Tuesday, March 20, 2012

The Iran Sanctions That Aren't - State Department Give Waivers to 11 Countries

Secretary of State Hillary Clinton announced today that the State Department is exempting 10 European countries and Japan from penalties for doing business with Iran's central bank:

"I am pleased to announce that an initial group of eleven countries has significantly reduced their volume of crude oil purchases from Iran -- Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and the United Kingdom. As a result, I will report to the Congress that sanctions pursuant to Section 1245 of the National Defense Authorization Act for 2012 (NDAA) will not apply to the financial institutions based in these countries, for a renewable period of 180 days," Secretary of State Hillary Clinton said in a Tuesday statement. "The actions taken by these countries were not easy. They had to rethink their energy needs at a critical time for the world economy and quickly begin to find alternatives to Iranian oil, which many had been reliant on for their energy needs."

Of course, Mrs. Clinton didn't mention that Iran has already announced it would no longer sell crude to France and the United Kingdom, so they're getting a waiver based on Iran's actions,not theirs. And the other EU countries have already announced they will phase out all purchases of Iranian oil by July 1st. However, at this point it really doesn't matter. Without barring countries from dealing with Iran's Central Bank the oil sanctions are almost meaningless.

Let me explain to you why. Oil is fungible, and as we saw with the UN's Oil for Food scandal involving Saddam Hussein and Iraq, it's easily transferable, can easily be moved through other hands to disguise its origin and can be swapped via third parties for other items. The US could even end up buying Iranian oil if it was shipped to say, Venezuela and reflagged. But take away the ability of buyers to pay Iran for it directly by isolating Iran's central bank and it becomes a much more difficult and costly matter.

One of the few effective things President George W. Bush did in the period after 9/11 to fight Islamist terrorism was to identify the banks used to bankroll it and a number of questionable individuals and organizations who held accounts in otherwise legitimate institutions. Aside from freezing all suspect assets here in America and blocking US financial institutions from having any dealings with the suspect accounts and organizations, President Bush successfully got foreign financial institutions to cooperate by ordering US financial institutions not to deal with banks overseas handling accounts for places like the Islamic Cultural Center in Milan, Italy, Al Taqwa Construction in Dubai and the Revival of Islamic Heritage Society(RIHS) in Kuwait, all al-Qaeda and Hamas fronts. Since the world's banking system is wired through New York, most countries complied, which led to something like $79.9 million in terrorist assets being seized.

If President Obama was actually serious about stopping Iran's nuclear weapons program and ending Iran's financing of terrorism, he'd do something similar and make all of Iran's banks including Iran's central bank persona non grata in the world's financial systems using the same tools. Even countries like China and India might decide that forgoing Iranian oil was better than having their ability to perform financial transactions here in America compromised or curtailed.

But then, that was never going to happen with this president. I've become fairly convinced that President Obama isn't particularly exercised about whether Iran goes nuclear or not. He might just take a wag the dog option to pull off a strike on Iran if he's lagging in the polls come October, but failing that, he appears to be fine with it.

Either he's simply clueless and doesn't see the danger, is too preoccupied with his domestic agenda and his re-election bid,or feels that America needs to be taken down a peg. Or perhaps a combination of all three.

1 comment:

B.Poster said...

I share the frustration with Mr. Obama's policies that are not working and likely cannot work. Sanctions are never going to work. There are simply to many people who are going to want to go around them and there simply is not the ability to enforce them and make others comply.

While I share the frustration, I do have to appreciate the VERY difficult position the Administration is in. Push to hard and you lose ANY cooperation now and perhaps on any thing else in the future. Not only that but you end up doing even more damage to America's already poor image. Don't push hard enough and you don't get cooperation and you look stupid and likely damage America's position even more this way to.

"Since the world's banking system is wired through New York..." push countries like China and India to hard and they along with others will decide to bypass NY and America all together in the world banking system and they along with the rest of the world will decide to end the dollar's role as world's reserve currency. This could all be implemented in about a week if the other powers wanted to do that.

Having the dollar as world reserve currency has been a huge advantage to us. Unfortunately with our massive debt, lack of an industrial base to supply any thing of value to the world markets that they cannot get elsewhere, and a currency that has lost tremendous value, the dollar will lose its role as world reserve currency within the next couple of years at most. At this point, the situation has become so dire the dollar's role cannot be saved in this role no matter who the leaders of the future are.

The prudent thing for America's leaders to do at this point would be to acknowledge the fact that the dollar's role in this regard is ending and to plan accordingly. A good question for a debate moderator to ask the candidates would be, "since the dollar's role as world reserve currency is coming to an end within the next two years at most and liely sooner than that how do you plan to deal with this?"