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What Washington’s Latest Iran Sanctions Mean and Why They Matter

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Who loses from this?

Iran’s regime and its proxies—but also, its economy and its people. Administration officials have pointed to how the sanctions have starved Iran of money to pay its proxies, and indeed the leader of Hezbollah has had to ask for donations. Given that the administration estimates the Iranian Revolutionary Guard Corps controls anywhere from 20 percent to half of Iran’s economy, the economic hit also inhibits the group’s ability to make money. But there is no clear indication that the sanctions have seriously inhibited the IRGC’s activities, even as they have constrained its ability to pay proxies.

Inflation is also spiking in Iran. Basic goods are growing more expensive, according to reports, and it’s becoming difficult to import medicine, even though sanctions specifically exempt humanitarian items. The effects hit all social classes, making it harder for the rich to travel or move money, harder for the middle class to procure preferred brands of things like office supplies, harder for the poor to afford daily life. The economic malaise has stoked protests—which, from the Trump administration’s perspective, is part of the point.

The less tangible losses are to the world economy, as international businesses complain of missed investment opportunities in Iran. U.S. allies who had hoped to find new markets and investment opportunities in the country after the Iran deal must turn away or risk punishment.

Notably, however, the administration’s prediction that global oil markets could handle the disruption without an oil price spike has so far proven generally correct. After prices rose to six-month highs in the days after the administration announced the end of sanctions waivers, they declined again, reflecting surplus production capacity in the market.

Who gains?

American regional allies Israel, Saudi Arabia, and the United Arab Emirates have cheered the maximum pressure campaign as important for their own security. There could be commercial benefits, too, to Gulf oil producers who can sell more of their own oil to make up the shortfall from Iran.  

Other beneficiaries: the Trump administration, smugglers, and lawyers. The Trump administration may not get Iranian compliance on the 12 demands Mike Pompeo issued for the Islamic Republic. But in the meantime it’s perfectly happy to deprive the regime of money. In officials’ view, every dollar that doesn’t flow into Iran is a dollar the regime can’t spend on terrorism or missiles.

The more the administration moves to render trade with Iran illegitimate, the more illicit actors will be willing to fill the gap. Iran has three decades’ worth of experience in finding ways to evade U.S. sanctions, from disguising its oil tankers to bartering, and the Iranian Revolutionary Guard Corps in particular has a sophisticated network of front companies that help it hide money. The higher the cost of doing business with Iran, the more money there is to be made for someone willing to facilitate that business.

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