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The announcement by President Hassan Rouhani on Wednesday that Iran will partially cease to comply with the 2015 nuclear deal was a foreseeable outgrowth of draconian sanctions imposed by the U.S. after its withdrawal from the agreement last year.

Why it matters: The Trump administration's "maximum pressure" campaign has increased the threat of a nuclear escalation across the Middle East. Even short of that nightmare scenario, it could be self-defeating in the long term, hurting Iran’s pro-Western middle class at the expense of hardliners who control both the black market and a repressive state apparatus to stifle dissent.

Where it stands: U.S. policy has undoubtedly inflicted economic harm on Iran.

Economic growth that followed the lifting of sanctions in 2016 has given way to an inflationary recession.

The Iranian currency has lost two-thirds of its value, as oil exports have dropped by more than half and will likely fall further.

Although food and medicine are exempt from sanctions, lack of access to the global financial system is giving rise to a humanitarian crisis. Some families have been unable to afford meat or obtain specialized medicine.

Yes, but: There is no sign Iran is shifting its regional policies or willing to bow to the Trump administration’s demands. Nor is there any hint that economic hardship has triggered popular unrest of a magnitude that would threaten the regime’s survival.

In the absence of visible changes in Tehran’s political calculus, Washington is defending the sanctions based only on their quantity and severity.

Between the lines: The current U.S. approach is unlikely to succeed.

The one thing Tehran would find more intolerable than suffering from sanctions is surrendering to them. Its counterstrategy: resist and survive, as it has in other collapses of oil revenue over the last 4 decades.

Iran will not negotiate without a strong hand. During the nuclear deal talks, President Obama took regime change off the table and let Iran enrich uranium on its own soil. Coercive diplomacy needs inducements of a kind the Trump administration has not offered.

The bottom line: The net effect of maximum pressure is an Iran with its economy in ruins but its regime intact. To prevent a costly war of choice, the U.S. may need to step aside from maximalist demands and preconditions and use staggered sanctions relief to advance win-win negotiations.

Ali Vaez directs the Iran Project at the International Crisis Group.

Trump's Iran policy could prop up regime in spite of economic harms

In the long term, hardliners could prevail while the middle class suffers.

Iranian President Hassan Rouhani at a Cabinet meeting in Tehran. Photo: Iranian presidency handout/Anadolu Agency/Getty Images

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The <a class="gtmContentClick" data-vars-link-text="announcement" data-vars-click-url="https://www.axios.com/iran-to-suspend-some-nuclear-deal-commitments-3bfc7fa6-89c7-4673-89df-c78cfeb5bf5c.html" data-vars-content-id="98bb843c-ca91-4e26-b033-f281afc33227" data-vars-headline="Trump&#x27;s Iran policy could prop up regime in spite of economic harms" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/iran-to-suspend-some-nuclear-deal-commitments-3bfc7fa6-89c7-4673-89df-c78cfeb5bf5c.html" target="_self">announcement</a> by President Hassan Rouhani on Wednesday that Iran will partially cease to comply with the 2015 nuclear deal was a foreseeable outgrowth of draconian sanctions imposed by the U.S. after its withdrawal from the agreement last year.Why it matters: The Trump administration&#x27;s &quot;maximum pressure&quot; campaign has increased the threat of a nuclear escalation across the Middle East. Even short of that nightmare scenario, it could be self-defeating in the long term, hurting Iran’s pro-Western middle class at the expense of hardliners who control both the black market and a repressive state apparatus to stifle dissent.

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

Iran's announcement that it's stepping up uranium enrichment levels to 5% follows its  breach of the 2015 nuclear deal's stockpile limits and marks its latest escalatory gambit to secure economic relief from Europe, sanctions reductions from the U.S., or both.

Why it matters: For a year after the U.S. withdrew from the Joint Comprehensive Plan of Action (JCPOA), Iran stuck to the agreement, hoping its compliance would be reciprocated by other signatories' initiatives. With Europe's special trade mechanism slow to come together, Tehran is stepping up enrichment to raise the costs of European delay and American escalation. Yet each new measure increases the possibility of a U.S. or Israeli military strike against Iran.

Where it stands: Breaching the 300 kilogram limit on low-enriched uranium earlier this month was a fairly modest, reversible first step; increasing enrichment levels beyond the 3.67% allowed under the deal begins to chip away at the deal's non-proliferation gains. But the move is still more of a warning sign than a meaningful step toward a bomb.

What to watch: There are 3 likely scenarios.

Fearful of a growing crisis, Europe seeks to mediate between Washington and Tehran. In a July 6 phone call with his Iranian counterpart Hassan Rouhani, French President Emmanuel Macron discussed the prospects of resuming nuclear talks. That would almost certainly require Iran's return to compliance with the deal and a U.S. commitment to some sanctions relief, though the latter seems unlikely.

Should that fail, Europe could condemn Iran's latest move while treating it as an act of diplomatic brinkmanship rather than a non-proliferation crisis. In turn, it could expedite work on financial channels to appease Iran and keep the agreement from fully unraveling.

Dissatisfied with European and the U.S. responses, Iran breaches more sensitive parts of the deal, such as enriching to 20% or limiting access by international nuclear inspectors. Europe could then initiate the JCPOA's dispute resolution mechanism for non-compliance, eventually leading to the reimposition of sanctions against Iran. The breaches also could trigger a U.S. or Israeli military operation against Iranian nuclear facilities.

The bottom line: The U.S. withdrawal from the JCPOA did not kill the deal, but new sanctions have made it difficult for anyone else to save the accord. As the Trump administration's maximum pressure campaign continues, it leaves fewer and fewer off-ramps from potential confrontations.

Robert Malley is president and CEO of the International Crisis Group, where Ali Vaez directs the Iran Project.

Iran's nuclear escalation raises stakes for U.S. and Europe

For now, higher enrichment is more of a warning than a step toward a bomb.

Behrouz Kamalvandi and Ali Rabiei seated while giving a press conference

Iranian Atomic Energy Organisation spokesman Behrouz Kamalvandi and government spokesman Ali Rabiei at a press conference in Tehran on July 7. Photo: Iranian Presidency/AFP/Getty Images

Nuclear program of Iran

Iran&#x27;s <a class="gtmContentClick" data-vars-link-text="announcement" data-vars-click-url="https://www.axios.com/iran-nuclear-deal-tehran-announces-new-breach-22facaee-c906-4cc2-8d32-e462ed2bf4bd.html" data-vars-content-id="a73a13a0-067b-4782-bd5d-51079b5a991e" data-vars-headline="Iran&#x27;s nuclear escalation raises stakes for U.S. and Europe" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/iran-nuclear-deal-tehran-announces-new-breach-22facaee-c906-4cc2-8d32-e462ed2bf4bd.html" target="_self">announcement</a> that it&#x27;s stepping up uranium enrichment levels to 5% follows its <a class="gtmContentClick" data-vars-link-text="breach" data-vars-click-url="https://foreignpolicy.com/2019/07/02/iran-isnt-trying-to-build-a-bomb-tomorrow-it-wants-sanctions-relief-uranium-jcpoa-trump-enrichment/" data-vars-content-id="a73a13a0-067b-4782-bd5d-51079b5a991e" data-vars-headline="Iran&#x27;s nuclear escalation raises stakes for U.S. and Europe" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://foreignpolicy.com/2019/07/02/iran-isnt-trying-to-build-a-bomb-tomorrow-it-wants-sanctions-relief-uranium-jcpoa-trump-enrichment/" target="_blank">breach</a> of the 2015 nuclear deal&#x27;s stockpile limits and marks its latest escalatory gambit to secure economic relief from Europe, sanctions reductions from the U.S., or both.Why it matters: For a year after the U.S. withdrew from the Joint Comprehensive Plan of Action (JCPOA), Iran stuck to the agreement, hoping its compliance would be reciprocated by other signatories&#x27; initiatives. With Europe&#x27;s special trade mechanism slow to come together, Tehran is stepping up enrichment to raise the costs of European delay and American escalation. Yet each new measure increases the possibility of a U.S. or Israeli military strike against Iran.

Ali Vaez

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Iran's nuclear escalation raises stakes for U.S. and Europe

Trump's Iran policy could prop up regime in spite of economic harms