Simone Aria Sheyenne Chapman Matthew Mastromarco Andrew Simmons

Simone Aria, Sheyenne Chapman, Matthew Mastromarco, Andrew Simmons, Manas Srinivasaiah 11. 14. 2018 1

Agenda What we will be discussing today 1 Iran and America: A Turbulent Relationship 2 Other U. S. Sanctions 3 The Current State of Between Trump and Iran 4 How U. S. Iranian Foreign Policy Affects World Markets 5 The European Pushback 6 Closing Remarks: A New Deal Going Foreword 2

The 50’s Iran and America: A Turbulent Relationship 1953 Coup 1957 Nuclear Agreement • US/British plot leads to overthrow of Iranian prime minister Mohammed Mossadegh • U. S signs civil nuclear cooperation deal with Shah of Iran • Insert monarch Shah Mohammad • • Mossadegh planned to nationalize Iranian oil assets Provides Iran with technical nuclear assistance • Leased Iran enriched Iranian Key to U. S oil company BP's profits • Led to Gerald Ford agreeing to help Iran build 23 nuclear power plants in 1976 • Monarchy of Shah Mohammad Iranian Nuclear Plant Sources: BBC, The Economist, United Nations 3

It gets a Little Frisky Iran and America: A Turbulent Relationship 1979 Iranian revolution 1997 Iranian Election • Coalition of leftists and Islamist's overthrow Iranian monarchy • Reformist Mohammad Khatami elected as Iranian President • U. S embassy taken over and U. S citizens held hostage for 444 days • Opened up dialogue with the U. S. to ease tensions • U. S cuts diplomatic relations with Iran in 1980 • In 2003 George called Iran part of the axis of evil with North Korea and Iraq • U. S backs Iraq dictator Saddam Hussein in his war with Iran • Led to 2005 ousting of Khatami and Election of radical Islamist Mahmoud Ahmadinejad Fall of U. S Embassy Prime Minister Khatami Sources: BBC, The Economist, United Nations 4

Joint Comprehensive Plan of Action Iran and America: A Turbulent Relationship Iran Deal • • In 2013 Hassan Rouhani becomes president of Iran Calls Obama to discuss solutions to U. S Iranian issues Iran Nuclear deal signed in 2015 after starting negations in 2013 International sanctions on Iran lifted in exchange for Iranian concessions on its nuclear program U. S/Iran Negotiations Sources: BBC, The Economist, United Nations 5

A Popular Tool Other Sanctions US Sanctions Overview • • • The United States currently has severe sanctions on five countries: Iran, North Korea, Syria, Cuba, and Venezuela Additionally, the U. S. has imposed sanctions on specific people in regions such as Belarus, Ukraine, Somalia, and Myanmar, predominately on people involved with terrorist regimes or attempts to destabilize democracy When considering embargoes from the Treasury Department, Commerce department, and State department, a total of 30 countries face sanctions • Some of these sanctions are relatively minor (e. g. Arms embargo on China) • In contrast, Canada only has sanctions against twenty countries Map of Affected Regions Sources: BBC, The Economist, United Nations 6

Key U. S. Sanctions Other Sanctions Key Restrictions by Country Executive Order 13810: Freeze assets and cut from financial system any companies, businesses, and individuals that trade with North Korea 1979 Travel restricted Syria 1986 Cuba 1958 Venezuela 2017 Executive Order 13582: Freezes all Government of Syria assets, prohibits U. S. persons from operating or investing in Syria, bans U. S. imports of Syrian-origin petroleum products Most imports and exports restricted, with the exception of select pharmaceutical, agricultural, and medical devices Tourist travel restricted Investors barred from acquiring newly issued debt Prohibits all transactions with Venezuelan-issued cryptocurrency Sources: BBC, The Economist, United Nations 7

Trump’s Iran Policy Current State Abandon Nuclear Accord Trump’s Actions • Accord is “decaying and rotten” Against advice of European allies Iranian President wants Iran’s Atomic Industry Organization to resume enrichment activities Impose Sanctions • Sanctions were imposed on November 5, 2018 Target Iran’s banking, shipping, ship building, oil, and insurance sectors Imposed record number of sanctions in 2017 on 944 individuals and entities Effectiveness of Actions • Sources: BBC, The Economist, United Nations Sources: Twitter, BBC, CNN, The New York Times USA’s use of sanctions led to: Iran’s currency lost 2/3 of its value Oil exports have decreased from 1. 5 million barrels from 2. 5 million Europe, China & Russia will focus on creating financial mechanisms that exclude the US • Chicago Project on Security and Threats President, Robert Pape, found in his study of sanction that 90% of penalties for national security purposes failed 8

Trump’s Iran Policy Current State Sources: Europarl 9

Overview: Analyzing the Impact How U. S. Iranian Foreign Policy Affects World Markets The Market for Oil Europe Flees Iran Crude Oil Production At Legal Crossroads (in millions of barrels per day) 4. 4 4. 1 • $120. 00 U. S. Sanctions Imposed • $100. 00 3. 8 $80. 00 3. 5 3. 2 $60. 00 2. 9 $40. 00 2. 6 2 EU Bans Imports Sanctions are lifted $20. 00 upon JCPOA 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2. 3 • European firms are funneling out of Iran to avoid hefty fines from the U. S. The EU’s “blocking statute” threatens European businesses with legal action if they comply with the sanctions Businesses are torn between violating EU or U. S. law Crude Oil Production All Smiles for China • $0. 00 Prices Iran’s crude oil production is highly sensitive to economic sanctions. As the 3 rd largest oil producer, global prices are largely affected by Iranian supply. • • China complies with U. N. imposed sanctions they do not concede to unilateral or bilateral ones As a critical importer of Iranian oil, they have indicated an intent to continue trading despite the sanctions China has potential to leverage its non compliance with U. S. sanctions in returns for concessions on tariffs 10

Europe’s Countermeasure European Pushback Regulation (EC) 2271/96: ‘Blocking Regulation’ • • • Adopted by the EU in 1996 to protect businesses “against the effects of the extraterritorial application of legislation adopted by a third country” The regulation was a response to counter U. S. sanctions against Cuba, Libya, and Iran as the argument put forth was that these sanctions benefitted ‘U. S. foreign policy interests at the expense of the sovereignty of EU Member States’ It allowed business to report adverse economic effects within thirty days and receive reimbursement through legal proceedings and political protection Effectiveness • • In 1996, this pressured Bill Clinton to impose debilitated sanctions through Iran and Libya Sanctions Act which could be avoided by any foreign company. This was a time where economic activity outweighed the adverse affect of US sanctions Things changed in 2010 when America started exploiting its control over financial institutions Sources: FT, Politico EU, US Department of Treasury, Europarl, European Commission 11

The Blocking Regulation European Pushback Updating the Blocking Regulation • • • In addition to the ’Cuban Liberty and Democratic Solidarity Act of 1996’ and the ‘Iran and Libya Sanctions Act of 1996’ they added Trump’s new executive order with unanimous backing of EU heads of state in 16 May 2018 It made it illegal for EU companies or banks to comply with US sanctions • Enforcement is subjugated on whether or not it was a commercial decisions and not one in pursuant of US legislation Allows European companies to continue trade with Iran in accordance with EU’s support for the Nuclear Deal (JCPOA) Effectiveness • • • Unlike before the EU has no modicum of leverage relative to the size and influence of America on the economic world Large EU companies, especially multinational corporations, will abide by US sanctions Small and mid sized corporations, that have little exposure to America, may leverage this avenue to do business with Iran in non dollar currencies Sources: FT, Politico EU, US Department of Treasury, Europarl, European Commission, OPEC, Bloomberg 12

Special Purpose Vehicle European Pushback SPV It is a special channel being proposed to allow trade with Iran independent of the US financial system Iran would trade the oil to this entity for credits to purchase EU goods EU would be able to acquire oil from Iran for credits • • Problems of the SPV • It is ambiguous to the extent of protection it would serve multinational corporations • Individual countries are afraid of hosting this entity in fear of retaliation from the US • As of current, the SPV is a quixotic answer to giving the blocking regulation some teeth. Its largely symbolic. Americans are calling the proposed SPV nothing but a paper tiger (US ambassador to EU) Confident that no country will host it or large company be apart of the SPV It will likely be another source of contention between the EU and Trump Pompeo “by sustaining revenues to the regime, you are solidifying Iran’s ranking as the number one state sponsor on terror… we do not intend to allow our sanctions to be evaded Trade Between Iran and the EU by Europe” 12 Trade in Billions of Dollars • The American Response 10 8 6 4 2 0 2015 2016 EU Imports 2017 EU Exports Sources: FT, Politico EU, US Department of Treasury, Europarl, European Commission, OPEC, Central Bank of Iran 13

Debate 14

Final Thoughts 15

List of Considerations Closing Remarks: A New Deal Going Foreword Nuclear and Terrorist Threats • The JCPOA addressed Iran’s nuclear ambitions and capabilities. With Trump’s upheaval of this agreement, America must now work to gain the same concessions while addressing Trump’s concerns with Iran’s sponsorship of terrorism Keep in mind the destabilizing nature of the sanctions on Iranian government and society Factor in the threat of nuclear proliferation in the area if Iran sees no incentive to uphold the previous Iran deal • • Factors and Home and Abroad • America’s credibility in the world is severely diminished, any new deal requires some type of trust that all parties will uphold their agreement. Gaining support of those states that are significant buyers of Iranian oil Bipartisan support in Congress will be crucial to give Trump the leverage he needs • • Economic Impact • Oil prices will be faced with increased volatility and uncertainty given the concessions made to certain countries the amount of oil being produced or not produced by OPEC members and other major players The availability of Iranian oil in the market after sanctions The buffer capacity of oil producers in the short run Sources: FT, Politico EU, US Department of Treasury, Europarl, European Commission 16

Conclusion Sources: BBC, The Economist, United Nations 17