“There is no doubt in my mind it is geopolitical hedging. They are trying to get as much (wheat) as they can in the country to blunt the effect of any further escalation in international sanctions,” said Rabobank commodities analyst Nick Higgins. “I think they hit the market hard and early and that from their perspective, limited the chances that anyone could react to such large purchases.” Food shipments are not targeted by sanctions, but the Iranian government is well aware that the price of food as well as the collapse of the local currency could fuel the same kind of unrest that has roiled other Middle East nations. Rory Lamrock, intelligence analyst with security firm AKE confirms that analysis. “If left unchecked, significant hikes in food and basic commodity prices on the ground are likely to be a key source of social unrest,” he noted.
On March 6th, the EU announced that a new round of negotiations between Iran and six nations, the US, UK, France, Germany, China and Russia, will be resuming soon. EU foreign policy chief Catherine Aston said it was time for “real progress.” Real progress reportedly consists of a joint request that Iran freeze production of uranium enriched to 20% purity (a level just below weapons-grade), and then ship its stockpile of the nuclear fuel to a third country. In addition, it is likely they will demand greater access to Iranian nuclear facilities by the International Atomic Energy Agency (IAEA).
How much teeth will the move by SWIFT add to the equation? According to its annual report, 19 Iranian member banks and 25 financial institutions sent and received 2 million messages through SWIFT in 2010. This is SWIFT’s first expulsion of any institution in its 39 years of existence, and its effect is being likened to being expelled from “what is the financial equivalent of the United Nations” according to Mark Dubowitz, a sanctions specialist in Washington, who advised U.S. lawmakers on the SWIFT legislation.
Yet as Foreign Policy reveals, the European Central Bank (ECB) guidelines for SWIFT inadvertently demonstrate the limitations of the system: The guidelines specifically bar access to SWIFT institutions that engage in “money laundering and the financing of terrorism[.]” Over the years, Iran has become quite adept at money-laundering. Last November, Iran was designated as a “Primary Money-Laundering Concern,” by the U.S. government, which imposed new sanctions on Iran’s energy sector. Furthermore, a report titled “Time for the Collapse,” reveals a strategy envisioned by Iranian military elites to destabilize the West through terror, drugs — and money laundering. Moreover, critics contend that SWIFT has breached the sanctions requirements, violated both U.S. and European laws and its own corporate rules in facilitating Iranian transactions. Taking such realities into consideration, it would seem the latest move by the EU may be less effective than advertised.
Nevertheless, the announcement has had an effect on overseas Iranian businessmen, who are shocked. “It will make life even more difficult for us than before, because this is like our lifeline to the outside being cut,” said Naser Shaker, who owns an oil and gas trading company in Dubai. Morteza Masoumzadeh, a member of the executive committee of the Iranian Business Council in Dubai, and managing director of the Jumbo Line Shipping Agency, called the news “devastating” and predicted “the collapse of many banking relations and many businesses.”
Yet even as these moves occur and Iranian businessmen despair, the ultimate question arises once again: can sanctions work? If history is relevant, the answer is no. Nothing up to this point has dissuaded Iran from pursuing its nuclear ambitions. Moreover, a regime with religiously inspired visions of facilitating an apocalypse they believe will engender the return of the Twelfth or Hidden Imam hardly sounds like the “rational actors” many wishful thinkers in the West want them to be. Add the reality that, despite their participation in the latest round of negotiations, Russia and China have been more than willing to use Iran as a counterbalance to U.S. interests and that the Iranian mullahs have a track record of ruthlessness in dealing with internal opposition, and it becomes far more likely the current regime will once again persevere.
As for negotiations, political reality suggests that Iran is not the only entity interested in buying time. The Obama administration would like nothing better than to avoid any serious confrontation with Iran until after the 2012 election. The president is already getting beat up in polls by Americans blaming him (rightly or wrongly) for higher gas prices that would skyrocket if hostilities ensued. No doubt Mr. Obama is also hoping that this latest move by the EU and the upcoming one by the U.S. Congress will persuade Israel to give non-military options one more chance to succeed.
Ironically, the severity of these sanctions may undercut such political calculations. If Iran survives its isolation and/or continues its pursuit of nuclear weapons, only two realistic options remain: a military confrontation — or a nuclear-armed Iran. Meanwhile, the clock continues to wind down.
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