The backlash to Iranian oil sanctions relief misses the point

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The Trump administration is currently coming under fire for their decision to temporarily lift sanctions on Iranian oil, but the proposed alternatives have become detached from reality.

The vocal opponents are treating the decision as though Washington willingly handed Tehran an enormous economic windfall beyond what they would earn regardless of sanctions being imposed. Some are now even pushing for the administration to retroactively amend the waiver by forcing Iranian oil revenues into escrow accounts, which is something Iran would never have agreed to.

That may sound tough. It may sound politically appealing. It is also a great way to ensure the destruction of the agreement that reopened the Strait of Hormuz.

Diplomacy is not about obtaining ideal outcomes. It is about obtaining achievable outcomes.

The memorandum of understanding reached between the U.S. and Iran is clearly not an ideal agreement from the American point of view. It contains concessions that many Americans understandably dislike. The temporary lifting of sanctions on Iranian oil is certainly one of them.

The question, however, is not whether Iran benefits from the deal. It does. The question is whether those benefits are large enough to justify risking the collapse of an agreement that was able to restore traffic, at least partially, through the Strait of Hormuz.

The answer is no.

Much of the public backlash surrounding the sanctions waiver has been based on an inaccurate assumption that Iran is suddenly gaining access to extraordinary amounts of new oil revenue. That is simply not the case.

For years now, Iran has been selling large volumes of oil despite sanctions, primarily to China. Those sales did not magically appear when sanctions were lifted. They already existed. The primary effect of sanctions relief is not creating entirely new oil sales. It is improving the realized revenues of sales that were already taking place.

Iran can obtain slightly higher prices. It can eliminate the bulk of costs associated with sanctions evasion. It can more easily repatriate the proceeds of those sales. Those benefits are real. But they are nowhere near the degree to which critics claim.

It estimated that the waiver, at least for the initial 60 days it is authorized, is likely worth only $1.5 billion in additional revenue to Iran beyond what it would have otherwise earned selling oil if sanctions remained in place. Even if the waiver is repeatedly extended, as many hypothesize it will be, the windfall remains far below the estimates often cited by critics.

More than a billion dollars is not nothing. Every additional dollar flowing to the Iranian government is undesirable to most people. But foreign policy does not exist in a vacuum. Policymakers must evaluate costs and benefits; not simply identify things they dislike.

As for the proposed alternative? Even if the United States retroactively revises the agreement and requires Iranian oil revenues to be placed into escrow accounts, in theory, Iran could continue exporting oil while being denied immediate access to much of the money.

The problem is that this proposal assumes Iran would have agreed to such terms in the first place. Why would Iran agree to reopen the Strait of Hormuz, resume oil exports and then allow the proceeds to be placed under the prison of American control? No serious observer should believe that was a realistic negotiating outcome.

The critics’ mistake is comparing the agreement that was actually achievable to a hypothetical agreement that would never be taken seriously.

The real choice was never between the current arrangement and a tougher arrangement. The real choice was between an agreement Iran would accept and the possibility of no agreement at all.

If Washington attempts to rewrite the terms after the fact, Tehran has alternatives. Iran sold oil before the waiver, and it can sell oil again without the waiver. But even more likely, it would see the Strait of Hormuz once again closed for business.

That broader agreement achieved something more important than a marginal increase in Iranian oil revenues: the reopening of the Strait of Hormuz.

For months, global energy markets and the world confronted the risks associated with disruption in one of the most important chokepoints on earth. Restoring stability was never going to come without concessions. The idea that Washington could secure that outcome while simultaneously dictating every condition imposed on Iran was always unrealistic.

That reality may be politically toxic. It may be embarrassing for those who hoped for a more favorable agreement. But successful diplomacy is measured against available alternatives, not delusional ones.

The lifting of sanctions on Iranian oil may not be ideal. It is certainly not desirable. But risking the closure of the strait over a relatively modest increase in Iranian oil revenues would be a far greater mistake.

The administration should resist calls to reopen negotiations over terms that were already negotiated. Sometimes the choice is not between a good deal and a bad deal. Sometimes the choice is between an imperfect deal and no deal at all.

Brett Erickson is managing principal of Obsidian Risk Advisors and an advisory board member at the Seton Hall School of Diplomacy and International Relations and DePaul University Driehaus College of Business.