Tuesday, November 06, 2018

How can the USA force other countries to impose sanction on Iran?

I have been trying (and failing) to get my head around exactly how the US's sanctions against Iran actually work. The New York Times has produced a detailed explanation of the US sanctions, but I still don't understand how the US can directly influence trade between Iran and other countries.
I understand the concept of sanctions: one country refuses to buy products from another in order to inflict economic pain on it, and thereby facilitate whatever political ends it hopes to achieve. But how can one country, like the USA, force other countries to impose sanctions? And how can it give certain countries waivers on those sanctions, as the USA appears to have given eight major importers of Iranian oil: China, India, South Korea, Turkey, Italy, Greece, Japan and Taiwan (yes, Taiwan, which those USA does not even recognize as a country, hence their careful use of the word "jurisdiction" and not "country")?
Well, it turns out (thank you BBC) that the way it works is that the US will prohibit any foreign company that trades with Iran from also doing business in the United States. In fact, there are also secondary sanctions whereby any US company that does business with a company found trading with Iran faces punishment itself. Given that most other countries disagree with the American move, seeing more likelihood of political success through the previously-struck nuclear agreement that Donald Trump has rejected so vehemently, and given that Iran itelf has rejected the sanctions out of hand and vowed to "break" them, this last provision puts a heavy burden of due diligence on all American companies doing business with pretty much anybody from anywhere. It all sounds totally impractical to me, as well as almost impossible to police.
China, Iran's largest customer, has already shown that it is is willing to subvert the system, by availing itself of a much more unofficial (read secretive) trading system, although Trump has graciously given it a pass from the current sanctions anyway. Even if the Americans succeed in barring Iran from the SWIFT (Society for Worldwide Interbank Financial Telecommunications) financial system, as it did in 2012, China has shown that it is willing to pay in cash or even barter to overcome such a hurdle.
So, it is far from clear how effective American sanctions will be, and how far they can force others to toe their line. At this rate, though, the USA is going to be reduced to trading with itself...

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