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POLITICS
Bloomberg Businessweek
October 8, 2018
○ Some of the
companies that have
agreed to stop doing
business with Iran
Total
Munich Re
Airbus
Royal Dutch Shell
Adidas
Hyundai
Volkswagen
43
says Anthony Rapa, a lawyer at Kirkland & Ellis
who focuses on sanctions compliance. Rapa is
impressed thus far with how efective Pompeo’s
team has been in isolating Iran. “Whatever you
might say about the president and his rhetoric, the
people running this ile know what they’re doing.”
Members of the Iran Action Group have visited
more than 30 countries so far, meeting with senior
oicials and company representatives. They lay out
the U.S. view of Tehran’s “malign behavior” in the
Middle East and around the globe. But their real goal
is to convey in detail just how far the U.S. is prepared
to go to inlict economic pain—chiely through sec-
ondary sanctions—on companies that expect to get
a reprieve if they keep up business ties with Iran.
So far they’ve been persuasive. A so-called
Divestment Tracker kept by the group lists 80 or
so companies, ranging from Total and Munich Re
Group to KLM Royal Dutch Airlines and Mazda
Motor, that have backed out of the Iranian market
over the past several months. More important for
Iran, which derives 80 percent of its tax revenue
from oil sales, exports of its oil products have fallen
40 percent from a high point of 2.8 million barrels
a day in April, the month before Trump backed out
of the nuclear accord.
That decline surpassed even the most bearish
forecasts. “Iran exports are going to drop more than
what the market expected only a couple of months
ago,” says Ben Luckock, co-head of oil trading at
Traigura Group, one of the world’s largest commod-
ities merchants. “When we add every country that
we think will continue buying, we struggle to see
exports much more above 1 million barrels a day.”
The Iran Action Group’s cast of characters
includes a former explosives ordinance expert,
Jason Shell; David Tessler, a mild-mannered sanc-
tions expert with two tweets to his name; Michelle
Giuda, who was once Newt Gingrich’s spokes-
woman and was also a national gymnastics cham-
pion at the University of California at Los Angeles;
and a former New York ad man, Len Khodorkovsky,
whose family led the Soviet Union when he was a
child and who now coordinates Pompeo’s anti-Iran
messaging campaign.
Their leader is Brian Hook, a foreign policy
wonk who worked for the George W. Bush admin-
stration and advised Mitt Romney’s 2012 presiden-
tial campaign. Hook wielded vast power under
Pompeo’s predecessor, Rex Tillerson, serving as
his policy brain. While his current mandate isn’t
as expansive, he’s been given valuable real estate,
moving into an oice along the State Department
corridor known as Mahogany Row. Working a few
doors down from Pompeo, he’s essentially taken
control of the department’s policy toward Iran.
The group’s effort is putting to the test the
proposition that the U.S. economy and dollar
are so central to the global economic system that
American sanctions alone will isolate Iran’s econ-
omy. That runs counter to the conventional wisdom
that Obama-era sanctions against Iran were efective
only because other nations participated, particularly
U.S. allies in Europe. “I’ve felt for a long time that
we’ve underestimated our ability to use U.S. tools
when they’re viewed as a leg to isolate inancial and
economic rogue behavior,” says Juan Zarate, chair-
man of the Financial Integrity Network and a former
deputy national security adviser to Bush. “The argu-
ment that our power was slipping away, our ability
to maintain sanctions was fading, was a really inac-
curate portrayal of where we were.”
Trump is going further than any previous pres-
ident in using American financial power as a
weapon—in direct confrontation with his allies,
daring them to keep doing business with Iran, even
if that brings the threat of U.S. economic punish-
ment and denial to the American market, which is
60 times the size of the Iranian economy. As far as
Hook is concerned, the question is settled. “Very few
companies are going to choose Iran over the United
States,” he said at a brieing in late September.
“That’s just the economic reality.”
Hook and his crew have vowed to cut Iranian oil
exports to zero, betting that other producers, such
as Saudi Arabia and Kuwait, can make up for lost
supplies and keep oil prices steady. But markets
are already spooked. The price of Brent crude, the
global oil benchmark, hit a four-year high of $85 a
barrel in early October, up from $55 a year ago.
Rising oil prices could expose the Iran Action
Group to what many regard as its biggest threat:
Trump himself. With the midterm elections only a
month away, the president may be concerned that
higher oil prices will hurt Republicans at the polls.
He inveighed against rising prices during his speech
before the UN General Assembly on Sept. 25, saying,
“We are not going to put up with it—these horrible
prices—much longer.” The risk is that the president
will reverse course on Iran, as he did with North
Korea, pivoting from belligerence to dealmaking.
“Trump appears at irst as though he’ll never capit-
ulate, but it’s a negotiating tactic, and he ultimately
wants to do a deal with Iran,” says Scott Modell, a
former CIA oicer and managing director at Rapidan
Energy Group. “He would be just ine freezing some
aspects of Iran’s bad behavior for now and entering
into prolonged talks in search of a broader deal, par-
ticularly because it’s his best chance of keeping U.S.
gasoline prices under $3 per gallon.”