As Iran Moves to Skirt U.S. Sanctions, China and Russia Emerge to Cash In


Chinese State Councillor and Foreign Minister Wang Yi (R) holds talks with Iranian Foreign Minister Mohammad Javad Zarif (L) at the Diaoyutai state guesthouse in Beijing on May 13, 2018. (Getty Images)



by Joseph Braude*

More than a week has passed since U.S. Secretary of State Mike Pompeo announced 12 White House demands for a new Iranian nuclear deal. Iranian authorities, having had a chance to digest the speech, are responding with bluster on the one hand and carefully calibrated signals to outside powers on the other. The more defiant rhetoric includes statements by Iranian Revolutionary Guard Corps deputy commander Hossein Salami on May 29. He insisted that despite Washington’s demand for an end to the Iranian ballistic missile program, the program will continue and Iran could repel an American military assault. “They think Iran should end the development of its missile program,” he said. “Since they cannot force us, they ask us to do it ourselves. … No one can destroy our missile power, and if they are afraid they can go to shelters.”


As the principal target for the U.S. is not the nuclear program but the Iranian government itself — and as Europe sides with the United States when the chips are down — Iranians are better off focusing on improving their economy in ways that do not rely on Europe

More subtle remarks were conveyed by Supreme Leader Ayatollah Khamenei, at an iftar dinner on May 23. In an indirect dig at the “pragmatist” wing of his regime — President Rouhani and Foreign Minister Javad Zarif — he said that Trump’s departure from the JCPOA proved that deals with the U.S. are essentially worthless. Concessions Iran won were achieved not through negotiation, he added, but by defying the West with “facts on the ground” to advance its nuclear program. As the principal target for the U.S. is not the nuclear program but the Iranian government itself — and as Europe sides with the United States when the chips are down — Iranians are better off focusing on improving their economy in ways that do not rely on Europe.

A general view of the Port of Kharg Island Oil Terminal, 25 km from the Iranian coast in the Persian Gulf and 483 km northwest of the Strait of Hormuz, in Iran on March 12, 2017. (Getty Images)



EUROPEAN COMPANIES FOLD 

As the U.S. Treasury Department prepares to reinstate and expand Iranian sanctions, there are further indications of how the sanctions will effect Iran’s economy as well as its involvement with the world economy. With respect to the country’s domestic predicament, economic analysts foresee a new spike in inflation, new currency lows, and an even wider gap between the country’s rich and poor. But these trends can be ameliorated somewhat to the extent the regime manages to skirt American sanctions. Thus the economic postures of the European Union, China, and India toward Iran — the country’s three largest trading partners — matter greatly to the regime and its population.

Elizabeth Rosenberg, a key sanctions advisor at the U.S. Treasury Department under the Obama Administration, was askedon National Public Radio whether Europe would abide by U.S. sanctions on Iran and whether Iran could evade the new restrictions. She said that while Iranians have honed a range of techniques to skirt sanctions, “in some instances, they haven’t been able to.” Nor would she commit to a prediction that Europe will flaunt the American embargo. Diverging from the United States in this matter, she said, “would mean risking quite a lot.”

It is a risk Switzerland’s Mediterranean Shipping Company and Denmark’s Maersk Line — the two largest shipping companies in the world — appear unwilling to take. Both have now confirmed that they are phasing out cargo shipments to Iran. And as the Wall Street Journal reportedthis week, tanker owners intend to move their ships to other countries in West Africa and the Middle East. The Swiss lender Banque de Commerce et de Placements (BCP) has also halted new business with Iran and begun to comply with the American Office of Foreign Asset’s Control’s prescribed “wind-down period” for preexisting trade. The move follows a similar decision earlier this month by DZ Bank, the second largest lender in Germany.


The economic postures of the European Union, China, and India toward Iran — the country’s three largest trading partners — matter greatly to the regime and its population

CHINA AND RUSSIA EMERGE TO PARTLY FILL THE GAP 

Outside the EU, by contrast, responses have been mixed. In India,accordingto the Federation of Indian Exporters Organization, the two banks responsible for brokering most of the country’s exports to Iran have told exporters to complete all trade with Iran by August 6, shortly before the new American sanctions kick off. But on May 28 in New Delhi, Indian Foreign Minister Sushma Swaraj saidthat India would ignore U.S. sanctions when it comes to exporting Iranian oil. “India will comply with UN sanctions and not any country-specific sanctions,” he declared. The world’s third-largest consumer of oil, India maintains a strong independent streak in its foreign and economic policies. It is also a longtime buyer from Venezuela, another country stridently at odds with the United States.


New reporting finds that Russian and Chinese companies with government backing seek to benefit from the departure of European companies from Iran

The two countries poised to test U.S. sanctions the most are Russia and China. New reporting findsthat Russian and Chinese companies with government backing seek to benefit from the departure of European companies from Iran. The state oil company China Petroleum & Chemical Corp, for example, is in the midst of completing a $3 billion deal to develop an Iranian oil field that Royal Dutch Shell PLC has decided not to bid for in the wake of new American sanctions. Russian oil companies are proceeding along similar lines, albeit more cautiously. Both countries’ private sectors feature businesses that deal only minimally with the United States, and would therefore be more open to accepting the risks of engaging Iran’s lucrative markets. China in particular, which buys a third of Iran’s oil exports, appears committed to Iran. American officials say they nonetheless expect to inhibit Chinese and Russian involvement alike.

*Middle East specialist Joseph Braude is the author of Broadcasting Change: Arabic Media as a Catalyst for Liberalism (Rowman & Littlefield). He is Advisor to the  Al-Mesbar Center for Research and Studies and tweets@josephbraude.