Will Iran sanctions herald the fall of the imperial Dollar?

Europe's new mechanism called Instrument in Support of Trade Exchanges (INSTEX) for circumventing the illegal US economic sanctions on Iran may or may not work, but the effort is certainly evidence of a world increasingly frustrated with living under the financial hegemony of Washington Stay with us to listen to an interesting analysis in this regard which appeared on the Common Dreams website, titled: “Will Iran sanctions herald the fall of the imperial Dollar?”

It was written jointly by Medea Benjamin and J.S. Davies. Medea Benjamin is founder of Global Exchange and CODEPINK: Women for Peace who recently wrote the book, “Inside Iran: The Real History and Politics of the Islamic Republic of Iran”.  Nicolas Davies is the author of “Blood On Our Hands: the American Invasion and Destruction of Iraq”.

In May 2018 When the Trump administration unilaterally pulled out of the international Iran nuclear agreement, the JCPOA (Joint Comprehensive Plan Of Action), and announced it would re-impose sanctions on Iran, the European Union (EU) declared its commitment to preserving the agreement and finding ways for its companies to circumvent US sanctions. Now, eight months later, the Europeans finally announced the creation of INSTEX (Instrument In Support Of Trade Exchanges) as an alternative payment system so that European firms can do business with Iran. This mechanism might be too little and too late to salvage the Iran nuclear deal but it marks a milestone in an inevitable transition of epic proportions: the end of the global hegemony of the dollar.

INSTEX is a complicated mechanism registered in France and headed by a German banker, with shareholders from the three European countries that were signatories to the Iran nuclear deal: France, Germany and the UK. It will initially be used for non-sanctionable trade, such as medicine, food and medical devices, and is also likely to only attract smaller businesses, not large companies with significant exposure to US markets.

It has had an 8-month difficult birth because no one country wanted to claim maternity rights for fear of a US backlash. Indeed, the US threatened to devour it before it was born.

While other countries use economic sanctions as weapons in international disputes, the US is the only country that imposes secondary sanctions on third country citizens and institutions. The US government uses the role of the dollar as an international reserve currency and the central role of US banks and institutions in the international financial system to present third country firms with an insidious either/or choice: cut off business ties with Iran (or Russia, North Korea, Turkey, etc.), or lose far more lucrative business with the US and risk financial penalties in US courts. For most companies, the choice is clear.

Since the US sanctions dozens of European companies have abandoned trade deals and investments in Iran that had resumed following the signing of the JCPOA in 2015.

It’s not just European companies that have jumped ship. Iran has had bad news from China, too. On December 20th, China’s Bank of Kunlun, which until now has processed most Chinese payments for Iranian oil, announced that it would fully comply with U.S. sanctions and stop processing payments when its current sanctions waiver runs out at the end of April. The bank, which is majority-owned by the China National Petroleum Corporation (CNPC), seems to be prioritizing its business dealings with the U.S. over its relations with Iran.

On the other hand, the CNPC has shelled out a billion dollars to take over Total’s share of a contract to develop Iran’s South Pars natural gas field, the largest in the world, after the French firm caved to US sanctions. As in other areas of US-China relations, China is clearly making calculated and nuanced decisions about how to respond to the US sanctions regime and its consequences.

Recently, Parsian Bank has been included in a list of 50 Iranian banks subjected to US sanctions. Parsian Bank, the largest private sector bank in Iran, had been processing payments for most imports of food, medicines and other humanitarian supplies to Iran. These items are officially exempt from US sanctions, but the Washington Post reported on November 17th that the US action against Parsian Bank was already “choking off medicine imports.”

European pharmaceutical companies has announced they were ending operations in Iran, which has a large domestic pharmaceutical industry, but many of the raw materials are imported. As a result certain imported medicine had become hard to find, and the price had spiked.

The US pretext for sanctions against the Parsian Bank is a convoluted chain of relationships that allegedly connect Parsian to the Basij or volunteer forces, not necessarily military, that have organizational ties to the Islamic Revolutionary Guard Corps (IRGC).

In a press release, the US Treasury laid out its case for sanctioning Parsian Bank as “part of the Basij’s economic conglomerate.” But the Parsian Bank is only tenuously connected to the Basij via one of its shareholders, the Andisheh Mehvaran Investment Company, which the Treasury alleges is indirectly owned by the Basij. This is akin to alleging that a US corporation is guilty whenever one of its shareholders is accused of a crime.

While sanctions hurt ordinary Iranians, US leaders claim they are intended to force the Iranian government back to the table to negotiate the nuclear deal, end its defensive ballistic missile program, and stop its support for the oppressed and popular mobilization forces in the region such as Hezbollah in Lebanon and Ansarallah in Yemen. Inside and outside Iran, however, US sanctions are seen as part of a larger strategy for a bid to change the system of government, something key members of the Trump administration, including National Security Advisor John Bolton, talk openly about.

This short-term victory of creating economic chaos, however, is not setting the scene for new negotiations or causing the government to collapse. It is, however, contributing to a growing international frustration that the US can use the power of the US dollar and its financial and judicial systems to tell firms in other countries who they can and can’t do business with. This imposition of US sovereignty and control over people and firms in third countries is deeply resented overseas.

As economist Jeffrey Sachs told Business Week, “Europe and China have banks.  One of these days, the US is going to talk the dollar right out of its international role.” Already, 87 countries, including many traditional US allies, have joined the Chinese-led Asian Infrastructure Investment Bank, which operates independently of the dollar-based financial system.

Europe’s new mechanism for circumventing US sanctions may or may not work, but the extraterritorial reach of US sanctions on Iran and other nations is certainly hastening the day when the rest of the world will develop a multipolar financial system that no one country can use as an illegitimate tool of imperial power. This will gradually force the US to find a new place in a post-imperial, multipolar world that it cannot dominate by military force or economic warfare.

As the deluded US leaders escalate their economic warfare against other countries, not least Cuba and Venezuela, it’s a good time for Americans to start thinking about how we can instead cooperate with all our neighbors in a smooth, peaceful transition to a sustainable, multipolar world.

AS/ME