Sabena Siddiqi |
Preparing for the long haul of U.S. sanctions ahead, Iran is trying to insulate itself and keep a “resistance economy” afloat. Already having faced the first wave of sanctions covering financial transactions, gold sales, and automobiles, Iran will soon be hit by the second wave on November 4 targeting the oil, gas, shipping and petrochemical sector.
Proactively, a financial package has been introduced by Tehran to contain the currency free-fall with measures to control the allocation of foreign currency and keep it strictly for essential imports. As the deficit continues, hoarding of gold has caused higher prices and an insufficient supply but there is no panic. In retrospect, Iran has experienced economic sanctions since 1979, followed by even more stringent UN conditions from 2010 to 2015. Definitely having been a survivor in the past, Iran is quite adept at taking preventive measures, while some facts are also working in its favor.
“Fifteen years ago some guy would set up a company in Dubai’s Jebel Ali port and load stuff from wherever and ship it to Iran and no one would notice, now the detection systems and knowledge are leaps and bounds ahead.”
First, from the legal aspect, Iran has more leverage, as most of the previous sanctions were under UN Security Council resolutions and within the ambit of international law. Since the Joint Comprehensive Plan of Action (JCPOA) was finalized, those resolutions were done away with as part of the deal. This time, however, under the current circumstances, those UN resolutions cannot be made part of the sanctions unless UNSC members Russia and China approve the same stipulations again and that seems quite unlikely.
Secondly, circumventing banking measures is relatively simpler for Iran as it does not use the SWIFT transactions system heavily, using local currencies or barter deals instead. Maintaining sustainable trade will still be possible for Iran if the EU, China, and India play their role. Stabilizing the Iranian rial is the first priority, and only recently Chinese oil futures contracts spiked 5 percent extra from their daily quotas, significantly boosting yuan-denominated oil trade.
Replacing the dollar with an alternative currency like the yuan will help Iran control the shortage of foreign exchange and sail through safely. Alongside, Iran is exploring the crypto-currency option for cross-border trade or even initiating a bank messaging system in place of SWIFT. Third, approaching countries like Pakistan, Oman, and Qatar, Iran may also draft some agreements with them for the use of their ports in case its trade gets affected. Implementing contingency plans, Iran has been working out various shipping options to overcome any hurdles.
Having said that, avoiding secondary sanctions for facilitating Iran is more difficult these days, according to sanctions compliance attorney Farhad Alavi. He says that “Fifteen years ago some guy would set up a company in Dubai’s Jebel Ali port and load stuff from wherever and ship it to Iran and no one would notice, now the detection systems and knowledge are leaps and bounds ahead.” In case such impediments occur, on its own China can help sustain Iranian trade just by increasing its purchase of oil and gas, the Chinese auto industry also has 10 percent of the Iranian market and has great potential to multiply so the trade will not be badly affected.
“Iran will continue to leverage its relationship with Russia and China to create a bulwark against Western pressure.”
Fourth, re-negotiating a nuclear deal with the US is the natural end of this impasse so the crisis may not be long drawn out. Contributing much-needed stability, even as the Middle East was gripped by war, the JCPOA deal had become vital for world peace. Considering the adverse repercussions, only a new nuclear deal can save the world from more crises. On its part, Iran has been ready to continue with the JCPOA nuclear deal if its demands of continued oil exportation and access to the global banking system are complied with.
In the meantime, the Trump administration has offered a dozen additional concessions in return for re-negotiation of Iran’s nuclear program. On its own this time, the US government’s approval ratings have been plunging at home and abroad, while its allies, the EU and India are dragging their feet.
Lacking approval from the Western bloc over abandoning the JCPOA, the US has no specific support from the UN either. Considering the legal glitch, carrying on sanctions might not be feasible if the matter is contested in court. If Iran survives both sets of sanctions, maintaining the tempo might become difficult for the US in the long run, and it might offer the supposedly better deal it promised.
Predicting Iran will survive the sanctions with the support of its friends, Professor Ariane Tabatabai from the Georgetown University has said, “Iran will continue to leverage its relationship with Russia and China to create a bulwark against Western pressure.” Considering all these factors, Iran may not be in really dire straits as the world believes and the whole matter could get resolved at the negotiating table eventually.
Sabena Siddiqui is a geopolitical analyst with a special focus on the Belt and Road Initiative, CPEC, and South Asia. She can be reached at firstname.lastname@example.org and tweets @sabena_siddiqui. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.