Published on January 30th, 2012 | by Jasmin Ramsey4
Effects of Iran sanctions painting grim picture
On January 23, the EU announced more sanctions and an oil embargo on Iran. The new restrictions impede cooperation with Iran in foreign trade, financial services, energy sectors and technologies, and ban any form of insurance by member states to businesses associated with Iran. EU countries also have until July 1 to secure alternative oil and petroleum sources from states like Saudi Arabia, which is supposed to increase output to prevent market supply shocks. In response, Tehran has threatened to sanction itself by halting oil shipments to certain EU countries ahead of the summer, a move it’s reportedly still debating.
Iran complained that the EU measures were “unfair” and “doomed to fail”, but the effects of the new sanctions, which enhance the pains of preexisting EU, US and UN sanctions, are already being felt. A Thomson Reuters headline from today reads: “Iran grain shipments stranded as sanctions bite“. Jonathan Saul and Michael Hogan build on a report from last week detailing how cargo ships destined for Iran, a major importer of grain, are waiting outside Iranian ports stocked with “about 420,000 tonnes” of product, because Tehran, with its blacklisted Central Bank, is finding it increasingly difficult to send “workable” letters of credit. These Iranian trade partners are in a lose-lose situation–at risk of incurring major losses if they deliver without guaranteed payment and facing the same consequences if they don’t. So the stocked cargo ships and European distributors are just waiting, like port employees and Iranian businesses are hoping, for some solution to materialize.
All the while Iran’s currency, the Rial, continues to devalue while its revenue sources are diminishing. An immediate EU-imposed ban on all new contracts for Iranian crude prevents the isolated country from courting new customers with deals enjoyed by countries like China and Russia. Financial headaches could also turn into major humanitarian issues if waivers and exceptions aren’t issued, especially with regard to food and other essential products.
Three days after the EU sanctions were announced, Israel declared that more, swifter sanctions are needed to halt Iran’s alleged nuclear ambitions. Influential U.S. voices, such as the Wall Street Journal’s hawkish editorial board, are making similar claims. Congress is also taking the U.S.’s Iran-sanctions policy to new levels by simultaneously approving legislation that makes diplomacy nearly impossible and pushing Iran into even smaller corners with the threat of more crippling sanctions.
The Obama administration has described its “dual-track approach” with Iran as a policy of sticks and carrots, but the sanctions that the U.S. has adopted and pressured other countries to implement are beginning to look like sticks being thrown at average Iranians at an increasing rate.
Secretary of State Hillary Clinton said in 2010 that the U.S. wants to change the behavior of the Iranian government “without contributing to the suffering of the ordinary people”, but in light of recent events and nightmares that could follow, the opposite seems to be occurring. Meanwhile, another drumbeat rolls on.