U.S. politicians love the “silver bullet” of economic sanctions to punish foreign adversaries, but the weapon’s overuse is driving China and Russia to develop countermeasures, as British diplomat Alastair Crooke explains
Just to clarify “Anglo-Saxon” part of the title – NOTHING done by any of the remaining “five eyes” (UK, Canada, Australia and New Zealand) is without being coordinated with self-perceived Masters of the Universe – the “exceptional” USA
By Alastair Crooke
Iran’s Supreme Leader Ali Khamenei told a large group of people in the holy city of Mashhad on Sunday that “The Americans did not act on what they promised in the [Iranian] nuclear accord [the JCPOA]; they did not do what they should have done. According to Foreign Minister [Javad Zarif], they brought something on paper but prevented materialization of the objectives of the Islamic Republic of Iran through many diversionary ways.”
This statement during the Supreme Leader’s key Nowruz (New Year) address should be understood as a flashing amber light: it was no rhetorical flourish. And it was not a simple dig at America (as some may suppose). It was perhaps more of a gentle warning to the Iranian government to “take care” of the possible political consequences.
What is happening is significant: for whatever motive, the U.S. Treasury is busy emptying much of the JCPOA sanctions relief of any real substance (and their motive is something which deserves careful attention). The Supreme Leader also noted that Iran is experiencing difficulties in repatriating its formerly frozen, external funds.
U.S. Treasury officials, since “implementation” day, have been doing the rounds, warning European banks that the U.S. sanctions on Iran remain in place, and that European banks should not think, even for a second, of tapping the dollar or euro bond markets in order to finance trade with Iran, or to become involved with financing infrastructure projects in Iran.
Banks well understand the message: touch Iranian commerce and you will be whacked with a billion dollar fine – against which there is no appeal, no clear legal framework – and no argument countenanced. The banks (understandably) are shying off. Not a single bank or financial lending institution turned up when Iranian President Hassan Rouhani visited Paris to hold meetings with the local business élite.
The influential Keyhan Iranian newspaper wrote on March 14 on this matter that: “Speaking at the UN General Assembly session in September, Rouhani stated: ‘Today a new phase of relations has started in Iran’s relations with the world.’ He also stated in a live radio and television discussion with the people on 23 Tir: ‘The step-by-step implementation of this document could slowly remove the bricks of the wall of mistrust.’”
Keyhan continues: “These remarks were made at a time when the Western side, headed by America, does not have any intention to remove or even shorten the wall of mistrust between itself and Iran. … Moreover, they are delaying the implementation of their JCPOA commitments. Lifting the sanctions has remained merely as a promise on a piece of paper, so much so that it has roused the protest of Iranian politicians.
“The American side is promoting conditions in such a way that today even European banks and companies do not dare to establish financial relations with Iran – since all of them fear America’s reaction in the form of sanctions [imposed on those same banks]. Actually, the reason for the delay in the commencement of the European banks’ financial cooperation with the Iranian banks and the failure to facilitate banking and economic transactions, is because many of the American sanctions are still in place, and Iranian banks’ financial transactions are [still] facing restrictions. Moreover, given their continuing fear of the biting legislations and penalties for violations of the Americans’ old sanctions, European financial institutions are concerned about violating the American sanctions that continue to be in force …
“It is pointless to expect the US administration to cooperate with Iran given the comments of the US officials, including [National Security Advisor] Susan Rice, since the Americans’ comments and behaviour reveal their non-compliance with their obligations and speak of the absence of the US administration’s political will to implement even its minimum obligations.”
Here Keyhan is specifically referring to Susan Rice’s observation to Jeffrey Goldberg in the Atlantic that, “The Iran deal was never primarily about trying to open a new era of relations between the US and Iran. The aim was very simply to make a dangerous country less dangerous. No one had any expectation that Iran would be a more benign actor.”
Keyhan continues: “Any action on the international scene calls for suitable and appropriate reaction. Therefore, we cannot expect a government like the US administration that seizes every single opportunity to restrict our county, to lift the sanctions. Rice’s recent comments are only a small part of the increasing anti-Iranian rhetoric of the American officials in recent months. These remarks should actually be regarded as a sign … that the dream of the JCPOA is nothing but wishful thinking and far from reality.” (Emphasis added).
The Supreme Leader’s nudge therefore was intended for the ears of the government: Do not build too much politically on this accord: beware its foundations may turn out to be built on sand.
‘Silver Bullet’ Worries
Recently U.S. Treasury Secretary Jacob Lew gave a talk at Carnegie, on the Evolution of Sanctions and Lessons for the Future, on which David Ignatius commented: “Economic sanctions have become the ‘silver bullet’ of American foreign policy over the past decade, because they’re cheaper and more effective in compelling adversaries than traditional military power. But Jack Lew warns of a ‘risk of overuse’ that could neuter the sanctions weapon and harm America. His caution against overuse comes as some Republican members of Congress are fighting to maintain U.S. sanctions on the Iranian nuclear program despite last year’s deal limiting that Iranian threat.”
So what is going on here? If Lew is warning against sanction overreach, why is it that it is precisely his department that is the one that is so assiduously undermining sanctions relief for Iran – “particularly since Lew’s larger point is that sanctions won’t work if countries don’t get the reward they were promised — in the removal of sanctions — once they accede to U.S. Demands”, in the paraphrase by Ignatius himself?
One reason for this apparent contradiction implicit in Lew’s remarks probably is China: Recall that when China’s stock markets were in freefall and hemorrhaging foreign exchange, as it sought to support the Yuan – China blamed the U.S. Fed (U.S. Reserve Bank) for its problems – and promptly was derided for making such an “outlandish” accusation.
Actually, what the Fed was then doing was stating its intent to raise interest rates (for the best of motives naturally!) – just as those, such as Goldman Sachs, have been advising. U.S. Corporate and bank profits are sliding badly, and in “times of financial depletion,” as the old adage goes, “bringing capital home becomes the priority” – and a strong dollar does exactly that.
But the Peoples’ Bank of China (PBOC) did a bit more than just whine about the Fed actions, it reacted: It allowed the Yuan to weaken, which induced turmoil across a global financial world (already concerned about China’s economic slowing); then raised the Yuan value to squeeze out speculation, betting on further falls in the Yuan; then let it weaken again as the Fed comments started to slide in favor of interest rate hikes, and a strong dollar – until finally, as Zero Hedge has noted:
In short, the Ignatius’s “silver bullet” of foreign policy (the U.S. Treasury Wars against any potential competitor to U.S. political or financial hegemony) is facing a growing “hybrid” financial war, just as NATO has been complaining that it is having to adjust to “hybrid” conventional war – from the likes of Russia.“It appeared the messaging from The People’s Bank Of China to The Fed was heard loud and understood. Having exercised its will to weaken the Yuan (implying turmoil is possible), Janet Yellen (Fed Chair) delivered the dovish goods [i.e. indicated that global conditions trumped the advice of the likes of Goldman Sachs to strengthen the dollar], and so China ‘allowed’ the Yuan to rally back. In a double-whammy for everyone involved, the biggest 3-day strengthening of the Yuan fix since 2005 also pushed the Yuan forwards, back to their richest relative to spot since Aug 2014 – once again showing their might against the dastardly speculative shorts.”
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