The new law bars American banks from opening accounts for foreign banks that do business with Iran’s Central Bank. In effect, the law says foreign banks must make a choice between doing business with Iran or with the United States. For most banks that choice would be obvious.
But if foreign banks won’t do business with Iran’s Central Bank, then payments for Iranian oil cannot be made and Iranian oil sales would plummet. One fear of the Obama Administration is that such a dramatic clampdown on Iranian oil sales would send the price of oil soaring and drive western economies back into recession.
But the new law is filled with delays and waivers that will allow the Obama Administration to limit the impact. For example, Obama can waive action if he determines that action would drive crude oil prices skyward.
In fact, Obama made no comments on the new sanctions when he signed the bill, signaling that he is satisfied that he has sufficient authority to waive and ignore any provisions he does not like.
In contrast, he spoke at length about another provision contained in the same legislation dealing with the handling of terrorists. He cited provisions he objected to and challenged them for fettering him.
But he did not object to the new sanctions. Meanwhile, the EU is working on new sanctions itself.
Its foreign ministers will meet January 30 to take up the sanctions issue or, more accurately, to give their imprimatur to sanctions the EU staff is now drafting. The sanctions are expected to ban the purchase of Iranian oil by any of the EU’s member states.
The holdup has not been any objection to the concept of such a ban but concern about pinpointing new suppliers to replace Iranian crude. The EU has been in the process of nailing down other suppliers for the past month.
Only Spain, Italy and Greece have been buying substantial quantities of Iranian oil recently and they are reportedly the only countries that insisted on having alternative suppliers lined up before the EU adopted a ban on Iranian oil.
ENI, Italy’s largest oil company, also weighed in. It said it had no problem shifting to other sources on its own.
However, under a buyback contract with Iran, ENI previously developed an Iranian oilfield and is being paid back for its work with crude oil from that field.
ENI said it did not object to an EU ban on Iranian oil imports so long as it could still take the oil it is owed by Iran. ENI said it is still owed $2 billion worth of crude.
No objections have been aired. Imports from Iran amounted to 6 percent of total EU crude imports in 2010. Iranian oil represented 15 percent of Spain’s imports, 14 percent of Greece’s and 13 percent of Italy’s.
French Foreign Minister Alain Juppe said Paris was pushing two key sanctions: first, a freezing of all Iranian Central Bank assets in Europe and, second, the embargo on Iranian crude sales to the EU.
South Korea has banned imports of Iranian petrochemical products, but not crude oil, which makes up 10 percent of its crude imports.
An official in Seoul said Monday that South Korea would soon send a formal request to Washington for a waiver under the new law.
The law allows the president to grant a waiver to a country that has “significantly” reduced its transactions with Iran. The definition of “significantly” is left up to the president, who is likely to find that South Korea’s ban on petrochemical imports is “significant.”
In Tehran, officials were running around a bit like chickens with their heads cut off. Some just laughed at the new sanctions, pooh-poohing them and saying they would have no impact.
Others said they were a vicious, warlike action that would receive a harsh Iranian reply. President Ahmadi-nejad announced that the Central Bank would reply with “force” to the US sanctions. Supreme Leader Ali Khamenehi said Iran had achieved “eye-catching success” in countering US sanctions in the past and would easily do so again.
The governor of the Central Bank, Mahmud Bahmani, who just last month said Iran should go on an emergency footing to counter sanctions, this week reversed himself and said, “The world will laugh at the United States for imposing sanctions on Iran’s Central Bank.”
The range of reactions didn’t seem likely to reassure the Iranian public. One of the more rational commentscamefrom Mohammad Nahavandian, the head of Iran’s Chamber of Commerce.
He said, “The sanctions have raised the cost of trade and economic transactions, but they have not managed to change Iran’s political behavior.” Indeed, the sole goal of sanctions is to convince Iran to reign in its nuclear program, and, so far, sanctions have accomplished nothing in that regard.
Basically, the sanctions do not stop Iran from doing whatever it wishes and buying whatever it needs for its nuclear and missile programs.
But it makes all of that much more costly in both money and time. Perhaps the most noteworthy point was a reaction that didn’t happen.
There was very little criticism of the new US law around the world. In the past, political figures, analysts and academics have usually lined up at the microphones to pound the United States for its policy excesses after passing new sanctions on Iran.
It has been commonplace to charge the Americans with making things worse and for refusing to negotiate with Iran. While that line was still heard in some quarters, the scale of the criticism was minute compared with the past.
It appears that Obama’s repeated offers to talk to Iran and Tehran’s repeated rejections have convinced most of the world that Tehran rather than Washington is the core problem.
In addition to the fear of new sanctions driving up the price of oil, US diplomats have been very concerned that the US sanctions on Iran’s Central Bank, which sanctions pressure foreign banks all around the world, would offend foreign governments and prompt them to balk at American policies against Iran.
In the past, Europe especially has bristled at such American extra-territorial policy. But European officials have been silent about the latest sanctions bill and have not raised those objections as in the past.
It appears there are very few European politicians who wish to be tabbed with defending the Islamic Republic.
