Dec 17, 2008

Officials, experts debate Iran sanctions: affecting Ali Khamenei or Ali the Plumber?

Artin Afkhami  

Source: NIAC website

Washington DC - "Who hurts the most under these sanctions?" Dr. Jahangir Amuzegar, former IMF executive and Iran 's Minister of Finance under the Shah, asked the audience at the Woodrow Wilson Center Thursday. "Ali the Plumber! People who eat bread, meat, sugar, and rice," he said.  "But the Qods Force and the elites in Iran are fine. How will the Obama administration reconcile these facts?"

In a panel discussion moderated by Dr. Haleh Esfandiari entitled "Iran: International Pressure and an Economic Crisis," the Treasury Department's Under-Secretary for Terrorism Stuart Levey joined Washington Post diplomatic correspondent Robin Wright and Dr. Amuzegar to discuss future possibilities for the US-Iran relationship.

 Although both Levey and Wright agreed that current financial sanctions are effective, Levey emphasized the need for more financial pressure on Iran , while Wright said the US should give diplomacy a try.

The Under-Secretary pointed to Western financial institutions' nearly universal boycott of Iran 's Bank Melli, Bank Saderat, and Bank Sepah as evidence in support of sanctions. But he emphasized the need to intensify financial pressure since Iran remains capable of providing funding for both its nuclear program and proxy groups like Hezbollah.

In Wright's view, falling oil prices, financial sanctions, and President Ahmadinejad's economic mismanagement have weakened the government enough to provide an opportunity for diplomacy to be successful. Ahmadinejad has spent nearly $90 billion of the domestic reserve in only three years, leaving the country only $9 billion of current accounts remaining, she added. And the IMF warned that Iran faced unsustainable budget deficits last August, even before the rapid decline in oil prices.

Amuzegar disagreed with both of the other two speakers, saying sanctions have affected ordinary people rather than the government, and as such are an ineffective tool. President Obama will need a completely new policy to accomplish his goals vis-à-vis Iran .

The Iranian government's ability to sustain itself may surprise observers, Amuzegar added, citing the €80 billion Iran has in European banks as enough to survive at least one year, by which time oil prices could increase. Oil prices, not sanctions, are the Achilles' heel of the Iranian government in his view - whereas sanctions disproportionally affect ordinary people.

Levey responded by saying: "We have to ask ourselves what the cost of a nuclear Iran is. Can we afford a nuclear Iran ?"

Levey and Wright both conceded that some flaws exist in the current sanctions regime. Iranians use Havaleh - an informal Islamic money wiring system dating to the eighth century - to bypass sanctions with financiers in the United Arab Emirates . UAE businesspeople allow Iran to import sanctioned Western goods, and Ms. Wright emphasized that the UAE will apply little pressure on Iran because of this lucrative trade.

Though the speakers did not reach agreement on US strategy, the implications are that if Iran 's economy does not improve, the government will find itself in a difficult situation.
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