There is no better time to bury news than when newspapers are not published or when the attention of those who report the news is elsewhere. Traditionally, the most dodgy companies hold their annual general meeting on Christmas Eve or New Year’s Day.
I was reminded of this recently when scrutinising the Treasury website. On December 24 2012, one of the few days of the year when the media is not watching closely, HM Treasury revealed that, in compliance with a European Union request, it was tightening the financial sanctions against Iran.
Moreover, on January 3 2012, as a result of the short-term fix between the Congress and the White House over the fiscal cliff, the United States passed strengthened sanctions designed to isolate Iran’s energy and financial sectors. The measure was tacked onto a $622 million defence spending bill.
Given the timing and placement of the announcements, neither attracted the attention of media fixated on other events including the 60,000 death toll of the Syrian conflict.
The good news is that Western attempts to isolate Iran, using economic and financial measures, are proving unyielding, despite the turmoil in the region. There is a general tendency to dismiss economic sanctions as ineffectual when it comes to forcing nation states — even those most trenchant in their views — to change direction. But the economic literature suggests that the tighter the noose, the more likely there is to be success.
The eventual collapse of the Apartheid regime in South Africa occurred after financial sanctions were tightened and Western banks, like Barclays, withdrew or refused to do business with the country.
Arguably, the arrival of Glasnost and the implosion of the old Soviet Union, occurred after Ronald Reagan applied maximum pressure on Moscow through economic measures and upping American defence spending and technology to the point that Russia could no longer keep up. Israel has had its own experience of economic sanctions with the administration of George Bush senior, who in 1991 temporary withdrew loan guarantees for house building in response to American objections to settlement activity in the West Bank and Gaza. The battle by the West to isolate Iran is on in earnest and against a tight deadline. For much of 2012 there was concern that if the main democracies did not act, to slow or stop Iran arming itself, then Israel would take military action. At the end of June 2012 the European Union, including Britain, imposed a total ban on oil imports to Iran.
There was some delay as a result of Asian customers being unable to obtain the “Protection and Indemnity Insurance” — much of which is written in Britain. Once this problem was overcome the noose was tightened and by October 2012, with the oil revenues and foreign drying up, the informal value of the Iranian currency plunged among Iran’s foreign exchange traders leading to riots on the street. This was among the first public signs that sanctions have been hurting.
As importantly, Washington has been clamping down on big international banks including British-based HSBC and Standard Chartered, both of which were found by regulators to have processed billions of dollars of transactions for Iranian connected enterprises. The banks have since paid large fines to the US authorities, admitted their culpability and vowed to clean-up their operations under threat of losing their American banking licences — potentially a huge blow.
New orders implemented by the UK Treasury on 24 December 2012 list 18 new Iranian connected entities as proscribed by the government’s “Sanctions and Illicit Finance” group that has the powers to freeze assets. These range from financial institutions, such as the First Islamic Investment Bank, with offices in the Far East, to disguised enterprises such as the Hongkong Intertrade Company, described by the UK Treasury as a “front company” controlled by the EU designated National Iranian Oil Company.
In the US, a new sanctions measure shepherded through Congress by Democratic Senator Bob Menendez and Republican Senator Bob Kirk seek to close a major loophole that has allowed Iran to circumvent existing sanctions. It aims to stop Iran bartering oil for precious metals that can be used in financial transactions amid some evidence that such deals have been done with Turkey.
In addition, the legislation designates Iran’s energy, port, shipping and ship building industries as “entities of proliferation” and prohibits transactions in these area. It also seeks to block vital material supplies necessary for nuclear facilities. Quietly, the West is recognising that unless it does more to cut off the flow of resources to Tehran, the military option –— with all the dangers that raised in terms of blocking the Strait of Hormuz and oil prices — will come to the fore again.
Encouragingly, latest moves in Brussels, London and Washington suggest that on the issue of Iranian sanctions, the West is able to act to together and keep up an unrelenting pressure.
Alex Brummer is City Editor
of the Daily Mail