‘Iran could begin feeling a further squeeze on its oil income soon’
Jan 20, 2013
Ever since European seaports closed their gates to Iranian oil tankers last summer, Iran has looked to the East to keep its economy afloat. Countries such as China, India and South Korea — some of them critics of Western sanctions — have offered Iran a lifeline of reliable markets and much-needed dollars.
But perhaps not for long. In just over two weeks, the Obama administration will begin enforcing a little-noticed statute that could dry up one of Iran’s largest remaining sources of oil income, U.S. officials say. Beginning Feb. 6, Iran still will get paid for the oil it delivers to Asian markets, from Mumbai to Shanghai to Pusan — only not in cash.
The law, part of a package of sanctions approved last year, requires that foreign governments keep any payments for Iranian oil locked up inside bank accounts in their own territory. Iran can use the money only to buy goods from the local economy, such as wheat or medicine or consumer goods. But it can’t collect hard currency that could boost Iran’s beleaguered economy back home, U.S. officials and analysts say.
Administration officials have been quietly anticipating the impact of the new provisions, which could be the most significant since last summer’s measures targeting Iran’s oil and banking industry. A side benefit, officials say, is the potential impact on Iran’s trading partners, which soon will have a compelling new economic interest in supporting tough sanctions against Iran.
“This is the next big shoe to drop,” said David S. Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence. “Most of these countries have large trade imbalances with Iran, and now Iran will have to find ways to spend all its oil earnings on their local economies.”
The new policy is coming into effect as the Obama administration is struggling to preserve an increasingly unwieldy coalition of nations supporting the West’s get-tough policies toward the country.
Sanctions, which are intended to force Iran’s leaders to accept restrictions on the country’s nuclear program, already have contributed to a sharp drop in the value of the Iranian currency, which has shed more than half its worth in 12 months. But the policies have spurred protests by several nations as well as human rights groups.
Some critics say the sanctions are primarily harming ordinary Iranians while failing to change the behavior of Iran’s ruling clerics. Other opponents, particularly countries dependent on Iranian oil, have objected because of potential damage to their own economies…