Iran Sanctions: A Reminder Of How America Militarized The Financial System

Authored by Tho Bishop via The Mises Institute,

Only CNN was surprised by Donald Trump’s recent announcement that he was pulling the United States out of the Iran Deal negotiated by his predecessor. Following the same failed approach of the last Republican administration, the President opted for confrontation with the Iranian regime rather than uplifting more moderate factions within the country through trade. The decision has already increased tensions in the volatile region, with Iran and Israel exchanging fire in Syria.

Meanwhile European leaders are meeting Iranian officials to try to design a way to bypass new American sanctions. Others have vocally attacked Trump’s actions and attacked the US playing the role of “economic policeman.”

As French Finance Minister Bruno Le Maire said after the decision:

Do we want to be vassals who obey decisions taken by the United States while clinging to the hem of their trousers? Or do we want to say we have our economic interests, we consider we will continue to do trade with Iran?

According to reports, European officials are looking at a few different options to help salvage their economic relationship with Iran.

One is by reviving “blocking statues” such as the ones the EU threatened in response to sanctions on Cuba, Libya, and Iran in the 1990s. The mechanism works similar to the anti-commandeering doctrine, ordering European officials to refuse to comply with US sanctions. As Reuters notes, blocking statues have “never been used and is seen by European governments more as a political weapon.” They were successful in the past because the Clinton Administration simply backed down, something that seems unlikely with President Trump.

The other is to establish new financial institutions with no connection to the US financial system. Iran has already made the euro the official reporting currency for foreign exchange, so on the surface this seems like a viable alternative.

The problem European decision makers face, however, is that the US has gone to great lengths to militarize the banking industry in recent years.

As Richard Goldberg noted at Foreign Policy:

[In 2010] Congress passed a new law leveraging America's greatest strength against the fulcrum of global commerce with Iran: financial transactions.

After years of blacklisting most financial institutions in Iran for their involvement in various illicit activities, Congress recognized that it also needed to punish third parties for doing business with these criminal enterprises. Thus, it declared that any foreign bank that maintained a correspondent banking relationship with a designated Iranian bank would forfeit its banking relationships in the United States.

In 2011, the United States extended this prohibition to transactions conducted with the Central Bank of Iran and, in 2012, to transactions conducted in connection with a wide range of Iranian economic sectors and activities.

No financial institution is going to want to risk being blackballed from the US banking system, no matter how firmly worded a blocking statute is. As such, the first proposed policy tool has little chance of success.

Meanwhile, US lawmakers are already devising ways to go after European Central Banks should they seek to establish special financial institutions for Iranian trade. As the Weekly Standard reported, a memo is being passed around Capitol Hill stating that US policy makers should:

Remind European governments that U.S. financial sanctions apply to all “foreign financial institutions,” which the Treasury Department has previously interpreted to include “central banks or foreign state-owned or -controlled banks,” not just private banks. Countries that consider shifting their payment processing from private institutions to central banks will put their financial systems at serious risk.

Ironically the lack of real options in checking Trump actually vindicates the worldview Trump espoused as a presidential candidate. Just as Trump articulated an “America First” approach to foreign relations that prioritized “national interest” ahead of the schemes of “globalists,” Europe must identify ways to limit their dependence on the US financial system – or else indeed be reduced to de facto-vassal status to Washington. Just as political decentralization is the best way to achieve true self-determination, financial decentralization is the best way for nations to protect their own sovereign interests.

Of course to really do so requires resetting the global monetary order.

So long as the dollar enjoys its privileged position established by Bretton-Woods, the rest of the world is vulnerable to the US leveraging that against them.

Comments

LetThemEatRand Mon, 05/14/2018 - 22:51 Permalink

Holy shit, Mises Institute sees the benefit to the rest of the world in ditching the dollar and is openly saying that the change is justified.  And the article states the word "globalist" in quotations as if it is a conspiracy theory.  Reminds me of the Economist article from a few years back calling for a one world currency by 2018.  For the People.

swmnguy LetThemEatRand Tue, 05/15/2018 - 08:36 Permalink

It's a little tough to take the article too seriously, when the word "statue" is used in place of the word "statute."  I know they're both words so Spell-Check won't catch the error, but anyone fluent in English can see the author is lazy and nobody edited the piece.

But the point of the article makes sense and is pretty obvious.  This might not be the moment Europe gets out of the dollar system.  I'm guessing Trump leaves wide enough loopholes to allow Europe to kick the can down the road yet again.  But the day is coming when Europe will have no choice but to choose, and will move away from the US Dollar to get out from under the weaponized US Banking system.  That day is the end of the US Empire.

As with so many of Trump's actions, all of which play off one another, he hasn't done anything yet.  Talk is increasingly cheap.  The various tariffs and sanctions and negotiations are all still nothing but verbiage.  Trump's history is of talking tough in one direction while acting in the other direction.

In reply to by LetThemEatRand

Aussiekiwi Mon, 05/14/2018 - 22:54 Permalink

And so it begins, the realization by Europe of what China and Russia already know, they must get out from under the heel of the US financial system or become a simple vassal of US policy.

pcrs Mon, 05/14/2018 - 23:09 Permalink

The us government is digging its own grave. If you cant see the writing on the wall now, when will you? If you are tied into the US financial system you can be plundered at any time for increasingly trivial reasons.

Alternatives will proliferate. 

JailBanksters Mon, 05/14/2018 - 23:11 Permalink

No

No

It's a reminder of how evil the empire is that STILL, still runs this planet.

Politicians, Central Banks, Media, Military, Religion, Trump, Rothschild's, Saxe-Coberg's are all working together, each one protecting the other one to enslave the Planet.

And anybody that thinks Trump is going to save America and the Planet is a eFing Moron.

WTFUD Tue, 05/15/2018 - 00:18 Permalink

Trump's Overreach could be a blessing in disguise.

Time to break free of the shackles, call his bluff, to request that he go stick his megalomaniacal carrot head in one of his sand bunkers as soon as he removes it from Bibi's crack-hole.

His handlers, Rothschild & Co won't want to lose it ALL. Right this minute there will be the flailing of arms around the EU even US Banking Directorate. The Rothschild's remember own only a share/seat in the larger Institutions. Then there's the Private Corps-HedgeFunds who can operate in China, concealing transactions through a myriad of funds.

It's either this or buy into the New Geopolitical Block at a higher entry down the road. 

Scipio Africanuz WTFUD Tue, 05/15/2018 - 04:58 Permalink

There was no alternative before the petroyuan, now there is! Try sanctioning China central bank, and get a dirty slap. Europe is now caught between a missile and a rocket, and I for one, am loving their predicament.

Why am I loving it? Because when it was done to others, Europe joined the USA in illegality, hoping somehow to profit. Unfortunately, the victims survived! And thus did the profits disappear! Come on Europe, bend over, get ready to be shafted like the SPINELESS b***ch you are!

The USA has now decided to keep the loot for itself, no more sharing, there's not enough to go round, Europe is NEXT to be LOOTED! And boy, she will be looted like there's no tomorrow, in fact, European gold will be FORCIBLY REPATRIATED to the good old USA.

Think I exaggerate? Mark today's date, and cry me a river when the uniformed boys arrive at European vaults, and ORDER the gold loaded on heavy transport planes.

They'll give as reason, some bullshit infraction of some extra-territorial law and demand GOLD, not useless paper, as penalties. What will Europe do? Nothing! She'll moan, groan, and cry but hey, what did she expect, she benefitted when the robbery was of others, no?

Now, it's Europe's turn! Karma! You is one NASTY bitch!

Laughing out loud, rolling seriously on the floor, trying to get some air from all the truly enjoyable laughing...

In reply to by WTFUD

reverendspooner Scipio Africanuz Tue, 05/15/2018 - 13:07 Permalink

Scipio Africanuz bless you.

May you always know day from night, true from false, wisdom from convenience.
May your every step be on firm earth.
May you see through illusion to reality.
May you bring splendor and joy to all you touch.
May you always know what it is to live in freedom.
May you be a support to those who have fallen.
May you guide those who wander
to return to their true path.
May your needs be fulfilled.
May you draw strength from your community.

This ended with 'May you be a part of the splendor that crowns Israel' which I consider a curse, so wishing just what's posted above.

In reply to by Scipio Africanuz

Paperoga Tue, 05/15/2018 - 01:05 Permalink

As a result of the abuse of sanctions, China will be incresingly purchasing goods at lower price from sanctioned countries (aluminium from russia, oil from iran), thus getting even more competitive. Make China greater again.

swmnguy uhland62 Tue, 05/15/2018 - 08:47 Permalink

Given that US policy has allowed US corporations to close down US manufacturing and import stuff made in China at an 85% discount in labor costs, I would be very surprised if Chinese goods will actually be banned from the US.  The US simply can't replace them at anything like the cost.  US corporations can't sustain a 6x increase in labor costs.  US workers can't survive in the US on $5,000/yr.

The loopholes will be y-u-u-u-uge.   Bigly.

In reply to by uhland62

Twee Surgeon Tue, 05/15/2018 - 02:00 Permalink

Honestly, i dont have a lot of sympathy for Iran if they are going to put up with that government and that religion, they can all fuck off. I'm just not buying any Islamo bullshit. if they all popped their boots tomorrow, who would miss them. A global PAIN IN THE ASS.

MrNoItAll Tue, 05/15/2018 - 02:04 Permalink

After years of being "vassals who obey decisions taken by the United States while clinging to the hem of their trousers", it sure looks like the Europeans are finally being forced to wean themselves from American influence and security guarantees. U.S. policy appears to be intended to push Europeans into flipping off America and going it on their own. Europeans will eventually have to go it entirely on their own, and they might need a swift kick in the seat of the pants to get them on their way.

otschelnik Tue, 05/15/2018 - 02:38 Permalink

Try to wire US dollars internationally these days.  Every other payment gets stuck in a US correspondent bank's compliance department, sometimes for weeks.  By making US banks liable to other people's contract obligations under money laundering, US banks are de facto deputized. 

I think the FED, DOJ, DOT are cutting the legs off of the stool they are sitting on.  Weaponizing the world’s reserve currency will end disastrously.

To Hell In A H… Tue, 05/15/2018 - 05:55 Permalink

As I say on ZH almost weekly. The time has come and arrived for a viable alternative to SWIFT and BIS. Uncle Scam cannot be trusted to keep its side of any deal. PERIOD!

The only course of action is to disintermediate the USSA when it comes to financial transaction over-reach. Disintermediate SWIFT, BIS, PAYPAL etc and all USSA banking institutions where the USSA believes it has reach and conducts over-reach.

This includes not giving the USSA any voting rights outside of 1 vote per country in any rule making, in the new international financial system and if the USSA refuses to sign up, then leave her looking from the outside in. For too long the world financial system has been used as a weapon by the West.

The downside is countries misbehaving in the future can continue to use the system as normal. But compared to the abuses of the USSA weaponizing the financial system, it is a price worth paying and the destruction of the current financial order is coming.