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Illustration: Sarah Grillo/Axios

President Trump has risked a split with America's closest allies and a possible ramp up in Iran's aggression, or even its nuclear program, in pursuing the hardline policies that culminated today in the restoration of sanctions on the country's oil, shipping and financial sectors.

Why it matters: The administration is betting the sanctions will hit the Iranian economy hard and force the regime to change course (or, perhaps, to change). The sanctions will indeed be painful, particularly as the SWIFT global payments system has now announced it’s cutting off several Iranian banks. But experts are far from convinced the pain will cause the regime to move in the direction Trump would like to push it.

The latest...

  • Secretary of State Mike Pompeo argued today that the sanctions will reduce Iran's capacity to "destabilize" the region. He’s demanding what amounts to a full capitulation from Tehran before any new deal is signed, and says the U.S. wants to “restore democracy” in the Islamic Republic. He hasn’t gone so far as to call for regime change, but has walked up to the line.
  • President Hassan Rouhani said today that Iran “will proudly break the sanctions,” which he says only hurt the Iranian people and which Iran is preparing to evade, including by repainting oil tankers and turning off their location devices.
  • The EU, France, Germany and the U.K. issued a joint declaration on Friday expressing “deep regret” over Trump’s decision and an “unwavering” commitment to the 2015 nuclear deal.

What they’re saying...

  • The Atlantic Council’s David Mortlock told reporters today there is now “similar economic pressure” as existed before the 2015 nuclear deal, “but much less diplomatic and political isolation” since the Trump administration is acting alone. Thus, Trump and Pompeo are demanding far more from Iran with considerably less leverage.
  • Holly Dagres, also from the Atlantic Council, added that hardliners in Tehran who railed against the 2015 deal, claiming the U.S. “would show its true colors,” have now been “strengthened," complicating matters further.
  • Robert Malley of the The International Crisis Group writes for Axios Expert Voices that "historically, there is little evidence that Iran’s economic performance correlates with its regional policy."
  • Similarly, CFR President Richard Haass told the NY Times, “there is nothing about the history of sanctions that suggests they can coerce any country into doing something big and dramatic. And this is a government that is unlikely to want to be seen as being coerced. That goes against the DNA of the Iranian revolution.”

What to watch...

  • These sanctions will inevitably hurt many ordinary Iranians. Shortages of medicine have already been reported. The Trump administration is betting Iranians will blame their government.
  • Behnam Ben Taleblu of the Foundation for Defense of Democracies writes for Axios Expert Voices that "there is a growingconsensus among analysts that Tehran will likely attempt to wait out the Trump administration and refrain from breaching the nuclear deal. Should Tehran hunker down and play for time, the Trump administration will need to find creative ways to tighten the sanctions belt such that time will cost the regime money, and lots of it."
  • Laura James of Oxford Analytica writes that "although Tehran is unlikely to violate the 2015 nuclear agreement, as both sides' positions harden the military may recommence naval confrontations in the Persian Gulf and expand missile development and testing." Iranian obstinance, she notes, “could move the Europeans closer to the U.S. position” over time.

Worth noting: Danish authorities have accused Iran of trying to assassinate a separatist leader living in Denmark, following a similar accusation from France. The Europeans have managed to silo off the nuclear issue from such tensions — for now.

Go deeper

Former FDA commissioner: "Reliable drug supply is absolutely critical"

Axios' Caitlin Owens and former FDA commissioner Mark McClellan. Photo courtesy of Axios Events

Having a reliable supply of pharmaceutical drugs throughout America will be "absolutely critical" to boosting affordability in health care during the Biden administration, former Food and Drug Administration (FDA) commissioner Mark McClellan said at a virtual Axios Event on Friday.

The big picture: McClellan, who served under President George W. Bush, says drugs having limited supply and limited competition leads to elevated pricing. He considers drug supply to be a national security and public health issue.

Felix Salmon, author of Capital
3 hours ago - Economy & Business

Americans are still spending money

Source: Census Bureau; Chart: Axios Visuals

Americans spent more money at stores and restaurants in 2020 than they did in 2019 — even in the face of a devastating global pandemic that shut down broad sectors of the economy.

Why it matters: The monthly retail sales report this morning came in well below expectations, and showed consumer spending falling on a seasonally-adjusted basis. Total expenditures were still higher in December 2020 than they were a year previously, however.

The deplatforming fight shifts to the courts

Illustration: Eniola Odetunde/Axios

The Capitol riot and tech firms' sweeping attempt in its wake to dislodge the online far right are kicking up efforts to have the courts settle knotty questions about online speech and power.

Why it matters: Legal battles could force the people angry at Big Tech to bring more rigor to arguments that have often devolved into messy sideshows.