions against 25 people and companies from Turkey, Iran and the United Arab Emirates (UAE) for transferring money to Iran’s Islamic Revolution Guard Corps, and then proceeded with President Trump’s approval of the new sanctions against Iran involving the metal industry.

Iran announced that the Tehran government may withdraw Iran from the nuclear deal concluded in 2015. Iranian President Hassan Rouhani called for the fulfillment of a commitment by Western countries to protect Iran’s oil and banking sectors, reminding them that the United States is out of the nuclear deal now. But Rouhani’s calls went unanswered. Hence, the Iranian Atomic Energy Agency also decided to increase the production capacity of enriched uranium at the Natanz nuclear facilities (3.67 percent uranium-235) by 4 times.

Pentagon Got On the Stage

US President Donald Trump called Iran’s responsive steps taken against the US at this time as “threatening” and threatened Tehran with implicit threats that there would be the possibility of a military conflict between the two countries. Iranian Defense Minister Amir Khatami responded and stated, “We will defeat the American-Zionist front.” “We will be the final victors,” he further added.

The US Department of Defense (Pentagon) took to the stage on the US – Iran front and sent the USS Abraham Lincoln aircraft carrier and 4 B-52 bombers to the Persian Gulf. The United States then increased the tension by sending 1,500 additional troops to the region. On the other side, Iran’s enriched uranium inventories hit above the limit set out in the nuclear deal, prompting a response from many countries. The White House said the United States and its allies would never allow Iran to develop a nuclear weapon, while British Foreign Secretary Jeremy Hunt said it was alarming that Iran had broken the nuclear deal, but Britain still supported the deal. In a statement, Germany Foreign Ministry called it “alarming” that Iran would raise its enriched uranium limit above the limit set out in the nuclear deal. The Spokesperson for the United Nations Secretary-General Stephane Dujarric said, “This decision by the Islamic Republic of Iran will not help preserve the agreement and will deprive the Iranian people of the tangible economic benefits of the agreement.”

Drone Problem

In addition to nuclear weapons and military tensions, another new debate began on the US – Iran relations in June 2019. Iran’s Islamic Revolution Guard Corps announced it had shot down a U.S. drone because it had entered Iranian airspace in the country’s south. Lead Spokesman for Public Affairs to the U.S. Central Commander, Bill Urban refuted the claim that the drone had entered Iranian airspace. However, both sides verified that the drone was shot down. Shortly after, President Donald Trump said the U.S. Navy shot down an Iranian drone in the Persian Gulf. However, the Iranian government, along with video recordings, said the UAV had “completed its mission and returned to the base successfully” and argued that the US claims are not true. As the news were being discussed, Trump said, “I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!

Iranian Foreign Minister Mohammad Javad Zarif was added to the sanctions list because he works on behalf of Iranian leader Ali Hosseini Khamenei, Office of Foreign Assets Control (OFAC) of the US Department of the Treasury announced in a written statement. It was then announced that new sanctions were imposed targeting Iran’s construction sector and the trade of some important materials used in military fields. Additionally, following the attacks against Aramco, Trump claimed Iran took up the attacks and said, “We have just sanctioned the Iranian national bank. These are the highest sanctions ever imposed on a country.”

U.S. – Iran War is Closer

As 2019 wraps up with U.S. sanctions on Iran, markets welcomed the New Year with shocking news on the Middle East. The U.S. the Department of Defense stated, “At the direction of the President, the U.S. military has taken decisive defensive action to protect U.S. personnel abroad by killing Qasem Soleimani, the head of the Islamic Revolutionary Guard Corps-Quds Force, a U.S.-designated Foreign Terrorist Organization.” It was further added, “General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region. General Soleimani and his Quds Force were responsible for the deaths of hundreds of American and coalition service members and the wounding of thousands more.” After the killing of Qasem Soleimani, the head of the Islamic Revolutionary Guard Corps-Quds Force, the U.S. President Trump tweeted, “Iran never won a war, but never lost a negotiation!” “He was already attacking our Embassy, and preparing for additional hits in other locations. Iran has been nothing but problems for many years. Let this serve as a WARNING that if Iran strikes any Americans or American assets, we have targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran &  the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD. The USA wants no more threats!” Trump further noted.

Iran Retaliated for Soleimani

The U.S. Department of Defense backed Trump, who threatened Iran in anticipation of the possibility that Iran would retaliate the killing of Soleimani. The Pentagon stated that it would respond to any retaliation and additional security measures were taken in the region. Shortly after, Iran declared that they suspended all commitments in the nuclear deal and launched more than a dozen missiles at Al Asad Air Base in Iraq. “Iran took & concluded proportionate measures in self-defense under Article 51 of UN Charter targeting base from which cowardly armed attack against our citizens & senior officials were launched.  We do not seek escalation or war, but will defend ourselves against any aggression,” Iranian Foreign Minister Mohammad Javad Zarif noted.

Esper verified the attacks and told that Iran launched 16 missiles to 2 bases and 11 hit the Ayn al-Asad airbase and further added that the missiles damaged warehouses, parking lots, taxiways, and a helicopter. Later on, President Donald Trump held a press conference. Trump reminded that Soleimani was “the world’s top terrorist” and “should have been terminated long ago” and thus, he was killed by the U.S. Army. “I am pleased to inform you; the American people should be extremely grateful and happy. No Americans were harmed in last night’s attack by the Iranian regime. We suffered no casualties. All of our soldiers are safe, and only minimal damage was sustained at our military bases. Soleimani was actively planning new attacks, and he was looking very seriously at our embassies, and not just the embassy in Baghdad.” he added. He also emphasized that the United States is ready to embrace peace with all who seek it. On January 10, 2020, Mnuchin stated, “The President is issuing an executive order authorizing the imposition of additional sanctions against any individual owning, operating, trading with, or assisting sectors of the Iranian economy including construction, manufacturing, textiles, and mining.”

Iran Shot Down a Ukrainian Passenger Jet

In addition to the military tension between the United States and Iran, a passenger jet crashed in Tehran, the capital of Iran, was added to the world’s agenda. National Disaster Management Organization of Iran said 176 people, including passengers and crew, died in the Boeing 737 jet crash. National Disaster Management Organization spokesman stated that Boeing 737 jet took off from Tehran Imam Khomeini International Airport to Kiev and shortly after take-off, it crashed at 06:18 due to a technical problem.

Iran announced that it would not give the black box of the Ukrainian Airlines passenger plane, which crashed shortly after taking off, to the United States and Boeing. It reiterated that the accident would be investigated by the Iranian aviation authority and caused suspicion. US President Donald Trump wanted to turn this situation in his favor and suggested that the Ukrainian plane may have crashed due to Iran’s fault. The Iranian government denied the allegations, stressing that the US is managing perceptions.

Due to the nuclear conflict, the Strait of Hormuz, unmanned aerial vehicle polemic and, most importantly, the continuous economic sanctions, the politics between the two countries became tough in the international arena. Also, in the Middle East, where problems cannot be solved through diplomatic channels and military retaliations are used instead, the US military presence could trigger a new crisis. Unless the US sanctions are lifted or discussed, at least, the Tehran administration’s failure to comply with commitments such as uranium enrichment, storage, research and development limits under the 2015 nuclear deal could also spread this tension to the US – EU – Iran line.

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