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What chances for Iran to evade sanctions

There has been much speculation about the extent of the impact that the latest US sanctions will have against Iran. Commentators express a wide array of views ranging from an absolute crippling of Iran’s economy, to the ability of Iran to outmaneuver the sanctions and remain resilient.

Those of the latter opinion point to Iran’s ability to sell oil to the likes of China and India, and also to the EU’s, seemingly adamant, stance to pursue a course that is in opposition to Trump’s sanctions program.

The Tehran regime is certainly putting on a confident demeanor and, to some extent; it is still flexing its muscles. Only this week Tehran signaled that is prepared to fund a new rail line from Iran, across Iraq to a port facility in Syria. This, it would seem to be, a manifestation of Tehran’s long pursued ambition to create a corridor to the Mediterranean Sea, writ large (something the Persians have been dreaming of since their defeat by Greeks in the battle of Salamis in 480 BC).

Iran continues to have a stranglehold over the government of Iraq. The Iraqi Prime Minister Adil Abdul Mahdi, in an act of predictable obsequy, recently praised the Iranian funded proxy militias in his country. In Syria the Iranians are present in parts of Damascus, almost as an occupying force. They are building military camps in Syria in a sign that they intend to stay. Both Hamas and Hezbollah are long range proxy forces ready to do Iran’s bidding hundreds of miles from Tehran.

At first glance then Iran appears to be still emboldened. Its leaders rant against the sanctions and declare that there is no consensus against them. However, a forensic look at the scale of the sanctions, which are, currently, less than two weeks old shows that the fate of Iran over the next few months could be very rocky, to say the least.

Washington has vowed to impose the ‘toughest sanctions ever placed’ on Iran. The onslaught of these sanctions will shortly be felt in a number of key areas.

The US treasury has announced that 700 Iranians will be specifically targeted by sanctions. This figure includes 300 people who were not targeted by the earlier sanctions program. Those who have money, or power in Iran, or both, will find that their ability to invest, to earn and to travel will be severely restricted. Hemmed in, the Iranian ruling elite will soon find their lifestyles controlled by Trump’s sanctions.

Steven Mnuchin, US Treasury Secretary recently announced that the new sanctions will focus on all relevant Iranian transactions through the EU’s mechanism that was set up to circumvent the US penalties. These include any transactions to do with Iranian Oil.

Furthermore the US has the power to sanction the SWIFT mechanism that allows for easy worldwide banking. Mnuchin stated that “SWIFT is no different than any other entity. We have advised SWIFT that it must disconnect any Iranian financial institutions that we designate as soon as technologically feasible to avoid sanctions exposure.”

Purportedly Iran has tried to counter this by creating a fleet of “Ghost Tankers,” whereby it hopes to continue oil sales, under the radar of the sanctions. However, this is not a feasible way with which to pursue international trade in the long term. Indeed, it is more of a petulant or desperate gesture.

This is compounded by Iran’s inability to receive or process funds through the SWIFT system. A country cut off from 21st century methods of commerce and finance cannot carry on for much longer.

How long the Iranian population will tolerate the hard and psychological effects of the sanctions on their daily lives remains to be seen. Yet in May, when President Trump signaled his withdrawal from the Nuclear Deal, Iran’s currency, the rial, went into freefall. No one has remained unaffected in Iran, but the poor have felt real hardships as a consequence. The deep fault lines in Iranian society opened and there were widespread demonstrations against the regime. The quashing of these outbursts of anger against Iran’s ruling elite was brutal. The more sanctions bite, the more the likelihood is that Iran will be convulsed by violence from those who have little stake in the much vaunted “Glories of the Islamic Revolution.”

At the core of the US sanctions is a desire to neuter Iran’s latent nuclear capability, its ballistic missile program and its ability to project its armed forces in the Middle East.

A cornered Iran will pose problems. Threatened Iran may well decide that aggression is the only form of defense. It might, for a while galvanize its people with its religiously embroidered ideology. But ordinary people cannot eat ideology. They cannot be paid by ideology. There houses cannot be powered by ideology.

Many commentators have opined that sanctions never really work. However, the depth and breadth of these superpower sanctions are like nothing the world has seen before. When the US Secretary of State Mike Pompeo declares that America will “squeeze” Iran he is not joking.

Recently he laid out his purposeful objectives with great clarity. “The sting of sanctions will be painful if the regime does not change its course from the unacceptable and unproductive path it has chosen to one that rejoins the league of nations."

He went on to say "The regime has been fighting all over the Middle East for years. After our sanctions come in force, it will be battling to keep its economic -- economy alive. Iran will be forced to make a choice: either fight to keep its economy off life-support at home, or keep squandering precious wealth on fights abroad. It will not have the resources to do both."

If the mullahs in Tehran have not yet heeded the resolve of the US in this matter they would do well to pay attention to Pompeo’s comments. From raw force, a US Navy carrier group and Marine expeditionary force, to the immense cyber capability of the US, Iran’s leadership will soon come to know that there is no easy way to resist the looming clout of a superpower that has eyes over everything they do. For all their bluster, they should be rightly humbled by the prospect.

 

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