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Unprecedented Chain of Devastating Sanctions - on the way to Iran
20 June 2012
Jaras: Moscow meeting turned up no results. Despite renewed optimism ignited in Istanbul, the follow up meetings in Baghdad and Moscow may have been Iran’s last and lost chances. Although both sides have announced that the meetings will continue at lower level nuclear experts next month in Istanbul again, but the whispers about tightened sanctions makes the next meeting seem like nothing more than a mere agreement born out of three months of talks.
The West is asking Iran to halt its Uranium enrichment program, and to turn in its 20% stockpile to another country, and to allow IAEA inspectors to completely control its nuclear facilities and to close up Fordo plant, as per the words of Mrs. Ashton. Iran on the other hand is not willing to allow routine visits by IAEA, or to simply give up its enriched Uranium.
And such is the reason why the option of even-tougher sanctions is now firmly placed on the table in the U.S. and E.U; “The worst case scenario” as Mehrdad Emadi, an EU economic adviser calls it. “The U.S. Congress decided three weeks ago that much harsher sanctions are necessary in order to control Iran’s nuclear weapon capability. This followed a formal expression of concern submitted to the U.S. by Saudi Arabia and Kuwait.”
“And thus the new round of sanctions begin their tour involving not only direct trade partners of Iran, but also every real or legal entity connected with Iran’s trade partners.” Emadi adds, Even the banks or organizations not directly working with Iran, and only working with countries that buy Iranian oil, will be targeted by the sanctions. For example, a bank in Hong Kong engaged in financial transactions with India involving the purchase of oil from Iran, would be sanctioned.
Should these unprecedented sanctions be approved and signed by the President of United States, the Chinese oil purchases from Iran will see a significant drop. These sanctions will cover a long chain of economic players that are involved with Iran, such as all oil refineries, oil tankers, oil transport insurance carriers, banks that finance Iranian oil transactions, even those producing Iranian oil by-products in ‘other’ countries - They will all be sanctioned. Emadi adds.
It is not only the United States opting for tough sanctions against Iran based on concerns posed by two of its allies in the Middle East, but the European Union as well has two separate but similar plans in the works, part of which will go into effect in July. Two proposals from Britain and France are set to completely ban any and all oil trade with Iran.
These are tri-level sanctions. The first level will prohibit insurance coverage for Iranian oil tankers. The second level, all banking transactions involving Iranian oil. The third and the most damaging will cover even bartering trades where Iranian oil is exchanged for products – such as trades currently taking place between Iran and China and India.
Based on recent analysis performed by International institutions that monitor the energy market, Iranian oil exports in the last six months have dropped by 500,000 barrels. Despite official claims, Iranian oil exports currently run about 1.9 million b/d and predicted to drop down to 1.5 b/d.
Emadi is hopeful for Iran to continue to use the path of negotiation talks and not allow the situation to get harder than it already is.
“If the negotiations stop, we will witness a tremendous economic shock in Iran, to the point where even the most basic essential items may end up facing an extreme shortage or maybe even a disastrously insufficient market. A heavy price to be paid by the people of Iran.”
Emadi adds that in the last month alone, he has received over 600 emails from various merchants and economic players in Iran, expressing extreme concern about the country’s economy and seeking his advice or viable solutions. It appears that the financial or productive capacity of the market has already hit a low point where it can’t even meet the basic needs of the society. This climate will ultimately lead to complete shut down of production, increased unemployment and escalated prices to the point of making even essential goods inaccessible to most people.
Domestic production will bear the brunt of it all and the country’s economy, as a whole will suffer irreversible damages. Meanwhile regime officials continue to adamantly deny the impact of the sanctions and claim to have discovered ways to circumvent the new sanctions. Emadi adds. According to recent study, even the smuggling channels thus far used will no longer be available. Even the windows open until now, in Turkey, Malaysia and Austria, are quickly closing.
Emadi calls these conditions “the worst possible scenario”.
“If Iran continues on the same path, we shall witness the complete collapse of its economy and maybe even famine in the country!”
Under those circumstances, Iran will have absolutely no choice but to be dragged to negotiation tables and to capitulate to the demands of Western countries, as the adverse effect of the sanctions thus far, are quite evident.
“Reaching that point will not only have diminishing returns, it will also jeopardize Iran’s national and strategic interests in the region to the extent where Iran will ultimately be forced to surrender. An undesired outcome by everyone within the regime and the opposition alike…”