Allied buy-in essential for effective sanctions, says former US Treasury Secretary Lew

Former U.S. Treasury Secretary Jacob J. Lew speaks at the Atlantic Council on February 19, 2019.

While the Trump administration’s decision to reimpose sanctions on Iran will be ineffective because the United States does not have “the support of our allies,” its approach to Venezuela – working in concert with friends – ” is more about the way things should be done, ”former US Treasury Secretary Jacob J. Lew told the Atlantic Council in Washington on February 19.

As the Trump administration and the US Congress increasingly view sanctions as an effective way to achieve US foreign policy objectives, Lew, who has also served as the President’s White House chief of staff of the time, Barack Obama, gave advice: “Sanctions are the most effective. when there is broad membership in the world among our allies. “

US President Donald J. Trump withdrew the United States from the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), in May 2018. The United States has since reimposed the sanctions against Iran that were lifted as a result of the agreement, which won Iran’s agreement to abandon its nuclear weapons program, but did not address the Islamic Republic’s other malicious activities.

Lew argued that sanctions are only useful when they are specifically aimed at “forcing policies to change.” While Washington can legitimately complain about Iran’s other actions in its neighborhood, Lew said, the US backtracking on the nuclear deal diminishes the usefulness of sanctions.

Sanctions can only be effective, Lew argued, if the sanctioned country believes there will be “significant and lasting relief” once it changes its behavior. Despite the United States’ decision to withdraw from the JCPOA, Iran continues to abide by the terms of the agreement, according to the International Atomic Energy Agency, the United Nations nuclear watchdog. The US withdrawal from the JCPOA has effectively left Tehran in a “damned if they do, damned if they don’t” scenario, according to Lew, potentially undermining the sanctions tool in future talks.

The effects are already visible, Lew said, as European allies test an alternative payment mechanism – called a special purpose vehicle (SPV) – to continue JCPOA-approved trade with Iran while avoiding U.S. sanctions. Although he doubted the SPV could actually escape sanctions, Lew said Washington must recognize that “plumbing is being built and tested to work in the United States. Over time, as these tools become more sophisticated, if the United States remains on a path where it is seen as going it alone… there will be more and more alternatives that will undermine the centrality of the United States.

Europe’s pursuit of an SPV has raised concerns that the United States’ policy of unilateral sanctions threatens the position of the US dollar as the main global currency. While Kerri-Ann Bent, head of sanctions for the Americas at Barclays, conceded that she doesn’t see the dollar losing its global position just yet, she noted that there is already “growing comfort with the treatment. of certain types of transactions ”in other forms of currency to avoid the risk of sanctions.

Heleen Bakker, Deputy Head of Mission for the Kingdom of the Netherlands, underlined the risk that an exit from the dollar could entail because “if transactions start to bypass the US dollar or the international financial system… start to happen, we also [could] lose track of these transactions and we may not have good oversight of what is going on outside of our jurisdiction. “

Atlantic Council non-resident principal researcher David Mortlock argued that the SPV “is not a dollar circumvention” because most dollar transactions with Iran were already banned before the JCPOA’s withdrawal, but warned that the European effort was a “rather bold political statement” in opposition to US policy.

Atlantic Council guest principal researcher Samantha Sultoon argued that all of this could have been avoided with greater coordination with U.S. allies. Simply, she argued, “multilateral sanctions are much more effective than unilateral sanctions.”

One of the areas where the coordination of multilateral sanctions has been most effective, said Daniel Fried, distinguished member of the Atlantic Council, has been in Venezuela, where “the United States has moved at least in the same direction, although ahead of the European Union and with the support of the Organization of American States.

Lew agreed. He argued that the actions of the Trump administration in Venezuela closely mirrored what the Obama administration achieved in bringing Iran to the negotiating table prior to the 2015 nuclear deal. “We have learned through a series. of progressively increased sanctions that you could keep a very disparate global community if you listen to the concerns of your allies, and even some less allies, when you need them to form a united front, ”Lew said.

Effective coordination was also vital in sanctions against Russia in response to Moscow’s aggression against Ukraine, Lew said. “A sanctions regime could not have been effective without European membership,” he explained, noting that the United States “did not have enough contact with Russia to do so unilaterally and to create the pressure that could potentially change Russia’s behavior. “

At the onset of the crisis, Lew said, Europeans “were very worried about taking measures that would cause another recession in Europe,” but stayed the course as they shared the United States’ goals to slow down. Moscow activities.

Fried noted that today the Trump administration has a similar level of international membership on the North Korean issue, but Lew warned that the sanctions appeared disconnected from general administration policy. The purpose of these sanctions, Lew argued, was to end North Korea’s nuclear program and should only be removed if that goal is met. Lew fears that Trump may ultimately come to an agreement with North Korean leader Kim Jong-un, but that the agreement “does not meet JCPOA standards” by actually achieving denuclearization.

Lew also cautioned the Trump administration against amalgamating the sanctions with other policy areas, as he said is currently happening with regard to China. He specifically called for the dropping of sanctions-related charges against Huawei CFO Meng Wanzhou in return for trade concessions from Beijing, to the detriment of US sanctions policy. “I think when you confuse sanctions efforts with political or political decisions, it tends to undermine the effectiveness of the sanctions themselves,” he said. On the contrary, he argued, “there should be an independent judicial process and there should be independent trade negotiations and the two should not be confused.”

It is dangerous to undermine the effectiveness of sanctions, Lew said, because “it is extremely important that the United States maintains the ability to have sanctions as an effective tool.” He said he couldn’t “count the number of times I was in a room where if we didn’t have sanctions as a meaningful way to respond, the conversation would almost immediately have followed a path to you or you didn’t. not use force. Sanctions can be a key tool in responding to assault or misconduct without restoring violence, Lew said, but must be used effectively and responsibly every time they are enacted.

David A. Wemer is Deputy Director, Editorial, at the Atlantic Council. Follow him on Twitter @DavidAWemer.

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