Japan on Thursday became the first country to officially inform Washington that it would seek a waiver from pending U.S. sanctions on foreign institutions doing business with Iran's central bank. Japanese officials delivered the message to a visiting U.S. government delegation. Other importers of Iranian crude, including India, China and South Korea, have either waffled in their commitment to support the U.S.-led sanctions or expressed an outright dismissal of them.
Washington passed sanctions on the Central Bank of Iran as part of a larger defense authorization bill Dec. 31. Nations that agree to abide by the sanctions have a six-month window to comply, during which time they can continue buying crude from Iran. This is similar to proposed EU sanctions that will be discussed Jan. 23. As with the 2010 U.N. sanctions banning gasoline sales to Iran, these sanctions are unlikely to have the desired effect of crippling Iran's economy to the point of Iranian capitulation. The same goes for the European Union's planned embargo, which will be replete with loopholes for objecting states. Beyond trying to financially strain Iran, the sanctions rhetoric is designed to keep Iran and its nuclear ambitions in the headlines and to demonstrate publicly that action is being taken against Iran, while quieter clandestine efforts are in play.
The last three months have seen the latest round of a cycle that has played out repeatedly over the last several years: Israel escalates claims that Iran is close to attaining a bomb that could threaten the existence of the Jewish state. The United States and Europe then propose hardened sanctions aimed at deterring that activity -- while Washington makes sure to note that military options remain on the table -- and Iran responds by threatening to disrupt the shipment of oil through the Strait of Hormuz, enervating global energy markets. The rhetoric in this circumstance belies the actors' capabilities. Israel knows it has limited ability to launch a successful airstrike on Iran, while the United States wants to avoid a new war with a Persian Gulf state, and Tehran does not want to incur the economic cost of shutting down the Strait of Hormuz.
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Thursday April 17th, 2014 | John Ransom
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Wednesday April 16th, 2014 | John Ransom