FOR ALL the talk of “maximum pressure”, Iran’s crude production and exports have remained stubbornly resilient to sanctions.

The most recent US salvos sent in the direction of Chinese terminals and storage operators facilitating Tehran’s flow into its largest customer have been underwhelming to date in terms of impact.

Sanctioning one of the most heavily sanctioned states with more lists and measures has produced diminishing returns.

Whether the so-called snapback to pre-Joint Comprehensive Plan of Action sanctions shifts the dial remains to be seen, but the nuance warrants attention from a shipping industry that has become somewhat complacent towards the risk posed by Iran.

This veto-proof mechanism for reimposing sanctions on Iran included in UN Security Council Resolution 2231 is largely a case of a political clock ticking. The snapback option will expire in October and letting it lapse would effectively end any hope of rebuilding international consensus on new sanctions against Iran.

So, the timer was set in the hope that it would force Tehran back to the negotiating table.

But UN sanctions are not the decisive weapon that you may assume. They do not specifically target Iran’s oil trade, nor are they enforceable unilaterally, instead member states must interpret them and enforce them through their own legislature.

They do not magically reverse China and Russia’s opposition and willingness to obstruct enforcement.

In their favour, however, the wording is sufficiently fuzzy to allow the US to crank the pressure up elsewhere on those choosing not to act or actively aiding Iranian trade.

Ofac’s hammer is significantly larger than the UN’s; denial of access to the dollar system is not a punishment with which to be trifled.

And while this will not eliminate the long queue of buyers for Iran’s oil and actors willing to process transactions, the additional layers upon layers of additional complexity may be sufficient to make some of them think twice about whether their risk appetite has now been sated.

Even a brief skim of UN Security Resolutions 1737 and 1929 is enough to induce a minor migraine, so perhaps previously Iran-curious financiers may decide to chuck an extra few percentage points onto their fee. Perhaps teapot refineries will think twice before accepting Iranian crude or demand an even bigger discount.

Sanctions are often accused of pushing air around a balloon, in that trade simply pops up somewhere else after you’ve squeezed one particular area.

Perhaps a more accurate metaphor is the boa constrictor.

Slowly, gradually, suffocation does eventually arrive.

Will the UN sanctions strike any more fear into the hearts of Iranian oil buyers than the US ones already in place? Probably not.

But do they make things that bit more complicated, a bit more expensive, and potentially just too much trouble to bother with in the first place?

Maybe.

Richard Meade
Editor-in-chief, Lloyd’s List

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