How The U.S. Can Put More Pressure On Iran

There's an excellent piece written by Michael Jacobson for The Guardian Online that is reposted here at the WashingtonInstitute. This is a detailed account of further measures that the United States could use to bring about further pressure on the nation of Iran. Some of it is quite technical but here's a sample:

Unfortunately, the US has not applied the same type of pressure to other sectors. For the US to succeed in changing the decision-making calculus in Tehran, it must greatly broaden the financial squeeze. While banks are now being far more cautious in scrutinising their Iran-related transactions, the same is not necessarily true for other businesses. As a result, Iran has been able to find ways to circumvent the current sanctions, and, most troublingly, continues to have access to sensitive technology and embargoed US and European products. One of the primary ways that Iran has been able to do this is through re-exports -- having products sent to destinations with loose export control restrictions and then shipped from there to Iran.

To crack down on this type of trade and further tighten the economic noose against Iran will require the US government to target a number of key industries involved in facilitating international trade, including shippers, distributors, freight forwarders and importers-exporters. The US should press these businesses to scale back or at least more closely monitor possible Iran-related transactions.

What Jacobson is pointing out is that the Iranians have found ways to circumvent the financial sanctions put in place against them by the U.S. and the West. By the U.S. pressuring these "re-export" partners, it could literally strangle the Iranians financially and would seriously deter some of the importation of certain highly volatile items.

Here's an example:

The US should then conduct outreach to the major players engaged in facilitating trade with Iran and give industry-specific briefings, outlining Iran's reckless behaviour. It will be far more difficult for the companies to do business as usual and to plead ignorance after being on the receiving end of such a briefing. The US should also make clear, as they have with the banking sector, that companies which fail to heed these warnings could be the subject of tough enforcement actions.

What this all amounts to , especially to a non-legal mind like me, the United States can confront these below the table partners of Iran and spell it out to them - that we, the United States, are watching your every move, that we have informed you of the breach you are making when you deal like this with Iran, and if you don't stop, we will bring action against you.

I like these maneuvers in that the Iranian economy is tanking big time right now and with some of these further sanctions, the drag on Iran's people could light the fuse of rebellion.

Most of you know I would much rather see the U.S., western allies and Israel bomb the ever-living shit out of Iran but in the meantime, I say put the screws to their pocket book.

Putting the Squeeze on Iran

US-Iranian relations are once again headline news after dropping off the radar for several months in the wake of the US National Intelligence Estimate in December 2007. In recent days, media and public attention has focused on the growing US diplomatic overtures to Tehran, as well as the reports about a possible military attack on Iran that continue to circulate.
With all of the focus on the diplomatic and military fronts, there has been little attention paid lately to the middle ground between the two: the US financial campaign against Iran. Financial pressure may be the most important tool the US has in its arsenal to persuade Iran to abandon all of its nuclear ambitions. While the US approach has been successful in raising the financial costs for Tehran of its nuclear ambitions, the regime shows no signs yet of changing course. To succeed in this effort, the pressure will have to be ramped up significantly, making the choice for Iran far more stark than it is today.
One problem with the current US effort to squeeze Iran is that it has largely been limited to one industry -- the financial sector. On this front, the US Treasury has taken the lead and has been quite successful. Over the past two years, the Treasury has made the case to global financial institutions that doing business with Iran is risky business, explaining how Iran is abusing the international financial system by using front companies and deceptive financial practices designed to mask their activities.
Major international financial institutions have been responsive to the Treasury pitch. When confronted with this information, global financial institutions -- particularly those based in Europe -- have taken action, either terminating or reducing their business with Iran. More surprisingly, in recent months, it appears that banks in the United Arab Emirates and China are also beginning to exercise greater caution in their business dealings with Iran.
While these foreign banks are not legally bound to comply with the broad US sanctions against Iran, many have heeded the Treasury warnings for several reasons. First, banks are focused on maintaining stellar reputations, and avoiding the type of specific risk outlined by the Treasury makes sense from a business perspective. Second, since the US is the world's leading financial centre, these banks are not willing to risk losing access to the US market for the sake of maintaining business ties to designated terrorists or WMD proliferators. Financial institutions are particularly eager to avoid being the "next ABN Amro" -- the Dutch bank fined $80m by the US in 2005 for having an inadequate programme in place to ensure compliance with the US sanctions against Iran and Libya. The Financial Times noted that the fine sent "seismic waves through the international banking system," and the "reverberations are still being felt today."
These US-led efforts have certainly had an impact on Iran, even in spite of booming oil prices (though Mahmoud Ahmadinejad's economic mismanagement has also contributed to domestic problems). Inflation has risen to 25%, and Iranian businesses are carrying cash to pay for transactions, due to difficulty opening foreign currency accounts with non-Iranian banks. Iranian importers are now having to pay in advance for commodities and are no longer able to receive revolving lines of credit, and their costs are up 20-30%. The Iranian banking community has been hit particularly hard by the sanctions and US pressure. Bank Sepah is on the brink of collapse and other Iranian banks are struggling as well. Bank Saderat has seen its corresponding banking relationships -- which are essential for a bank to operate effectively internationally -- fall from 29 in August 2006 to eight by early 2008.