Jun. 9, 2013 (TSR) – The United States on Monday targeted Iran with currency and auto-sector sanctions over its nuclear program.
U.S. President Barack Obama imposed sanctions on foreign financial institutions that conduct or facilitate significant transactions in the rial, in an attempt to further weaken the Iranian currency that has already lost two-thirds of its dollar value since late 2011.
A senior administration official said the low level of the rial was a key vulnerability for the Iranian government.
“The objective is to take aim at the rial and to make it as unusable a currency as possible, which is all part and parcel of our efforts to apply significant financial pressure on the government of Iran,” the official, who spoke on condition of anonymity, said on a call with reporters.
In his ninth executive order against Iran, the president also approved sanctions against people who do business with Iran’s auto sector, which the White House said was a major source of revenue for Tehran.
The sale and transfer of automotive parts to Iran are prohibited according to the new U.S. sanctions, and Iran’s shipping industry now faces similar restrictions. The sanctions go into effect on July 1.
The head of the Iranian Shipping Company has warned against the effect of these sanctions and, at a gathering of shipping organizations, he said Iran must devise ways of countering the sanctions, which will include non-U.S. bodies beginning July 1. He confirmed the effect of sanctions on reducing petrochemical exports.
Iran’s petrochemical industry was also subjected to U.S. sanctions on May 30.
Iran has consistently maintained that its nuclear program has no military component, but nuclear talks between Iran and the world powers have not yielded any breakthroughs, which has resulted in the intensification of sanctions on Iran by the United States.
The United States and Western powers have imposed a series of economic sanctions aimed at pressuring Iran into halting what they claim may be a drive to develop the capability to build nuclear weapons. Tehran says its nuclear program is purely for generating power and for medical devices.
The office of Iran’s Supreme Leader has condemned the sanctions, saying the U.S. actions are not related to Iran’s atomic program but rather are an attempt to “suppress” and “censor” the Iranian people.
Iran is a signatory to the NPT, whereas Israel that is wagging the US’ tail is yet to be transparent to world and refuse to sign the treaty.
The sanctions have hurt Iran’s economy, but there is little evidence they have slowed the nuclear program ahead of a presidential election in Iran next week.
Restrictions on the auto industry, which traditionally employs the most people after the oil and gas sector, also raise fears it is ordinary Iranians that will be most harmed, analysts said.
“We hold the door open to a diplomatic solution that allows Iran to rejoin the community of nations if they meet their obligations,” White House press secretary Jay Carney said in a statement. “However, Iran must understand that time is not unlimited. If the Iranian government continues down its current path, there should be no doubt that the United States and our partners will continue to impose increasing consequences.”
The sanctions imposed on the rial on Monday included a ban on maintaining significant accounts outside Iran denominated in that currency. It is the first time that trade in the rial has been targeted directly for sanctions, the White House said.
In a related action, Iranian sanctions will for the first time target financial dealings with all Iranian government officials, not just officials tied to the oil industry and central bank, U.S. officials said.
U.S. sanctions on Iran have so far included an exception for natural gas exports, which flow to several close U.S. allies, including Turkey.
Critics of the sanctions say they only harden the resolve of the Iranian government to continue funding the nuclear program.
For sanctions to work, they need to be accompanied by more diplomacy, said Paul Pillar, a former CIA analyst.
“It’s a fallacy to think that there is some point at which so many sanctions have been implemented that the Iranians will cry uncle,” Pillar said. “They have no incentive to make concessions unless they are led to believe that concessions will bring significant sanctions relief.”
Senior U.S. officials said there will be further sanctions announced in the future to pressure Iran to negotiate about its nuclear program.
Mark Dubowitz, the head of the Foundation for Defense of Democracies, which advocates tougher policies on Iran, said Washington will likely impose sanctions on the Islamic Republic’s construction, engineering, and heavy machinery industries in coming weeks.
BIS report: Iran dealings $ 23b with 44 countries
Bank of International Settlements says Iran has $ 23.6b dealing with 44 countries.
BIS also reported that in the financial year ending in December 2012 Iran had $16.5b deposits in world banks. The latest report by BIS added that this figure was cut $ 1.483b compared to that in the same date last year. Iran’s deposits in foreign banks were decreased $ 2.163b compared to the same in the end of 2012, amounting to $ 16.615b. It was reported to be $ 14.353b in the end of 2011.
Since 2008, Iran’s deposits in foreign banks has experienced a decreasing trend, when it was reported to be $ 41.5b, plunging to a third during 4 years.
Banks incorporated into the report were located mainly in US allies and Europe. Since the beginning of 2012 attempts have been made to keep a small as possible a gap between Iran’s debts and deposits to avoid the brunt of sanctions. Report also had it that during 2012, the gap between Iran’s debts and deposits has been significantly widened, amounting to $ 9.5b in December 2012 from its initial figure of $ 4b in December 2011.
Iran’s debts to foreign banks were $ 10.745b in December 2011, being $ 7.099b in the end of 2012, showing a decrease of 3.646b during 2012.
BIS headquarters has located in Basel, Switzerland, and publishes its reports under the title of ‘International Banking and Financial Market Developments,’ in quarterly base.
The report provides debts and deposits of 44 banking and non-banking institutes of 44 countries, mainly European.