The Power Of Sanctions In Iran (2 pp.)

The Power Of Sanctions In Iran

January 26, 2012

The nation of Iran has some decisions to make.  As the world’s fourth largest oil producer, producing well over four million barrels of oil per day, its place in the global economy is well-honed and has been integral in its role of supplying oil to many first world nations.  One would think that with this record of success, Iran would then take steps to secure and strengthen this role, to integrate its desire for growth as a nation with its abilities for providing in demand, high quality oil in large quantities.  Its importers, notably China and much of Europe have for a long time gobbled up Iranian oil, providing much needed financial resources to a country burdened by high rates of inflation and an otherwise scarcity of high-income exportable goods.  But much of Iran’s actions in recent days show a movement away from safety and security in its global markets, and the world has reacted.

The U.S. was the first nation to impose economic sanctions on Iran after it refused to halt its nuclear program.  President Obama has succinctly stated he wants to prohibit Iran from developing any nuclear weapons, prompting Iran to claim they are attempting to develop their nuclear capabilities only for utility power generation purposes.  Obama called his bluff and put in economic sanctions, prohibiting Iran’s central bank from doing any business with American financial systems.  And most in the West agree that this declination to produce nuclear weapons may be only an empty promise from Ahmadinejad, who has long been clear about his severe mistrust of Western militias.  Are we indeed to trust an Iran with nuclear ambitions, when their military interests in general have been so mistrustful towards Western powers?

Obviously, as President Obama has stated, and followed by both the European Union and Australia, the answer is no.  The sanctions, put into effect earlier this week, have already had a severe impact in Iran, which has been forced to raise bank interest rates and restrict trade in foreign currency in response.  And threatening to close by military force the Strait of Hormuz, notably the chief port for the transport of Middle Eastern oil to the rest of the world, is not helping Iran’s cause either.  Europe, once responsible for purchasing 90% of Iran’s oil supply, now dwindles at 10%, purchasing oil instead from neighboring Saudi Arabia, Iraq, and Libya in response to lack of deference with Iranian policies.  And the new sanctions amidst the West will only make matters worse for Iran.  With the EU now barring its members from importing Iranian oil, Iran’s only significant trading partner remaining will be China.

The question now stands, just where is Ahmadinejad heading?  Economic policies in Iran have, for the most part, become better since he became President in 2005.  Many say this is in response to his taming the “borrow and spend” policies of previous leaders, and increasing subsidies for food and petrol among Iran’s needy and impoverished near-majority to increase consumer spending.  Unemployment and inflation have been reduced almost significantly under these policies, and before the sanctions were put in place, Iran looked like it was on a solid economic path for itself.  So where does Ahmadinejad want to take the country now?  Certainly not into a more significant recession at his country’s newly found lack of oil customers.  And one may somewhat easily say the West’s disdain for Ahmadinejad developing a stricter weapons program is in fact legitimate.  The leader has spoken out about Israel, saying he wished it wiped off the map, and has blamed 9/11 not on Al-Queda, but on the United States Government, saying it must have wished for an excuse for confrontation with nations.  Mr. Ahmadinejad, I’m sorry, but it seems that finding the excuse for confrontation lies within yourself.

If Ahmadinejad is to see any further improvement in economic conditions for his country, he needs to take one thing seriously.  We in the West have reason not to trust his military goals, and he needs to accept that.  Only if he agrees to abandon his nation’s nuclear program can his country again make progress in the global economy.