German Chancellor Angela Merkel gave a speech in which the divisions between Europe and the United States became glaringly obvious. Merkel is quoted as saying: “It is no longer such that the United States simply protects us, but Europe must take its destiny in its own hands. That’s the task of the future.” The speech came after the US pulled out of the Iranian nuclear deal and as Merkel and French President Macron began efforts to preserve the agreement even without the participation of the US. Much depends on whether the US imposes sanctions on European companies if they continue to trade with Iran. The extra-territorial reach of US law would be intolerable, but most companies do more business outside of Iran than within it and would therefore have little choice but to drop their Iranian contacts. The divide between the US and Europe is reflected in the growing trade disputes between the Union and the US in addition to the US withdrawal from the Paris climate accords. The US withdrawal from the Trans-Pacific Partnership (TPP) and its threats to withdraw from the North American Free Trade Agreement (NAFTA) also raise serious questions about whether the US can be considered a reliable partner in any agreement.
We need to wait know how the US intends to implement sanctions against Iran now that it has withdrawn from the JCPOA. There is, however, a clear worst case in which the US imposes sanctions on any government or company that conducts business with Iran, including barring those entities from participating in the global financial transaction network know as the Society for Worldwide Interbank Financial Telecommunication (SWIFT). According to the SWIFT website:
“SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services.
“We provide our community with a platform for messaging, standards for communicating and we offer products and services to facilitate access and integration; identification, analysis and regulatory compliance.
“Our messaging platform, products and services connect more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories. Whilst SWIFT does not hold funds or manage accounts on behalf of customers, we enable our global community of users to communicate securely, exchanging standardised financial messages in a reliable way, thereby facilitating global and local financial flows, and supporting trade and commerce all around the world.”
In 2012 the US Congress persuaded SWIFT to exclude Iranian banks from participating in the SWIFT network. According to Wikipedia:
“In January 2012, the advocacy group United Against Nuclear Iran (UANI) implemented a campaign calling on SWIFT to end all relations with Iran’s banking system, including the Central Bank of Iran. UANI asserted that Iran’s membership in SWIFT violated U.S. and EU financial sanctions against Iran as well as SWIFT’s own corporate rules.
“Consequently, in February 2012, the U.S. Senate Banking Committee unanimously approved sanctions against SWIFT aimed at pressuring the Belgian financial telecommunications network to terminate its ties with blacklisted Iranian banks. Expelling Iranian banks from SWIFT would potentially deny Iran access to billions of dollars in revenue and spending using SWIFT but not from using IVTS. Mark Wallace, president of UANI, praised the Senate Banking Committee.
“Initially SWIFT denied it was acting illegally, but now says “it is working with U.S. and European governments to address their concerns that its financial services are being used by Iran to avoid sanctions and conduct illicit business.” Targeted banks would be—amongst others—Saderat Bank of Iran, Bank Mellat, Post Bank of Iran and Sepah Bank. On 17 March 2012, following agreement two days earlier between all 27 member states of the Council of the European Union and the Council’s subsequent ruling, SWIFT disconnected all Iranian banks from its international network that had been identified as institutions in breach of current EU sanctions and warned that even more Iranian financial institutions could be disconnected from the network.
“In February 2016, most Iranian banks reconnected to the network following lift of sanctions on Joint Comprehensive Plan of Action“
United Against Nuclear Iran is a private advocacy group and thus we know little about how it is funded. But Eli Clifton wrote an article for The Nation on the group in which he stated:
“Nearly one-third of anti-Iran pressure group United Against Nuclear Iran’s 2013 budget came from the country’s foremost Republican megadonor, a man who invested a reported $98 million to defeat Barack Obama in the 2012 election, casino magnate Sheldon Adelson. Adelson routed his $500,000 donation to UANI through his family foundation, according to tax documents.”
Adelson was a very strong supporter of the decision to move the US Embassy in Israel from Tel Aviv to Jerusalem.
If the US implements similar types of sanctions on Iran, then the implications for oil prices could be significant. When the earlier sanctions were imposed in 2011 and 2012, oil production in Iran plummeted. The impact of the Iranian decline, however, was mitigated at that time by increased US production because of fracking but also because economic demand for oil was suppressed because global economic growth was so sluggish. This time, however, supplies of oil are much tighter. Economic growth is more robust and oil production in Venezuela, Libya, and Nigeria is well below normal because of political turmoil.
Oil prices currently are at their highest level in three years. The Bank of America predicted today that oil prices could soon reach $100 per barrel from its current level of $71 per barrel. One of the chief beneficiaries of such a high price for oil will be Russia and Vladimir Putin.
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