Can Riyadh Gain In Tehran Sanc­tions?

UAE could gain from sanc­tions be­cause it has pre­vi­ously served as valu­able in­ter­me­di­ary and goods that could not be sold to Iran due to sanc­tions were routed through UAE

The Day After - - CONTENT - By Chan­dan Ku­mar

Re­cent Ira­nian trade fig­ures sug­gest that the UAE, a strong backer of US ef­forts to squeeze Iran eco­nom­i­cally, could emerge along­side China as the Is­lamic re­pub­lic’s fore­most life­line in seek­ing to blunt the im­pact of harsh sanc­tions. Rus­sia and Oman rather than Europe are emerg­ing as run­ners-up in pos­si­bly en­abling Iran to cir­cum­vent sanc­tions.

Cast­ing fur­ther doubt on Europe’s abil­ity and will to stand-up to US sec­ondary sanc­tions, de­spite its vo­cal sup­port for the em­bat­tled 2015 in­ter­na­tional agree­ment that curbed Iran’s nu­clear pro­gram, are new Ger­man fi­nan­cial rules sched­uled to take ef­fect this month. The rules could de­lay or pre­vent cri­sis-rid­den Iran from repa­tri­at­ing Eu­ros 300 mil­lion ($347 mil­lion) de­posited in an Ira­nian-con­trolled bank in Ham­burg.

Fig­ures for Ira­nian trade in the pe­riod from 21 March to 22 July of this year, compiled by Ira­nian en­ergy and eco­nom­ics an­a­lyst Faezeh Foroutan, shows China and the UAE jointly ac­count­ing for 39.8 per­cent of Ira­nian im­ports and 37.8 per­cent of its ex­ports. By com­par­i­son, nine mem­bers of the Euro­pean Union, in­clud­ing heavy­weights Ger­many, France and Bri­tain shoul­dered only 15.5 per­cent of im­ports and 7.93 per­cent of ex­ports.

Ira­nian lead­ers have said that the fu­ture of the nu­clear agree­ment, of­fi­cially dubbed the Joint Com­pre­hen­sive Plan of Ac­tion (JCPOA), in the wake of the US with­drawal would de­pend on the abil­ity of Europe, China and Rus­sia to en­sure that the im­pact of US sanc­tions would be sub­stan­tially blunted.

Ira­nian for­eign min­is­ter Mo­ham­mad Javad Zarif in­sisted that China’s role was key. “The role of China in the im­ple­men­ta­tion of JCPOA, in achiev­ing JCPOA, and now in sus­tain­ing JCPOA, will be piv­otal,” Zarif said.

China, a sig­na­tory to the nu­clear agree­ment along­side Europe, Rus­sia and the US that with­drew from the ac­cord in May, has re­jected US re­quests to cut Ira­nian oil ex­ports even it re­port­edly promised not to in­crease them. China is Iran’s top en­ergy ex­port mar­ket.

China’s re­fusal to cut back on Ira­nian oil pur­chases threat­ens to ren­der the Trump ad­min­is­tra­tion’s goal of re­duc­ing Ira­nian ex­ports to zero un­achiev­able and means that its Novem­ber 4 dead­line to do so is un­re­al­is­tic.

Act­ing out of self-in­ter­est, China, more­over, ap­peared to be will­ing to strengthen the Is­lamic re­pub­lic in other ways, in­clud­ing by sup­port­ing mil­i­tar­ily the Ira­nian-backed regime of Syr­ian pres­i­dent Bashar al-As­sad in its quest to gain con­trol of Syria’s last ma­jor rebel strong­hold in the north­ern re­gion of Idlib.

Speak­ing to Syr­ian pro-govern­ment daily Al-Watan, China’s am­bas­sador to Syria, Qi Qian­jin, said that China was ‘fol­low­ing the sit­u­a­tion in Syria, in par­tic­u­lar af­ter the vic­tory in south­ern (Syria), and its mil­i­tary is will­ing to par­tic­i­pate in some way along­side the Syr­ian army that is fight­ing the ter­ror­ists in Idlib and in any other part of Syria.” The

am­bas­sador was re­fer­ring to re­cent Syr­ian vic­to­ries against rebel forces in south­ern Syria and on the Golan Heights.

Chi­nese par­tic­i­pa­tion in a cam­paign in Idlib, the dump­ing ground for rebels evac­u­ated from else­where in Syria, in­clud­ing Uyghur fight­ers from the north­west­ern prov­ince of Xin­jiang, would be China’s first ma­jor en­gage­ment in for­eign bat­tle in decades. China wor­ries that Uyghur fight­ers may want to re­turn to Xin­jiang.

The UAE’s po­ten­tial role in help­ing Iran de­flect US sanc­tions may not be surprising given the fact that Dubai has long func­tioned as a key trans-ship­ment point for Iran with trade in the year end­ing at the end of March top­ping $16.8 bil­lion but is no­table given Emi­rati back­ing for the US sanc­tions.

Iran, nonethe­less, in re­sponse to a se­ries of UAE mea­sures against Ira­nian fi­nan­cial net­works, has sought to shift its ex­port hubs to Qatar and Oman and strengthen eco­nomic ties with Rus­sia.

The UAE “has been Iran’s no. 1 trade part­ners for years. The point is the grow­ing role of Rus­sia and Oman,” Foroutan said, ex­press­ing doubt that Oman could re­place the UAE in the short term.

Rus­sia ad­vised Iran dur­ing a meet­ing be­tween Pres­i­dent Vladimir Putin and Ali Ak­bar Ve­lay­ati, a se­nior ad­viser to Iran’s supreme leader, Ay­a­tol­lah Ali Khamenei, that his coun­try was will­ing to in­vest $50 bil­lion in the Is­lamic re­pub­lic’s oil and gas sec­tor. The two men met days be­fore Putin’s sum­mit with Pres­i­dent Don­ald Trump in Helsinki.

Ve­lay­ati said a Rus­sian oil com­pany had al­ready signed a $4 bil­lion deal with Iran that “will be im­ple­mented soon” and that “two other ma­jor Rus­sian oil com­pa­nies, Ros­neft and Gazprom, have started talks with Iran’s oil min­istry to sign con­tracts worth up to $10 bil­lion.”

Iran and Rus­sia signed pre­lim­i­nary agree­ments for up to $30 bil­lion in in­vest­ments in Iran’s oil in­dus­try months be­fore the Trump ad­min­is­tra­tion said it would re-im­pose sanc­tions.

Europe’s abil­ity and will­ing­ness to play its part in sal­vaging the nu­clear deal was called into ques­tion by the new Ger­man fi­nan­cial rules and could de­pend on whether the Brus­sels-based So­ci­ety for World­wide In­ter­bank Fi­nan­cial Telecom­mu­ni­ca­tion (SWIFT) bows to US threats if it fails to ex­clude by Novem­ber Ira­nian banks from its global fi­nan­cial trans­fer sys­tem.

Euro­pean of­fi­cials sug­gest that a SWIFT con­cur­rence with US sanc­tions would put to bed any hope of sal­vaging the nu­clear deal. Europe ap­pears, how­ever, to be bank­ing on the fact that the US may not fol­low through on its threats, at least not against the so­ci­ety as such, be­cause that would un­der­mine the global fi­nan­cial sys­tem that em­pow­ers it.

How­ever, the new Ger­man cen­tral bank rules that cre­ate ad­di­tional pow­ers to block trans­ac­tions if their ex­e­cu­tion could threaten “to end im­por­tant re­la­tion­ships with cen­tral banks and fi­nan­cial in­sti­tu­tions of third coun­tries” ap­pear to con­sti­tute a nod to­wards the US sanc­tions.

Com­ing into ef­fect on Au­gust 25, the rules could al­low the bank to re­ject an Ira­nian re­quest that it au­tho­rize the with­drawal of U$S300 mil­lion from the Europäisch-Iranis­che Han­dels­bank AG, a Ham­burg-based fi­nan­cial in­sti­tu­tion owned by Ira­nian banks, in­clud­ing state-owned Bank of In­dus­try and Mine. Iran wants to phys­i­cally ship the money to Tehran to evade po­ten­tial US ef­forts to block a trans­fer.

Ira­nian of­fi­cials told the Ger­man govern­ment that the for­eign cur­rency was needed to en­able Ira­ni­ans who travel abroad but don’t have ac­cept­able credit cards be­cause of sanc­tions to be able to pay their travel ex­penses.

US and Is­raeli of­fi­cials pres­sured Ger­many to block the with­drawal, ar­gu­ing that Iran might use the funds to fi­nance oper­a­tions in Syria, Ye­men, Iraq or Afghanistan. Said con­tro­ver­sial US am­bas­sador to Ger­many Richard A. Grenell: “We are very con­cerned about the re­ports that the Ira­nian regime is try­ing to move hun­dreds of mil­lions of eu­ros to Iran from a Ger­man bank.”

It’s a con­cern Ger­many seem­ingly shares. A Ger­man de­ci­sion to block the trans­fer of the funds would how­ever in­flu­ence Ira­nian per­cep­tions of Europe’s re­solve. That in turn would fo­cus at­ten­tion on Iran’s ma­jor trad­ing part­ners. China and Rus­sia have been rel­a­tively clear where they stand while the UAE may find it more dif­fi­cult to evade mea­sures that would se­verely curb what has long been a lu­cra­tive busi­ness.

The Khaleej Times, the UAE’s old­est English-lan­guage news­pa­per that was co­founded the UAE govern­ment, pub­lished days be­fore the US with­drawal from the nu­clear agree­ment ar­gued nonethe­less that the UAE would gain whether or not sanc­tions were re-im­posed. “The UAE could gain from sanc­tions be­cause it has pre­vi­ously served as a valu­able in­ter­me­di­ary dur­ing sim­i­lar pe­ri­ods. Goods that could not be sold to Iran di­rectly due to sanc­tions were routed through the UAE,” it said.

Ira­nian Pres­i­dent Has­san Rouhani with Chi­nese Pres­i­dent Xi Jin­ping

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