In the debate over the Iran deal among US legislators, high-profile enemies such as New York Senator Charles Schumer attack the Administration's suggestion that the one alternative to this agreement is war-bombing Iran's nuclear facilities. Such critics hold out that continued or perhaps intensified sanctions could bring Iran to its knees, submitting to demands for a "better" deal. The hiccup is that the rest of the world is likely to lift sanctions and do business with Iran. Hence, Schumer and company have to insist that the US take punitive action against foreign economic interests that are willing to engage with Iran (so-called secondary sanctions). Such punitive action would, it is suggested, bring other countries into line and produce collective economic pressure that brings Iran to heel.
This reasoning is understandable from the groupies of Netanyahu: it has been a key element of the Israeli leader's Gaza policy of siege. That is, the notion that reducing a people to economic desperation will break their will. But is this realistic, or rather is it based upon a distorted and craven understanding of human nature?
The enemies of diplomacy with Iran have scoured the JCPOA with a fine tooth comb, operating from the most negative and cynical assumptions of how each provision will be interpreted, and how Iran will implement it. On the other hand, when it comes to the defense of their own strategy they have offered barely more than a dogmatic assumption that an economic siege can cause so much suffering and despair in Iran that it will capitulate; and that through another set of brutal penalties, we can force the hand of those who disagree-namely the rest of the world sans Netanyahu.
The peace party, led by the Administration, has offered a detailed and intricately crafted diplomatic settlement. The war party that dare not say its name has provided only a dogmatic appeal to human desperation, that if we pummel Iranians enough, and then pummel our allies and trading and finance partners enough, they will do our will. Such a strategem would, to say the least, betray the values that make America great and undermine our moral credibility in the world; at the same time it is a wild fantasy, albeit a perverted one.
Enter today US Treasury Secretary Jack Lew. In the New York Times nyti.ms/1IQDwW8 , Lew offered a reality check. Cutting off European and other businesses and financial institutions would be an economic disaster for the United States, Lew persuasively argued. Our exporters and investors need access to global payment networks, and we have debt service obligations in other places, including Japan, that require continuing economic and financial relations. I would add that, ironically, Charles Schumer purports to represent New York in the Senate; following Lew's impeccable reasoning, New York as a financial center would be hardest hit of all by cutting off foreign economic actors from our financial networks, which means cutting off our networks from them.
Secretary Lew also mentioned the WTO. Most likely punitive secondary sanctions of the kind contemplated by Schumer and company would have to be justified under the national security exception in the GATT (Article XXI) and in related agreements-very pertinently the GATS that covers financial services. The US has often taken the view that the national security exception in the GATT is self-judging. The fact that the wording of Article XXI refers to measures that a nation "considers" to be necessary for its national security is the textual hook for saying national security is self-judging.
But under the investment treaties the United States has entered into with numerous countries it has signed on to obligations that could not so easily be waived on the basis of a self-judging national security provision. As is clear from litigation under the Argentina-US BIT, the language in BITs is likely not to qualify the requirement of necessity with an expression such as "considers", which could imply extreme deference if not self-judging by the state taking sanctions. Plainly said, if the enemies of the Iran deal had their way, under the existing investment agreements that are binding on the United States, the US could be liable for hundreds of millions if not billions of dollars of damages if foreign companies doing business in the America were penalized for transactions with Iran.
Secondary sanctions already exist to some extent. But their premise is a multilateral consensus on sanctions, reflected in the UN Security Council resolutions. Continuing or intensifying secondary sanctions is a whole new game where the Congress rejects the Iran deal but our allies and trading partners disagree and are unwilling to renew their own sanctions. In those changed circumstances, secondary sanctions would be an affront to our allies and trading partners, attacking their sovereignty and impeding their choice to deal with Iran in the circumstance of the Congress's closure of the path of diplomacy. It would be nigh impossible to show that secondary sanctions were necessary to the national security of the United States where the Congress threw out the window a tangible fully worked-out diplomatic alternative.
The United States is currently attempting to finalize economic agreements with important partners-TTIP with the Europeans and TPP looking out toward the Pacific. Investor-state dispute settlement (ISDS) is often regarded as a threat to national sovereignty. But ISDS can protect the sovereignty of America's economic partners by allowing monetary claims against the United States if it punishes foreign firms that deal with Iran.
Both the EU and the TPP partners of the United States should demand clear language in these accords, cutting off at the pass the possibility that non-US business entities could be punished for dealings with Iran. Such sanctions should be prohibited where they are unilateral, and not justified by an agreed framework for responding to violations. Since the Obama Administration has pioneered the path of diplomacy and cooperation, it could scarcely object to such a clause. Further, some enemies of diplomacy with Iran have ventured that even if Congress does not halt America's participation in the deal, a future President might unravel it. Significant financial consequences if such an effort were to try to force the hand of America's allies and trading partners would have at least some dissuasive effect on future efforts to undo the Iran deal. With fast track now in place, the Congress would only be able to stop such a safeguard provision by nixing the trade agreements altogether. Something many Republicans would have second thoughts about doing.
