Economic warfare is being fought with an intensity not seen since the period leading up to World War II as countries deploy tariffs, embargoes and economic sanctions to force policy changes or punish their adversaries.

Free trade is coming off second best, and global trade has stalled. There’s been no growth in trade volumes since late 2017, contributing to a slowing world economy.

The World Trade Organization, as the upholder of global trading rules, looks increasingly impotent. Its resemblance to the League of Nations in the late 1930s will sharpen if, as is possible, the US withdraws in the lead-up to next year’s presidential election.

A rising tide of trade embargoes in the early 1940s was the catalyst for Japan’s bombing of Pearl Harbor and attacks in Southeast Asia to secure its supplies of rubber and oil.

While the escalation of tariffs between the US and China has been the greatest concern to economists and institutions like the International Monetary Fund, the use of economic sanctions is becoming increasingly aggressive and extends far beyond UN Security Council mandates.

The US regards its sanctions as having a global reach—any business defying a US sanctions regime against another country can expect to lose access to the US dollar as a means of payment and have any US financial assets frozen.

China, which doesn’t recognise US sanctions, is increasingly being caught in their web.

The US was able to ask Canadian authorities in December 2018 to arrest Huawei chief financial officer Meng Wanzhou, claiming Huawei controlled an Iranian trading company that had been shipping US goods to Iran in defiance of its sanctions.

A US appeals court on 30 July held that three Chinese banks were in contempt for failing to hand over to US authorities details of financial transactions involving goods destined for North Korea.

One of the banks, the Shanghai Pudong Development Bank (about the same size as the Commonwealth Bank), had been subpoenaed under the US Patriot Act to provide information on its dealings with a Hong Kong–based trading company and is now at risk of having all dealings with US correspondent banks banned.

That would be viewed by China as opening a third front in its conflict with the US, which started with tariffs, then escalated to the banning of technology exports and would now see the US using the global dominance of the US dollar to impose financial sanctions.

A week earlier, the US imposed sanctions on a Chinese oil trading business over allegations that it shipped crude oil from Iran. The Chinese government has said it doesn’t recognise the US sanctions and will continue importing Iranian oil. The sanctions mean the company is barred from foreign exchange, banking or property transactions involving US jurisdictions. It effectively prevents it from using US dollars to settle its trade.

Another example of the global reach of US sanctions in recent days was the order by Brazil’s supreme court that the state oil company, Petrobras, must refuel two Iranian cargo ships, which were loaded at a northern Brazilian port with corn exports. Petrobras had argued that the ships had brought Iranian fertiliser, which was banned under US sanctions, and feared it would become exposed to the sanctions if it refuelled the ships.

The worry is that sanctions can lead to open conflict. This risk has been highlighted by Iran, which has warned that if sanctions prevent it from selling oil, it will forcibly stop all oil shipping through the narrow Hormuz Strait.

The United Kingdom’s seizure of the Iranian oil tanker Grace 1 in the Strait of Gibraltar, which it claimed was heading for Syria in breach of European Union sanctions, was swiftly answered by the Iranian seizure of a British oil tanker, Stena Impero, in the Strait of Hormuz.

The co-chair of the EU’s foreign relations committee, former Swedish deputy prime minister Carl Bildt, challenged the British action:

The legality of the UK seizure of a tanker heading for Syria with oil from Iran intrigues me. One refers to EU sanctions against Syria, but Iran is not a member of the EU. And the EU as a principle doesn’t impose its sanctions on others. That’s what the US does.

One day before the British action, UK authorities in Gibraltar had passed a regulation authorising the seizure of shipping in territorial waters if it breached European sanctions.

Spanish authorities, who don’t recognise British sovereignty of Gibraltar and its territorial waters, claimed the British were acting at the behest of the US in pursuit of its sanctions against Iran. Certainly that was how the Iranians saw it.

Britain is ostensibly opposed to the US sanctions on Iran which were imposed after the Trump administration unilaterally withdrew from the Iran nuclear deal. The EU has been trying to keep that deal alive, promising Iran it will find ways to ease the economic pressure it is confronting.

It has devised a new payments platform to enable European companies to trade with Iran without falling foul of US sanctions. The platform, called Instex, enables payments to be made without going through banks which would be exposed to sanctions.

It is a virtual ledger that enables European companies importing and exporting with Iran to exchange payments with each other, mirroring exchanges by Iranian importers and exporters on the other side of the border. No actual euros have to be exchanged for Iranian rial. Russia, which is also exposed to US sanctions, is backing the Iranian deal.

Iran says the platform, which has so far been confined to food and pharmaceuticals, needs to start dealing with oil if it’s to keep the nuclear deal alive.

The virtual payments platform had to be created because the financial messaging service through which all global financial movements are transacted, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), has buckled to the US sanctions and has banned all dealings with Iranian banks. SWIFT is based in Belgium, but it is cooperatively owned by 11,000 global banks and any dealings with Iran are transparent to US authorities.

Panama has also decided it doesn’t want to defy the US and has withdrawn the registration of around 60 Iranian ships. The Iranian ship seized by the British had its registration cancelled while it was en route. Without registration, a ship can’t obtain insurance and may be barred from entering ports.

Iran now says it has seized another oil tanker, while the US has imposed personal sanctions on Iran’s foreign minister, Mohammad Javad Zarif. Amid this escalating economic hostility, a diplomatic solution is not in prospect.

In a recent analysis, Richard Haass suggests that one way out of the current crisis with Iran is a renegotiated Joint Comprehensive Plan of Action (JCPOA) that addresses shortcomings in the 2015 Iran nuclear deal negotiated by the Obama administration alongside France, the UK, Germany, China, Russia and the EU.

The original JCPOA is flawed because it doesn’t ultimately prevent Iranian nuclear acquisition in the long term. It’s scheduled to ‘sunset’ over the 2026–2031 period as various constraints on Iran’s nuclear ambitions are lifted. The risk is that Iran could remain in full compliance with the JCPOA but exploit easing constraints over time, so that, as the agreement lapses, Tehran is well placed to make a quick breakout towards acquiring nuclear weapons. In this sense, the JCPOA may ultimately not  solve anything beyond kicking the can down the road, in much the same way that numerous failed agreements with North Korea have done.

Nor does the current JCPOA deal with Iranian ballistic-missile development. Tehran has been free to develop delivery systems for nuclear weapons and to modernise its ballistic missile technology. By the time the agreement expired, Iran’s ballistic-missile capabilities would likely be significantly more advanced than they are now.

Furthermore, from about 2023, the JCPOA allows Iran to acquire advanced military capabilities. A mere three and a half years from now, Russia and China could be pounding on the doors of Iran’s defence ministry offering the latest capabilities at highly competitive prices. By the late 2020s, Iran could have modernised its military forces and developed more advanced ballistic missile capabilities with longer range. Iranian nuclear weapons by the early 2030s would then be the icing on the cake.

The geopolitical assumptions underpinning the JCPOA negotiations were also dubious. I argued in 2017 that it was based on a strategy of hope. The hope was that somehow, through good intentions on the part of the West led by the US, an arms-control approach to Tehran would change Iran’s strategic calculus and mindset, and it would willingly forgo nuclear weapons and become a responsible regional actor. Yet, since the signing of the JCPOA, Iran’s expanding presence in Syria, poised against Israel’s northern border; its ongoing support for terrorist groups such as Hezbollah and Hamas; and its expanding influence in Iraq don’t support such an optimistic hypothesis.

And now Tehran has reportedly attacked commercial shipping in the Persian Gulf and, in an unprovoked attack, has apparently shot down a US RQ-4A Global Hawk drone in international airspace. At the same time, Iran is moving towards increasing its production of low-enriched uranium production to a level that will exceed the limits of the JCPOA in coming days, and has indicated it may enrich uranium to a higher level. That step would allow a shorter breakout time for acquiring nuclear weapons. An Iranian scramble for a bomb could prompt US or Israeli preventive strikes and increase the risk of proliferation cascades with Saudi Arabia and other regional actors.

Certainly, an argument can be made that Tehran is responding to the US’s withdrawal from the JCPOA in 2018 and the reintroduction of sanctions. The blame can be shared around, and the Trump administration would have been wiser to have stuck with the JCPOA, with all its flaws, and proposed side agreements to close its loopholes. By pulling out of the JCPOA, the US has effectively assumed the blame for the current crisis and has handed a political victory to Tehran for nothing in return. Iran is now set to walk away from the deal too, and that will add a new level of risk to the mix.

Two possible paths forward seem to be emerging. The first is an escalatory cycle of action–reaction between Iran and the US, leading to some form of military conflict in the near future. Further Iranian attacks on shipping, for example, would accelerate the slide towards war. Such attacks would be an unacceptable breach of international legal norms upholding freedom of navigation of the seas. The US would be correct to defend commercial shipping against future attacks, even at the risk of further provocations from Iran.

There’s no indication yet that the US is actively preparing for war with Iran, and President Donald Trump doesn’t seem eager to embark on such a conflict. It’s unclear what war would really achieve, or what the objectives of the US, and any coalition partners, would be. Limited military strikes on Iranian nuclear facilities are not likely to force Iran to give up any future nuclear ambitions and would almost certainly prompt Iranian retaliation against the US throughout the region—for example, via state-sponsored militias in Iraq or via naval units of Iran’s Islamic Revolutionary Guard Corps in the Persian Gulf. The US would respond in turn, and the risk is of an escalating conflict drawing the US deeper into a quagmire that would be longer and worse than Iraq and Afghanistan.

Nor would it be likely to lead to regime change in Tehran. The potential cost in lives would be immense. The US would be further isolated from its partners in Europe, who are unlikely to support the Trump administration in such a conflict. It seems highly unlikely that the US would gain a legal mandate beyond self-defence, and no chapter VII UN Security Council authorisation would be forthcoming.

The larger geopolitical canvas also matters, and in the event of a prolonged US–Iran war, the US would be distracted from responding to the much more serious risk of an assertive China and a revanchist Russia. Beijing and Moscow are increasingly coming together to challenge US strategic primacy and the Western alliance system and to bring about a revised rules-based international order that ends US global leadership. So while the US must respond to provocation, a new war isn’t going to end happily for anyone.

A better alternative is to test Tehran’s intentions. A new Iran deal of the sort that Haass argues for—a ‘JCPOA 2.0’—should be proposed. The objective from the US side should be to close loopholes in the original deal to truly preclude Iranian acquisition of nuclear weapons over a much longer period, and sweep up Iranian ballistic-missile development in a way that caps, and then rolls back, such capability. In return for Iran’s agreement, and through adequate verification and monitoring by the International Atomic Energy Agency, sanctions would be eased, allowing the original JCPOA’s trade benefits to flow.

If Tehran would be willing to look at a new deal that really did close off its nuclear option for the long-term—if it really is sincere about not wanting nuclear weapons—it should be willing to talk. That could generate a new opportunity for diplomacy that could ease tensions in the region and allow both sides to pull back from the brink. The likelihood is, though, that they won’t.

When about 100 Russian servicemen and military equipment were reportedly flown into Venezuela in late March, US President Donald Trump’s response was to declare that ‘Russia has to get out’. Moscow refused, saying that the troops would stay ‘as long as needed’ and that they were only there to repair equipment, such as Venezuela’s Russian-made S-300 air-defence system. Russia has denied the recent reports that it had told the US that it was pulling defence personnel out of Venezuela.

Amid the continuing political, economic and humanitarian meltdown of Venezuela, an anti-American alliance consisting of Russia, Cuba and Iran is coalescing to counter US economic and diplomatic pressure on embattled President Nicolas Maduro. The anchor of the alliance is Cuba, which colonised Venezuela through its security services when Fidel Castro’s protege Hugo Chavez came to power in 1998.

Castro then began shipping tens of thousands of barrels of oil a day back to Cuba, while Venezuela became what is widely considered a ‘mafia state’. He also expanded his relationships with the narco-terrorist insurgencies plaguing the region, most famously FARC and the National Liberation Army in Colombia. Cuba’s security services helped stand up loyalist paramilitary organisations called colectivos to terrorise opponents of the Maduro regime. More recently, Cuba assisted in creating the Special Actions Force, or FAES, which strikes at opposition figures.

But Cuba is not alone. It cooperated with its longstanding ally, Iran, to help build security architecture to protect its colony. The expeditionary wing of Iran’s Islamic Revolutionary Guard Corps, the Quds Force, worked alongside Cuban intelligence in Venezuela to consolidate the regime’s hold. Since 2005, Iran has extended €1 billion (A$1.61 billion) in loans to Cuba and is heavily involved in several projects there, including a shared intelligence station to block US radio broadcasts.

A proxy of the Quds Force, Lebanon’s Hezbollah, has also had a close relationship with the Venezuelan regime, which mostly revolves around proceeds from illicit drugs, money laundering and other organised crime to supplement its activities in the Middle East. In an exposé on the US Drug Enforcement Administration’s operation to track and shut down Hezbollah’s global operations, Josh Myer writes that:

[B]eginning in 2007, DEA agents watched as a commercial jetliner from Venezuela’s state-run Conviasa airline flew from Caracas to Tehran via Damascus, Syria, every week with a cargo-hold full of drugs and cash. They nicknamed it ‘Aeroterror,’ they said, because the return flight often carried weapons and was packed with Hezbollah and Iranian operatives whom the Venezuelan government would provide with fake identities and travel documents on their arrival.

The Venezuelan embassy in Iraq was reportedly involved in a similar effort.

In 2010, an unclassified US Defense Department report to Congress on Iranian military power noted an increased Revolutionary Guard presence in Venezuela, and there are now credible reports of a Hezbollah terrorist training camp on Venezuela’s Margarita Island, as well as in Cuba. Maduro recently wrote a letter to Hezbollah secretary-general Hassan Nasrallah thanking him for his support after Nasrallah pledged military and security specialists to preserve his regime. Nasrallah said it was but a ‘small part’ that Hezbollah could offer Maduro and the memory of Chavez in return for the support they gave Hezbollah and Iran, particularly in providing funds for Hezbollah.

Just as worrying to the Americans as the pervasive Iranian presence in Venezuela is the increasing Russian interest in preserving Maduro’s rule. Moscow has almost single-handedly kept Maduro’s regime afloat financially, primarily through the Russian energy company Rosneft, which has used its leverage to take possession of Venezuela’s oil and oil infrastructure in exchange for massive loans. Igor Sechin, Rosneft’s chief executive and one of Russia’s most powerful men, had a close relationship with Chavez and reportedly meets with Maduro regularly.

As demonstrated in Syria, Moscow doesn’t like to let its allies fall, and the troops deployed to Venezuela aren’t the only indicator of increasing Russian military involvement there. In January, Reuters reported that perhaps hundreds of Russian ‘mercenaries’ from the Wagner group—a Russian military intelligence front with a presence in Syria, Ukraine, Sudan, the Central African Republic and possibly Libya—had been deployed to help protect Maduro. The report was published a day after Russia and Iran discussed coordinating their response to the crisis in Venezuela, and Russia is almost certainly leveraging Iranian and Cuban infrastructure to help keep Maduro in power.

In February, for example, Russia granted Cuba a military credit line for €38 million (A$61.25 million), and the Wagner contingent was said to have flown to Venezuela via Havana. There are also reports that Russia is looking to establish new bases in both Cuba and Venezuela, which it denies. In April, Iran opened a direct route to Caracas for Mahan Air, a company that’s been sanctioned in much of the Western world for being a transport system for Quds Force personnel and weapons. Iran’s foreign minister, Javad Zarif, reportedly mooted sending Revolutionary Guard personnel to protect Maduro.

Trump initially seemed to favour military intervention in Venezuela. He has since done a complete about-face, following a mid-May phone call with Russian President Vladimir Putin who he says assured him that Russia ‘is not looking at all to get involved in Venezuela’. The failure of senior US officials to stage-manage Maduro’s overthrow using only sanctions and diplomacy has prompted Trump to lash out at their hawkish rhetoric and false assumptions.

While the current US strategy is simply to maintain sanctions and international pressure and wait out Maduro’s regime, the dynamics set in motion by the US and by Venezuelan opposition leader Juan Guaido could take on a life of their own. Military intervention is extremely unlikely, but any uncalculated escalation or sudden collapse of the regime could inadvertently involve US forces battling Iranian- and Russian-backed Venezuelans in America’s own backyard.

Iran and the US are engaged in a strategic race with opposing objectives, but a common deadline—the US presidential election in November 2020.

For Iran, it’s a race for survival of the regime, to ensure it can hold power and withstand US attempts to precipitate regime change through economic sanctions that target both the Iranian government and the public.

The hope of the Iranian regime, comprising both conservatives and moderates, is that US President Donald Trump will lose the 2020 election and that his Democrat replacement will rejoin the nuclear agreement, the Joint Comprehensive Plan of Action (JCPOA), and lift Trump’s sanctions.

For Trump and his anti-Iran inner circle, it’s a pre-election race to reverse, or at least to contain, the ‘malign threat’ that Iran poses to the region and especially to US, Israeli, and Saudi and other Gulf state interests. Earlier this week, the US announced it would deploy a carrier strike group to the Middle East in response to that threat.

During this term, Trump wants, indeed needs, to achieve at least one of three strategic security goals to prove his international credentials to both domestic and foreign audiences. Iran is one goal and North Korean denuclearisation and reconciliation in Afghanistan are the others.

With both North Korea and the Taliban there is at least dialogue, which can be touted as progress, however thin that reality is, for now. But Iran is a tougher challenge. Its response so far to Trump’s pressure has been its unwillingness to consider negotiations while the US is not a JCPOA signatory. As Trump will not rejoin the JCPOA or consider lifting sanctions without prior negotiated outcomes, an indefinite stalemate exists. In these circumstances, Trump has no incentive other than to play hardball with Tehran. This week, for example, Trump ratcheted up pressure through new sanctions on Iran’s base metals industry.

Can Iran survive the 18 months until the US election? US sanctions are hurting Iran’s economy, and will hurt more once the full impact of Trump’s policy of zero imports of Iranian oil, which were effective from 2 May, begins to take effect among countries that had previously been granted import waivers: China, India, Turkey, Greece, Italy, Japan and South Korea. China and India have, between them, traditionally imported more than 40% of Iran’s oil production.

Specifically, can the Iranian government contain growing domestic unrest about economic hardship? Some countries may defy Trump and continue to import Iran’s oil. China and India are the most likely to do so. Iran can continue to circumvent other US sanctions through ‘grey zone’ trading, and the new Instrument in Support of Trade Exchanges, established by the UK, France and Germany, that enables legitimate foreign trade to bypass the US financial system. Will these help save the day for Tehran?

Multiple sources claim this is possible for three reasons. First, Iran has a record of determined self-sustainability in highly adverse circumstances. Second, whatever changes Iranians might seek, they want an Iranian solution in collaboration with others, but not dictated by others—particularly not by the US. And third, such trade could lessen the likelihood of severe repressive measures being imposed by the Iranian government to contain widespread unrest, especially if the regime is threatened. No-one, especially Iran, wants to suffer the domestic and regional consequences of the destabilisation of a nation of some 80 million people.

One outcome of Trump’s policies has been to drive Iranian conservatives and moderates to a near common position of opposition to the US. Most outsiders, especially the Europeans and, reportedly, many former senior US civilian and military officials, are conscious that this is counter to US interests. They see the more logical and less dangerous policy as working with the moderates, within the JCPOA framework, to facilitate a progressive change of regime thinking through the economic and related benefits that the nuclear deal offered. Although a full accord is highly unlikely, the outcome would better balance regional security interests.

In this context, during my visit to the Middle East in January, I posed the question of the regional threat of Iran’s ‘arc of influence’ to officials and other representatives of a mix of nations, and political factions within them. A significant number of them claimed Iran’s activities were no different to those of nations like Saudi Arabia, Turkey, the US and Russia. Locals felt no threat of invasion by Iran and believed the division between Shia and Sunni Muslims could be reduced if the will was there. Some neutrals in Lebanon believed forces from Iran, Hezbollah and Russia prevented Islamic State from extending its caliphate into eastern Lebanon in 2015 and 2016.

Although Trump’s policies have driven Iran’s moderates and conservatives closer together, there are strong divisions between these factions on how Iran should proceed. According to several sources, the resignation of Foreign Minister Javad Zarif in February, reflected this. Although President Hassan Rouhani declined his resignation, Zarif had made strong enemies among the conservatives, including in the Islamic Revolutionary Guard Corps, by strongly resisting policies and practices he saw as unnecessarily provocative.

These included threats about resuming the production of higher grade uranium, though it would have been far short of weapons-grade material. Zarif also raised concerns about the test-firing of missiles from naval vessels near US warships, the build-up of Iranian forces in southern Syria, including support for Hezbollah and the possibility of a second front against Israel, and threats to close the Strait of Hormuz if Iranian oil shipments were impeded. A lot of these threats were sabre-rattling, which the US and Israel have necessarily responded to, but any miscalculation could have quickly resulted in serious hostilities.

Zarif made his point, reiterated in a conciliatory statement he released on 1 March, which also recognised the influence of conservatives including Quds Force commander Qassem Soleimani, who is responsible for Iranian deployments and militia support in Syria, Iraq, Yemen and Lebanon.

While both Iran and the US manoeuvre within the boundaries of the stalemate, there’s concern among stakeholders that if the regime in Tehran survives and Trump is re-elected, that will embolden him to step up his campaign against Iran.

The second electoral deadline is Iran’s presidential poll in August 2021. In 2005, moderate president Mohammad Khatami was replaced by hardliner Mahmoud Ahmadinejad, in part as a backlash against Washington’s anti-Iranian policies.

That experience could be repeated in 2021 and that would not be likely to improve regional stability.

There’s no doubt US President Donald Trump’s renewed sanctions will hurt Iran, but it is not a given that they will halt its nuclear and missile programs, or its other activities in the region. The challenges the president faces, from the Europeans especially, will test the effectiveness of US leadership on the issue.

Major players in the Iran nuclear deal (the Joint Comprehensive Plan of Action, or JCPOA) have used the latest UN General Assembly meeting, or acted simultaneously with it, to strengthen their positions for and against the agreement.

Supporting the deal were a joint ministerial statement on 24 September from the JCPOA participants (Britain, France, Germany, Russia, China, Iran and the EU) and an address from Iranian President Hassan Rouhani to the UN on 25 September.

Trump attacked the JCPOA in his UN address, also on 25 September, and in his opening remarks on 26 September as Security Council chair. The release of two US State Department documents, the Annual country reports on terrorism 2017 and Outlaw regime: a chronicle of Iran’s destructive activities, was timed to provide more detailed support for Trump’s claims of Iranian ‘malign activities’, regionally and globally.

Israeli Prime Minister Benjamin Netanyahu complemented Trump with his own address to the UN on 27 September.

Predictably, the joint statement strongly reasserted participants’ commitment to the JCPOA, and to the EU’s ‘blocking statute’, updated on 7 August, that legally protects all EU businesses that defy Trump’s reimposed sanctions and continue to trade with Iran. Also announced was the creation of a ‘special purpose vehicle’ to provide businesses in the EU and elsewhere with ‘secure payment channels’ that would bypass US financial systems. However, the statement noted that operational aspects of the vehicle were yet to be finalised.

In a clear challenge to Trump’s actions to severely restrict international trade with Iran, the joint statement referred to the importance of ‘normalising trade and economic relations’ and securing ‘the continuation of Iran’s oil and gas condensate, petroleum products and petrochemicals’. It also emphasised that these objectives were consistent with UN Security Council resolution 2231, which endorsed the JCPOA in January 2016.

In his address to the UN, delivered with notable restraint, Rouhani criticised the US withdrawal from the JCPOA—but not Trump by name—and emphasised the importance of adhering to international agreements and obligations. He also warned of the dangers of undermining international institutions and referred to the anomaly of the US using sanctions to pressure other countries to ‘violate’ international law, in the shape of the UN-endorsed JCPOA, and threatening to punish them if they didn’t. Rouhani defended Iran’s presence in Syria as being at the invitation of Bashar al-Assad and emphasised Iran’s role in combatting terrorism. He identified the Israel–Palestine issue as ‘the most pressing crisis in the Middle East’.

In a bid to counter Trump’s reimposed sanctions and withdrawal from the JCPOA, Iran had lodged a claim with the International Court of Justice that the sanctions violated the US–Iran 1955 Treaty of Amity. That treaty goes back to the days of a compliant shah and ignores the decades of hostility since. On 3 October, the court ruled that the US should lift sanctions linked to humanitarian goods and civil aviation safety, but added that it had no mandate to rule on the broader dispute (it also has no power to enforce its rulings). The US responded by terminating the treaty.

In his UN address, Trump described Iran as the ‘world’s leading sponsor of terrorism’ and said the ruling regime was a ‘corrupt dictatorship’ that sows ‘chaos, death and destruction … across the Middle East and beyond’. He said Iran must never gain access to nuclear weapons, develop ballistic missiles capable of delivering them or acquire the funds to pursue its ‘agenda of aggression and expansion’. Trump also re-emphasised the importance of the reimposed sanctions and of other countries’ compliance to prevent Iran pursuing its agenda.

Trump did not call for regime change, although it was implicit. He did say that after the next round of sanctions hit on 4 November, ‘more will follow’. It’s thought any new measures will include punitive targeting of countries and businesses that continue to trade with Iran.

Netanyahu said Iran still aspired to develop nuclear weapons. He said there was a ‘a secret atomic warehouse’ in Tehran containing unspecified nuclear equipment which Iran should have disclosed and destroyed as part of the JCPOA. Netanyahu also challenged the International Atomic Energy Agency’s ability to detect and demand access to suspected covert nuclear facilities. Noting the irony of this, Iran’s foreign minister, Javad Zarif, tweeted the following day that it was ‘time for Israel to fess up and open its illegal nuclear weapons program to international inspectors’.

None of the stakeholders, then or since, has indicated any willingness to compromise, although sources claim there’s been intense back-channel discussion seeking a solution. Rouhani rejected a US proposal to meet with Trump on the sidelines of the UN assembly, saying that any such talks had to be held within the JCPOA framework.

Several developments over the next few weeks will shape the way ahead. On trade, a key factor will be the impact of the next round of sanctions on Iran’s economy. They primarily target Iran’s oil and gas exports, the source of up to 70% of its foreign currency income. It’s not clear how many countries will cease importing Iranian petroleum products. China is expected to continue this trade with Iran, as will India, at least in part.

Also critical will be how many businesses cease direct and indirect trade with Iran for fear of punitive secondary sanctions, especially the loss of access to US markets, despite the EU’s safety net.  Major international businesses have already withdrawn from Iran, or intend to do so, including Total, Maersk, Peugeot, Siemens and Boeing. But one US concern is the extent to which China, Russia and possibly India could exploit the opportunity to fill all or part of the vacuum.

The outcome of the 6 November US midterm elections could also affect developments. If the Republicans poll well, Trump will read that as support for his Iranian (and other) policies. If they poll badly, that lack of support might allow for some flexibility in the US position.

Right now, Trump holds the stronger hand, but his ability to continue to do so is facing a serious challenge.