Tough US sanctions on Iran take effect
TEHRAN’S NUCLEAR PROGRAMME AND MALIGN BEHAVIOUR UNDER FOCUS AS NEW CURBS SET TO HIT KEY SECTORS OF ITS ECONOMY
Powerful US sanctions on Iran’s energy, shipping, and shipbuilding sectors, as well as those targeting transactions with the Central Bank of Iran and other Iranian banks, will come into force today, following the US decision to withdraw from the 2015 nuclear deal with Tehran in May.
Iran’s clerical rulers have played down the US move, but many ordinary Iranians appear apprehensive. The daily struggle to make ends meet has been getting harder for months: The economy was battered by the reimposition of a first raft of US curbs in August after Washington’s pullout from a nuclear deal between Tehran and global powers in May. 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.
There are fears that the economy, weakened by years of sanctions, mismanagement and corruption, may collapse as the US puts more pressure on the world’s Number 3 crude exporter.
Today, 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 maximumpressure campaign on Iran after the US withdrawal from the 2015 nuclear deal. Yesterday 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 today, 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.
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?
Little is expected to happen today, 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
Iranian businessmen have been finding it harder to cope. Some 70 per cent of small factories, businesses and workshops have started to shut down in the past months due to lack of raw materials and hard currency, media reports.
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
granted temporary waivers from secondary sanctions so they can continue to buy oil. But sanctions apply to activities that happen from today 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 today.
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?
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 US. The top commander of Iran’s Revolutionary Guards, Major General Mohammad Ali Jafari, said yesterday Iran would resist and defeat a US “psychological war” and sanctions against its vital oil sector.