The transatlantic and Cold War dynamics of Iran sanctions, 1979–80

Christian Emery is a Fellow in the Department of International Relations at the London School of Economics. He is currently converting his doctoral thesis, which examined the Carter Administration's policy towards the Islamic Republic of Iran, into a book.

Abstract

This article examines the transatlantic economic sanctions levied against Iran following the US embassy hostage crisis. It charts their shifting objectives and notes their integration with US–Iranian relations, transatlantic dynamics and Cold War concerns. Two main conclusions are drawn. Firstly, that the sanctions pursued multiple objectives besides efforts to coerce the Iranian regime. Secondly, that their economic scope is an unreliable indicator of their effectiveness or transatlantic cooperation. The Soviet intervention in Afghanistan enhanced the tactical value of sanctions as a substitute for actions that posed greater geo-political risks for the United States. The European allies, though eager to protect their substantial financial investments in Iran, eventually acquiesced to demonstrate transatlantic solidarity and prevent a US military intervention that threatened their vital interests.

Notes

Christian Emery is a Fellow in the Department of International Relations at the London School of Economics. He is currently converting his doctoral thesis, which examined the Carter Administration's policy towards the Islamic Republic of Iran, into a book.

  [1] Westad, The Global Cold War, 288; Halliday, ‘The Iranian Revolution and Great Power Politics’, 246; Rubenstein, ‘The Soviet Union and Iran under Khomeini’, 599.

  [2] Cottam, ‘US and Soviet Responses to Islamic Political Militancy’, 274.

  [3] Parsi, Treacherous Alliance, 89; Rubenstein, ‘The Soviet Union and Iran under Khomeini’, 599; Carter, Keeping Faith, 473.

  [4] Moses, Freeing the Hostages, 2. For discussion of Zbigniew Brzezinski's urging of a military solution see Brzezinski, Power and Principle, chap 10; Sick, All Fall Down, 170–1; Vance, Hard Choices, chaps 14–15; Sullivan, Mission to Iran, 22.

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  [6] Cottam, ‘US and Soviet Responses to Islamic Political Militancy’, 277.

  [7] Rubenstein, ‘The Soviet Union and Iran under Khomeini’, 599; Walt, Revolution and War, 257; Parsi, Treacherous Alliance, 90; Westad, The Global Cold War, 296; Rubin, ‘American Relations with the Islamic Republic of Iran, 1979–1981’, 310; Saivetz, ‘Superpower Competition in the Middle East’, 88.

  [8] Parsi, Treacherous Alliance, 89; Cottam, ‘US and Soviet Responses to Islamic Political Militancy’, 279; see also Rubenstein, ‘The Soviet Union and Iran under Khomeini’; Chubin, ‘The Soviets and the Gulf’, 62; Hiro, Iran under the Mullahs, 62.

  [9] Haughton, US Foreign Policy and the Iran Hostage Crisis, 105; Sick, All Fall Down, 280.

 [10] Moses, Freeing the Hostages, 85.

 [11] Paul Henze to Zbigniew Brzezinski, ‘Thoughts on Iran’, memo, 9 November 1979. Declassified Documents Reference System.

 [12] Chubin, ‘The Soviets and the Gulf’, 924; Moses, Freeing the Hostages, 9; Jordan, Crisis, 38; Carter, Keeping Faith, 460.

 [13] Brzezinski, Power and Principle, 484–5.

 [14] Lindsay, ‘Trade Sanctions As Policy Instruments’, 159; see Christopher, American Hostages in Iran, 24–5; Carswell, ‘Economic Sanctions and the Iran Experience’, 247–8; Cawell and Davis, ‘Crafting the Financial Settlement’, 231; Baldwin, Economic Statecraft, 254; Moses, Freeing the Hostages, 338.

 [15] Carswell, ‘Economic Sanctions and the Iran Experience’, 254.

 [16] Saunders, American Hostages in Iran, 44–5; Sick, All Fall Down, 206; Vance, Hard Choices, 375–7; Bill, The Eagle and the Lion, 296–7; Farber, Taken Hostage, 182; Haughton, US Foreign Policy and the Iran Hostage Crisis, 10; Moin, Khomeini: Life of the Ayatollah, 227–8; Alerassool, Freezing Assets, 101.

 [17] Alikhani, Sanctioning Iran, 83; Carswell, ‘Economic Sanctions and the Iran Experience’, 253; Hiro, Iran under the Mullahs, 323; John M. Goshko, ‘U.S. criticizes British shift on Iran sanctions’, Washington Post, 22 May 1980; ‘Europe Goes Its Own Way’, Newsweek, 2 June 1980, United States edition, 44; ‘Hostage debate delayed; Britain sanctions still allow business’, The Associated Press, 30 May 1980; Pollack, The Persian Puzzle, 170.

 [18] Bradley Graham, ‘Europe to impose sanctions on Iran despite Britain’, Washington Post, 21 May 1980.

 [19] Total exports to Iran by EC member states in the reported period of 1979 were valued at US$ 2.691 billion, in comparison with US$ 4.132 billion during 1980. Official Journal of the European Communities, no C115/ 2021, 18 May 1981.

 [20] Carter, Keeping Faith, 464–5, 486–7; Jordan, Crisis, 247; Saunders, ‘Diplomacy and Pressure’, 99, 110; Sick, ‘Military Options and Constraints’, 153; Vance, Hard Choice, 408.

 [21] ‘Storm over the Alliance’, Time, 28 April 1980.

 [22] Baldwin, Economic Statecraft, 114.

 [23] For Europe's scepticism of US policy in response to the Afghan crisis see Goldman, ‘President Carter’, 19–34.

 [24] Robert B. Cullen, Associated Press, 6 November 1979. Copulos and Phillips, ‘The Iranian Dilemma’. US imports of Iranian oil were higher in November 1979 than in the same month of any other previous year (Energy Information Administration statistics).

 [25] Alikhani, Sanctioning Iran, 67.

 [26] Carswell and Davies, ‘The Economic and Financial Pressures’, 176.

 [27] Jonathan C. Randal ‘U.S., Iran declare halt to oil trade’, Washington Post, 13 November 1979.

 [28] Copulos and Phillips, ‘The Iranian Dilemma’.

 [29] Randal ‘U.S., Iran declare halt to oil trade’; W.A. Bachman, ‘U.S. shaping strategy to offset Iranian crude loss’, Oil & Gas Journal, 3 December 1979.

 [30] Jordan, Crisis, 54; Carter, Keeping Faith, 461; Carswell and Davies, ‘The Economic and Financial Pressures’, 176.

 [31] ‘Iran: The Test of Wills’, Time, 26 November 1979.

 [32] ‘What if Iran ended U.S. Oil Sales?’, U.S. News & World Report, 19 November 1979.

 [33] Carswell and Davies, ‘The Economic and Financial Pressures’, 176; Baldwin, Economic Statecraft, 255.

 [34] ‘Pressure on the Ayatollah’, Washington Post, 13 November 1979; Carswell and Davies, ‘The Economic and Financial Pressures’, 176.

 [35] NSC memo to Phil Wise and Carter, ‘Text of Khomeini Speech’, 20 November 1979. Jimmy Carter Library, Atlanta, GA, Box 30, File Iran: 11/21 27/79.

 [36] All figures taken from ‘How to be a good ally without putting oneself out’, The Economist, 19 April 1980, 47.

 [37] Shehadi, ‘Economic Sanctions and Iranian Trade’, 15–6.

 [38] Carter Press Conference, Washington DC, 12 November 1979 quoted in Alikhani, Sanctioning Iran, 67.

 [39] Jordan, Crisis, 55; Carter, Keeping Faith, 466.

 [40] John M. Goshko and Don Oberdorfer, ‘Iranians reject PLO mediation on hostages’, Washington Post, 9 November, 1979. For an account of America's efforts to enlist the mediation of the PLO see Saunders, ‘Diplomacy and Pressure’, 78–9.

 [41] Edward Cody, ‘PLO pledges “utmost effort” to win release of hostages in U.S. embassy’, The Washington Post, 11 November 1979.

 [42] The threat was made by acting Iranian foreign and finance minister, Abolhassan Bani-Sadr on 13 November. In July 1981, Fernand St Germain, chairman of the House Committee on Banking, Finance and Urban Affairs, confirmed plans to enact a freeze in the event of a threatened withdrawal of Iranian assets predating the hostage crisis. see ‘Iran, the financial aspects of the Hostage Settlement Agreement’, Committee on Banking, Finance and Urban Affairs, House of Representatives, 97th Congress, 1st Session, July 1981.

 [43] Moses, Freeing the Hostages, 328.

 [44] Moses, Freeing the Hostages, 328 Moses bases this assessment on interviews with senior Treasury officials, Robert Carswell and Richard Davies. For other studies of this motivation see Cohen, In Whose Interest?; Lissakers, ‘Money and Manipulation’; Fatemi, ‘The Iranian Revolution’.

 [45] Carswell, ‘Economic Sanctions and the Iran Experience’, 249. See also chapters by Carswell, Davies and Hoffman in Christopher (ed) American Hostages in Iran: Conduct of a Crisis.

 [46] Carswell, ‘Economic Sanctions and the Iran Experience’, 250.

 [47] Editorial, Wall Street Journal, 4 December 1979.

 [48] Hugh Anderson, ‘Carter's monetary moves against Iran have set precedent for U.S. currency’, The Globe and Mail, 17 November 1979.

 [49] ‘U.S. bars purchase of Iranian oil, freezes Iran's assets; Teheran submits new conditions for release of hostages; U.N. role proposed’, Facts on File World News Digest, 16 November 1979, World Affairs, 861.

 [50] Edward Cody, ‘U.S. freeze on Iran's assets is troubling Saudi Arabians’, Washington Post, 24 November 1979.

 [51] Edward Cody, ‘US reassures Saudis on bank assets’, Washington Post, 26 November 1979.

 [52] Cody, ‘U.S. freeze on Iran's assets is troubling Saudi Arabians’.

 [53] Cody, ‘U.S. freeze on Iran's assets is troubling Saudi Arabians’

 [54] Carswell and Davies, ‘The Economic and Financial Pressures’, 180.

 [55] Cody, ‘US reassures Saudis on bank assets’.

 [56] Energy Information Administration: Table 11.5 World Crude Oil Production, 1960–2006.

 [57] Moses, Freeing the Hostages, 338.

 [58] Moses, Freeing the Hostages, 338

 [59] Moses, Freeing the Hostages, 338; Carswell, ‘Economic Sanctions and the Iran Experience’, 264; see also see Hoffman, ‘The Bankers Channel’.

 [60] Christopher, American Hostages in Iran, 24–5; Carswell, ‘Economic Sanctions and the Iran Experience’, 263; Moses, Freeing the Hostages, 328.

 [61] Moses, Freeing the Hostages, 113.

 [62] See Hoffman, ‘The Bankers Channel’.

 [63] Carswell, ‘Economic Sanctions and the Iran Experience’, 261.

 [64] Caswell, ‘Economic Sanctions and the Iran Experience’, 255.

 [65] Carswell and Davies, ‘The Economic and Financial Pressures’, 177. The extent that the Iranians were fully aware of their complex financial investments and holdings in US holdings is unclear.

 [66] Carter, Keeping Faith, 464–5.

 [67] Quoted in Edward Walsh, ‘Rivals doubt Carter will retain poll gains after Iran crisis’, Washington Post, 17 December 1979.

 [68] United Nations Security Council Resolution 457, S/ INF/ 35, 1979.

 [69] Saunders, ‘Diplomacy and Pressure’, 98.

 [70] Ganji, Politics of Confrontation, 167.

 [71] Carter, Keeping Faith, 466.

 [72] Hiro, Iran under the Mullahs, 323.

 [73] ‘How much will sanctions cost us?', The Economist, 26 April 1980, 54.

 [74] Hiro, Iran under the Mullahs, 323.

 [75] Alikhani, Sanctioning Iran, 71.

 [76] ‘Hostage debate delayed; Britain sanctions still allow business’, The Associated Press, 30 May 1980.

 [77] Shehadi, ‘Economic Sanctions and Iranian Trade’.

 [78] Hiro, Iran under the Mullahs, 323; Alikhani, Sanctioning Iran, 71.

 [79] Hiro, Iran under the Mullahs, 323.

 [80] Robert McCartney, ‘Europeans discuss Iran sanctions’, Associated Press, 17 May 1980, 71.

 [81] Robert McCartney, ‘Europeans discuss Iran sanctions’, Associated Press, 17 May 1980, 71

 [82] ‘How much will sanctions cost us?’, The Economist, 26 April 1980, 54.

 [83] Sick, ‘Military Options and Constraints’, 241.

 [84] Carter, Keeping Faith, 466.

 [85] Sick, ‘Military Options and Constraints’, 242.

 [86] With the USSR, Czechoslovakia, Kuwait and Bangladesh abstaining.

 [87] Carter, Keeping Faith, 478.

 [88] It is likely that some had supported the resolution in the knowledge that the Soviets would veto it anyway.

 [89] John M. Goshko, ‘Allies’ laws may limit cooperation on Iran sanctions', Washington Post, 18 January 1980.

 [90] Christopher, American Hostages in Iran, 8; Saunders, ‘Diplomacy and Pressure’, 110; Goshko, ‘Allies’ laws may limit cooperation on Iran sanctions'.

 [91] McCartney, ‘Europeans discuss Iran sanctions’; ‘How to be a good ally without putting oneself out’, The Economist, 19 April 1980.

 [92] Carswell, ‘Economic Sanctions and the Iran Experience’, 253; Sick, ‘Military Options and Constraints’, 248; Ganji, Politics of Confrontation, 180; Bowie, ‘The Atlantic Alliance’, 62; Leonard Downie Jr, ‘Allies plan limits to their support of U.S. sanctions’, Washington Post, 18 January 1980.

 [93] ‘Mo'infar, Salimi on EEC Decision’, Paris AFP, 23 April 1980, FBIS-SAS-80-080.

 [94] ‘GDR will reportedly provide food supplies if necessary’, Baghdad INA – 21 November 1979, FBIS-MEA-79-226.

 [95] National Intelligence Daily, CIA, Wednesday 30 April 1980, http://www.foia.cia.gov.

 [96] Moses, Freeing the Hostages, 84–5.

 [97] Fritz Ermath to Brzezinski, ‘NSC on Afghanistan’, National Security Council, memorandum, NSC026, 2 January 1980. National Security Archives.

 [98] Hilali, ‘Soviet Decision-making’, 122.

 [99] Hartman, ‘“The Red Template”’, 468–9.

[100] Quoted in Westad, The Global Cold War, 315.

[101] Saivetz, ‘Superpower Competition’, 90; Westad, The Global Cold War, 315–25; Hiro, Iran under the Mullahs, 284.

[102] Saivetz, ‘Superpower Competition’, 90.

[103] Moses, Freeing the Hostages, 85; Sick, ‘Military Options and Constraints’, 343.

[104] Brzezinski, Power and Principle, 480; Jordan, Crisis, 53.

[105] Brzezinski, Power and Principle, 484–5.

[106] Brzezinski, Power and Principle, 484; Moses, Freeing the Hostages, 88; Ganji, Politics of Confrontation, 180.

[107] Baldwin, Economic Statecraft, 260.

[108] Cullen, ‘US, Allies to postpone new sanctions against Iran’.

[109] Richard Lehman, ‘US stake in Iran’, 27 November 1979, Jimmy Carter Library. Brzezinski Country File, 1977–81, Iran: 11/21–27/79, Box 30.

[110] Richard Lehman, ‘US stake in Iran’, 27 November 1979, Jimmy Carter Library. Brzezinski Country File, 1977–81, Iran: 11/21–27/79, Box 30

[111] Paul Henze to Brzezinski, National Security Council memo, 11 April 1980. Declassified Documents Reference System.

[112] Hamilton Jordan Confidential File, Box 34B, 1977–80, Iran: 11/79–03/80. Jimmy Carter Library.

[113] ‘Minutes from National Security Council Meeting’, NSC 026, 2 January 1980. National Security Archives, Washington DC, Carter–Brezhnev Project, Box No.5.

[114] Memo to President Jimmy Carter from Hamilton Jordan, 4 February 1980. Declassified Documents Reference System.

[115] State of the Union Address, 23 January 1980.

[116] Memo from DCI, ‘The Hostage Situation’, 9 January 1980. Jimmy Carter Library, Brzezinski's Country Files, 1977–81. NLC-6-30-6-3-3.

[117] Hamilton Jordan to Jimmy Carter, ‘What can we do about the hostages?’, 22 January 1980. Jimmy Carter Library, Hamilton Jordan's Confidential Files, 1977–80, Box 34B,

[118] Saunders, ‘Diplomacy and Pressure’, 110.

[119] Hamilton Jordan to Jimmy Carter, ‘What can we do about the hostages?’, 22 January 1980.

[120] CIA memorandum, ‘Iran: Bani-Sadr's foreign policy views’, 5 February 1980. DDRS.

[121] For a description of this initiative see Saunders, ‘Diplomacy and Pressure’, 114–25.

[122] For a description of this initiative see Saunders, Diplomacy and Pressure, 120.

[123] For a description of this initiative see Saunders, Diplomacy and Pressure, 132.

[124] Moses, Freeing the Hostages, 156.

[125] Bakhash, The Reign of the Ayatollahs, 67.

[126] Sick, ‘Military Options and Constraints’, 272; Saunders, Diplomacy and Pressure, 134.

[127] Carter, Keeping Faith, 482; Moses, Freeing the Hostages, 108.

[128] Lundestad, The United States and Western Europe Since 1945, 201–2. See also Lundestad, Empire by Integration, 108–9; Freedman, ‘The Atlantic Crisis’, 395.

[129] Lundestad, The United States and Western Europe Since 1945, 202–8; Dankert, ‘Europe Together, America Apart’, 20; ‘Europe's ostrich and America's eagle’, The Economist, 8 March 1980.

[130] Leonard Downie Jr, ‘Allies had hoped to prevent use of force by U.S.; joining sanctions seen as inducement’, Washington Post, 24 April 1980.

[131] Goldman, ‘President Carter’, 19.

[132] Westad, ‘The Fall of Détente and the Turning Tides of History’, 22; Leffler , For the Soul of Mankind, 233; see also Zubok, A Failed Empire.

[133] Lundestad, The United States and Western Europe Since 1945, 212; Bowie, ‘The Atlantic Alliance’, 60.

[134] Goldman, ‘President Carter’, 20

[135] Goldman, ‘President Carter’, 20

[136] Lundestad, The United States and Western Europe Since 1945, 208; Carter, Keeping Faith, 465, 486–7.

[137] Goldman, ‘President Carter’, 23.

[138] Bowie, ‘The Atlantic Alliance’, 60.

[139] Lundestad, The United States and Western Europe Since 1945, 209.

[140] Bowie, ‘The Atlantic Alliance’, 60.

[141] Carter, Keeping Faith, 465, 486–7.

[142] Cable from Walter John Stoessel Jr to Vance, ‘FRG will apply sanctions against Iran’, cable no. 01017, 17 January 1980. Declassified Documents Reference System.

[143] ‘Cable from President Carter to German Chancellor Helmut Schmidt regarding Germany's decision to apply sanctions against Iran’, 18 January 1980. DDRS.

[144] Downie, ‘Allies plan limits to their support of U.S. sanctions’.

[145] Letter to President Jimmy Carter from Chancellor Helmut Schmidt regarding West German support of US sanctions against Iran, 18 January 1980.

[146] Bradley Graham, ‘Schmidt says Bonn ready to back U.S. on Afghanistan, Iran’, Washington Post, 18 January 1980.

[147] Maureen Johnson, ‘Eight Common Market countries pledge retroactive sanctions against Iran’, Associated Press, 21 May 1980.

[148] Goldman, ‘President Carter’, 25.

[149] Dankert, ‘Europe Together, America Apart’, 20; Freedman ‘The Atlantic Crisis’, 401.

[150] For discussion of the implications of the Carter Doctrine for Europe see Njølstad, ‘Shifting Priorities’.

[151] Bowie, ‘The Atlantic Alliance’, 58; Ellen Lentz, ‘Conference hears varied views on Europe's role in crisis’, New York Times, 16 June 1980, 14; Dankert, ‘Europe Together, America Apart’, 20.

[152] Lundestad, The United States and Western Europe Since 1945, 211; Laird, ‘France, Germany, and the Future of the Atlantic Alliance’, 51.

[153] Downie, ‘Allies had hoped to prevent use of force by U.S.’.

[154] Robert Cullen, ‘Immediate, tangible results from new sanctions aren't likely’, Associated Press, 8 April 1980.

[155] Alikhani, Sanctioning Iran, 79.

[156] William M. Welch, ‘Reagan calls Iran sanctions more of same’, Associated Press, 7 April 1980.

[157] Downie, ‘Allies had hoped to prevent use of force by U.S.’.

[158] Prime Minister Thatcher's Statement to the Commons, 13 April 1979.

[159] Quoted in Ronzitti, Rescuing Nationals Abroad, 43.

[160] Despite planning and training for Operation Eagle Claw having started almost immediately after the crisis began, the first realistic capability for a rescue mission was not reached until the end of March.

[161] Holloway Report, 17. http://www.gwu.edu/∼ nsarchiv/NSAEBB/NSAEBB63/doc8.pdf.

[162] Reisman, ‘The Legal Effect of Vetoed Resolutions’, 905.

[163] Downie, ‘Allies had hoped to prevent use of force by U.S.’.

[164] John M. Goshko and Don Oberdorfer, ‘The options now; future course of the confrontation is more complicated and dangerous’, The Washington Post, 26 April 1980.

[165] John M. Goshko and Don Oberdorfer, ‘The options now; future course of the confrontation is more complicated and dangerous’, The Washington Post, 26 April 1980

[166] John M. Goshko and Don Oberdorfer, ‘The options now; future course of the confrontation is more complicated and dangerous’, The Washington Post, 26 April 1980

[167] ‘Stunned allies react to aborted hostage rescue effort’, Associated Press, 25 April 1980.

[168] This was already being undermined by different opinions on how best to deal with rising oil prices and the lingering question of the British rebate.

[169] Downie, ‘Allies had hoped to prevent use of force by U.S.’.

[170] ‘Carrington's first stumble’, The Economist, 24 May 1980, 74.

[171] Johnson, ‘Eight Common Market countries pledge retroactive sanctions against Iran’.

[172] John M. Goshko, ‘U.S. criticizes British shift on Iran sanctions’, Washington Post, 22 May 1980.

[173] John M. Goshko, ‘U.S. criticizes British shift on Iran sanctions’, Washington Post, 22 May 1980

[174] Johnson, ‘Eight Common Market countries pledge retroactive sanctions against Iran’.

[175] ‘Europe goes its own way’, Newsweek, 2 June 1980, United States edition, 44.

[176] ‘Hostage debate delayed; Britain sanctions still allow business’, The Associated Press, 30 May 1980.

[177] ‘Hostage debate delayed; Britain sanctions still allow business’, The Associated Press, 30 May 1980

[178] Carter, Keeping Faith, 465, 486–7.

[179] Carter, Keeping Faith, 465, 486–7

[180] For Germany's role in the crisis see Hoffman, ‘The Bankers Channel’, 246. For the relationship between Carter and Schmidt see Lundestad, The United States and Western Europe Since 1945, 204, 200. For American support for US policy see Goldman, ‘President Carter’, 21–3.

[181] ‘European Community nations impose sanctions on Iran; Britain modifies stand’, Facts on File World News Digest, 23 May 1980, 378.

[182] Christopher, American Hostages in Iran, 8.

[183] Downie, ‘Allies had hoped to prevent use of force by U.S.’; Baldwin, Economic Statecraft, 261; Vance, Hard Choice, 381; Carter, Keeping Faith, 466.

[184] Brzezinski, Power and Principle, 487.

[185] Hiro, Iran under the Mullahs, 323.

[186] Moses, Freeing the Hostages, 337; Farber, Taken Hostage, 4–5; Bill, The Eagle and the Lion, 296; Sadjadpour, Reading Khamenei, 11.

[187] Sadjadpour, Reading Khamenei, 11.

[188] Christopher, American Hostages in Iran, 8.

[189] Quoted in ABC News Transcripts: ‘World News Tonight’, 11 May 1980.

[190] State Department: Iran Transitional Paper: #1, 4 December 1980, National Security Archives.

[191] Shehadi, ‘Economic Sanctions and Iranian Trade’, 16.

[192] Ramazani, ‘Iran: Burying the Hatchet’, 63.

[193] Ramazani, ‘Iran: Burying the Hatchet’ 64.