Iran V: Sanctions
Competition
AHC
March 16
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, 2012 Georgian/Turkish (and/or the Iranian/Turkish border) and running to Austria, via Turkey, Bulgaria, Romania and Hungary.218 EU nations have been interested in the Nabucco project because it represents an opportunity for the EU to diversify its gas supply options and reduce its reliance on Russian gas imports, which in 2008 amounted to around 32% of their total demand.219 The deal has remained controversial, however, as a result of EU sanctions, and Nabucco Gas Pipeline International, due to what it calls “the current political situation,” decided not to plan a third pipeline to the Turkish-Iranian border as of 2011.220 Despite this setback for Iran, Nabucco is actively seeking new gas suppliers, which leaves the door open to future Iranian-Turkish energy cooperation.221 The end result is that influencing third country decisions to circumvent or ignore sanctions will remain an important past of US and Iranian competition. Iran still possesses enormous energy resources that will continue to be an attractive investment opportunity. The desire to build a lucrative foothold in Iranian energy may become a consideration for countries that are ambivalent about supporting Western regional influence in the future. What is far less clear, however, is how Iran can avoid the impact of the growing sanctions on its banking industry and ability to carry out foreign currency transactions and trade. The action the EU took in cutting off Iran’s access to SWIFT, the actions the US took much earlier to restrict the access Iran’s banking industry and financial institutions had to world markets, and the prospects of much sharper US sanction during the course of 2012, all present problems for Iran where it has no clear solutions and interact with export and import sanctions by sharply restricting its ability to trade.
The Future Impacts of Sanctions It is far too soon to determine just how much impact the new sanctions – and any additional sanctions that follow – will have on Iran. Long before new sanctions were put in place in late 2011 and early 2012, however, sanctions made it increasingly difficult for Iran to compete with other developing economies in international markets, put it at a disadvantage for attracting crucial foreign direct investment, and left the Iranian government unsure of how to confront the growing challenges.222
The Impact of Sanctions on the “Short Game” Many economists and analysts agree that even the threat posed by the new sanctions have caused Iranian prices to rise and making it increasingly difficult for Iranian companies to work internationally.223 Iran’s currency was already becoming far more unstable by late December 2010 —dropping in value to record lows —which led to increasingly haphazard attempts at government intervention. The Iranian Rial fell to a new low relative to world currencies in late 218
Parkinson, Joe, “Iran Sets Turkish Pipeline Project,” Wall Street Journal, July 24, 2010, http://www.pipelineandgasjournal.com/nabucco-pipeline-project-gas-bridge-europe 220 http://portal.nabucco-pipeline.com/portal/page/portal/en/NewsEdit/8E79E5BF557DCC2DE040A8C0010178CA 221 Dow Jones Newswire, “RWE executive sees good progress on Nabucco gas supply deal,” Jan Hromadko, September 11, 2011. http://online.wsj.com/article/BT-CO-20110913-704599.html 222 Kevan Harris, “Iran’s new economic slump”, The Iran Primer, USIP, June 22, 2011. http://iranprimer.usip.org/blog/2011/jun/21/iran’s-new-economic-slump 223 The Washington Post, “Sanctions begin to compound Iran’s severe economic problems”, Thomas Erdbrink, October 5, 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/10/05/AR2010100505972.html 219
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