Will the Pandemic Ease U.S. Sanctions?

In just three short months, the COVID-19 pandemic has forced a drastic reassessment of many elements of conventional political wisdom. The virus’ disruptive influence has been most evident in domestic politics, where governments scramble to push through record-setting stimulus and bailouts to lessen the blow of an exponential infection rate on quarantine-stricken economies. However, this new reality has yet to fully trickle up to the epicenter of U.S. foreign policy: the White House. The question now is whether the pandemic will pave the way for détente in sanctions policy or a ruthless doubling down to leverage the resulting chaos. Recent history and mixed messaging leave little expectation of relief.

Compassion by Coronavirus

In late March, thirty-two Democratic lawmakers addressed a letter to Secretaries Pompeo and Mnuchin imploring a reconsideration of sanctions on “major sectors of the Iranian economy, including [on] civilian industries, Iran’s banking sector and exports of oil”. The lawmakers’ concern mixed compassion with realpolitik: highlighting not only the adverse effects on ordinary Iranians but also the “economic and security interests of the U.S. and our allies” in the region. Presidential candidate Joe Biden echoed this in a 2 April statement, when he called for regulatory reprieves like “broad licenses” for pharmaceutical and medical device companies, a “dedicated channel for international banks”, and “new sanctions guidance” for exporters to provide assistance without fear of penalty.

International calls for a reexamination of sanctions began earlier. On 24 March, U.N. High Commissioner for Human Rights Michelle Bachelet argued that “in [the] context of global pandemic, impeding medical efforts in one country heightens the risk for all of us.” Her solution was that “sectoral sanctions should be eased or suspended.” Another dire warning came from Hilal Elver, U.N. special rapporteur on the right to food, who outlined in a 31 March statement that “the continued imposition of crippling economic sanctions on Syria, Venezuela, Iran, Cuba, and, to a lesser degree, Zimbabwe…severely [undermines] the ordinary citizens’ fundamental right to sufficient and adequate food.” A second U.N. special rapporteur, as well as the U.N. Secretary General have since issued calls for waiving unilateral sanctions.

While experts and officials in the United States and abroad increasingly see the pandemic as a time for rapprochement (however temporary), the final say lay with the White House – where mixed messaging has reigned of late.

Give an Inch…

Before COVID-19 consumed the government’s focus, President Trump was preoccupied with Venezuela and Iran. In the past year, the U.S. has ratcheted up the pressure, both economically and militarily; the result of which exacerbated vulnerabilities in their response to the pandemic. While the two countries remain major focal points for Trump’s foreign policy, the continuation of the administration’s sanctions policy has come into question. No doubt there have been acts of incompetence and cover-up the world over, but cracks, however slim, are appearing in the administration’s united front as the pandemic spreads.

One such glimmer of flexibility came from State Department. On 31 March, Secretary of State Pompeo hinted at a shift in the administration’s tone on Iran sanctions, saying “we evaluate all of our policies constantly, so the answer is – would we ever rethink? – Of course.” That a hawkish official like Pompeo was willing to say this publicly was a significant development. While humanitarian assistance has been permitted since early March, sectoral sanctions still weigh heavy.

Another glimmer was the recently revealed Democratic Transition Framework for Venezuela. The framework promises sanctions relief on government officials and the oil sector in exchange for Maduro and Guaidó relinquishing control to a five-member ruling council. But U.S. special envoy to Venezuela, Elliot Abrams, implied no sanctions would be lifted unless all foreign military units left the country. However, Venezuela’s Foreign Ministry quickly dismissed the framework as “tutelage.” It was a non-starter for Maduro, who rejected it outright.

While not the about-face many officials have called for, it appears the administration has opened a narrow window for negotiation. Whether they follow through is another question.

Never Let a Good Crisis Go to Waste

For every lifeline the administration has floated, it has also pulled back. The day after Pompeo’s suggestion of flexibility, Trump tweeted of an Iranian “surprise attack” and threatened “a very heavy price, indeed!” Similarly, the dubious carrot of the Venezuela framework was paired with a familiar stick: “sanctions will remain in effect, and increase, until the Maduro regime accepts a genuine political transition.” Thus, the common thread of mixed messaging returns.

Such doublespeak is due to the administration’s balancing act of placating domestic and international concern while leveraging the instability created by sanctions on Iran, Venezuela and others. There is good reason to believe the administration’s suggestions of flexibility are nothing more than suggestions. The assumption that the U.S. will relax its sanctions during this crisis runs counter to the long-standing Trump doctrine of “maximum pressure” on “malign actors”.

Even if the Trump administration dramatically shifted course, the knock-on effects of its hardline sanctions policy may have constrained meaningful change. For example, banks will remain reluctant to process transactions to sensitive destinations, even with rollbacks, given their risk-averse nature and the administration’s recent history of aggressive enforcement. The impact of open licenses may be limited if banks reflexively regard such transactions as inherently radioactive. De-risking is now fully muscle memorized, and such a Pavlovian response is hard to unlearn. It will take exceedingly clear guidance and open communication from the administration to do otherwise. So far, there has been little evidence of this approach.

Conclusion

The ripple effects of the COVID-19 pandemic will continue to manifest in unforeseen ways. However, for the time being, unilateral U.S. sanctions remain unaffected. The administration’s axiom of “maximum pressure” has not yet bent to the realities of global pandemic, and its mixed messaging offers little concrete insight. While Europe is more open to temporary workarounds, if the U.S. does not retrench, exporters, banks and the sanctioned parties themselves will remain in limbo. Calls to halt unilateral sanctions will grow as the crisis worsens, but so will the United States’ leverage in imposing conditions on countries like Iran and Venezuela. Against the backdrop of billions reorganizing their daily lives to slow the spread of the COVID-19, U.S. sanctions policy remains business as usual.