New sanctions bound to take heavy toll on Iran
Tehran’s nuclear programme and malign behaviour under focus as new curbs set to hit key sectors of its economy
Dubai: On Monday, the United States will reapply curbs to Iran’s vital petroleum and banking sectors in an effort to rein in its arch foe’s nuclear, missile and regional activities.
Iran’s clerical rulers have played down the US move, but many ordinary Iranians appear apprehensive.
Foreign businesses of all types, ranging from oil companies, trading houses to shipping, have stopped doing business with Iran for fear of incurring US penalties.
What is the significance of the new sanctions?
The coming sanctions and the social media offensive are the centre-piece of the Trump administration’s maximum-pressure campaign on Iran after the US withdrawal from the 2015 nuclear deal. Sunday marked the end to a 180-day grace period for countries and companies doing business with Iranian banks, oil and shipping companies. Hundreds of people and groups that received sanctions relief under the deal will be relisted. Anyone who assists their trade can be sanctioned, too. The sanctions target major sectors of the Iranian economy, such as energy, shipping, shipbuilding and finance, including the Central Bank of Iran. In all, more than 700 individuals, vessels, aircraft, banks, companies and other entities were put on the US blacklist – 300 more than before.
The administration aims to squeeze Iran’s already-precarious economy, particularly by denying it the oil revenue that makes up about 80 per cent of the government’s tax income. US officials are optimistic that the financial starvation diet will eventually force Iran to stop supporting militant groups in Yemen and Syria, and to renegotiate the nuclear deal.
What will the impact of the sanctions be?
Ordinary Iranians fear cuts in Iran’s oil sales could be the ultimate hammer blow to the economy, since energy exports are still the country’s main source of earnings.
Iranian leaders hope sanctions waivers granted to eight buyers of Iranian crude, combined with rising oil prices, will compensate for a reduction in oil export volumes.
But even without the new measures due on Monday, Iranian businessmen have been finding it harder to cope.
Some 70 per cent of small factories, businesses and workshops have already started to shut down in the past months due to lack of raw materials and hard currency, according to Iranian media.
The US sanctions permit trade in humanitarian goods such as food and pharmaceuticals. Yet measures imposed on banks and trade restrictions will make life hard for Iranian patients.
"The Guardian Council has in several sessions reviewed the [terror financing] bill ... and it has considered it to have flaws and ambiguities."
— Abbas Ali Kadkhodaie| Council spokesman
Multinational companies that dipped into the Iranian market after the nuclear deal have departed in recent months. The Iranian rial has collapsed since the US withdrawal, driven to a historic low against the dollar. Iran’s oil exports have slumped from about 2.5 million barrels a day to below 1.5 million. The International Monetary Fund predicts the economy will shrink by 3.6 per cent this year.
Some Iran hawks in Congress and elsewhere said the move should have gone even further. They were hoping for Iran to be disconnected from the main international financial messaging network known as SWIFT.
What changes on the first day of sanctions?
and below — slump in Iran’s oil exports from about 2.5m bpd
Little is expected to happen on Monday, beyond a relisting of about 400 people and companies that were delisted when the nuclear agreement took effect, and the addition of about 300 others. Officials say they will release the names of the eight nations that have been granted temporary waivers from secondary sanctions so they can continue to buy oil. But sanctions apply to activities that happen from Monday going forward, so it could be weeks or longer before any new punishments come down.
What are the waivers all about?
Washington has said eight nations will receive temporary waivers allowing them to continue to import Iranian petroleum products as they move to end such imports entirely. He said those countries, which other officials said would include US allies such as Turkey, Italy, India, Japan and South Korea, had made efforts to eliminate their imports but could not complete the task by Monday.
The waivers will be valid for six months, during which time the importing country can buy Iranian oil but must deposit Iran’s revenue in an escrow account. Iran can spend the money but only on a narrow range of humanitarian items.
What is Iran likely to do?
individuals, companies and other entities put on US blacklist
Iranian officials have slammed the decision to reimpose the sanctions. “The possibility of America being able to achieve its economic goals through these sanctions is very remote and there is certainly no possibility that it will attain its political goals through such sanctions,” Iran’s Foreign Ministry spokesman, Bahram Qassemi, told state TV.
Iranian President Hassan Rouhani, a strong supporter of the nuclear deal, called on Europe, Russia and China to quickly enact plans to “compensate for and mitigate the effects of America’s newest unilateral and extraterritorial sanctions.”
The danger for the US strategy is that at some point Iran may decide to revive its nuclear programme, rather than returning to the negotiation table in a weakened state, as the White House intends.
European governments have assured Tehran they will stay by its side as long as it remains in the deal. If Iran starts to enrich uranium or rebuild its nuclear infrastructure, the Europeans say they will join the United States.
The top commander of Iran’s Revolutionary Guards, Major General Mohammad Ali Jafari, said on Sunday Iran would resist and defeat a US “psychological war” and sanctions against its vital oil sector.
Council rejects terror financing bill
Iran’s powerful Guardian Council on Sundayrejected a bill on joining the UN convention against terrorist financing seen as crucial to maintaining trade and banking ties with the world.
The conservative-dominated council, which oversees legislation passed by the parliament, said aspects of the bill were against Islamic law and the constitution and sent it back to lawmakers for revision.
“The Guardian Council has in several sessions reviewed the bill... and it has considered it to have flaws and ambiguities,” wrote spokesman Abbas Ali Kadkhodaie on Twitter.
The bill, narrowly passed by parliament on October 7, is one of four put forward by the government of President Hassan Rouhani (pictured above) in order to meet demands set by the international Financial Action Task Force (FATF), which monitors countries’ efforts to tackle money-laundering and terrorist financing.
Many hawks in Iran say the laws would limit the country’s ability to support “resistance groups” such as Lebanon’s Hezbollah and Palestinian Hamas by bringing greater transparency to its accounts.
But Rouhani’s government argues it is particularly vital after the United States walked out of the 2015 nuclear deal and reimposed sanctions.
The other parties to the deal — Britain, France, Germany, China and Russia— have sought to salvage the agreement and maintain trade with Iran, but have demanded that it accede to the FATF.
Iran is alone with North Korea on the FATF, although the Paris-based organisation has suspended counter-measures since June 2017 while Iran works on reforms.
Last month, the FATF gave Iran another extension to February to update its laws.
A previous bill on the mechanics of monitoring and preventing terrorist financing was signed into law in August.
But two others - on money-laundering and organised crime - have also been delayed by higher authorities, including the Guardian Council, after being approved by parliament.
— AFP