January 10, 2007 at 10:45:45

The Plan for Economic Strangulation of Iran

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By Dr. Abbas Bakhtiar (about the author) Page 1 of 4 page(s)

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For OpEdNews: Dr. Abbas Bakhtiar - Writer

It is said that there is more than one way to skin a cat. It seems that United States is trying to skin this cat �Iran- in anyway that it can, including economic strangulation. While people are concerned with Iraq and the gathering armada in the Persian Gulf, United States has been quietly carrying out a not so covert economic war against Iran.

Since the 1979 revolution in Iran, the country has been under constant US unilateral sanctions. "The first U.S. sanctions against Iran were formalized in November of 1979, and during the hostage crisis, many sanctions were leveled against the Iranian government. By 1987 the import of Iranian goods into the United States had been banned. In 1995, President Clinton issued Executive Order 12957, banning U.S. investment in Iran's energy sector, followed a few weeks later by Executive Order 12959 of May 6, 2000, eliminating all trade and investment and virtually all interaction between the United States and Iran." [1]

Despite the sanctions Iran continued to attract foreign investment and technical cooperation for its energy sector. Countries such as France, Italy and others took advantage of absence of the American competition and tried to fill the gap. However, the threat of American retaliation kept the investment way bellow the desired levels. It only allowed Iran to continue to keep its oil export at its OPEC determined quota level.

The Economic Choke-point: Oil & Gas

"According to the Oil and Gas Journal, as of January 1, 2006, Iran held 132.5 billion barrels of proven oil reserves. This figure, which includes recent discoveries in the Kushk and Hosseineih fields of Khuzestan province, means Iran holds roughly 10 percent of the world's total proven reserves. The vast majority of Iran's crude oil reserves are located in giant onshore fields in the south-western Khuzestan region near the Iraqi border. Overall, Iran has 40 producing fields � 27 onshore and 13 offshore. Iran's crude oil is generally medium in sulfur and in the 28�-35� API range."[2]

There is no doubt that Iranian economy is driven by oil. Oil revenues constitute over 70 percent of its total export earnings and 50 percent of its GDP. Iran's oil revenues were $32 billion in 2004, $45.6 billion in 2005, and according to Iran's National Oil Company international affairs director, Hojjatollah Ghanimifard, will reach $52 billion by the end of the Iranian calendar year (21 March 2007).

Iran currently produces about 4 million barrels of oil per day, of which only 2.5 million barrels are exported with the remaining 1.5 million barrel being consumed internally. According to the latest report (26 Dec 2007) by the National Academy of Sciences of the United States (NAS), if the current increase in local Iranian oil consumption continues and the current decline in oil production is not stopped, then by 2015 Iran's oil export will decline to zero.[3] According to this and other reports Iran needs to invest about $2.5 billion a year just to stand still. Iran is not running out of oil, but needs money to maintain old fields and bring in the new fields online.

The existing major oil fields in Iran are: Ahwaz (1958), Aghajari (1936), Gacchsaran (1937) and Marun (1963). These four fields together, during their highest output, produced almost 4.5 million barrel of oil per day. All four reached their peak in late 60s to mid 70s. According to Mathew R. Simmons by 2003, these 4 oilfields' combined production were reduced to 1.7 million barrel per day. [4]

The current US strategy is to starve the Iranian oil and gas industries of new investments, thereby reducing the Iranian government's revenues which are hoped will in turn reduce Iran's ability to maintain not only its armed forces, but also the government's social obligations to its people (subsidies, salaries, etc.). It is hoped that this combined with international isolation and (with the help of Saudi Arabia) a reduction in oil prices (OPEC crude basket price: $51.25 per barrel on 8/1/07) will not only cripple the Iranian economy, but also (possibly) lead to a regime change. All attacks on the economy was being presented under the guise of stopping Iran from developing WMDs, and in particular Nuclear weapons.

The attack on Iranian economy started in earnest in early 2006. United States began putting considerable pressure on international banks and financial institutions to cut their ties with Iran. Countries also were pressured to reduce their economic contact with Iran. For example beside the usual behind the scene warnings and threats, in September 2006, the US treasury secretary M. Paulson Jr, used his first meeting of world finance chiefs as a venue for the Bush administration's mission to isolate Iran.

"Emerging from a meeting of finance ministers representing the Group of Seven industrialized nations, Paulson said he urged his counterparts to intensify efforts to prevent banks and private companies in their countries from being used as unwitting conduits for financing and materials aiding Iran's ambitions."[5]

Later under pressure from the US some three top Japanese banks: Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corp announced that, in line with US financial sanctions, they will refrain from working with Iran's state-run Bank Saderat of Iran (with 3400 branches in Iran). Recently another major Iranian Bank with some foreign branches is being targeted for freeze of assets and sanctions. "Bank Sepah International Plc (BSIP), incorporated in the United Kingdom, specializes in providing finance and services for international trade worldwide with a particular focus on Iran and the Persian Gulf region, according to its Web site. The bank is a wholly owned subsidiary of Bank Sepah, Iran, which was established in 1925 and is the oldest of the Iranian banks. Bank Sepah has a large network of branches in Iran as well as offices in Paris, Frankfurt and Rome".[6]

The pressure was also felt by Indian and Swiss banks as well. In mid 2006 the State Bank of India (SBI), the only Indian bank operating in Iran (with a token presence) came under intense pressure to quit Iran [7].

Other banks that succumbed to the pressure were USB AG (took over Banco Pactual S.A. in 2006) and Credit Suisse Group of Switzerland (controlling group of other banks such as: Bank Leu, Schweizerische Volksbank, Neue Aargauer Bank, Winterthur, and Donaldson, Lufkin & Jenrette Inc.). UBS AG, Europe's largest bank by assets, also cut all business ties with Iran in January 2006 and met with U.S. legislators in April 2006 about its transfers of U.S. banknotes to the Islamic Republic. Credit Suisse Group, Switzerland's second-biggest bank, also quit Iran in January. Other Banks to quit or restrict their activities in Iran were: ABN AMRO of Holland and London-based HSBC.

These were just a few example of United States' indirect financial pressure on Iran. Governments, companies and financial institutions are under intense pressure to terminate all dealings with Iran. But so far Iran has managed to sustain, albeit with great difficulty, its oil industry and financial institutions functioning.

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Dr. Abbas Bakhtiar lives in Norway. He works as a management consultant.He is also a contributing writer for many online journals.

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