US’ Sanctions and Iran: An Analytical Appraisal

By Brigadier (Retired) Dr. Ahsan ur Rahman Khan

 

The Sanctions

On 8 may this year, ignoring the advises of even US’ closest allies, US President Donald Trump unilaterally pulled US out of the Iran nuclear Agreement, also threatening Iran with new severe sanctions. And, a week later, according to a report published in The Guardian on 17 May 2018, In a pre-emptive strike on Tuesday, the US treasury imposed new sanctions on the governor of the Iranian central bank, Valiollah Seif, and the Iraq-based Al-Bilad Islamic Bank – in both cases for allegedly moving millions of dollars to Hezbollah on behalf of Iran’s Revolutionary Guards.” “The US treasury said the move would cut off Iran’s access to the critical bank network. The US has said it will progressively reintroduce the main sanctions against Iran, starting with the automobile and civil aviation sectors on 6 August. Energy and finance will follow on 4 November”; and The US has given all firms, not just European ones, between three and six months to wind down their business dealings with Iran, with the timeframe dependent on the nature of the business(1).  

Additionally, in his speech on 21 May 2018, US’ Secretary of State Mike Pompeo announced additional sanctions including 12 Demands from Iran if Iran wanted to avoid being economically ‘crushed’ by US. Those details including12 Demands were published by Joseph Trevithick in The Drive on 21 May 2018. It mentioned: Pompeo’s comments seemed to suggest there would be additional sanctions on top of the ones that had been in place prior to the JCPOA coming into effect in 2015, but he offered few specifics on what they might entail”; and, These will be the strongest sanctions in history by the time we are complete, Pompeo said“; After our sanctions come into full force, [Iran] will be battling to keep its economy alive”; further, The Secretary of State said the United States would halt these plans if Iran met its demandsEven just a look of those 12 US’ demands clearly show that those demands require Iran to politically capitulate’, which obviously would be absolutely unacceptable to any country – that is why the mentioned report published by The Drive realistically captioned it as, Pompeo’s 12 demands For Iran Read More Like a Declaration of War Rather Than a Path to Peace’. (2)  

Iran’s Economy, Exports and Imports

Basically, The economy of Iran is a mixed and transition economy with a large public sector. Some 60 percent of the economy is centrally planned. It is dominated by oil and gas production, although over 40 industries are directly involved in the Tehran Stock Exchange, one of the best performing exchanges in the world over the past decade. With 10 percent of the world’s proven oil reserves and 15 percent of its gas reservesIran is considered an “energy superpower“. Iran has fifth highest total estimated value of natural resources, valued at US$27.3 trillion in 2016.” (3)

As for exports, a Trading Economics report updated to 2018 highlights: Oil and natural gas are Iran’s most important exports, accounting for 82 percent of the country’s export revenues. Other exports include chemicals, plastics, fruits, ceramic products and metals. Iran’s main exports partners are: China (21 percent of total exports), Japan (9.2 percent) and Turkey (9 percent). Others include: South Korea and Italy”. (4)

According to another report of Trading Economic updated to 2018: “Iran main imports are: non-electrical machinery (17 percent of total imports), iron and steel (14 percent), chemicals and related products (11 percent), transport vehicles (9 percent) and electrical machinery, tools and appliances (7 percent). Main import partners are: United Arab Emirates (31 percent of total imports) and China (17 percent). Others include: South Korea, Turkey and Germany”. (5)

Foreign Companies Likely to Be Most Affected by US’ Sanctions

According to the report dated 9 May 2018 in Fortune (an American multinational business magazine headquartered in New York City United States) the six foreign companies doing business with Iran which are likely to be most adversely affected by the US’ sanctions if such sanctions are actually applied as announced so far, are: Plane-makers – Chicago-based Boeing, and France-based Air Bus; US’ General Electric (making parts for Airbus, has also received big parts orders for oil and gas facilities in Iran), and France’s Total ( has a $2 billion deal with China’s CNPC to develop Iran’s South Pars gas field. It’s already spent $90 million to develop the field, and Iran’s state oil company says it won’t be compensated until production begins); car-makers – Germany’s Volkswagen (it has started selling cars to Iran last year), and France’s PSA Group makers of Peugeots and Citroens (also selling to Iran). (6)

About the cost of losses which these US and European companies may suffer due to US’ sanctions, a report in WTOP (a commercial radio station licensed to serve Washington D. C.) mentions, European and American companies could lose billions of dollars in commercial deals canceled and a major new export market undercut by the U.S. decision to re-impose sanctions on Iran”. (7) Of course to these financial loses should also be added the related job losses.

Effects on Iran’s Economy Indicated So Far

The reports received so far indicate that while the new US’ sanctions are certainly likely to cast adverse effects on Iran’s economy, yet those effects are also not likely to be of the magnitude desired by US – thereby allowing Iran to successfully survive those sanctions, albeit with difficulties, while also drawing anti-US geopolitical advantages at least in the regional context.

A report by DW dated 11 may 2018, captioned How will Iran’s Economy hold up if sanctions return?suggests, Trump’s decision to end the Iran nuclear deal will hit the Iranian economy, although with China and the EU not on board the impact may be less severe than some fear. How Iran’s banking system fares could tell us more”; and, in another opinion, The sanctions could significantly reduce Iran’s oil revenue, making it hard to have access to its oil revenue in cash and could push Iran to have oil for goods and services deals,” Sara Vakhshouri, the head of Washington-based consultancy SVB Energy, told DW”.

While mentioning the key economic indicators, the DW report does mention certain adverse effects, like Iran’s Rial has fallen by 25 % against the Dollar; and if the announced sanctions are imposed, GDP growth may fall, inflation may rise, Iran’s purchasing power may reduce, etc. On the other hand this DW report also highlights the factors which are likely to mitigate the adverse effects of US’ sanctions. In that context this report emphesises on two major factors:-

Firstly, because most of Iran’s oil exports — over 1.5 million barrels per day (bpd) — goes to Asian countries. The reactions of China, Japan, India and South Korea to these new sanctions will be critical to their impact. China is the world’s largest importer of Iranian crude, at an average of 648,000 bpd, and demand is growing. ————— “Other countries, including China, Russia and India, will need to decide to what extent they comply with US sanctions threats or, alternatively, approach this as an opportunity to further strengthen their commercial positions in Iran,” Justine Walker, head of sanctions policy with trade association UK Finance, told DW”. —— India, the second largest importer of Iranian oil, is unlikely to be immediately affected by US sanctions”.

Secondly, because Europe, which went along with the sanctions previously, may not do so again. The bloc could seek a waiver to allow it to continue buying oil from Iran. Historically, Europe and the US have not seen eye-to-eye on Iran and German comments this week appear to indicate that if anything that rift could intensify”. (8)  

These two factors of emphasis of the DW report are also supported by the 9 May 2018 publication of the known energy site OIL PRICE.com. It asserts that the bulk of Iranian exports is shipped to Asian countries – most of whom have already said they will continue importing Iranian oil – while the handful of European nations that received Iran crude will likely continue to do so in the future, once they request, and are granted, sanctions waivers”. To support that argument of the major direction of Iran’s export of oil (crude and condensates) towards Asia, this report also contains a chart courtesy Bloomberg which shows the distribution of that export. This chart shows the export of Iran’s crude and condensates to major customers in k b/d to: China – 648 .080; India – 501 .982; Korea – 313 .646; Turkey – 165 .260; Italy – 154 .813; Japan – 137 .541; UAE – 127 .215; Spain – 113 .941; France – 109 .396; and Greece – 77 .138. (9)   

Analysis and Inferences

It is well-known that even the closest allies of US – UK, France, Germany – which are not in any way Iran-supportersseriously differ from this extremistanti-Iran onslaught launched by Donald Trump, because this onslaught of Donald Trump is certainly likely to cause destability in the region and serious turmoil in the sphere of the international relations. However, at least so far Donald Trump is sticking to this policy. Factually the linchpin reason for that adamant attitude is based on Donald Trump’s religiously-based strategy Pivot Israel’. Since Iran is now the only challenger to Israel’s geopolitical expansion in the region for the formulation of the Greater Israel’, Donald Trump’s current design is either to make Iran so weak economically that Iran politically capitulatesto US’ dictates, or the severe economic sufferings of Iranian people may create such unrest in their country that may assist US in engineeringa regime change to bring up a pliantgovernment in Iran. Details of those latent aspects are given in my paper Latent Aspects of US’ Withdrawal from Iran Nuclear Agreement: Discerned Realities and Analysispublished last month in Eurasia Review (10) and www.intrinsicoverview.com.

In that context it is worth noting that Donald Trump’s political power-base mostly comprises of the Evangelical Christians, or Evangelical Protestants who constitute a quarter of US’ population and are politically important. (11). And to them are added the Christian Zionists who belong to the Christian Zionism movement within Protestant fundamentalism that sees the modern state of Israel as the fulfillment of Biblical prophecy and thus deserving of political, financial and religious support. Christian Zionists work closely with the Israeli government. (12). Donald Trump himself was raised as a Presbyterian (i.e. belonging to Protestant Church) and in the Oval Office, he has surrounded himself with close advisors who share his deep faith. (13). US’ Vice President Mike Pence’s family background was Irish-American Roman Catholic, however he embraced a markedly Evangelical perspective at college and has maintained that faith orientation ever since, including a particularly strong Christian Zionist perspective. (14).

In view of these religious-political realitiesof the current anti-Iran onslaught policy of US under Donald Trump, it appears more likely that at least for quite some time now Donald Trump will stick to this policy – not like his policy turn-around relating to North Korea from a Destroy North Koreato Donald Trump – Kim Jong-un dialogue summit.

Increase in serious problems in certain economic aspects for Iran is therefore foreseeable. However, reading the somewhat disapprovingresponses from the concerned Asian countries as also noting the expression of sort of non-support of this policy from EU, It is also certain that US will not be able to economically coerceIran to political subjugationas desired by the US’ government.

There are certain reports about emerging unrest in certain Iranian cities relating to economic problems. If these reports are true, the US’ new sanctions may further aggravate the situation. However, knowing the psyche and historical background of Iranian nation, it is clear that any attempt by US to manipulate such situation to covertly engineer a massive uprising resulting in the formation of a US’ pliant governmentshall not only fail but also be counter-productive.

References

(1). https://www.theguardian.com/world/2018/may/15/eu-tells-iran-it-will-try-to-protect-firms-from-us-sanctions

(2). http://www.thedrive.com/the-war-zone/20989/pompeos-12-demands-for-iran-read-more-like-a-declaration-of-war-than-a-path-to-peace

(3). https://en.wikipedia.org/wiki/Economy_of_Iran

(4). https://tradingeconomics.com/iran/exports

(5) https://tradingeconomics.com/iran/imports

(6). http://fortune.com/2018/05/09/trump-iran-nuclear-sanctions-companies/

(7). https://wtop.com/europe/2018/05/european-businesses-most-affected-by-us-sanctions-on-iran/

(8). https://www.dw.com/en/how-will-irans-economy-hold-up-if-sanctions-return/a-43744340

(9). https://oilprice.com/Energy/Crude-Oil/Who-Was-Buying-Iranian-Oil-And-What-Happens-Next.html

(10). https://www.eurasiareview.com/07062018-latent-aspects-of-us-withdrawal-from-iran-nuclear-agreement-discerned-realities-oped/

(11). https://en.wikipedia.org/wiki/Evangelicalism

(12). http://thebridgelifeinthemix.info/wp-content/uploads/2015/08/ChristianZionism_Wagner_2003@0-copy.pdf

(13). https://www.harpercollins.com/9780062749598/the-faith-of-donald-j-trump/

(14). https://www.opendemocracy.net/paul-rogers/trump-pence-jerusalem-christian-zionism-connection

Tags: #US’ sanctions #Sanctions on Iran #US’ new sanctions on Iran #Effects of US’ sanctions on Iran #Foreign companies’ losses due to Iran sanctions #EU’s reaction to Iran sanctions #Asian countries and Iran sanctions