Last week, U.S. Secretary of State Mike Pompeo complained about Republicans in Congress who were grandstanding for harsher sanctions on Iran. Now, he has joined the grandstanders, announcing that the Trump administration is stepping up its maximum pressure campaign against Iran by ending waivers that had allowed some states to import Iranian crude oil.
This may have significant consequences for global oil markets. It will have bigger consequences for U.S. power. Trump administration unilateralists, together with their Capitol Hill supporters and anti-Iran lobby groups, such as the Foundation for Defense of Democracies, think they can use sanctions as a tool of regime change. They are wrong. The increasingly desperate efforts of the United States to ratchet up sanctions are likely to backfire, hardening the resolve of the Iranian regime and driving both allies and competitors away from the U.S.-dominated global financial system.
The administration’s sanctions unilateralists are making a fundamental mistake about the nature of U.S. financial power. U.S. clout is not a direct product of its military might or even its large domestic economy. Instead, it is a byproduct of the unique topography of globalization—the system of networks that allows global financial transfers and trade to take place. These networks did not come into being through any grand master plan but instead were the result of an uncontrolled and decentralized process of adaptation to the new opportunities of globalization.