Sanctions on Tehran: American Bets and Iranian Opportunities

Transcription

1 Sanctions on Tehran: American Bets and Iranian Opportunities Hussam Abu Hamed

2 Introduction: In last May, US President Donald Trump decided to withdraw from a nuclear agreement with Iran, in which the US administration did not see guarantees to prevent Iran from developing nuclear capabilities after It was devoid of clauses that would control Iran's influence in Syria, Yemen and Lebanon, and put an end to the ballistic missile program, and forces Iran to stop threatening its neighbors, the allies of the United States. The US administration called on Iran to renegotiate a new agreement to reach a "real and lasting" solution under verifiable conditions, not under the "unfair" conditions of Iran's nuclear agreement, which were "unsatisfactory". Europe expressed its deep regret for the American decision, and France and Germany have proposed to include US concerns in an agreement to be attached with the existing agreement, but Trump did not welcome the proposals of the Europeans, he was convinced by the need to take his administration out from the agreement, so the US administration imposed two packages of sanctions against Iran. The first one included, since 7 th of August, the financial, commercial and industrial sectors, while the second package, which took effect on 5 th of November, included the energy sector. Tehran has described the US sanctions as "unjust and illegal," and has stuck to the nuclear agreement, as long as it has benefited it, and if Europe has guaranteed to undermine US sanctions after canceling them according the nuclear agreement. It also rejected "last minute negotiations", predicting its ability to break sanctions and sell the oil. Will the financial and oil embargo which leads to collapses in the Iranian economy, force Tehran to sit down at the negotiating

3 table, to conclude a new agreement in accordance with strict US conditions? Or will Tehran be able to circumvent these sanctions, or co-exist with them, as well as it coexisted with the Western and international sanctions before concluding the current nuclear agreement? The bets of US punitive policy The United States seeks to stifle the Iranian economy and prevent the flow of the dollar and other hard currency into the Iranian treasury. Trump's administration is betting on the Iranians' conviction that the new sanctions will continue until a broader agreement on nuclear and non-nuclear issues is reached and that their confidence is shaken as this policy changes as the current administration changes. The White House seeks to frame sanctions that have been reintroduced as counter-terrorism measures, which increases the likelihood of its resilience to political changes in the United States. Increases the likelihood of its steadfastness against the political changes in the United States. Since the Europeans do not express reservations about the cooperation on counterterrorism issues, Trump tries to convince the Europeans that there is a link between terrorism and certain entities on the list of " Specific Global Terrorists ". More than 700 individuals, entities, ships and aircrafts have been listed on the sanctions list, including the major banks, the oil exporters and the shipping companies. US Secretary of State Mike Pompeo announced that more than 100 major international companies had withdrawn from Iran because of US sanctions (including major auto and energy companies: the French "Total", the Italian "Eni",the French

4 "Peugeot" and the German "Daimler"). Pompeo added that the oil exports fell by about one million barrels per day, which is choking the Iranian energy sector, the main source of income in the country, and it is expected that the International Financial Telecommunication Association, "SWIFT" will cut its contacts with Iranian entities which are targeted by the sanctions, thus Iran will be isolated from the global financial regime. The middle-class feeling of sanctions pain can turn the corruption evading sanctions in Iran from a problem into an opportunity for Washington to exploit, exploiting the public anger in Iran from those who win concessions through illegal earnings, and some analysts believe that although Trump's administration has little credibility with the Iranian people, but Washington can rely on comprehensive information about the corruption, provided by Iranian sources, that could raise the Iranians' concern about the threat their leaders pose on their economic future. Between sanctions and wrong government policies Washington's decision-making circles interpreted widespread protests in Iranian cities following the collapse of the Iranian riyal this year as a direct result of the US embargo, but American experts justified the protests with the accumulated problems that the Iranian economy has for decades, and led to a living crisis. The Atlantic Institute said that Iran did not come out of the US embargo, even after the nuclear agreement in Most of the deals and trade memorandums signed by Iran with the European and Asian companies were rejected by banks, despite the American encouragement, and the appeal by the former Secretary of State John Kerry the financial and banking sectors to deal with Iran. Thus, many experts believe that Iran can live

5 with the current US embargo as it coexisted with the previous Western embargo, despite the fragility of the Iranian economy, which already suffers from several crises, starting with the collapse of the riyal, corruption and the control of the Iranian Revolutionary Guards over companies and the money market, and not ending with the inflation and high unemployment rates. The unemployment rate in Iran, according to World Bank estimates, was 12.4% in the last summer and is expected to reach 30% among the young people next year, compared with the current level of 28.3%, according to the bank's statistics in last June. The International Monetary Fund's (IMF) expectation about Iran's GDP shows a drop of 1.5% this year compared to 3.6% next year. The misguided government policies may have contributed to a more pessimistic outlook about the Iranian economy more than the fear of the consequences of the new US sanctions. For example, the exchange-rate policies have exhausted the public funds and increased the wealth of corrupt elites, so almost all of the dollars derived from oil exports have been converted at the low official prices, the oil revenues between April and September were only 82% of the budgeted amount, according to the central bank data, while a large surplus and government gains of at least 25% of the budget would have been achieved if these revenues had been converted according to the free market price. At the beginning of last October, the central bank of Iran announced that it would provide 95 billion dollars at the official price (42,000 riyals per dollar) for the main commodities, but many of these commodities are sold at prices which are equal to the free market price of 140,000 riyals per dollar, which means a difference of 30 billion dollars for the mediators. What Increase

6 the economic difficulties are the control of the Iranian Revolutionary Guards over some economic sectors where its policies are counterproductive. It is true that Tehran stock exchange has risen 90% since the new Iranian year until mid-october, but this was the result of a crisis of confidence with banks and the concerns about inflation, which led to a flow of funds on shares, but the value of shares estimated by dollar continues to fall sharply. The Iranian economy is expected to witness a greater protection, or to apply what the Iranians call a more resistant economy, which is based on slogans rather than on economic policy. There is a fear that sanctions will re-produce a hybrid situation that puts Iran's economy out of the global economic circle again, opening the door to mismanagement, smuggling and the creation of new rich. Positive indicators and opportunities to withstand There are positive indicators reflected in reports on the Iranian economy. Compared to last year, Iran's exports rose this year, and its imports declined, this supported the GDP as the non-oil trade balance improved by 8.5 billion $, covered by petrochemical exports valued at 7.02 Billion dollars, easing the pressure on reserves. Iran's economy which is about billion $, according to World Bank Statistics, does not depend heavily on oil sales, as it is expected, but it depends on other economic activities, including agriculture and industry. According to World Bank statistics, oil accounts for only 13.57% of Iran's GDP, as it was 34% or about22.5 billion $ of the 2017 budget. Iran has already reached agreements with several countries in terms of oil sales, forcing Trump's administration to grant six-

7 month exceptions to eight countries, including Turkey, Japan and South Korea But granting these exceptions to countries that originally refuse to apply US sanctions has made some see it as a way to save the American face no more. Economists do not see the possibility of Iran's oil zeroing, as the first importer of Iranian oil Chinacontinues to buy it, although there are real problems related to bank transactions under the US embargo, China was unable to buy all the quantity which previously purchased from Iran in last October, because China's Kunlun Bank has failed to deal with the Iranians as a compliance with the sanctions. However, there are opportunities for countries such as China, India, Russia and the European Union, which need Iranian oil, to circumvent the ban by creating small companies that have no commercial interests in America and can buy the Iranian oil through these companies. Thus, the secondary embargo that America threatens global companies will not be useful for punishing such companies, or even placing them on the blacklist in The US Treasury Department. The barter style of Iranian oil purchases allows these countries to break US sanctions, without breaking the essence of the US demand of preventing the dollar from flowing into Iran. India, which has declared its non-compliance with US sanctions, has worked in parallel, waiting for American exception, to establish a private financial line to deal with Iran, allowing it to buy its needs using the local currency "Rupiah" to be deposited in an Indian bank, which has no international connections, so Tehran will use these funds to buy what it needs from New Delhi. The European Union, which expressed its deep regret about the US decision to restore sanctions, announced a special mechanism for financial transactions with Iran aimed at bartering Iranian oil

8 with European goods without the need for mediation by banks and institutions. There are always loopholes that Iran and its stakeholders can buy Iranian oil (especially since its low price will tempt companies in order to gain high profits), such as circumventing US sanctions, and there are no guarantees that the US government will be able to monitor and control the deals. Iran's Oil tankers can circumvent the ban by closing the sea-wide tracking devices, changing the flag, and even the ship's name and destination. The United States has no choice but to use satellites if it wants to tighten the ban. As for monitoring by SWIFT international network, Iran has not been yet totally banned from using the network, but the US Treasury has partially banned some of its institutions and for a total ban, expected over the next year, to use the network, Trump has managed to overcome a potential opposition of Democratic Party deputies. Iran's real problem seems to be its ability to provide reserves of hard currency, especially the dollar. But Iran, according to the economic agency, "Bloomberg", started since the declaration of the ban to the use networks to smuggle dollars, and to use front companies in many countries. US debate about the new sanctions: In addition to the objections of US allies, the stakeholders in the relationship with Tehran, Trump's decision to withdraw from the nuclear agreement has raised controversy about its use among a number of US officials within the White House, the foreign and defense ministries, and the intelligence services. With US officials acknowledging that the nuclear agreement which the previous administration reached with Iran was not perfect, but they saw it as a good base that should be upheld first and then

9 addressed its shortcomings. While disavowing it would isolate the United States from European partners and affect the partnership in other international files, especially as they seem to be sticking to the nuclear agreement with Iran, this will miss the chance of an unprecedented international consensus to end Iran's nuclear program and will open the door wide to promote the interests of other countries, such as Russia and China, in addition to Iran itself. summary: With these loopholes in the US sanctions wall and the chances of circumventing them, American sanctions, which may be painful for the Iranian economy and which affect the middle and poor classes, are unlikely to hold back the political elite in Iran in a short period expected by the US administration. There is no chance for Trump, with an Iranian refusal, to persuad other signatory parties (Russia, China, Britain, France and Germany) to mediate between the United States and Iran in order to conclude a new agreement that eliminates the other they hold. These countries do not count on the fairness of the previous agreement, as much as they view it from the perspective of their interests, which are contrary to American interests, and it seems that an unfair agreement for them much is better than to stay without any agreement. Iran may try to annoy the United States of America, in hot and complex files, mainly in Syria, Yemen and Lebanon, which affects the chances of re-establishing stability in the region, with a wide conflict in the interests of the countries that manage these files.