On Friday, France, Germany, and the United Kingdom—collectively known as the E3—successfully pushed for the reinstatement of United Nations Security Council economic sanctions against Iran. These measures, originally active between 2007 and 2015, were lifted under the terms of the 2015 nuclear agreement, which has since collapsed. The reimposition follows the formal termination of the Joint Comprehensive Plan of Action (JCPOA), prompting immediate depreciation of Iran’s rial on informal markets, where it reached 1.12 million per U.S. dollar.
The strategic intent behind these renewed restrictions remains uncertain. Analysts question whether the goal is to indefinitely weaken Iran’s economy, provoke domestic unrest, or compel the cessation of uranium enrichment activities. However, historical evidence suggests limited effectiveness. Depriving middle-income citizens of financial stability does not necessarily translate into political upheaval, and Iran has continued advancing its nuclear capabilities despite external pressure.
Although the UN designation lends formal legitimacy, widespread compliance is unlikely. China, responsible for approximately one-third of Iran’s trade, has consistently circumvented U.S. and international restrictions. Iranian oil shipments have been rerouted through third countries like Malaysia, where vessels are reflagged to obscure their origin. Chinese refineries, including smaller independent operators, continue purchasing crude without relying on dollar-based transactions or global banking systems.
Even with U.S. Treasury penalties on some entities involved in these arrangements, Iran compensates buyers by offering discounts of up to $6 per barrel. Meanwhile, non-oil trade between China and Iran totaled $34 billion last year, far exceeding Iran’s European trade volume, which stood below $5 billion and declined nearly 20% from 2023 levels.
Other key partners include Turkiye and Iraq. Ankara is expected to disregard the renewed sanctions, continuing bilateral commerce, while Baghdad maintains essential trade ties, including energy imports from Iran. Much of this exchange occurs through informal channels, which, while costly, allow Tehran to sustain critical economic flows.
India and Brazil also remain significant trade partners. India purchases around $2 billion annually in non-oil Iranian goods, and despite past U.S. pressure over energy imports, New Delhi may reconsider sourcing from Iran, especially given recent American tariffs on Indian exports. Brazil, facing 50% U.S. import duties under proposed policies, could turn to Iranian alternatives in petrochemicals, fertilizers, and agricultural products like pistachios. While one estimate placed bilateral trade at $8 billion, a more conservative assessment suggests figures in the billions.
Iran entered the 2015 agreement in good faith, suspending 80% of its enrichment activities in exchange for sanctions relief. However, U.S. legislative blocks prevented full implementation, leaving European firms such as Renault, TotalEnergies, and BMW unable to operate in Iran due to Treasury restrictions. Despite this, Iran adhered to its obligations, verified by the International Atomic Energy Agency. After the U.S. unilaterally withdrew from the JCPOA in May 2018 and imposed unprecedented sanctions, Iran maintained compliance for an additional year before concluding that the agreement was effectively void due to lack of reciprocity.
The current actions by the E3 appear inconsistent, given their failure to deliver promised investments. Iran dismantled much of its nuclear infrastructure for economic incentives that never materialized, highlighting a breakdown in diplomatic trust.
— news from Informed Comment
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Do UN “Snapback” Sanctions really Matter to the Iranian Economy and its Nuclear Program?
Ann Arbor (Informed Comment) – The E3 — France, Britain and Germany — successfully led a bid at the UN Security Council Friday to reimpose UNSC economic sanctions on Iran, which had been in place 2007-2015 but were lifted because of the 2015 Iran nuclear deal. That deal is now dead as a door nail. n nThe move caused the anemic Iranian currency, the rial, to fall further on the black market, to 1.12 million to the dollar. The problem with these US and UN sanctions is that it is unclear what they are supposed to accomplish. Is it just a bid to keep Iran weak forever, what I call “negative imperialism”? Is it hoped that Iranians will feel the economic pain so much that they will rise up and overthrow the ayatollahs? But if you deprive the middle classes of resources, how will they accomplish that? Are they intended to make Iran give up its enrichment program? The first of these goals is foolish, and the other two show no evidence of being practical. n nThese new sanctions no doubt further constrain the Iranian economy, but despite the UNSC imprimatur they are destined to be widely ignored. China accounts for about a third of Iranian trade, and that is likely to continue. China has so far found ways around US sanctions on Iran, accepting wildcat shipments of oil at Qingdao south of Shanghai, bought by domestic Chinese refineries or “teapots” for Chinese use, avoiding the use of dollars or international banking networks. Even so, the US has found ways of imposing Treasury Department sanctions even on some of these companies, forcing Iran to discount its oil by as much as $6 per barrel to recompense the buyers. Iran secretly sends its tankers to Malaysia, where the tankers are rebranded as Malaysian and reported as such by China. n nThat trade will likely find a way to continue, though a dark cloud for Iran has arisen on the horizon in the form of the burgeoning Chinese EV industry, which is beginning to cut into Chinese petroleum imports and over the next decade could substantially reduce them. Still, even non-oil bilateral trade between Iran and China amounted to $34 billion last year. n nIran’s annual bilateral trade with Europe, which will take a hit, was less than $5 billion and it fell by nearly a fifth from 2023. n nTurkiye is another big trading partner of Iran (accounting for 9%), and the Turkish government will likely defy the restoration of UNSC sanctions, as well. Iraq has no choice but to do substantial trade with Iran, even buying some electricity from Tehran. For both Turkiye and and Iraq, a lot of Iranian trade is conducted via the black market. That way of proceeding imposes costs on Iran, but it is substantially better than nothing. n nIndia and Brazil are also important markets for non-oil Iranian products and will continue to be. Iran is doing about $2 billion a year in non-oil trade with India, as New Delhi has backed off purchasing Iranian petroleum under Washington’s threats. Now, though, that Trump has put heavy sanctions on India for importing Russian oil, India may decide it has nothing to lose from renewing Iranian purchases in the short term. n nIran does a lot of business with Brazil through intermediaries, exporting petrochemicals, fertilizer, even pistachios. I saw one estimate of $8 billion bilateral trade annually but that seems high to me. The total is anyway in the billions. With Trump’s 50% tariffs on Brazil, Lula could well replace some imports from the US with Iranian ones, which is kind of poetic justice. n nIran only made the 2015 nuclear deal, mothballing 80% of its civilian enrichment program, in hopes of receiving sanctions relief. It never received that relief, because the US Republican Party would not legislate an end to US sanctions, which include third-party sanctions. So although I think France, Britain and German sincerely signed on to the deal, their corporations were prevented from doing business in Iran by the US Treasury Department. Iran nevertheless faithfully adhered to its terms, as certified by the International Atomic Energy Agency. Then in May 2018 Trump tore up the Joint Plan of Collective Action and imposed the most severe sanctions ever applied by one county to another in peace time. Iran went on abiding by the JCPOA for another year, but then decided it had been released from its terms de facto, given that it received no sanctions relief. No quo, no quid. n nThe E3 is being completely hypocritical. Renault, TotalEnergies, BMW etc. never invested in Iran as they had promised to do. Iran got taken for a ride, giving up most of its enrichment (which was intended to keep it from being attacked) and receiving nothing in return.