Monday, May 23, 2011

Impact of Sanctions on Iran

By Nader Uskowi

During a breakout session yesterday at the AIPAC policy conference underway in Washington, the impacts of economic sanctions on Iran were discussed: Are the current sanctions effective, and are there more that can be done by the US? Following are the highlights:

- CISADA, US’s Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, is regarded as the first real biting sanctions regime after successive US administrations failed to impose any meaningful sanctions on Iran.

- Out of the grand total of 30 banks operating in Iran, 21 have been put under CISADA’s sanctions. Foreign banks that deal with these Iranian banks would lose their access to US financial markets. It is estimated that 75% of major financial institutions that were operating inside Iran have consequently cut off their banking relations with Iran, forcing the country to use the few available channels at much higher costs. It was discussed that the administration needed to sanction one foreign bank still dealing with Iran to create much more effective results.

- The Central Bank of Iran (CBI) has not yet been added to the sanctions list. The addition of CBI would face opposition in Europe. But such move would have the most severe impact on the Iranian banking system.

- CISADA also prohibits foreign companies from engaging in trade of products that are on sanctions list, like gasoline, and would lose the privilege of working in the US market. If major global corporations follow this provision, Iran would be forced to deal with fewer companies left, again raising the cost of doing business for the country. Until now only a Belarusian oil company has been subjected to CISADA sanctions, a company that does not operate in the US in the first place. There were calls on the US administration to enforce the provision against companies that would have seriously impact on Iran, particularly the Chinese oil and gas companies.

- There were also discussions of indirectly add crude oil, Iran’s economic lifeblood, to the list of products on sanctions list. A direct move to include crude, it was argued, would put oil process at unacceptable levels, but tightening sanctions against companies and organizations active in crude oil supply chain, like IRGC, will affect the oil exports.

Concluding discussions: CISADA has had significant effects on the banking sector, but the work is incomplete. Sanctioning of a single foreign bank and the addition of CBI to the sanctions list would create prohibitively high costs for the country’s financial transactions. The impact on foreign companies still engaging in trade with Iran has been much less effective. Sanctioning a major company, like a major Chinese oil and gas company, would create much higher costs for Iran’s imports. On products on sanctions lists, without addition of crude oil, the country’s economic lifeblood, to the list, all existing sanctions would be only partially effective. Due to market sensitivity of higher oil prices, the move needs to be indirect, targeting companies in the crude oil supply chain. The sanctions make Iran’s transactions expensive and that’s their impact.


Anonymous said...

A nation like Iran with 70+ million population and lots of natural resources cannot be sanctioned or isolated. It's almost an impossible task. But that doesn't stop one from trying.

What is likely to happen in the near future as the US economy keep tanking with no end in sight, countries doing business with Iran will do it in currencies other than the US dollars or euro. That in itself will have far more negative consequences for the US itself than Iran. Iran's been working hard to establish an oil burse, which will soon come on-line. Already, China and Russia are doing trade in their local currencies and as trade grows between these two, others will emulate and follow suite. It's just a natural progression.

Having said that, for the time being, Iran will also experience a bit of difficulties in trade but that will ware-out over time as with any other sanctions.

The idiocy of the whole things is not about Iran's perceived nuclear threat. Iran actually suspended her nuclear program during the Khatami years(if I'm not mistaken) and got nothing in return - NOTHING!!! Pretty much like what happened to the North Koreans. Except that in case of North Korea, they actually detonated a nuclear device in response. So it wouldn't make any difference if Iran dismantle or continues with their program.

All these efforts are aimed at curtailing Iran's influence in the region and bolstering Israel and other US puppets in the region who happen to be on stilts at the moment and I doubt it will work in the long run.Americans have a habit of lacking foresight when it comes to strategic thinking. A clear case in point is how they're struggling to deal with the uprisings that's sweeping away their puppets in the region.

The futility of these sanctions is that, Iran doesn't have any monies saved in US banks like Gaddaffi and or the Persian Gulf Sheikdoms have and this makes any unilateral US sanctions against Iran always DOA. So in a desperate move, the US sanctions other countries that do business with Iran. This is surely bound to increase tensions among countries and will surely backfire as different countries have their own interest. Talk about winning friends. And as for the argument about the US putting sanctions on Chinese companies that do business with Iran, it's more a case of cutting ones nose to spite their face. The US simply cannot afford to get in an economic battle with china. Just look under your computer, ipad, iphone etc and you'll see "MADE IN CHINA" - that says is all. The Chinese are also in no way going to cut their trade relations with Iran just to please the US - especially in the highly volatile energy market. So with a little push from AIPAC, the US is committing suicide in broad day light on behalf of a foreign entity...Well done America!!

Anonymous said...

As a result the US is on the verge of bankrupcy and is only survivng because more and more Americans are gettimg homeless due to Aipac and Israel's diversion of wealth from the US into Israel for building houses on other peoples land.

At the end of the day, Iran uses other means to get what it wants.


Anonymous said...

It's telling that the economic warfare being directed at the ordinary people of Iran was addressed at a breakout session at the AIPAC policy conference.

This sort of effort is required to maintain Iran as a subordinate, stunting its economic growth, in order to maintain the supremacy of the colonial effort in place since 1949 at the western most tip of south Asia.

Anonymous said...

Can someone please tell me what is the cost of maintaining all these sanctions by the US? Seems to me apart from the US and US - "allied" stooges both in the ME and in Europe, who're on their way out by the way, nobody else takes it seriously. If someone could please throw some light on the issue, that will be great..