Some Breathing Room for Iran

Apparently there is a loophole that provides a bit of a lifeline to Iran by which it can gain access to foreign currency, despite brutal US-led sanctions that attempt to cut Iran off from global markets.

At the Heriatge Foundation,  Daniel Kochis is in a big huff about the fact that this loophole is providing the Iranian economy some breathing room and preventing a complete ugly collapse of the economy that would do nothing but cause suffering for the innocent people of the country.

Kochis writes:

 A technical loophole is allowing the theocratic regime in Iran to skirt the full force of economic sanctions meant to compel the country to give up its nuclear ambitions.

A recent letter from a bipartisan group of U.S. Senators to the presidents of the European Council and European Central Bank has shed light on a problem that has given Iran a backdoor way to gain access to foreign currency reserves, which it desperately needs to help stabilize a teetering economy, according to media reports.

At issue is the Iranian use of the European Central Bank’s Trans-European Automated Real-time Gross Settlement Express Transfer System—also known as Target 2. This allows Iran to convert Iranian rials into euros. With euros in hand, Iran has far more latitude to conduct foreign transactions than it otherwise could with their increasingly worthless currency.

The Senators urged the European Central Bank to immediately block Iranian access to Target 2.

The news couldn’t have come at a worse time, as Iran continues to advance its nuclear program and Chuck Hagel takes over at the Pentagon. While the U.S. and European allies hope that economic sanctions will help persuade Iran to abandon its nuclear program, Monday’s revelation casts doubt on the effectiveness of these efforts.

That such a major loophole allowing Iran financial maneuverability exists through a mechanism of the European Central Bank is hardly reassuring. Indeed, the flaw within sanctions leads to the more troubling concern that the U.S. and European strategy that seeks to pressure Iran to give up its nuclear program may be based upon the false premise that the Iranian economy is at its breaking point. If the ability to access foreign currency is helping to stabilize the economy of Iran, then the effect of diplomatic pressure from the U.S. and allies is greatly diminished.

Bloomberg News reports:

The letter was signed by at least 35 senators, including a majority of members of the banking and foreign relations committees, according to a Senate aide who asked not to be identified because the letter hasn’t been announced.

Sanctions are often imposed against a country like Iran on the bizarre idea that it will collapse the economy and make the people so miserable that they will overthrow the government. Step A usually occurs, step B rarely.

High rates of malnutrition, lack of medical supplies, and diseases from lack of clean water were reported in Iraq as a result of sanctions imposed on that country.

Chlorine is commonly used to purify water, but because it can also be used to make poisonous chlorine gas, the sanctionsincluded banning its manufacture under any conditions throughout Iraq and its import severely restricted

Denis Halliday was appointed United Nations Humanitarian Coordinator in Baghdad, Iraq as of 1 September 1997, at the Assistant Secretary-General level. In October 1998 he resigned after a 34 year career with the UN in order to have the freedom to criticize the sanctions regime, saying "I don't want to administer a program that satisfies the definition of genocide"

Estimates of deaths of children during the sanctions vary widely, but range from a minimum of 100,000 to over 500,000 children.