Canada Is Right Not To Lift Iran Sanctions Prematurely

The nuclear deal that six world powers signed with Iran earlier this month will soon remove most international sanctions in exchange for Iran’s acceptance of long-term restrictions on its nuclear program. The Canadian government, by contrast, has wisely announced that it will keep its sanctions in place for now. The goal of sanctions was to persuade Iran to accept limitations on its nuclear activities. But the deal falls short of preventing Iran from developing a nuclear weapon while removing all instruments of economic pressure on Tehran. That Canada has chosen to retain some measure of leverage for the West is sound. Ottawa will minimize the likely use and abuse of Canada’s economy by Tehran, were the Islamic Republic to continue its illicit procurement and money laundering activities.

There are good reasons to be skeptical. The deal fails to institute a strong verification mechanism to minimize the risk of Iran successfully cheating. It removes most restrictions after a decade, ensuring that Iran will eventually be able to pursue nuclear weapons, faster and more efficiently, once the deal sunsets. Iran will be on a fast track to reviving its economy, despite the regime’s financial support for terrorism and insurgency across the Middle East. Most importantly, the deal lifts most sanctions, opting for a snap-back mechanism if Iran cheats.

Snap-back sounds attractive: if Iran cheats, the reasoning goes, sanctions will be immediately re-imposed. There are three problems with this notion. First, the impact of sanctions is not immediate. Second, Iran can walk away from the deal the minute sanctions are snapped back. Third, all contracts signed before sanctions are restored must be honored. In short, Iran has every incentive to cheat.

It took almost six years, after all, for sanctions to yield results. UN Security Council resolutions 1696 (July 2006) and 1737 (December 2006) established the basis for a robust sanctions regime that culminated almost four years later to its present configuration. UN resolutions, in turn, offered Western countries the legal cover to ratchet up independent sanctions against Iran. Eventually, sanctions passed by the EU, the U.S. Congress, and other Western nations like Canada inflicted such economic damage to Iran that the Ayatollahs agreed to negotiate.

But Tehran drove a hard bargain and the West felt compelled to relieve its economic pressure at the start of negotiations, giving Iran’s economy a much-needed boost. The lifting of sanctions envisioned by the nuclear deal will accelerate this relief. A snap-back will have to deal with a fully recovered Iranian economy that will have likely developed mechanisms to mitigate the impact of possible future sanctions. In short, the removal of sanctions does not allow a snap-back to the status quo ante. It would guarantee that economic pressure will only gradually be brought to bear, while Iran’s nuclear program will be much more advanced than it is at present.

This poses a particularly acute challenge for Ottawa. Iran has always favoured Canada as a location for its illicit procurement activities. Canada’s industry offers access to advanced technology and know-how; its solid Western economy offers an ideal environment for banking. Trade agreements and a common border with the U.S. made Canada a perfect transshipment point for U.S. goods to Iran. Canada’s generous immigration policies made it possible, in some cases, for regime procurement agents to acquire Canadian permanent residency through investment programs financed by the regime. Though Ottawa has successfully fought back in the past, if Canada were to lift its sanctions against Iran and seek a thaw in bilateral relations, Tehran could once more seek to exploit Canada as a launching pad for its illicit activities.

The nuclear agreement makes all this possible. Controls and restrictions on Iranian front companies—hundreds of which the agreement removes from sanctions lists—will now be laxer. Iran will be able to plug its financial sector back into the international banking system, with less scrutiny on thousands of daily transactions previously prohibited or closely monitored by financial institutions and intelligence agencies. 

Tehran’s procurement agents will soon see asset freezes and travel bans lifted. Most ominously, numerous Iranian entities previously involved in procurement for Tehran’s clandestine nuclear weapons’ and ballistic missile programs will be quickly removed from the sanctions list. They can now go on a shopping spree.

Opening up Canada’s markets and financial sector to Iran now would only make it easier for Iranian companies and entities until now under sanctions to resume their activities. Canada will become vulnerable again to Iran’s illicit finance and procurement activities. It is not in Canada’s interest to lift sanctions prematurely.

Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies. Follow him on Twitter @eottolenghi