Sunday, March 25, 2012

About those trade sanctions against Iran

It is not so very surprising that trade sanctions against a country that exports the world's most desirable commodity are extremely difficult to enforce.  In fact, because sanctions against Iran are almost certain to fail, it is likely that she will emerge far stronger for the experience.  Iran will develop a new customer base, new strategic alliances, and new suppliers.  And unless her enemies start bombing out of sheer frustration, she will probably look on these sanctions as an historic opportunity.

Iran gobbles up U.S. wheat

By Tim Lister and Emily Smith CNN   March 20th, 2012

Iran is buying American wheat for the first time in three years as it seeks to hedge against the growing impact of sanctions and weather-related crop shortages. Some 120,000 tonnes of hard red winter wheat grown in the Plains is on its way to the Islamic Republic, according to the U.S. Department of Agriculture. The sale of another 60,000 tonnes has been finalized, according to trade sources, and Iran may ultimately buy some 400,000 tonnes of U.S. wheat this year.

The purchases are part of a massive effort by the Islamic Republic to build up its grain stockpiles amid growing difficulties in financing imports of everything from steel to palm oil. At the same time, Iranian companies are devising elaborate workarounds to find new markets for crude oil exports.

Exports of U.S. wheat to Iran are legal. U.S. and European sanctions against Iran exempt agricultural products. The major U.S. commodity traders - Bunge, Archer Daniels Midland and Cargill - won't comment on whether they were involved in the deals, but Cargill told CNN that it "does sell agricultural commodities to Iran as food is specifically excluded from the sanctions" implemented because of Iran's nuclear program.

"We take great care to ensure that these sales respect both the spirit and the letter of the law while trying to make sure that ordinary people are not deprived of basic foodstuffs," a Cargill spokeswoman said.

According to USDA figures, 1,564,000 tonnes of U.S. wheat were exported to Iran in 2008, when the country was suffering a drought, and 312,000 tonnes the following year. Iran has also bought smaller amounts of U.S. soybeans and corn.

Once again, analysts say dry weather is in part driving the sales.

"Iran's appetite is driven by drought, a desire to build up grain inventories and hedging against the future impact of sanctions," says Shelley Goldberg, director of global resources and commodities strategy at Roubini Global Economics. "Inventories were getting quite low last year."

State-owned and private Iranian companies are devising ways to overcome the shortage of hard currency, using barter, gold and currencies such as the Indian rupee and Russian rouble. Traders say it also appears that Iran's Central Bank has stepped in, making foreign exchange available to facilitate imports. more
This move is the biggie.  IF Iran can make these new arrangements work, she will have inflicted extremely serious economic damage on those who wish her harm.
Iran presses ahead with dollar attack – oil bourse will start trading oil in currencies other than the dollar from March 20

March 19, 2012 by Jack Blood

Last week, the Tehran Times noted that the Iranian oil bourse will start trading oil in currencies other than the dollar from March 20. This long-planned move is part of President Mahmoud Ahmadinejad’s vision of economic war with the west.

“The dispute over Iran’s nuclear programme is nothing more than a convenient excuse for the US to use threats to protect the ‘reserve currency’ status of the dollar,” the newspaper, which calls itself the voice of the Islamic Revolution, said.

“Recall that Saddam [Hussein] announced Iraq would no longer accept dollars for oil purchases in November 2000 and the US-Anglo invasion occurred in March 2003,” the Times continued. “Similarly, Iran opened its oil bourse in 2008, so it is a credit to Iranian negotiating ability that the ‘crisis’ has not come to a head long before now.”

Iran has the third-largest oil reserves in the world and pricing oil in currencies other than dollars is a provocative move aimed at Washington. If Iran switches to the non-dollar terms for its oil payments, there could be a new oil price that would be denominated in euro, yen or even the yuan or rupee.

India is already in talks with Iran over how it can pay for its oil in rupees.

Even more surprisingly, reports have suggested that India is even considering paying for its oil in gold bullion. However, it is more likely that the country will pay in rupees, a currency that is not freely convertible.

Last week, Indian state-owned group Hindustan Petroleum said that Indian businesses could not pay for Iranian crude imports in rupees unless the federal finance ministry exempted such payments from crippling withholding tax. This issue remains unresolved.

India and Iran have agreed – but not yet started – to settle 45pc of payments for Iranian oil in rupees. Iran will then use the currency to buy imports from India.

New Delhi currently spends about $12bn (£7.6bn) on Iranian oil each year, importing 12pc of the country’s needs from the country.

India pays for its oil in dollars, routed through a bank in Turkey after a previous mechanism was shut down in 2010. The Indian government has been resisting calls to stop importing oil from the pariah state.

“There have been problems with regard to Iran’s nuclear programme,” Manmohan Singh, India’s prime minister, said on Friday. “We sincerely believe that this issue can be and should be resolved by giving maximum scope to diplomacy.”

All of this means that the EU ban on Iranian oil imports, which comes into force on July 1, could hit Europe harder than it does Iran.

The country currently supplies 500,000 barrels of oil per day to the EU and there is a potential oil price spike in the offing should Iran pre-emptively stop the flow of oil to Europe, which it has threatened to do. more
Already, there is some chest-thumping coming out of Iran.  And with some cause. Turns out there are few countries willing to trash their economies to shut off the Iranian crude it requires to operate their societies.  Energy is critical, after all.
US oil sanctions failed – Iran’s VP
23 March, 2012

The Iranian Vice President has downplayed sanctions against the Islamic Republic, saying an embargo on Tehran’s oil sector has been defeated “in practice.” The remark came a few days after the US exempted 11 countries from being sanctioned. 
Mohammad-Reza Mir-Tajeddini told reporters that “in a clear retreat, the US exempted 11 countries from oil sanctions against Iran. The hostile US policy of imposing sanctions on the Iranian oil sector is, undoubtedly, a failure. 
This was in response to a move by Washington, which had earlier announced that Japan and 10 member states of the European Union were going to be exempt from being penalized for importing Iranian oil. 
However, the Islamic Republic’s biggest buyers – China, India and South Korea – are still on the list. China alone receives about 22 per cent of Iran’s oil exports.

Vice President Mir-Tajeddini reiterated Iran’s position as one of the world’s largest oil suppliers and said no sanctions could impact its economic development.

The fact that Washington decided to give some of Iran’s buyers the go-ahead to import its oil may appear to support the VP’s statements. But in reality, the EU is imposing sanctions of its own on the Islamic Republic, with an oil purchase ban being put in effect on July 1st. Japan has cut its imports by 20 per cent. So what Iran is choosing to interpret as failure may be merely a strategic move from the US. 
Middle East expert Professor Seyed Mohammad Marandi, however, believes that for now Iran is only benefitting from the penalties. While the US and its allies are trying to pressure Tehran, they are hurting themselves more.

“The price of oil has increased dramatically. Iran is making much more money than it was before. The sanctions have had no effect so far on Iranian oil exports. And numerous countries, especially countries independent of the Western bloc, are actually seeking greater amounts of Iranian oil,” he explained to RT.

“The Iranians are not going to have a problem with exporting oil because there is a huge shortage in the market. And many of the countries, dictatorships and regimes allied to the US, are inherently unstable. There is trouble in Central Asia, there is trouble in Nigeria, in Sudan, Saudi Arabia has a very old and dying king – the market really needs Iran.”

He added that by imposing sanctions the Western countries are only limiting their own abilities to import and export oil,with their rivals coming to replace them. more
This is the official sanctions list.  The possibility for cheating is extremely high so this list is, at best, provisional.  These attempts at trade sanctions will not hurt Iran but it will hurt the oil customers around the world who will see their energy costs rise.  Perhaps, given the futility of these sanctions, that is the whole point.

US reveals Iran petro penalty hit list after exempting allies

22 March, 2012

The US State Department has revealed the list of 12 countries which may be subjected to American financial sanctions for failing to cut oil imports from Iran.

The number of countries was mentioned earlier on Tuesday, as Washington announced a penalty waiver for Japan and 10 EU counties which complied with American demands and reduced their purchases. However, the names of the countries were not given.

Four of the countries on America’s anger list are among top 100 buyers of Iranian crude. They are China, India, South Korea and South Africa, with the first two being the two largest buyers. 
Also targeted by possible financial sanctions are Indonesia, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan and Turkey.

US President Barack Obama may order banks based in those countries and involved in oil trade with Iran to be cut off America’s financial system. On the other hand, he may exempt some of them from sanctions, if US national security demands it. So America’s allies like South Korea or Pakistan may dodge repercussions.

Meanwhile China on Thursday slammed America’s pressure on Iran’s trading partners following the exemption of Japan and European countries from penalties. The People’s Daily, the official newspaper of the ruling Communist Party, called the US policy misguided and selfish.

"One stand-out feature of unilateralism is this: that one's own rules become the world's rules. Everyone must respect them, and if you don't, then you will be punished," the paper said in a commentary.

The US is campaigning to cripple Iranian oil export as part of pressuring it into stopping uranium enrichment. In January the EU joined the sanctions with a six-month grace period, while Japan adopted a policy to reduce imports from Iran. Western countries say the Islamic Republic may be trying to build a nuclear weapon under the guise of its civilian nuclear program.

Tehran rejects the allegations. Some counties including UN Security Council members Russia and China say no evidence of such intension is available and oppose economic sanctions against Iran, saying they fail to resolve the problem.

The uncertainty of the situation over Iran has resulted in world oil price gradually climbing over the months. The IMF warned this week that if the flow of crude from the country is abruptly cut, the resulting price shock would deal a serious blow to the global economy. more

No comments:

Post a Comment