Mulling Sanctions: Will the 45th President Limit Trade with Iran and Cuba?

Mainbrace | March 2016 (No. 2)

Stefanos N. Roulakis

The election of the 45th President of the United States could have a drastic impact on the global maritime industry. There are few issues that changed for the maritime industry in the last year of the Obama administration as much as trade sanctions against Iran and Cuba.

Likewise, there are few issues that could impact future business opportunities in the maritime sector as much as the next U.S. president’s policy towards trade sanctions. This article surveys the positions of the two main U.S. political parties towards Iranian and Cuban sanctions, as well as the views of the five leading candidates, among which are two persons of Cuban descent. The article also considers how Iran’s recent elections may contribute to the 45th president’s policy regarding sanctions. Adding to what has already been an interesting election cycle, the leading Republican candidate accepts the rollback of sanctions with Iran and Cuba, while the leading Democratic candidate has taken a hard line on Iran. This shows that the risk of sanctions exists no matter who is ultimately elected to the presidency.

In sum, businesses should explore new opportunities in Iran and Cuba with the advice of counsel. However, they should also be prepared to reinstitute sanctions compliance procedures. Additionally, it is clear that, contrary to conventional wisdom, a victory by either party could lead to a reinstitution of sanctions against Iran or Cuba.

U.S. Electoral and Political Basics

The 2016 U.S. presidential election is currently in its “primary” phase, meaning the Republican and Democratic parties are holding elections to nominate delegates to their respective conventions. These delegates will then vote to nominate each party’s nominee for the office of president at their respective conventions. The general election will occur on November 8, 2016, and the 45th president will take office on January 20, 2017.

While sanctions remain a key issue for the maritime industry, the unpredictability of the campaign combined with a myriad of issues under discussion have resulted in sanctions becoming secondary issues for the general electorate.

Elections in Iran

In addition to the U.S. presidential election, Iran’s citizens are voting in what may be its most consequential election since the 1979 revolution. The results of the elections will largely be seen outside the country as a referendum on the out- comes of sanctions relief and the nuclear deal with the P5+1. A second consecutive electoral victory for moderates in Iran may impact the policy of the 45th president by validating the policy of sanctions relief President Obama’s policy. At the time of writing, polls were closing in Tehran and results were unavailable.

A Republican Victory Would Increase the Likelihood of Increased Sanctions

The fact that President Obama was the architect of the historic shift in relations with both Iran and Cuba will make it difficult for the Democratic nominee to directly contravene the current president’s policy. However, as we will see, this is far from certain. Additionally, the Democratic Party’s recent policy documents have not mentioned Iran or Cuban policy as an issue.

In contrast, one of the general themes of the Republican primary campaign to date is opposition to President Obama’s legacy and policies. Additionally, the Republican Party has made opposition to rapprochement with Iran and Cuba a centerpiece of its policy. Specifically, the Republican Party’s platform on American Exceptionalism states, “We urge the next Republican President to unequivocally assert his support for the Iranian people as they protest their despotic regime.” The platform takes a more detailed stance on Cuba, rejecting any “dynastic succession of power within the Castro family” and requires “the legalization of political parties, an independent media, and free and fair internationally-supervised elections” as prerequisites for the rollback of U.S. sanctions.

Additionally, 47 Republican senators wrote an open letter to the Supreme Leader of Iran, Ayatollah Ali Khamenei, stating that Republicans in the legislature and a Republican president would do their utmost to implement new sanctions against Iran. Among the signatories were Senators Ted Cruz and Marco Rubio, two of the three leading Republican candidates. Senator Bernie Sanders, one of the Democratic candidates, did not sign the letter.

Should Iran violate the terms of its agreement with the six countries that signed the nuclear accord (the “P5+1”), Senators Cruz, Rubio, and Sanders all voted to “snap back” sanctions, a concept that has broad bipartisan as well as international support.

Most Candidates Take a Hard Line on Sanctions, Especially with Iran

Hillary Clinton

As President Obama’s first Secretary of State, Hillary Clinton, the leading Democratic Party nominee, was intimately involved in President Obama’s Iran and Cuba policies. In particular, Secretary Clinton was involved in President Obama’s unprecedented “Nowruz” (the Iranian New Year) greetings to the Iranian people shortly after his first election in 2009, where he spoke in Persian, as well as the critical days of the “Green Revolution” in Iran later that summer.

Although Secretary Clinton is supportive of the results of the P5+1 talks, which has resulted in sanctions relief, she has taken a hard line on Iran. This may indicate future sanctions should she be elected. Recently, Secretary Clinton stated that “Iran is still violating UN Security Council resolutions with its ballistic missile program, which should be met with new sanctions designations and firm resolve.” In a recent debate, Secretary Clinton stated that the normalization of relations with Iran “would remove one of the biggest pieces of leverage we have to try to influence and change Iranian behavior.”

On Cuba, Secretary Clinton has supported the rollback of sanctions, stating, “The Cuban people have waited long enough for progress to come … The Cuba embargo needs to go, once and for all.”

Ted Cruz

Senator Ted Cruz is a first-term Republican senator from Texas who was formerly the state of Texas’ chief legal advisor and a legal clerk to a justice of the U.S. Supreme Court. Senator Cruz’s base of support largely stems from his conservative policies and opposition to the Obama administration. While Senator Cruz is the son of a pastor and Cuban dissident, neither the Cuban-American community nor Cuban-American relations have been key to his political rise.

On Iran, Senator Cruz has been unequivocal on his opposition to the current Iran policy and that he plans to reinstate sanctions. Senator Cruz recently said that, “On day one, a President Cruz will immediately repeal every word of President Obama’s dangerous Iran deal and will prioritize American national security interests in every instance.” Senator Cruz’s voting record in the Senate supports his position, as he voted both to over- ride President Obama’s executive agreement with Iran and the P5+1 to roll back sanctions as well as to end debate on the issue to bring the matter to a vote. As noted above, Senator Cruz also signed the letter to Iran’s Supreme Leader.

Marco Rubio

Like Senator Cruz, Marco Rubio is a first-term Republican senator of Cuban ancestry. Unlike Senator Cruz, Senator Rubio is from south Florida, a center of the U.S.’s Cuban-American demographic. Senator Rubio has made Cuba a more central theme of his campaign than other candidates, proposing a bill to change U.S. policy regarding benefits for immigrants from Cuba. Regarding sanctions, Senator Rubio has promised to “[r]everse President Obama’s attempts to normalize relations and condition any further lessening of sanctions until Cuba engages in meaningful political and human rights reform, returns U.S. fugitives, and agrees to honor American property claims and outstanding judgments.” He also taken the position to “modernize U.S. sanctions against Cuba to restore leverage and encourage true improvements in the lives of the Cuban people.”

On Iran, Senator Rubio has taken a hard line. As president, Senator Rubio plans to “undo the deal with Iran on day one” and has threatened additional sanctions. While missing the procedural vote to end debate on the Iran agreement, Senator Rubio did vote to override President Obama’s executive agreement with Iran and signed Senator Cotton’s letter to Ayatollah Khamenei.

Bernie Sanders

Senator Bernie Sanders is a self-described Democratic Socialist who represents the State of Vermont in the U.S. Senate. Although not a member of the Democratic Party until recently, Senator Sanders has surprised many pundits in his forceful rise as a contender for the Democratic nomination. Of all candidates surveyed here, Senator Sanders has been the most unequivocally open to détente with both Cuba and Iran.

In his statement after voting against the override of President Obama’s executive action, Senator Sanders cited his anti-war policies, stating that, “I voted to support the Iran nuclear deal today because it is my firm belief that the test of a great nation is not how many wars we can engage in, but how we can use our strength and our capabilities to resolve international conflicts in a peaceful way.”

On Cuba, Senator Sanders bases his opposition to the embargo on the basis of promoting  “democratic values in the region and strengthening [U.S.] economic and cultural ties with its people.” Senator Sanders has also put forth the argument that sanctions against Cuba have a large economic cost on U.S. businesses.

Donald Trump

At the time of writing, Mr. Trump, a businessman and television personality from New York, is the frontrunner for the Republican nomination. It is especially surprising that the Republican frontrunner appears to be the most supportive of the rollback of Iran and Cuba sanctions, given overwhelming Republican opposition to these policies. Despite not having previously held elected office, Mr. Trump has drawn on his business experience to describe his approach to the Iran and Cuba sanctions policy. Regarding Iran, Mr. Trump said, “I’ve heard a lot of people say, ‘We’re going to rip up the deal.’ It’s very tough to do [that] … Because I’m a deal person.” However, Mr. Trump outlined his strategy as, “I would police that contract so tough that they don’t have a chance.”

Regarding the U.S. opening with Cuba, Mr. Trump took a similar view. In response to a question on the thaw in Cuba-U.S. relations, Mr. Trump stated that, “I think it’s fine, but we should have made a better deal. The concept of opening with Cuba—50 years is enough—the concept of opening with Cuba is fine. I think we should have made a stronger deal.”

The fact that the Republican frontrunner appears to take a different view than the Republican Party is indicative of several things. First, it shows that this has been the year of “outsiders” for the Republican Party, where established politicians have largely been unable to garner support. Additionally, Mr. Trump’s stance shows that while sanctions policy is key for the maritime industry and the business community in general, it may not be an essential policy for many voters.

Analysis

Predicting the future of American policy based on campaign primary statements is a flawed art at best. By necessity, candidates that become president usually distance themselves from many statements and policies made while campaigning. The fact that the Republican frontrunner and both Democrats running support at least some sanctions relief means that it is possible the status quo established by President Obama could continue as the 45th president’s policy. A victory by Iranian moderates would further buttress this possibility.

However, the breadth of support for sanctions and a hard line against Iran in particular amongst several candidates of both parties should be cause for concern for the maritime community. Combined with significant opposition in Congress to President Obama’s policies on ending sanctions, it is certainly within the realm of possibility that the U.S.’ current trajectory of ending sanctions against Iran and Cuba could change within the next year.

Barring Iranian infringement of the P5+1 agreement, it is unlikely that the global community or the United Nations would muster to reinstitute sanctions against Iran as happened earlier in the decade. This would mean that any sanctions imposed unilaterally by the United States would be less far-reaching than the previous sanctions regime, and may not impact the maritime industry or other businesses to the same extent. However, even unilateral U.S. sanctions would impact the maritime industry as the United States has shown an increased willingness in recent years to target foreign nationals as well as its own citizens for sanctions violations.

Conclusions

The recent opening of trade with Iran and Cuba has created opportunities for an industry that has faced several challenges in the past year. Easing the almost globally-reaching sanctions regime against Iran has created opportunities for a variety of carriers and operators to re-enter the Iran trade. Additionally, the easing of Iranian sanctions has also created opportunities for the Offshore Services and construction sector, of which the United States has a large fleet.

Similarly, thawing U.S. relations with Cuba has allowed U.S.- based industries to explore possibilities of business expansion in the United States’ nearest Caribbean neighbor. In particular, U.S.- based cruise, passenger, and offshore services stand to benefit from expanded business opportunities. The world- wide maritime community would benefit from the loosening of restrictions on calling both on Cuba and the United States.

In sum, interested parties should continue to explore business opportunities with the advice of counsel to ensure avoidance of costly penalties. Given the political uncertainty of the trajectory of sanctions in the next year, companies should be prepared to “snap back” appropriate sanctions management techniques by early 2017.