August 7, 2012 7:12 pm
StanChart will not be the last bank to be stung by the US
.
Standard Chartered, a British bank, has found itself on the receiving end of a bluntly worded message: do business with Iran, and the US will punish you for it. Executives at the bank are not the only ones wondering: “Who are these Americans to penalise a British bank for doing business with a third country? What gives Washington the right to strong arm European regulators into supporting US foreign policy plans?” The answer: the same Americans who do not want to see Iran develop a nuclear weapons capability but who are not prepared to provoke another Middle Eastern war by dropping bombs to destroy it.
For the past several years, market anxiety over Iran has focused on the risk of military strikes on the country’s nuclear programme. When will Benjamin Netanyahu, Israeli prime minister, give the order to drop the bombs? Will Barack Obama help? Will Iran block the Strait of Hormuz, the bottleneck through which about 40 per cent of the world’s seaborne crude oil passes each day? Are we heading towards another war in the world’s most volatile region?
As Standard Chartered has learnt the hard way, military conflict, even a limited one, is not the likeliest market-moving Iran-related risk. Sanctions are not simply the opening act to a more dangerous moment, Iran’s equivalent of the shortlived Kofi Annan mission to Syria. Sanctions are the headline risk.
They will remain so for the foreseeable future. The potential costs of an Israeli attack on Iran are high; other strategies – sanctions in particular – will be given time to work. Add the Obama administration’s unwillingness to kick the hornets’ nest, particularly in the lead-up to November’s elections, and the importance of sanctions comes into sharper focus.
Sanctions, of course, are a long-term project, one that has been gradually ratcheting up pressure on Tehran over several years. It takes time to build a coalition and to expand the scope and severity of restrictions: denying Iran parts for its aeroplanes, constraining its banking (including central banking) transactions and restricting its all-important energy exports.
The latest round from Washington will further squeeze foreign companies, add new pressure on importers of Iranian oil, ban the purchase of Iran’s petrochemical products, and impose tough penalties on firms that trade with the country’s Revolutionary Guard.
Iran and its people have endured tough times before, and there are no credible signs that the country is on the verge of political upheaval. Iranian officials regularly shrug off sanctions with stories of the hardships imposed by the Iran-Iraq war and the legendary fortitude of Iran’s people in surviving them.
However, in a country where 60 per cent of the population is not old enough to remember that conflict, in which communications within the country and across borders is available to an unprecedented percentage of the population, and in which expectations for higher standards of living are on the rise, sanctions are having an impact and the regime is increasingly on edge.
In the end, it is the economic and financial restrictions – not military action or even cyber-sabotage – that will determine whether Iran crosses the nuclear threshold. Perhaps the force of sanctions will persuade Iran’s leaders to accept a face-saving deal that allows for a civilian nuclear programme, the enrichment of uranium outside Iran’s borders, and a robust and credible international monitoring process. Or perhaps Iran will simply muscle its way through towards nuclear breakout, accepting risks to economic and social stability along the way.
In either case, it is clear that financial tools, not air strikes, are the market-moving risk to watch. Many companies and financial institutions understand this. Standard Chartered will not be the last company to face heavy fines and new restrictions on its ability to operate in the US but European, Japanese and some other companies have seemingly done a better job than Standard Chartered in taking this risk seriously. Sanctions are a lot less eye-catching than air strikes or a blockade but it is now clearer than ever that they are the primary market risk to watch.
Those who do not understand this are liable to take an unsympathetic beating from US officials.
The writer is president of the Eurasia Group and author of ‘Every Nation for Itself: Winners and Losers in a G-Zero World’
For the past several years, market anxiety over Iran has focused on the risk of military strikes on the country’s nuclear programme. When will Benjamin Netanyahu, Israeli prime minister, give the order to drop the bombs? Will Barack Obama help? Will Iran block the Strait of Hormuz, the bottleneck through which about 40 per cent of the world’s seaborne crude oil passes each day? Are we heading towards another war in the world’s most volatile region?
As Standard Chartered has learnt the hard way, military conflict, even a limited one, is not the likeliest market-moving Iran-related risk. Sanctions are not simply the opening act to a more dangerous moment, Iran’s equivalent of the shortlived Kofi Annan mission to Syria. Sanctions are the headline risk.
They will remain so for the foreseeable future. The potential costs of an Israeli attack on Iran are high; other strategies – sanctions in particular – will be given time to work. Add the Obama administration’s unwillingness to kick the hornets’ nest, particularly in the lead-up to November’s elections, and the importance of sanctions comes into sharper focus.
Sanctions, of course, are a long-term project, one that has been gradually ratcheting up pressure on Tehran over several years. It takes time to build a coalition and to expand the scope and severity of restrictions: denying Iran parts for its aeroplanes, constraining its banking (including central banking) transactions and restricting its all-important energy exports.
The latest round from Washington will further squeeze foreign companies, add new pressure on importers of Iranian oil, ban the purchase of Iran’s petrochemical products, and impose tough penalties on firms that trade with the country’s Revolutionary Guard.
Iran and its people have endured tough times before, and there are no credible signs that the country is on the verge of political upheaval. Iranian officials regularly shrug off sanctions with stories of the hardships imposed by the Iran-Iraq war and the legendary fortitude of Iran’s people in surviving them.
However, in a country where 60 per cent of the population is not old enough to remember that conflict, in which communications within the country and across borders is available to an unprecedented percentage of the population, and in which expectations for higher standards of living are on the rise, sanctions are having an impact and the regime is increasingly on edge.
In the end, it is the economic and financial restrictions – not military action or even cyber-sabotage – that will determine whether Iran crosses the nuclear threshold. Perhaps the force of sanctions will persuade Iran’s leaders to accept a face-saving deal that allows for a civilian nuclear programme, the enrichment of uranium outside Iran’s borders, and a robust and credible international monitoring process. Or perhaps Iran will simply muscle its way through towards nuclear breakout, accepting risks to economic and social stability along the way.
In either case, it is clear that financial tools, not air strikes, are the market-moving risk to watch. Many companies and financial institutions understand this. Standard Chartered will not be the last company to face heavy fines and new restrictions on its ability to operate in the US but European, Japanese and some other companies have seemingly done a better job than Standard Chartered in taking this risk seriously. Sanctions are a lot less eye-catching than air strikes or a blockade but it is now clearer than ever that they are the primary market risk to watch.
Those who do not understand this are liable to take an unsympathetic beating from US officials.
The writer is president of the Eurasia Group and author of ‘Every Nation for Itself: Winners and Losers in a G-Zero World’
Copyright The Financial Times Limited 2012.
0 comments:
Publicar un comentario