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Swiss come into US sights again over Iran

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Despite sanctions against Iran, there is one clandestine route that remains open for business: a short sea corridor connecting Oman with Iran (Keystone)

by Jean-Michel Berthoud, swissinfo.ch


The United States authorities have long been at odds with some Swiss banks, but could soon be turning their sights on Swiss-based commodity traders.

At issue are new economic sanctions against Iran passed by the US Congress at the end of last year, and which come into force on July 1.

Both the European Union and the US have imposed sanctions because they believe Iran is developing nuclear weapons. Iran says its nuclear progamme is for peaceful purposes only.
Switzerland has been unhappy about sanctions against Iran in the past, chiefly because it has represented US interests in Iran for over 30 years. It has also tried to mediate unofficially in the dispute over Iran’s controversial nuclear programme.

A year ago Switzerland stepped up its economic sanctions against Iran to bring them into line with those of the EU and the US, but only after coming under prolonged international pressure.

Now Switzerland finds itself being pushed into a corner once again. On January 23 the EU announced that it would step up its measures against Iran in the middle of 2012.

And on February 6 Barack Obama ratcheted up US sanctions yet further. He ordered an embargo on property and assets belonging to the Iranian government and to the Iranian central bank in the US. All Iranian financial institutions are also affected.

Switzerland stopped importing oil from Iran in 2006. According to the State Secretariat for Economic Affairs (Seco), in 2010 its imports of other items were worth only €27.4 million (SFr33 million). But its exports – mainly pharmaceuticals and machinery – were worth rather more: €562.6 million in 2010.

Tight-lipped Swiss

According to documents published by WikiLeaks, representatives of the US embassy in Bern have called on Seco to prevent the export of what are described as sensitive goods to Iran several times in the past few years. In most cases it seems that Seco immediately complied.

Seco deputy spokeswoman Marie Avet, could not confirm the truth of these leaks to swissinfo.ch, nor comment on them.
Christa Markwalder, a member of the Foreign Affairs Committee of the House of Representatives, reminded swissinfo.ch that the documents released by WikiLeaks were written for internal use by the US administration.

“I would not overrate Wikileaks,” she said. “After all, Switzerland is a sovereign state with its own foreign policy. We are also the protecting power for the US in Iran, which means we are of particular interest to the US as far as Iran is concerned.”

According to the respected German-language Neue Zürcher Zeitung newspaper, David S. Cohen, the US Treasury’s under-secretary for terrorism and financial intelligence, visited Bern at the beginning of February for talks with various members of the Swiss administration, including Seco. Cohen is responsible for the implementation of sanctions against Iran.

“No comment,” said Avet.

US embassy

However, Alexander N. Daniels, public affairs officer at the US embassy in Bern, was more forthcoming. He confirmed to swissinfo.ch that Cohen had been in Bern to explain the new US measures to the foreign ministry and Seco.

They include a boycott of Iran’s central bank, which has often acted recently as a financial intermediary for oil deals, and which is also thought to finance a large proportion of the imports for the Iranian nuclear programme.

Daniels added that Cohen had had similar talks in Britain and Germany.

Five giants

Although Switzerland no longer imports Iranian oil, about one third of the world’s oil deals are thought to be brokered by five Swiss-based commodity-trading giants – Glencore, Gunvor, Vitol, Trafigura and Mercuria.

Avet assured swissinfo.ch that the commodity traders would follow the sanctions in business involving the US.

She said the same question had arisen over the EU sanctions. But there the problem is that the EU has only issued a decision, and it is not yet clear how the measures are to be implemented in practice.

“So at the moment we cannot give you any more information,” she told swissinfo.ch. “But clearly, in trading and doing business with countries which have introduced these sanctions, we shall keep to them.”

Markwalder pointed out that Switzerland is a major trading centre for raw materials, in particular oil products, and some large companies were deeply involved. But she added that it is not clear to what extent they would be affected as far as oil products from Iran are concerned, if at all.

“It would actually be in the interest of these firms to obey the sanctions. Since these businesses are involved in trade all over the world, they have no interest in losing market access, licences and so on in the US.”

Swiss response

The Swiss government is to consult about how it should react to the strengthened EU and US measures. It will take its decision on the basis of an assessment by Seco.

Markwalder said the foreign affairs committee would also be discussing the matter.

“Switzerland would need some very good arguments if it were to break ranks with the western states – that’s to say, the EU and US,” she said.

“It’s true that we play a rather special role as a protecting power in Iran, but we still cannot afford to stand aside and provide a platform for sanctions busting.”

Jean-Michel Berthoud, swissinfo.ch
(Translated from German by Julia Slater)

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Iran May Disrupt Hormuz Shipping, Supporting Oil, S&P Says

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By Ayesha Daya

Feb. 14 (Bloomberg) — Iran might respond to sanctions with “low-level provocation” such as slowing shipping through the Strait of Hormuz, keeping oil prices at their currently high level, according to three Standard & Poor’s reports.

Iranian authorities could disrupt supplies of oil from the Persian Gulf by imposing tanker inspections or boarding merchant ships in its territorial waters, supporting oil prices because markets would increasingly view armed conflict as “a real, if remote, possibility,” according to the reports’ authors, who include Paris-based Jean-Michel Six, S&P’s chief economist for Europe.

The likelihood of severe disruption of oil supplies through the strait, through which 20 percent of the world’s oil flows, is “very low,” though if one did occur, it might boost oil to $150 a barrel and push economies into a recession, according to the reports.

“For oil-producing sovereigns of the Gulf Cooperation CouncilSaudi Arabia, U.A.E., Qatar, Kuwait, Oman, and to a lesser extent, Bahrain — higher oil prices would actually be beneficial,” said Elliot Hentov, an S&P credit analyst in Dubai. “As oil exporters, they would receive more foreign earnings that they could either use to stimulate demand or improve their government’s balance sheets.”

The U.S. and the European Union are imposing tougher sanctions on Iran and Israel has talked of an attack on the Islamic Republic’s nuclear facilities in an attempt to halt its atomic program. Iran, which says its nuclear program is for civilian purposes, has threatened to block the Strait of Hormuz in retaliation.

The three S&P reports discuss the impact of rising Gulf tensions on Middle Eastern states seeking to borrow money, the risks that a closure of Hormuz would pose for companies looking for credit and the threats to global economic growth from an oil shock.

The Ticking Clock

Four reasons why — this time — you should believe the hype about Israel attacking Iran.

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by ROBERT HADDICK

Washington Post columnist David Ignatius created a tempest last week when he reported U.S. Defense Secretary Leon Panetta’s prediction that Israel will attack Iran and its nuclear complex “in April, May or June.” Ignatius’s column was as startling as it was exasperating. When the sitting U.S. defense secretary — presumably privy to facts not generally available to the public — makes such a prediction, observers have good reasons to pay attention. On the other hand, the international community has been openly dealing with the Iranian nuclear issue for nearly a decade, with similar crescendos of anticipation having occurred before, all to no effect. Why would this time be different?

Further, an Israeli air campaign against Iran would seem like an amazingly reckless act. And an unnecessary one, too, since international sanctions against Iran’s banks and oil market are just now tightening dramatically.

Yet from Israel’s point of view, time really has run out. The sanctions have come too late. And when Israeli policymakers consider their advantages and all of the alternatives available, an air campaign, while both regrettable and risky, is not reckless.

Here’s why:

1. Time pressure

In his column, Ignatius mentioned this spring as the likely deadline for an Israeli strike. Why so soon? After all, the Iranian program is still under the supervision of IAEA inspectors and Iran has not made any moves to “break out” toward the production of bomb-grade highly enriched uranium.

But as a new report from the Bipartisan Policy Center discusses, Iran’s uranium enrichment effort continues to advance, even after the Stuxnet computer attack and the assassination of several of its nuclear scientists. According to the report, Iran seems to be successfully installing advanced, high-efficiency uranium-enrichment centrifuges, which foreshadows a significant increase in enrichment capacity and output in the near future. More ominously from Israel’s perspective, Iran is now installing centrifuge cascades into the Fordow mountain site near Qom, a bunker that is too deep for Israeli bombs to penetrate.

On-site IAEA inspectors are currently monitoring Iran’s nuclear fuel production and would report any diversions to military use. As Tehran undoubtedly assumes, such a “breakout” (tossing out the inspectors and quickly enriching to the bomb-grade level) would be a casus belli, with air strikes from Israel likely to soon follow. Israeli leaders may have concluded that Iran could break out with impunity after the Fordow site is operational and the enrichment effort has produced enough low-enriched uranium feedstock for several bombs. According to the Bipartisan Center report, Iran will be in this position later this year. According to the New York Times, U.S. and Israeli officials differ over their calculations of when Iran will have crossed into a “zone of immunity.” Given their more precarious position, it is understandable that Israeli policymakers are adopting a more conservative assessment.

2. Alternatives to military action now fall short

Israeli leaders undoubtedly understand that starting a war is risky. There should be convincing reasons for discarding the non-military alternatives.

The international sanctions effort against Iran’s banking system and oil industry are inflicting damage on the country’s economy and seem to be delivering political punishment to the regime. But they have not slowed the nuclear program, nor are they likely to have any effect on the timeline described above. And as long as Russia, China, India, and others continue to support Iran economically and politically, the sanctions regime is unlikely to be harsh enough to change Israel’s calculation of the risks, at least within a meaningful time frame.

Why can’t Israel’s secret but widely assumed nuclear arsenal deter an Iranian nuclear strike? Israel’s territory and population are so small that even one nuclear blast would be devastating. Israel would very much like to possess a survivable and stabilizing second-strike retaliatory capability. During the Cold War, the United States and the Soviet Union achieved this mainly with their ballistic missile submarine fleets, which were always on patrol and held each others’ cities at risk. Israel does not have large numbers of submarines or any nuclear-powered subs capable of long submerged patrols. Nor can it be confident that its policymakers or command-and-control systems would survive an Iranian nuclear first strike.

Even if Iran sought a nuclear weapons capability solely to establish its own defensive deterrent, the outcome would be gross instability in the region, very likely leading to one side or the other attempting a preemptive attack (the Iranian government denies that its nuclear program has a military purpose). Very short missile flight times, fragile early-warning and command systems, and no survivable second-strike forces would lead to a hair-trigger “use it or lose it” dynamic. An Israeli attack now on Iran’s nuclear program would be an attempt to prevent this situation from occurring.

3. The benefits of escalation

A strike on Iran’s nuclear complex would be at the outer boundary of the Israeli Air Force‘s capabilities. The important targets in Iran are near the maximum range of Israel’s fighter-bombers. The fact that Iraq’s airspace, on the direct line between Israel and Iran, is for now undefended is one more reason why Israel’s leaders would want to strike sooner rather than later. Israel’s small inventory of bunker-buster bombs may damage the underground uranium enrichment plant at Natanz, but they will likely have no effect on the Fordow mountain complex. Iran has undoubtedly dispersed and hidden many other nuclear facilities. An Israeli strike is thus likely to have only a limited and temporary effect on Iran’s nuclear program.

If so, why bother, especially when such a strike risks sparking a wider war? Israel’s leaders may actually prefer a wider escalating conflict, especially before Iran becomes a nuclear weapons state. Under this theory, Israel would take the first shot with a narrowly tailored attack on Iran’s nuclear facilities. Paradoxically, Israel’s leaders might then prefer Iranian retaliation, which would then give Israel the justification for broader strikes against Iran’s oil industry, power grid, and communication systems. Even better if Iran were to block the Strait of Hormuz or attack U.S. forces in the region, which would bring U.S. Central Command into the war and result in even more punishment for Iran. Israel’s leaders may believe that they enjoy “escalation dominance,” meaning that the more the war escalates, the worse the consequences for Iran compared to Israel. Israel raided Iraq’s nuclear program in 1981 and Syria’s in 2007. Neither Saddam Hussein nor Bashar al-Assad opted to retaliate, very likely because both knew that Israel, with its air power, possessed escalation dominance. Israel’s leaders have good reason to assume that Iran’s leaders will reach the same conclusion.

What about the rockets possessed by Hezbollah and Hamas, Iran’s proxies north and south of Israel’s population centers? Israel’s leaders may believe that they are much better prepared to respond to these threats than they were in 2006, when the Israeli army struggled against Hezbollah. There is no guarantee that Hezbollah and Hamas will follow orders from Tehran to attack — they understand the punishment the reformed Israeli army would inflict. Hezbollah may now have an excellent reason to exercise caution. Should the Assad regime in Damascus collapse, Hezbollah would likely lose its most important protector and could soon find itself cut off and surrounded by enemies. It would thus be a particularly bad time for Hezbollah to invite an Israeli ground assault into southern Lebanon.

4. Managing the endgame

An Israeli raid on Iran’s nuclear complex would probably not lead to the permanent collapse of the program. Iran could dig out the entrances to the Fordow site and establish new covert research and production facilities elsewhere, perhaps in bunkers dug under residential areas. Israel inflicted a major setback on Iraq’s program when it destroyed the unfinished Osirak reactor in 1981. Even so, Saddam Hussein covertly restarted the program. Israel should expect the same persistence from Iran.

So is there any favorable end-state for Israel? Israeli leaders may envision a long term war of attrition against Iran’s program, hoping to slow its progress to a crawl while waiting for regime change in Tehran. Through sporadic follow-up strikes against nuclear targets, Israel would attempt to demoralize the industry’s workforce, disrupt its operations, and greatly increase the costs of the program. Israeli leaders might hope that their attrition tactics, delivered through occasional air strikes, would bog down the nuclear program while international sanctions weaken the civilian economy and reduce political support for the regime. The stable and favorable outcome for Israel would be either Tehran’s abandonment of its nuclear program or an internal rebellion against the regime. Israel would be counting more on hope rather than a convincing set of actions to achieve these outcomes. But the imperative now for Israel is to halt the program, especially since no one else is under the same time pressure they are.

Israel should expect Tehran to mount a vigorous defense. Iran would attempt to acquire modern air defense systems from Russia or China. It would attempt to rally international support against Israeli aggression and get its international sanctions lifted and imposed on Israel instead. An Israeli assault on Iran would disrupt oil and financial markets with harmful consequences for the global economy. Israel would take the blame, with adverse political and economic consequences to follow.

But none of these consequences are likely enough to dissuade Israel from attacking. A nuclear capability is a red line that Israel has twice prevented its opponents from crossing. Iran won’t get across the line either. Just as happened in 1981 and 2007, Israel’s leaders have good reasons to conclude that its possession of escalation dominance will minimize the worst concerns about retaliation. Perhaps most importantly, Israel is under the greatest time pressure, which is why it will have to go it alone and start what will be a long and nerve-wracking war.

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Despite Sanctions by EU & US, Irani Black Gold Turns into 24K Gold

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JNN 24 Jan 2012 Tehran : Despite fresh EU sanctions against Iran’s oil exports,India has agreed to pay the price of crude oil it imports from Iran in gold, which makes it the first country to drop the US dollar for purchasing the Iranian oil. China has shown interest in Iran’s oil with hiring at least two supertankers to ship oil from the country.

According to a report published by DEBKAfile news website, unnamed sources have stressed that China is also expected to follow suit.

India and China take about one million barrels per day (bpd), or 40 percent of Iran’s total exports of 2.5 million bpd and both of them have huge reserves of gold.

The report added that by trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its Central Bank’s assets and the oil embargo which the European Union’s foreign ministers agreed to impose on Monday, January 23.

The EU currently buys around 20 percent of Iran’s oil exports.

On the other hand, experts say the vast sums involved in these transactions are expected to boost the price of gold and depress the value of the dollar on world markets.

“An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept [in the] dark,” the report stated.

India is Iran’s second largest customer after China, and purchases around USD 12-billion-a-year worth of Iranian crude, or about 12 percent of its consumption.

Delhi is to execute its transactions, the report said, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of the Indian government, the Reserve Bank of India representatives, and Halk Bankasi (Peoples Bank) — Turkey’s seventh largest bank which is owned by the government.

US President Barack Obama signed into law, on December 31, 2011, new sanctions which seek to penalize other countries for importing Iran’s oil or doing transaction with Islamic Republic’s Central Bank.

Foreign ministers of the European Union also imposed sanctions on Iran’s oil imports over the country’s peaceful nuclear program during their Monday meeting in Brussels.

The sanctions involve an immediate ban on all new oil contracts with Iran and a freeze on the assets of the country’s Central Bank within the EU.

Tehran has warned that the embargo will have negative consequences, such as increasing the oil price.

Clarkson Research Services Ltd., a unit of the world’s largest shipbroker, announced the two supertankers were booked to carry about 2 million barrels of crude from Iran’s Khark Island to China.

Qi Lian San, a large crude carrier anchored near Singapore, was booked to load 270,000 tons of crude at Khark Island from Feb. 3 to Feb. 5 and carry the cargo to China, Clarkson said.

The Chinese oil trader, Zhuhai Zhenrong Co., also booked an unidentified ship owned by the National Iranian Tanker Co. to load 265,000 tons of crude in Khark Island on Jan. 29 and sail to the Chinese port city of Ningbo.

Two other ships, Davar and Hoda, which called at an Iranian oil terminal, are heading for China, Bloomberg reported.

Ship-tracking data show Davar is sailing to Ningbo after leaving Iran’s Soroush terminal on Jan. 11, and Hoda is bound for Shui Dong. The National Iranian Tanker Co. owns both very large carriers.

Customs data also showed that China imported 2.4 million metric tons of crude from Iran last month.

On Monday, EU foreign ministers in Brussels agreed to embargo Iranian oil that involved an immediate ban on all new oil contracts with Iran.

Earlier this month, China’s vice foreign minister said his government “opposes imposing pressure and sanctions.”

Source

Geithner to pressure China and Japan to back economic sanctions against Iran

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By Erik Wasson – 01/04/12 09:52 AM ET

Treasury Secretary Tim Geithner will travel to China and Japan next week to hold high-level economic talks, the Treasury Department announced Wednesday.

High on the agenda will be getting Chinese support for new sanctions against Iran, which is forging ahead with its plans to develop a nuclear weapon. Iran will also be a top priority in Japan.

President Obama last weekend signed harsh new U.S. sanctions into law as part of the 2012 defense authorization bill.

Tensions between the United States and Iran have ratcheted up in recent weeks as the new U.S. sanctions against Iran’s central bank were sent to Obama’s desk.

Iran has threatened to block shipping in the Persian Gulf in order to cause a spike in oil prices, in retaliation. China is one of the biggest customers for Iran’s oil and has shown reluctance to punish Tehran.

China’s foreign ministry on Wednesday criticized the new U.S. sanctions.

“China has always maintained that sanctions were not easing tensions, the Iranian nuclear issue has to be resolved in a fundamental way, that dialogue and negotiation is the only correct way,” spokesman Hong Lei said when asked about the U.S. law.

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“China is opposed to a country putting its domestic law above international law, by placing on the other countries unilateral sanctions.  Like many other countries, China and Iran maintained normal, open and transparent trade and energy exchanges, these transactions do not violate United Nations Security Council resolutions should not be affected.”

Geithner’s trip on Jan. 10 to 12 will start off with a meeting with Chinese Vice Premier Wang Qishan.

In a conciliatory gesture to China last week, Treasury once again decided not to name China a “currency manipulator,” despite acknowledging that the renminbi is undervalued.

The low value of China’s currency promotes China’s exports into the United States and hurts the ability of U.S. products to compete in China. A Senate-passed bill to slap trade sanctions on China over its currency has stalled in the House since October.

Geithner will meet with Prime Minister Yoshihiko Noda on his journey to Japan. Japan is contemplating trying to join the TransPacific Partnership trade agreement being negotiated by the Obama administration.

For such a TPP agreement to be completed, Congress would almost certainly need to renew fast-track trade negotiating authority for the president. That power would force up-or-down votes in Congress on any trade pact.

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