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February 7, 2012 4:41 pm

The Possible Impact of the New Iran Sanctions

avatar by Maxine Dovere

Central bank of Iran (main building) in Tehran. Photo: Orijentolog.

Almost two decades ago, a financial minister of a small Gulf country was asked how he could employ the use of Israeli technology to explore his country’s newly found coastal gas reserves. “Well” said the minister “business is business.” (Mid East Market Watch, WEVD ). More recently – at the 2011 Clinton Global Initiative – Muhtar Kent, Chairman of the Coca Cola Company – commented that “Business has a unique opportunity to do things differently.” Kent told the Algemeiner that “there is an unprecedented opportunity…The region’s politics will take care of itself as civil society builds.”

Many involved in the Middle East, representatives of nations throughout the region, recognize the power of business to affect regional politics. The application of financial sanctions against the current Iranian regime has unquestionably impacted the country’s day to day “society.” The recent financial sanctions against the Central Bank of Iran and other Iranian financial institutions put in place by President Obama are a clear indication of America’s understanding of the effect of financial action as a policy changer. The question of what “bang” America will secure – this time by use of sanctions – against the Iranian” buck” remains.

The American sanctions edict, issued in a letter sent to Congress, includes a freeze on the property of the Central Bank of Iran, other Iranian financial institutions and assets held in the United States by the Iranian government. The tightened sanctions come in response to American concern about the Iranian government’s refusal to suspend a nuclear program suspected of being aimed at nuclear weapons production. Full application of the restrictions will affect Iranian ability to profit from oil sales revenue, further constraining its ability to process financial transactions.

The Central Bank sanctions were included as an amendment in the wide-ranging defense bill Obama signed into law December 21, 2011. The White House said Obama signed the Executive Order approving the sanctions on Sunday, well ahead of the six-month window he was afforded in the originating defense bill. In his letter to Congress, the President said the sanctions are warranted “I have determined that additional sanctions are warranted, particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran’s anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran’s activities.”

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White House spokesman Jay Carney stated that “There has been a steady increase in our sanctions activity, and this is part of that escalation.” The change in policy, he confirmed which formerly affected only Iranian entities or individuals did not include all Iranian financial institutions, was put in place “particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks…and the hiding (of) transactions of sanctioned parties.”

The banking sanctions included a warning to international financial institutions that engaging “in certain significant financial transactions” could place them at risk of American sanctions. The action follows American attempts to pressure its allies to seek oil resources from alternate sources including Saudi Arabia. China and India, however, continue to buy Iranian crude.

Maintaining its stance that its nuclear program has peaceful intents, the Iranian regime has threatened to retaliate by closing the Straits of Hormuz, which will prevent European oil buyers from receiving shipments even before the July 1 European Union embargo of Iran’s oil is set to go into effect.

The order blocks all property and interests in property belonging to the Iranian government, its central bank, and all Iranian financial institutions, even those that haven’t been specifically designated for sanctions by the U.S. Treasury.  U.S. regulations already prohibited American citizens or entities from virtually all direct and indirect transactions involving Iran or its government, aside from those exempted under general licenses for transactions involving food, medicine, remittances and humanitarian relief. The latest measure was mandated as part of Iran sanctions legislation that was passed by Congress and signed by the president December 31.

The President has called Iran a “serious threat,” both to the United States and to Israel, to international security, and a possible precursor to “an arms race in this Middle East. His support of “tough sanctions” was stated as early as 2007 in a speech to the AIPAC conference. Concern about the use of a military option was also stated from that time. In September, 2008, Obama stated that “I reserve the right, as president of the United States to meet with anybody at a time and place of my choosing if I think it’s going to keep America safe.”

The president attempted to use a “carrot and stick” approach, for example offering Iran World Trade Organization membership as a benefit of abandoning its nuclear program. The President’s support of “opening dialogue” with Iran is reflected in ongoing attempts at engagement fostered by the White House

Israeli leaders, who see Iran as their most serious security threat, have, on the one hand, hinted they may order a pre-emptive military strike on suspected nuclear targets in Iran if they conclude that the sanctions are ineffective, but, on the other hand, they have maintained an interest in a diplomatic approach. Mr. Obama and his aides have sought to restrain Israel, stressing in recent days that sanctions and diplomatic pressure are the preferred strategy for dissuading Iran.

The latest White House move has been said to be part of the attempts to convince Israel not to take unilateral military action, an action many believe would change the balance of the world in multiple areas. The President’s statements and recent comments from high level Israeli sources indicate that hope for a diplomatic solution remains.

International sanctions are hitting the people of Iran directly. Currency devaluation limits Iranians’ ability to sell their property or buy “hard goods” in the international market. Jews still living in Iran – like other Iranian citizens – are directly affected. Following four rounds of U.N. sanctions against Iran, and the newest American measures, conditions continue to deteriorate.

Will the pain of the people be sufficient to affect the regime?  NPR (National Public Radio) reports that analyst Meir Javedanfar (of Iranian heritage) says “The Iranian people don’t want another war. They are a great people and they want to live in peace. It’s just their leadership that is aggressive, not them,” Javedanfar says. “And it hurts me to see how [the] people of Israel are being threatened by a regime which has called their country a virus, a cancer. I don’t want to see them get hurt, either, so it’s a very difficult … scenario for Iranians.”

In Israel, Menashe Amir, hosts Israel Radio’s Farsi service. He says he receives call from listeners in Teheran. “Most of the Iranians are concerned…. They demand Israel not to attack civilian targets, not to destroy the Iranian infrastructure, not to harm the economy of the country.” The commentator says “a strike on military targets might be acceptable to some (in Iran.)”

James Clapper, an American intelligence official, said on January 31 that an attack fueled by Iran was “probably” likely.  Evidence of plots – all foiled – has recently surfaced.  Clapper testified before the Senate, regarding “the alleged” October scheme to assassinate Saudi Ambassador Adel Al-Jubeir at a Georgetown (Washington, DC) café.  Said Clapper “some Iranian officials — probably including Supreme Leader Ali Khamenei — have changed their calculus and are now more willing to conduct an attack in the United States in response to real or perceived U.S. actions that threaten the regime.”

Clapper, who recently spoke with the director of Mossad, Israel’s intelligence service, said “We’re doing a lot with the Israelis, working together with them. And of course for them, this is, as they have characterized, is an existential threat.”

An Israeli internal security document reported by ABC said “Jewish and Israeli institutions in the Unites States are on high alert over concerns that they will be targeted by Iran or its proxy.” According to ABC, “the head of security for the Israeli consul general for the Mid-Atlantic States said “the security threat has increased on ‘guarded sites/ such as Israeli embassies and consulates, and “soft sites” such as synagogues, as well as Jewish schools, restaurants and Jewish community centers.” Similar concerns, says ABC, have been voiced by U.S. regional intelligence. Further “Open source has reported many demonstrations against Israel are expected to be concentrated on Israeli embassies and consulates…..demonstrations could potentially turn violent at local synagogues, restaurants, the Israeli Embassy and other Israeli sites.”

Paul Goldenberg, national director of the Secure Community Network, funded by the Jewish Federations of North America, says “The people that want to come after Israel overseas will look at Jewish targets in the host nations as well,” he said. “They will look not just at embassies, but at synagogues and JCCs as secondary targets.” He cited the “an alleged plot to kill two rabbis and the Israeli ambassador in the capital city, Baku” Azerbaijan.

Knowledgeable diplomatic sources have told the Algemeiner that 2012 is an important transitional year during which the power of sanctions and the influence of the media are in position to bring about change. “If the Iranian people knew things would be different, and if the “electronic curtain” could, with certainty, be lifted, the willingness of the people to oppose the government would increase significantly.”

Even before the most recent round of sanctions was put into place, CIA director David Petraeus told a Senate Intelligence Committee hearing that  “The sanctions have been biting much, much more literally in recent weeks than they have until this time,”

“What we have to see now is how does that play out, what is the level of popular discontent inside Iran, does that influence the strategic decision-making of the Supreme Leader and the regime, keeping in mind that the regime’s paramount goal in all that they do is their regime survival,” he said.  The former general noted that Iran’s currency has lost “considerable value.”

The Algemeiner source reiterated the general’s assessment. “Sanctions are the first thing actually affecting the people of Iran – smoking them out. People will come to the streets again with greater experience.” Iranians, he reminded, “are the originators of the Arab spring.”

A succinct editorial in Israeli daily Yediot Ahronot asked “Can the Iranian leadership fold [in the face of sanctions]?” And answered “Yes. The regime in Teheran is not being demanded to stop its entire nuclear program, but only to hold to what it declared: Nuclear power for peaceful purposes. It would be enthusiastically received in Tehran.”

Concluded the editorial – “(The regime) would be strengthened. But these are rational considerations, while the leadership in Teheran displays irrational behavior.” “Israel is prepared to – and will – do everything possible in order to prevent Iran from having nuclear weapons. No Israeli Prime Minister or Chief-of-Staff will take upon himself the responsibility of a Tehran with nuclear weapons.”

“[Iran is] feeling the pressure,” said President Obama on Super Bowl Sunday. “But they have not taken the step that they need to diplomatically, which is to say, ‘We will pursue peaceful nuclear power. We will not pursue a nuclear weapon.’ Until they do, I think Israel rightly is going to be very concerned and we are as well.” The President told Matt Lauer that his “top priority is preserving the security of the United States and Israel.”

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