Surviving sanctions: how would Iran hold out



Sun, 14 Oct 2018 - 04:40 GMT


Sun, 14 Oct 2018 - 04:40 GMT

SUPREME LEADER: Ayatollah Ali Khamenei, shown at a 2009 clerical gathering, oversees an organization called Setad that has assets estimated at about $95 billion. REUTERS/

SUPREME LEADER: Ayatollah Ali Khamenei, shown at a 2009 clerical gathering, oversees an organization called Setad that has assets estimated at about $95 billion. REUTERS/

CAIRO - 13 September 2018: While Iran grapples with sanctions and internal protests, reports on prospective oil imports by India from Iran were released. The different in that news is not that Iran’s oil imports will not come to a halt. As that is not the first embargo imposed on Iran, the country has developed latent mechanisms to evade penalties.

As sanctions will take effect on November 4, a couple of Indian public refiners placed orders to import Iranian oil. U.S. Special Representative for Iran Brian Hook and Assistant Secretary of State for Energy Resources Francis F. Fannon held meetings with the Petroleum Ministry and Ministry of External Affairs counterparts in Delhi on Oct. 12.

Sanctions Evasion

Iran appealed to the UN’s International Court of Justice arguing that the U.S. sanctions are harmful to the country’s economy and its citizens. The U.S. Secretary of State Mike Pompeo described the act as in interference in his country’s right to impose economic sanctions describing it as “meritless.” Last August, one dollar bought 107,000 rials, compared with 43,000 rials in January as sanctions were first imposed on the oil sector in November 2017.

Analyst at the Arab Forum for Analyzing Iranian Policies (AFAIP) Nourhan Ahmed Anwar explains that the Iranian state has developed a strategy to survive and evade sanctions that used to be imposed for decades since 1979. The strategy consists of establishing enterprises in the names of foreign and Iranian businessmen living abroad.

Those are directly affiliated with the Islamic Revolutionary Guards Corp (IRGC) to manage billions of dollars on Iran’s behalf. Once the intelligence bodies of other countries unveil the entity that stands behind those companies, they are shut off and others are established, Anwar clarifies.

As speculations that oil may hit $100 per barrel by the end of the year have risen, the U.S. administration considers waivers for major Iranian oil importers including China, India, Turkey, the UAE and Japan in condition of decreasing imports. Although sanctions are expected to cut Iranian oil exports by 1.5 barrels per day, Iranian oil is still available in the global market through covert trade. Satellites spotted tankers that stop at different countries in their way from Iran to importers as camouflage.

Impact Alleviation

Nevertheless, the Iranian economy has been going downhill as the other sectors do not receive enough foreign investments and have limited access to different markets. That critical situation is epitomized in high levels of unemployment and falling value of the rial. Iranian President Hassan Rouhani blamed U.S. sanctions for the crises rather than the government before the parliament in August. However, the majority of members refuted his speech questioning the lack of reforms measures and development initiatives.

Iranian President Hassan Rouhani speaks during a parliamentary session in Tehran, Iran August 28, 2018. President Official Website/Handout via REUTERS

A number of European companies pulled out of the country as the U.S. sanctions include businesses operating in Iran. Examples include the British Airways and Air France KLM. Since the U.S. withdrew from the Joint Comprehensive Plan of Action (JCPOA) in May, major companies like Siemens, Total and Maersk announced they would stop dealing with Iran. Experts also estimate that Chinese banks are likely to comply with the sanctions as they would not be able to bear the consequences in parallel to the slowdown in the Chinese economy.

Moreover, the U.S. Secretary of Treasury Steven Mnuchin and the Israeli Finance Minister Moshe Kohlen held a meeting in August to discuss the enforcement of economic sanctions against Iran, especially in the high-tech sector.

Iran has resorted to smuggling to Europe. It smuggles drugs, sand, and is involved in human trafficking. That is accomplished through Bandar Abbas port falling under the direct control of the Revolutionary Guards without any governmental supervision. As European companies find smuggling quite profitable, European states are more eager than the United States to enter the Iranian market with aim of putting an end to the phenomenon, Anwar says.

According to Iranian Afkar newspaper, Iran plans to benefit from the 22 million small and medium industrial units located in European Union countries to fulfill its local needs, Anwar reveals. Furthermore, a memorandum of understanding was signed with South Korea to provide training for workers in small and medium Iranian enterprises, Anwar says.

Following the Caspian Sea Convention signed in August, Iran has boosted its trade with Azerbaijan. It also made an agreement with Turkey to export its oil in return for Turskih Lira and implementing a barter system in order to get food, Anwar says.

Erdogan and Khamenei
Turkish President Tayyip Erdogan and Iranian President Hassan Rouhani are seen during a joint news conference in Tehran, Iran, October 4, 2017. Kayhan Ozer/Presidential Palace/Handout via REUTERS

Last year, Iranian Prime Minister visited Turkey which had helped Tehran by enabling it to get access to petrodollars which has resulted on sanctions on some Turkish banks. In May, a U.S. court sentenced Deputy General Manager at Haltbank Mehmet Atilla to three years in prison as he was convicted of engaging in a scheme of fraudulent food and gold transactions starting 2012.

After Total SA withdrew from Iran’s South Pars gas field, China, whose energy needs more than doubled over the past decade, may be a substitution. China has showed interest to invest in the oil and gas sector in Saudi Arabia and Qatar. It has already invested in Iran before as well as the United Arab Emirates and Iraq. Chinese companies are also eying a $1.5 billion refinery upgrade.

However, Anwar contends that the current U.S. sanctions are the harshest in Iranian history as they mainly target oil and that Iran would still be negatively influenced. One of the solutions is changing the ownership contracts of oil tankers owned by Iran, Anwar suggests.

Internal Turbulences

Protests are driven by rising prices and the fall in the value of national currency. Anwar says Iranians are objecting the billions of dollars spent on providing arms for Syria, Houthis in Yemen, and financial support for the Shiite Lebanese Hezbollah while poverty rates are rising and unemployment rates have reached 40 percent.

Although the Iranian ruling regime accuses its rivals of fueling such protests, it fails to absorb that the people realize the negative impact of the state’s foreign policy characterized by the intervention in the internal affairs of other countries in the region, Anwar says. The Analyst speculates that Rouhani plans to increase fuel prices in order to reduce public debts.

Iran arrested tens of public employees holding foreign nationalities accusing them of espionage, Intelligence Minister Mahmoud Alavi announced in August. In 2017, at least 30 dual nationals were arrested because of espionage charges.

The official also said that bombing attempts of metro stations and universities have been foiled, and that a terrorist cell was disbanded northern the country while an IS militant was arrested southern the country.

A general view of the attack during the military parade in Ahvaz, Iran September 22, 2018. Tasnim News Agency/via REUTERS

Iranian Foreign Minister Mohammad Javad Zarif blamed "a foreign regime" backed by the United States for the shooting at a military parade in September resulting in 29 deaths and injuries in Ahwaz city located in southwestern Iran on the Persian Gulf.

On the other hand, Western officials announced that Iran plots terror attacks across Europe accusing the country of standing behind a foiled attack on protesters of Iranian descent in Paris last June. At the time, two Iranian diplomats were arrested in Germany and Belgium in relation to the incident and extradited to their homeland.



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