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.