The Strategist

US puts Iran on the brink of survival

08/07/2018 - 15:34

Washington’s new sanctions put Iran's economy "on the brink of survival," said the American economist Steve Hanke on Monday, August 6, in an interview with the German neespaper Die Welt. Experts from the German organization Germany Trade & Invest (GTAI), who predicted an early economic recession to the national economy of Iran, agree with him.

Örlygur Hnefill
Örlygur Hnefill
New US sanctions will inflict very substantial damage on Iran, and this is the leitmotif of the comments of most economists in Europe and the US on Monday.

The essence of the new sanctions of Washington

Imposition of renewed sanctions against Iran became inevitable after in May 2018 US President Donald Trump decided to withdraw from the nuclear agreement with Iran, concluded in 2015. Withdrawal from the agreement, in addition to the great military and geopolitical significance, just suggested the restoration of the regime of economic sanctions.

The time for the resumption of sanctions is 0 hours 0 minutes by Washington time on the night of August 6 to August 7. Judging by preliminary data, Tehran will be prohibited to acquire the US currency, as well as to trade in gold and other precious metals. The trade with Iranian contractors should be stopped with aluminum, steel, graphite, coal and a number of computer programs for industrial enterprises. After 90 days, on the night of November 4 to November 5, restrictions will be extended to include the export of Iranian oil. The declared goal of Washington is to cut off Tehran from the currency and major commodity markets in order to stop the growth of Iran's political and military influence in the Middle East.

How do sanctions against Tehran work?

US sanctions relate not only to the Iranian companies themselves, but also to foreign firms that conduct business with Iran. In this case, it's not just about planned transactions. As the deputy head of the Federal Association of German Chambers of Commerce and Industry (DIHK), Volker Treier, put it earlier, the sanctions legislation in the US "does not imply preservation of previously concluded contracts." This means that even the projects initiated before imposition of sanctions cannot be continued. Once the penalty measures are introduced, all transactions must be stopped within no more than 180 days.

Companies violating the sanctions regime will be fined. The fines will apply to their activities in the US, and their American business partners will be forced to terminate all business relations with them. It doesn’t matter if a European company strictly abides by European laws. This fact does not in any way justify them from the point of view of Washington. The US can punish those Europeans that bypass complex international trade and commercial law by influencing their business interests in America.

In fact, businesses face a commercial choice. Now, it is time to decide between the American or Iranian markets. Given that the United States is the main foreign trade partner of a significant number of states, the choice of most firms is obvious.

Tehran will be blocked 

But even those firms that do not have business in the US and are not afraid of its loss, can hardly circumvent the sanctions. The main obstacle is that banks are not ready to conduct monetary settlements with Iran. Volker Treier, the expert of the Federal Association of Chambers of Commerce and Industry of Germany (DIHK), explains: "Even firms that did not suffer from US sanctions directly, for example, those working in medical services or not doing business in the United States , currently cannot find a bank that would ensure the execution of transactions in Iran, "- said Trayer.


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