US Sanctions On Iran: The Unraveling Of Pax Americana

Authored by Christopher Wood via Grizzle.com,

Amid current news headlines about North Korea and related nuclear issues, it is important not to ignore the potential schism that could occur in the G7 world as a consequence of the practical fallout from Donald Trump’s decision on May 8 to exit the 2015 Iran nuclear deal.

WHAT WILL HAPPEN TO EUROPEAN INVESTMENTS IN IRAN?

One practical issue is what is going to happen to European investments in Iran. The most high profile example is French energy company Total’s investment in a giant Iran gasfield. Total said this month it would pull out of Iran and its development of the giant South Pars gasfield unless it is specifically protected from US penalties and related sanctions (see Financial Times article “Total threat to pull out of Iran dents EU hopes of saving accord”, May 17, 2018).

Obviously, some form of compromise may be negotiated. But if Washington takes a hard line, such as claiming US jurisdiction as regards dollar transfers between two sovereign countries as was the case in 2014 with the US$9 billion fine levied on French bank BNP, then a confrontation is seemingly inevitable and, as a result, a growing questioning of the US hegemony implied by the US dollar paper standard, a concern which has long been shared by both China and Russia.

QUESTIONING THE US’ ROLE AS THE “ECONOMIC POLICEMAN OF THE PLANET”

In this respect, the most interesting reaction to the Iran issue since Donald Trump made his announcement on May 8 was that of the French finance minister Bruno Le Maire when he said on May 9 that it was not acceptable for the US to be the “economic policeman of the planet”.

In this respect, France is the European country to watch since it has a history of being willing to stand up to Washington in the post-1945 world. That cannot really be said of Germany and certainly not of Britain.

POMPEO WARNS IRAN OF ESCALATING SANCTIONS

Staying on the subject of Iran, US Secretary of State and former CIA boss Mike Pompeo made an ultra-aggressive speech on Monday threatening Iran with escalating sanctions. In his first major foreign policy address as Secretary of State, Pompeo stated:

Sanctions are going back in full effect and new ones are coming… This sting of sanctions will be painful if the regime does not change its course… These will indeed end up being the strongest sanctions in history when we are complete.

The above rhetoric hardly suggests a willingness to compromise with the European position. The significance of all of the above is that Europe and the US remain on a collision course.

IRAN’S EXPORTS BOOMING SINCE SANCTIONS ENDED

The importance of Europe for Iran can be seen in the fact that Iran’s exports to Europe have surged almost ninefold since the end of sanctions in January 2016.

Thus, Iran’s exports to the EU have risen from US$1.3 billion in 2015 to US$11.4 billion in the 12 months to January, according to the IMF Direction of Trade Statistics (see following chart).

There is also of course the growing trade between Iran and China. Iran’s total trade with China rose by 18%YoY to US$27.5 billion in the 12 months to January (see following chart). All this makes Iran a good example of the increasingly multipolar world where American influence or interests appear to be fading.

IRAN ANNUALIZED EXPORTS TO EU

Source: IMF – Direction of Trade Statistics

IRAN ANNUALIZED TOTAL TRADE WITH CHINA

Source: IMF – Direction of Trade Statistics

IRAN’S CURRENCY TAKES A HIT

Meanwhile, Iran’s currency has been hit hard in recent months as a result of the uncertainty created by Trump’s previous repeated earlier threats to pull out of the nuclear deal and now subsequent follow-through decision.

The rial has depreciated in the black market by 33% against the US dollar year-to-date (see following chart). This followed a period of comparative stability where the currency traded in a 13% range for two years, helped by the optimism created by the nuclear deal as well as by very high real interest rates. Iranian treasury bill yields peaked at 27% in early 2017 and bottomed at 16% late last year. They are now back at 19% as a result of the market pressure created by the threat of renewed American sanctions.

IRANIAN RIAL/US$ (INVERTED SCALE)

Note: Based on black market rate after Iran unified its dual exchange rates on 9 April. Source: Ministry of Economic Affairs and Finance, Bonbast.com

SUBSTANTIAL FOREIGN INVESTMENT IN IRAN

With a classic bullish emerging market demographic profile, in terms of a population of 80 million, 60% of whom are under the age of 35, Iran has, naturally, attracted a lot of foreign direct investment in recent years, most particularly following the 2015 nuclear deal.

The biggest of late was the previously mentioned Total’s US$4.8 billion investment signed in July 2017. But Total says it has only invested under €40 million so far, according to the above mentioned FT article, which is precisely why the French company wants to know if it can get a specific waiver from the sanctions.

In terms of the aggregate data, Iran’s actual FDI inflows surged by 64%YoY to US$3.37 biilion in 2016, according to United Nations data. While an Iranian government report published last year disclosed that Iran has approved US$11.8 billion in FDI during the 12 months to December 2016, with Spain and Germany accounting for US$3.2 billion and US$2.9 billion of that total respectively.

IRAN FDI INFLOWS

Source: UNCTAD World Investment Report 2017

WILL WE SEE A RETREAT FROM PAX AMERICANA?

The point, therefore, remains that a confrontation between the US and the Eurozone on this issue is potentially a landmark development in the retreat from Pax Americana.

But for now it is probably the case that most of Europe, in the spirit of appeasement, will be content to fudge the issue in the hope that Donald Trump may not be re-elected to the US presidency for a second term and life will return to “normal”.

IRAN’S ECONOMY

Turning away from geopolitical issues, Iran’s economy and financial markets spring some positive surprises. The country has an open capital account, while there is no tax on capital gains or dividends. The Tehran Stock Exchange celebrated its 50th anniversary last year.

But if FDI has been coming into the country in recent years, foreign portfolio investment activity has been much more limited, with estimates of only US$100 million invested in aggregate. This is the consequence in terms of equities of both a lack of inclusion in benchmark MSCI indices and, of course, of sanctions.

NO FOREIGN BANKS IN IRAN

There is still no foreign bank in Iran and therefore a lack of familiar custodians acceptable to international portfolio investors. Indeed, despite the 2015 nuclear deal, it is still not possible to use foreign credit cards to pay for hotel bills or any other transaction.

Foreign credit rating agencies are also absent which may not surprise given the three biggest are owned by the Americans. This is a pity for the Iranian Government given that, with minimal foreign currency debt and total government debt to GDP of only 35% of GDP, it would make a lot of sense to do a landmark sovereign bond issue. Total external debt is now only US$10.8 billion or just 2.5% of GDP, according to the Central Bank of Iran (see following chart).

IRAN EXTERNAL DEBT AS % OF GDP

Source: Central Bank of Iran, IMF

Comments

J S Bach 07564111 Wed, 05/30/2018 - 00:19 Permalink

For all of you uneducated idiots out there...

What has Iran ever done to us?  What national interest of ours was ever threatened by that nation? (Nothing)

Now... the kicker...

What has Israel ever done to us?  (Rosenbergs, Lavon Affair, U.S.S. Liberty, Jonathon Pollard, 9/11, ALL Middles Eastern wars).

So... all ye thinking individuals...

Whom do our fearless, bribed, compromised, soulless leaders advocate that we boycott, sanction and ostracize?

Think, people... think.

In reply to by 07564111

NiggaPleeze Rapunzal Wed, 05/30/2018 - 03:57 Permalink

"That cannot really be said of Germany and certainly not of Britain"

Apples / oranges.  US aligns with Britain because Britain and Jewish oligarchs (House of Windsor, House of Rothschild, etc.) control the US just like they control UK, behind this facade of "democracy".  Germany, while still an occupied country, has a streak of independence that the US lacks.  But some of the disagreements are also political theater.  Germany never really goes against the US, it just sometimes doesn't send its citizens to die for these oligarchs like US is wont to do.

In reply to by Rapunzal

David2923 ChargingHandle Wed, 05/30/2018 - 03:32 Permalink

1) Bush’s National Security Advisor Brent Scowcroft pointed out in the 1999 book “A World Transformed”, co-authored with George H.W. Bush, when Iran’s Rafsanjani personally facilitated the release of the Lebanon hostages in late 1991, the Bush administration “didn’t do anything.” Goodwill, as it turns out, did not beget goodwill (In other words, Bush welched on a promise to Iran, and there goes the trust)……2) May 2nd 2003, Iran, through the Swiss Ambassador, presents the US State Dept. with a “Roadmap” to mending Iran/US relations. Everything for both sides was on the table to be negotiated. US Top State Dept. officials decided not to reply (Ignored) to Iran’s offer to normalize relations…..  3) The downing of Iran Flight 655 in July 1988 by the US Navy…… 4) 1953 overthrow of their democratically elected Prime Minister Mohammad Mosaddegh complements of the CIA’s Operation Ajax.... 5) Multiple times sanctions place on Iran lead by the US……. 6) November 2001, Iran assisted the USA (via the 6+2 meeting at the UN) in the taking of Kabul with a plan of freeing up the Northern Alliance. Iran’s plan succeed for the US to take Kabul from Taliban. Then in a January 29th 2002 speech George W Bush labels Iran a part of the “Axis of Evil” thus worsening relations….7) 2017, Iran is found to be certified by the US government to be COMPLIENT with the multination nuclear agreement, yet more sanctions are imposed on Iran by the USA. JCPOA, noting that "according to Article 29, the US is committed to refrain from any policy intended to affect ‘the normalization of trade and economic relations with Iran.'' Also, President Donald Trump is reported to dissuaded other foreign leaders from doing business with Iran at the 2017 G20 summit, thus a violation of the agreement …….8) 2010 to 2012, Israeli Intelligence assassinates 5 Iranian scientist. Oct 2011, Former Speaker of the House Newt Gingrich supported "taking out [Iranian] scientists," and presidential candidate Rick Santorum called the killings "A wonderful thing”…….. 9) Four fairly recent wars just outside Iran’s borders, twice in Iraq, Afghanistan and Syria….. 10) Continued bad mouthing by the goons in the Trump administration…… 11) December 2011 US CIA Drone flying in Iran airspace then falls out of sky..….12) 2010 Cyberattack called “Stuxnet” on Iran by Israel and the US July 18th ….. 13) The US has up to 42 military installations surrounding Iran (My count, I could be wrong). I provided a link for a map to verify, or do your own search: https://www.juancole.com/2012/02/ring-of-iranian-bases-threatens-us.html this does not count Israeli military or ships at sea in the area..…. Now who are the real terrorists? (As I study this, the list keeps getting bigger and bigger)….. 14) US support of SADAM’S INVASION of Iran in Iran/Iraq war (Sadam used chemical weapons on Iran and no world condemnation)…….. 15) On March 14th, (2016) Iran announced that it will never pay the $10.5B that a U.S. court demanded it pay for the 9/11 attacks. The same Bill-Clinton-appointed judge who had ruled, on 29 September 2015, that Saudi Arabia has sovereign immunity for 9/11 and so can’t be sued for it, ruled recently, on March 9th that Iran doesn’t have sovereign immunity and fined Iran $10.5 billion to be paid to 9/11 victims and insurers; but, on March 14, Iran’s Foreign Ministry said Iran won’t pay, because, as the Ministry’s spokesman Hossein Jaberi Ansari put it, "The ruling is ludicrous and absurd to the point that it makes a mockery of the principle of justice while [it] further tarnishes the US judiciary’s reputation.” Source: by Eric Zuesse March 16th 2016

In reply to by ChargingHandle

ZIRPdiggler David2923 Wed, 05/30/2018 - 05:04 Permalink

We already know it's a well established fact that deep-state loiterers like the Bush family never had and never will have any interest in any move that facilitates peace.  Their legacy and that of the others on 'team-deep state', will continue to be a legacy of genocide and suffering. REAL history will show that the last 70 years has been the most terrible, bloodstained reign of an empire (USA) that ever was, post-enlightenment period.

In reply to by David2923

africoman J S Bach Wed, 05/30/2018 - 04:40 Permalink

No amount of paid cyber trolls can change that kind of fact, my friend.

 

If that is a truth, then is I$I$rahell Americas allies or enemy?

 

http://www.azquotes.com/picture-quotes/quote-if-the-people-of-the-middl…

http://www.azquotes.com/picture-quotes/quote-israel-the-jewish-state-th…

http://www.azquotes.com/picture-quotes/quote-israel-is-a-true-friend-it…

 

MIGA is the only agenda of 5th columnist, dual citizens & corrupted pedophile officials in America.

 

In reply to by J S Bach

ZIRPdiggler jostrow1502 Wed, 05/30/2018 - 04:56 Permalink

Nope, sorry. You're wrong. Israel has proven to be the biggest problem on earth. They've negatively influenced just about every geopolitical sphere on the globe with their mossad mayhem, hiding behind the USA's skirt. Or is it the other way around? When I look at the looting politicans in our government and the power brokers in pedowood, I can't tell any more. 

In reply to by jostrow1502

nidhug jostrow1502 Wed, 05/30/2018 - 14:20 Permalink

i see mockingbird was a big success in the ussa. the "real jews/hebrews" were wiped out in 70ad btw. the people you falsly claim are "jewish" are European and ashkenazi coverts, most of the people that can claim to be "real jews" today are black;) try opening a book that your propaganda ministry havent spoiled.

but you keep doing you, just remember the cia/mossad laughs at your gullible easy to brainwash mind as they steal ur money.

in the next 10 years ur "country" will become a shithole, even ur own deep state is trying to warn you ffs. 

http://www.deagel.com/country/United-States-of-America_c0001.aspx

Forecast 2025

Population-100 million

Gross Domestic Product-$2.4 trillion

GDP per capita-$24,561

Purchase Power Parity-$16,374

so if the rest of the world is lucky and the empire decides NOT to take the entire world with it, we have a bright future over here in the old world. sadly i bear no false hope, people like you made sure of that.

now go and try to figure out why there is no such thing as "judeo-christian", we cant have peace as long the father of lies rules the zionists and the empire.

 

 

 

In reply to by jostrow1502

Scipio Africanuz revolla Wed, 05/30/2018 - 07:41 Permalink

In this battle, Iran has the advantage.

Now, in other news, seems the Israeli regime has begun recalibration of its behaviour towards peace. On one hand, is the agreement, brokered by Russia, supported by state and defense, to cede the ground in Southern Syria to the tigers, and other SAA forces. On the other, is the ceasefire with Hamas.

Seems to me secretary Pompeo, has begun overhauling US diplomacy, and secretary Mattis, has begun recalibration of US defense. If successful, USA might yet retrieve her credibility from the jaws of oppobrium.

Now, I have heard that President Putin, whom I consider a strategist without peer, and minister Lavrov, whom I consider a diplomatic tactician without equal, are somehow conceding hard won geopolitical ground.

Now, I'm not a mind reader but I can assess with confidence, that just ain't true because it's contrary to the nature of these men. Now, with the above mentioned news, is the goal to restore Syria's territorial integrity, not coming into sight?

Many desire robust kinetic responses to provocation, without considering that kinetism, is a last resort when diplomacy fails. Guess what? Diplomacy is working! What can be obtained without bloodshed should be, because the life of every soul, takfiri or otherwise, is precious in the sight of God.

If Prince Vladimir Vladimirovich were a trader, he would make an excellent one! He placed his wager on Damascus, put in his stop loss, and as the wager moved in his favor, trailed his wager with protective stops, and he's using the gains from that wager, to make other wagers, thereby enriching his employers, and supporting his allies, all from that one wager, WOW!

A good trader knows when to let a wager tell him what to do. If your stop loss has not been breached, WAIT! If it is, take ACTION!

He wagered just a tiny part of his stake, and reaped outsized returns!

The USA on the other hand, placed huge bets without stop loss. Stopped out, she doubles down and now, her stake has diminished significantly. Secretary Pompeo needs to win some wagers in order to stay in the game else, the "risk of ruin" is high probability!

President Putin, if you ever tire of managing Russia, perhaps you might like to team up, so we can trade markets like there's no tomorrow. I promise it'll be fun, and we won't do it just for the money, but for the fun, and abundant discovery opportunities. You sir, should be inducted into the hall of fame of the greatest traders!...

In reply to by revolla

InnVestuhrr revolla Wed, 05/30/2018 - 17:13 Permalink

We are wise to all of you goat-fucking sub-human vermin worshipers of the vile immoral islamic cult, peddling the anti-Israel & anti-Jew propaganda to serve your perverted interests.

It is understandable how inferior you feel after having been beaten repeatedly, in spite of outnumbering the Israelis many fold, humiliated and exposed for the inferior defective sub-human primitives that you are.Why don't you just terminate yourself and end your suffering as a failure ???

In reply to by revolla

LetThemEatRand Tue, 05/29/2018 - 23:55 Permalink

How quaint of the author to suggest that the EU may stand up the US on Iran sanctions.  The whole point of the sanctions is to force Iran to join the international banking cartel, which cartel controls the governments of the EU and the US.   Sure there will be strongly worded diplomatic cables and statements, but that's it.

gwar5 Wed, 05/30/2018 - 00:06 Permalink

No, it's bullshit.

Iran trade with G7 countries is very small because their economy is very small. G7 trade with the USA is massive and is attached to massive self-defense entanglements.

Iran has no leverage. They lose.

EU is just butt hurt because the $150 Billion given to Iran from US taxpayers was/is being used to prop up the EU for buying European Airbus, German products, French products and such. Not to mention paying debt to the Russians for their nuclear work and to pay for ongoing work.... and, of course, to project terrorism which was known by everybody but elites just considered it the cost of 'doing' business part of the deal.  

InnVestuhrr 07564111 Wed, 05/30/2018 - 17:14 Permalink

We are wise to all of you goat-fucking sub-human vermin worshipers of the vile immoral islamic cult, peddling the anti-Israel & anti-Jew propaganda to serve your perverted interests.

It is understandable how inferior you feel after having been beaten repeatedly, in spite of outnumbering the Israelis many fold, humiliated and exposed for the inferior defective sub-human primitives that you are.Why don't you just terminate yourself and end your suffering as a failure ???

In reply to by 07564111

swmnguy arby63 Wed, 05/30/2018 - 08:05 Permalink

It was.  When the Shah was still in power, Iran paid for military equipment it hadn't yet received.  Then the Shah was deposed, and the US government never delivered the hardware but kept the money.  And impounded Iranian government deposits in US banks.  This was unlawful.  And as part of the negotiations over Iran's nuclear program, Iran asked for their money back.  In cash, and not in US Dollars.  Because the US has cheated Iran so many times they don't trust us; wonder why.

You don't have to approve of the Iran nuclear deal.  But there is such a thing as the truth.

In reply to by arby63

JibjeResearch Wed, 05/30/2018 - 00:19 Permalink

Iran has a big decision:

1. Allow International Banks inside of Iran............ or

2. Use Cryptocurrencies

lolz..... either one, its culture will be damaged...

Or, option 3..

Suck up all the economic hardship and hope Russia/China (PetroYuan/Gold) get the upper hand.

 

 

arby63 Wed, 05/30/2018 - 00:22 Permalink

What a crock of bullshit.

Exactly what is this supposed to mean: "as a consequence of the practical fallout from Donald Trump’s decision on May 8 to exit the 2015 Iran nuclear deal..."

What is a consequence of practical fallout? You know what it is? NOTHING. Words strung together in a sentence with zero meaning.

G-R-U-N-T Wed, 05/30/2018 - 00:58 Permalink

"One practical issue is what is going to happen to European investments in Iran"

European investments, the way Europe is going, won't even stick around in Europe, much less Iran!

NuYawkFrankie Wed, 05/30/2018 - 01:06 Permalink

POX Americana has just about run its course.

The Planet's immunity grows stronger by day... while the virus - with no "easy pickings" left to feed off - now, with a slight mutation, turns on its host.

And "The End" which - as Jim Morrison intoned & informed us - was "always near" now comes into plain view.