(Persia Digest) - Forbes wrote that With little more than two weeks to go until the first set of fresh US sanctions is imposed on Iran, officials in Tehran and the capitals of its major trading partners are struggling to find ways to protect the commercial ties that have built up over the past few years.
The new US measures to restrict Iran’s trade with the world are due to be introduced in two waves and follow the decision of President Donald Trump in May to pull the US out of the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA).
The first wave comes into effect on August 6 and covers areas such as financial transactions, dealings in gold and other precious metals and the automotive industry. A second wave on November 4 will cover sectors such as oil and gas, petrochemicals and shipping.
Even before any of these measures have come into effect, many European and Asian firms worried about attracting unwelcome attention from the US have taken action. Giants of French industry such as car maker Renault, oil firm Total and shipping giant CMA CGM have all announced their intention to pull out of Iran. Airlines like Austrian Airlines and Dutch flag-carrier KLM have said they are scaling back or cancelling routes into Iran. Japanese banks like Mitsubishi UFJ Financial Group and Mizuho Financial Group say they will no longer handle transactions involving Iran.
Such moves would appear to indicate that US sanctions are already restricting the Iranian economy in potentially significant ways. But alongside the efforts of large corporations to protect themselves, some concerted attempts are also underway to undermine what the US is doing.
Globally, the White House is virtually isolated in its policy approach towards Iran. While it can count on the support of some close allies in the Middle East such as Israel, Saudi Arabia and the UAE, almost all of Iran’s most important trading partners are – in one way or another – trying to find ways to dilute the impact of the US measures so they can continue to trade as freely as possible.
Speaking in London on July 19, just before heading to the US for talks, South Korea’s foreign affairs minister Kang Kyung-wha said her government was looking for waivers for its companies. “We have gotten them with previous rounds of sanctions before the [JCPOA] agreement and we are seeking similar ways to minimise the impact on our industries,” she said.
A critical issue for South Korea is Iranian crude supplies. Some 12% of the country’s oil imports came from Iran in 2017, according to the US Energy Information Administration, although the figure has dropped in the early months of this year.
“Obviously, we very much hope some kind of deal can be made between all parties with the US to move things forward with Iran, but in the meanwhile we want to take care with our ties, business ties in particular. We import a great deal of crude oil from Iran, so it is a huge challenge for us,” Kang added.
Other countries including US allies in Europe have also called for waivers for their companies, but to date US officials has firmly rejected the idea. As a result, Iran’s trading partners are looking to develop other ways to subvert or bypass the US measures.
Reports from Iran say a number of European governments – including France, Germany and the UK – have suggested to Tehran they could open accounts for the Iranian central bank at their own central banks. The European Union is also preparing to update its ‘blocking statute’ which will, in theory at least, offer legal cover for any European companies wanting to trade with Iran in defiance of the latest US sanctions.
Iran is also working hard to develop its own measures, exploring the potential for using cryptocurrencies to settle cross-border trades and perhaps setting up a new international bank messaging system to rival Swift, the current global standard. It has also been looking to revive the dormant practice of barter deals to ensure trade keeps flowing without the need for anyone to handle US dollars.
However, it remains unclear if Europe in particular can construct a robust enough system to protect its companies from US measures. If in doubt, most companies with any exposure to the US market – whether through direct sales or perhaps because of a need to access the US banking system – are likely to steer clear of Iran.
European diplomats acknowledge the difficulties they face in trying to keep the nuclear deal alive. “I have to tell you it is a difficult exercise, because the weight of the US in the global economy and financial system is obviously relevant. But we are determined to preserve this deal,” said Federica Mogherini, the EU’s high representative for foreign affairs, earlier this month.
The EU, Russia, China and others are all working together on this and there is a consistent voicing of support for the JCPOA.
“It's not perfect. It doesn't cover all of Iran's behaviour, but it was never designed to. It focuses on Iran's nuclear programme and we believe any effort that could halt Iran's progress in developing a nuclear weapons programme should be supported,” said Julie Bishop, Australia’s foreign affairs minister, speaking in London on July 18. “We were disappointed that the US pulled out of the JCPOA.”
Like other US allies, the Australian government appears to be taking an approach of trying not to annoy the White House too much while also trying to protect its commercial interests.
“On the question of US sanctions, we will obviously consider any request [from the US] for us to do likewise, but at this stage we have acted as other supporters of the JCPOA have and have continued limited commercial opportunities with Iran,” said Bishop.
Looking north and east
However, the key countries for Iran as it tries to find a way to cope with the heightened pressure from the US are probably not American allies but China and Russia.
From Tehran’s perspective, both these countries have the motivation, ability and willingness to ignore US sanctions if they choose. In addition, their companies often have less exposure to US markets and their state-owned enterprises are liable to feel less vulnerable to pressure from Washington.
“Iran will continue to leverage its relationship with Russia and China to create a bulwark against Western pressure,” predicts Ariane Tabatabai, visiting assistant professor of security studies at Georgetown University and co-author of the recently published book Triple Axis: Iran's Relations with Russia and China.
Iran’s links with Russia are complicated by a sometimes turbulent history between the two countries and Moscow’s relatively warm ties with Iran’s regional opponents Saudi Arabia and Israel. Relations with China are rather more straightforward, being based more on economic and commercial interests. China may not have a great desire to openly stand up to the US on the issue of Iran, but it does want to protect its own interests, say analysts.
“It’s very difficult for China to walk away from cheap oil and Iran will offer it cheap oil,” says Dina Esfandiary, fellow at the Centre for Science and Security Studies at King's College London and Tabatabai’s co-author on Triple Axis.
Whether the determination of politicians and policymakers in Beijing, Brussels, Moscow and elsewhere is enough to fatally undermine the US sanctions remains to be seen. It will at least partly depend on the attitude of people and political leaders in Iran itself – any disruptions to trade could embolden hardliners in Tehran and lead them to call for the country to abandon the restraints it has accepted on its nuclear activities and to redouble its efforts. The threat of a more belligerent tone emerging from Iran is one reason why America’s allies are so adamant about the need to oppose US policy in this area.
“We believe it is absolutely in our security interests; we believe it is in the security interest of the region and of the world,” said Mogherini. “I cannot say if our efforts together with others' efforts are going to be enough, but what I can say is that we are doing all we can and we will continue to do all we can to try and prevent this deal from being dismantled, because we believe the consequences of this would be catastrophic for all.”
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