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Sanctions and Iran

Last June, the U.N. Security Council adopted Resolution 1929 and imposed its fourth round of sanctions on Iran for violating resolutions aimed at ensuring the peaceful nature of Iran’s nuclear program. Dep’t of Pub. Info., United Nations, Security Council Imposes Additional Sanctions on Iran, Voting 12 in Favour to 2 Against, With 1 Abstention, UN (June 9, 2010), In retaliation, Iran threatened to stop trading with any nation that imposed sanctions. Iran Won’t Trade with Countries Imposing Sanctions, Malaysian Insider (Jul. 24, 2010), But this threat has been belied by continued trade—for instance, South Korea recently announced attempts by the two countries to broker a trade deal in areas not covered by Resolution 1929 sanctions. South Korea in Deal with Iranian Central Bank to Revive Trade Ties, Int’l Bus. Times (Oct. 8, 2010), However, the question arises: are sanctions actually working? Iran’s finance and economic minister has recently stated that, despite thirty years of sanctions, Iran’s economy continues to grow. See Elise Labott, Iran Has Grown Stronger from Sanctions, Finance Minister Says, CNN World (Oct. 9, 2010), This may be the right answer to the wrong question. The goal of the sanctions is not to completely cripple Iran’s economy, but to pressure Iran into bringing its nuclear program into line with international law.

An interesting phenomenon in international affairs is when actors successfully coordinate behavior without an official requirement or threat. It is disputed whether international law can truly “exist” without a Hobbesian Leviathan. A world view requiring a supreme power to enforce international law before admitting international law legitimately exists is ultimately simplistic; multilateral or even private economic threats or penalties can be effective, cumulative paths to changing the behavior of actors. Recently, the Wall Street Journal reported that bankers in the United Arab Emirates have dried up financial activity with Iranian banks backlisted by the U.S. Treasury. Chip Cummins & Jay Solomon, U.A.E. Cuts Off Ties to Iran Banks; Middle Eastern Country’s Move Follows Malaysia’s Clampdown, Reflecting Growing Adherence to U.S. Treasury’s Blacklist, Wall. St. J. (Oct. 5, 2010) (online with subscription). Going beyond the U.N. sanctions to follow U.S. Treasury suggestions is not mandatory, and considering that the U.A.E. –Iran trade used to be in excess of $12 billion, the question arises of why the U.A.E. banks have decided to do so. See Iran, UAE Trade Exceeds $12 Bln, Fars News Agency (Apr. 30, 2008), By comparison, Europe-Iran trade in goods in 2009 was 28.7 billion euros. Bilateral Relations: Iran, Eur. Trade Comm’n, (last updated Sept. 3, 2010). It turns out that Dubai, at least, may be less sanguine about sanctions on Iran than the rest of the UAE, but Dubai’s economic difficulties have forced the emirate to seek a bailout from Abu Dhabi, a wealthier neighbor; this in turn has forced Dubai to be more responsive to pressure from Abu Dhabi on following U.S. urgings for additional sanctions. See Dubai Curbs Iran Trade Under Sanctions Regime Hurting Business, Dubai Direct Trade (July 14, 2010), Economic pressure, after all, is often far more decisive than written law. Such is the very theory behind economic sanctions in the first place.

A particular area of concern in imposing sanctions is tailoring them. Where actors impose sanctions, they risk causing unnecessary harm and compromising humanitarian goals. The World Bank and the IMF recently denied certain loans to Iran. See Labott, supra. Iran’s finance and economic minister has characterized these as humanitarian and development loans and has stated that the legal department of the World Bank had initially found offering such loans would not violate sanctions. Id.

Next week’s post will consider this particular dispute in more detail.


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