How GOP threats against Iran have Guaranteed end of European Sanctions

By Juan Cole | (Informed Comment) –

The US sanction regime on Iran has a unilateral dimension. That is, there are sanctions only the US applies. Then there is a European dimension, which involves using the clout of the Department of Treasury as well as the persuasiveness of the Department of State’s diplomats to get European Union buy-in regarding their own sanctions. There is another, international dimension, which, however, is not nearly as robust as the US and the EU sanctions. Indeed, Iranian trade with India, China and Turkey, e.g., has substantially expanded since 2005, even as Iran’s trade with Europe and the US has plummeted.

Jonathan Tirone at Bloomberg Business, however, quotes Richard Dalton, the Britain’s former ambassador to Iran, on why, if the talks fail, Europe might well refuse to sanction Iran further and might, instead, blame the United States:

“As things are shaping up now, it doesn’t seem like it would be easy to say the fault or the failure comes fully down to the Iranians … if the failure happens now, it may be because of something which the U.S. either does or is incapable of doing.”

Dalton is a diplomat and trying to avoid being abrasive, but it seems pretty clear that his is indicating that the GOP’s 47, who wrote Iran a letter warning that they would undo any agreement the moment Obama went out of office, may well have given Europe an “out.” If the talks, fail, they can be blamed on the Republican Party, not the Islamic Republic. And many European countries will be unable to see why they should punish Iran (and themselves) for the sake of GOP orneriness.

Iran-Europe trade in 2005 was $32 billion. Today it is $9 billion. There isn’t any fat in the latter figure, and it may well be about as low as Europe is willing to go. Tirone also points out that European trade with Iran has probably fallen as low as is possible, and that those who dream of further turning the screws on Tehran to bring it to its knees are full of mere bluster.

Arguably, Iran has simply substituted China, India and some other countries, less impressed by the US Department of Treasury than Europe, for the EU trade. Iranian trade with the global south and China has risen by 70%, Tirone says, to $150 billion. Indeed, at those levels Iran did more than make a substitution. It pivoted to Asia with great success before the phrase occurred to President Obama.

China is so insouciant about US pressure to sanction Iran’s trade that it recently announced a plan to expand Sino-Iranian trade alone to $200 billion by 2025. (It was about $52 billion in 2014). And Sino-Iranian trade was only $39 bn. in 2013, so the rate of increase is startling. China is interested in Iran’s non-oil exports, a harbinger of the post-fossil-fuels future.

It seems to me unlikely that China cares whether the US nuclear deal gets signed off on by Congress or not. China has its own priorities. It took up most of the slack from the fall in European trade all by itself.

In 2014, the previous success of US arm-twisting in getting India to reduce Iranian oil imports was not reproduced. Oil imports alone went up 42%. Sanctions are already crumbling in Asia, and it isn’t clear that if the negotiations fail because the US wasn’t a credible negotiating partner (we’re looking at you, Tom Cotton), the Asian giants won’t likely to tell Washington to jump in the Indian Ocean.

And there is a real possibility that Europe will feel exactly the same way.

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Related video:

CCTV News: “Debate over who can lift Iran’s sanctions ensues”

28 Responses

  1. Not only will most, if not all, third-party (non-US) sanctions disappear, but by using the US/UK sponsored SWIFT banking network as a club, the USA has inadvertently helped China to bring their alternative to SWIFT on-line quicker. China now not only has membership commitments from most of Asia, but also many European nations. Within a few months, there will be two parallel banking systems on the earth. One mostly controlled by the USA and one mostly controlled by China. The SWIFT network uses the US dollar as the trading currency, BUT the Chinese equivalent uses a basket of currencies (but NOT the USA dollar).

    If most of Asia and Europe decides to move most of their trading to the Chinese system, to avoid dealing with the USA treasury, the US dollar could be hit hard and many USA multi-national companies may decide to use the Chinese system to hide most of their trade transactions from the USA government (but not the Chinese government).

    As a result, while the congress critters can make thousands of laws trying to control the rest of the earth, USA companies and non-USA companies will simply evade US rules by using the Chinese system. The congress critters can huff and puff all they want, but they will accomplish nothing except making lots of other people angry at the USA.

    Someone should remind congress critters that over the last 10000 years, as political leaders have tried to control trade and money, humans have devised ways to smuggle goods and launder money for fun and profit. The congress critters simply can NOT win at this game. They can only lose or lose really, really badly.

    The congress critter egos are going to take a BIG whack up side the head real soon.

    • So, do you think it will be possible for corporations to make end runs around spiteful US sanctions, which seek to punish any corporation US or foreign which violates US sanctions regime? Or will many of them conclude that the (business) risk of trade with Iran is not worth the risk?

      I disagree about congress-critters becoming the losers here. As long as Iran can be successfully demi-gouged, politicians can thrive politically, even as their policy hurts the country/

      • Well, failed sanctions are only useful as a way of whipping up anger to further escalation. Meaning, the GOP and its Armageddon prophets start talking about Europe “betraying” us and the world plotting against us and how this proves the Book of Revelations is happening. Then they use this state of war to carry out whatever foreign and domestic policies they’ve wanted all along.

        The problem here is the vast widening of the enemies list, which means the sanctions list. Trying to add Russia, China and the EU to the list gives us no one to trade with anymore. Latin America pretty much went off the reservation years ago. India is the obvious remaining labor pool for our capitalists to exploit for quick gain, but there it is cutting deals with Iran.

      • It isn’t a matter of a foreign company concluding that the risk of trade with Iran isn’t worth doing that trade.

        Companies are going to want to keep their options open, and this new Chinese banking system allows them to do that. And that’s a mighty powerful incentive, even if that company has no current plans to trade with anyone on any US Treasury sanctions-list.

        The US Treasury can’t punish a company merely because it conducts its business outside of the SWIFT system, and there is nothing that stops a company from conducting its trade with the USA via SWIFT and its trade with Everyone Else via that competing Chinese banking system.

        And if they do so…… Treasury’s job of policing any US sanctions-list becomes much, much, harder.

      • I have already experienced the end run around US laws . . .

        Many years ago, I was the customer care manager for a company whose products were restricted from being sold to China, BUT . . .

        I soon discovered that many of our products were actually being used in China (I got the support questions).

        So how did our products get to China you ask – by the ancient techniques of smuggling and money laundering. I was able to trace some of the serial numbers and discovered that we had sold our products to companies in Asia that appeared to be legal, fully functional companies and they paid in US dollars through legitimate Asian banks. We shipped to legitimate addresses in Asia. Then our products “fell off the edge of the earth.” That is, our products “disappeared” from the ship-to address and some time later “magically” appeared in China.

        In reality, our USA company had no way to really verify which companies in Asia would violate USA law and forward ship our products to China.

        Even if we quit selling to all of Asia (causing us a loss of a lot of profit), we could not guarantee that some customer, some place else on earth would not also trans-ship our products to China.

        In the end, to cover our own rear ends, we reported the “illegal” transfer” of our products to the US government, stopped sales to the companies that appeared to have done the transfer and moved on.

        Of course, all the smugglers did was create lots more “legitimate” companies (often by buying a company that had existed for many years and turning it into a front), who purchased our products until they were caught. Wash, rinse and repeat.

        When I was at another company, we had customers in northern Mexico that preferred to buy our products direct from us in San Diego, CA USA and “transport” the products across the border instead of dealing with our reseller in Mexico because the reseller had terrible customer service. Again the USA company did nothing “illegal,” it was the customer.

  2. The more you think about it, the more far-reaching the ramifications of establishing a reasonable relationship with Iran would be. Especially over time, as unnaturally stunted relationships with Iran’s neighbors and the West become more balanced.

    It would, as many people have observed, drive a change in our relationship with everyone in the region. The screaming against a deal here is hardly against a nuclear deal of some sort, but against ANY type of deal (e.g., change).

    So many of these relationships with the West are so deeply invested in backward values and priorities, and are so deeply entrenched, that the screams could get really loud. And a good deal of suffering would have to be expected as well, as there is such a deep commitment to the status quo.

    Those in power regionally, who’ve been feeding off their current relationships—particularly with the US—for generations, simply will not be able to take this quietly.

    • A thoughtful post as always, Travis.

      I’m looking forward to a corner being turned soon in the UNSC . Netanyahu’s rookie blunder has denied him another time consuming round of fruitless negotiations. We shouldn’t be begging to go back to THAT until we’ve prepared the ground so as to change the rules. The President adeptly shifted to the alternative forum, one in which actual pressure can be applied liberally prior to negotiations.

      Nothing matters but pressure. The French are forging ahead. A clear legal basis for various types of sanctions based on a recognition of Palestinian sovereignty beyond the green line would do the job. And then there are the EU and individual states and even NATO to follow through.

      I trust President Obama to get this done. He has mobilized his staff to push back at the Israelis. That is a decision! There is no reason to do that and to then take the foot off the gas before it’s finished.

      By the way, I haven’t seen anyone writing about the incentives to settle represented by offers of reciprocal amnesties for both side’s war criminals, the Lincolnesque approach. That’s real hardball. And at the same time it is conciliatory.

    • The Mideast desperately needs to go through a de-colonization and power restructuring to get rid of the last of the French/UK/USA empire garbage.

      Until that happens, the area will continue to be unstable and unable to move into the 21st century.

      It is long past time that the European drawn borders are restructured and the Sunni/Shia power alignment fixed.

      • This is really what it all boils down to. Not to mix metaphors too much, but this is going to be some tough medicine to take. There’s going to be blood, such as we’re now seeing. Too bad it’s real people who’ll bear the brunt: withdrawal effects from a history of imperialism.

  3. I disagree with many decisions Obama has made in the Middle East, even though he was left a crappy hand by Bush the Fool, by comparison he seems to be the only elected leader who acts like an adult.
    While our Limbaugh and Hannity like senators call for another war that cannot be won militarily China goes about the business of adding to their several trillion dollar stash unfazed by Netanyahu’s hysterics concerning Iran’s nuclear capabilities.

    • Americans are very ignorant about the rest of humanity, but especially ignorant about Asia and China in particular.

      China has a 5000 year history of mercantilism. This is why there are significant Chinese communities all over Asia.

      Americans appear to only vaguely know the last 200 years of Asian history when the Europeans expanded their empires, but for thousands of years prior to the European empires, China would be considered a “regional power” in our modern way of thought.

      One of the things the Chinese learned over their 5000 year history is conquering and trying to control people is very costly and it is usually less expensive to co-opt people economically.

      • Americans are taught by their schools to despise mercantilism as a violation of free enterprise.

        However, mercantilism seems to have a successful track record – if you can play the current global hegemon for a sucker. Japan and Germany were screwed after 1929, when the Depression caused a trade war that let the status quo empires survive by exploiting their colonies and left others lusting for empires of their own. Yet ironically Japan and Germany could be said to have won World War 2 by assaulting those empires and putting the US on top, since the US replaced that failed system with free trade, but then actually bent it over to favor postwar Japan’s rebuilding due to the Cold War. This created a blueprint for South Korea and Taiwan; proclaim your anticommunism, collect US aid, and use its clout to gain access to world markets while dumping goods on US markets and destroying its industries.

        China’s new mercantilism, therefore, is far more aggressive than its old one. But it’s working. Maybe this is always how it worked; the US played free trade Victorian Britain for a sucker and exploited the Royal Navy’s protection of global trade routes. I’m wondering now if American states and cities ran these same games against each other, who would win?

  4. It is hard to believe that no one in Washington could not have seen this coming. The US government with all its sanctions has created a whole new market. A new market where the US has deleted itself from. Way to go! Now, I am reading headlines where the GOP presidential candidates are proclaiming how they will undo whatever Obama does with Iran. I guess in the very near future it will be Israel and the US only. That should be fun!

    • Americans do not appear to understand that humans have spent the last 10000 years coming up with ways to circumvent trade restrictions put in place by tribal rulers. In the end the tribal rulers ALWAYS lose the the smugglers and money launders ALWAYS WIN.

      You are correct that the congress critters will rant a lot and lose big time in the end (as will Americans that want jobs).

  5. I miss the days when, even with outrageous Congress people, there were statesmen and intelligent, thoughtful people who ran the country for the good of its citizens. Today it appears it’s run to gain notoriety and legislate against its citizens. This country is getting itself in international trouble.

    • Read “American Theocracy” by Kevin Phillips. Or if you really want to get depressed, read “The Peloponnesian War” by Thucydides.

      • Thank you. I will. I remember in my youth the Fundamentalists were always there but sidelined because of their outer limit radical and strange religious interpretations. Now, lo and behold, they’re powerful. Tragic.

  6. Let us hope you are right. Why should US/GOP intransigence and stupidity continue to produce more unneeded problems?

  7. Obama may be too late to save US authoritarianism from disintegrating further. European industrial, agricultural and commercial interests might have ridden along with all these sanctions if every one else was on board but they cannot sit on their backsides watching others pick all the fruit. Iranian and Russian sanctions are costing Europe far too much to be worth whatever benefit they are argued to provide. Once they go by the board, European leaders will feel increasingly pressured by their electorates to deal firmly with the threat posed by Israel in the ME, a threat that with its support from across the Atlantic has reduced much of the Arab world to anarchy and bloody terror with tentacles reaching deep into European society and eroding security and freedom in a manner scarcely reached at the height of WWII.

  8. Juan, wanted you to know I tried to access this page via my phone earlier and got a hijack attempt to an Android “update” page. Might want to check on that.

  9. Julie

    WWII & the Cold War are over. Why does Europe still follow the US’s lead on sanctions against Iran & wars in the ME? @DaraDeBrun

    • It is a leader generation problem.

      Most of the current leaders in Europe were born just after WW2 and still have memories of that period.

      Once the current leaders transition to the next two generations, things will very probably change very rapidly.

  10. Just another case of the GOP unable or unwilling to think beyond their little ideological pug nose… they seem to have no capacity to contextualize anything. I doubt they even thought such a thing could happen (they’d be blamed for failed deal and the EU etc quitting sanctions) – getting at Obama and doing Bibi’s bidding was front and center and the only thing their small paranoid brains go after. And our country is run by these @$@#$! Get them out and out soon please.

  11. Juan and others here- What is available re a sane people’s union/org/movement?
    Seems like the time is ripe for a popular counter revolution to the insanity of the religious right and their royal masters and empowering Satanic gods, the 1%.

  12. Sanctions are also expensive for the sanctioners who have to monitor potential violators.

    • But it can also improve the individual economies of those that are assigned to monitor the sanctions.

      there is lots of bribe money flowing, which is why sanctions are a farce.

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