Friday, March 6, 2015

Geopolitics: Why The West Would Benefit From Ending The Iran Sanctions

(Drivebycuriosity) - Recently there is much ado about the Iran sanctions. The current negations between US and Teheran about a possible treaty which could end the measures have a deadline of March 31. I think it would be rational and a benefit for the US and their allies to stop the sanctions by then.

                                                     Gunboat Diplomacy

Since 2006 US and other western nations are punishing Iran because Teheran is accused to prepare nuclear weapons. These accusation are based on the fact that Iran bought centrifuges which are used for rarefying Uranium into fissile material. Teheran claims that they are using this material to operate energy plants for powering their economy. The situation reminds me of of Saddam Hussein`s alleged weapons of mass destruction which have been used as an excuse for a messy war which still continues.

Since 2006 the West is punishing a country with 77 million people by curbing oil sales, freezing Iranian assets and other measures - a reminder of the gunboat diplomacy against China in the begin of the 20th century.

I think there are at last 3 reasons for ending the sanctions:

1. If the sanctions had functioned, why continuing them? If the sanctions didn´t function in the recent 8 years, what sense does it make to continue them?

2. The Iran is an important ally in the war against Isis (nytimes). The terrorist organization wants to erect an Islamic caliphate in the middle east region controlled by them. These Islamists are very successful so far and are already controlling regions in Iraq and Syria -  in spite of military strikes by the US and their aliens (cbsnews). Americans are reluctant to act massively against Isis because of the experience with the mess the war against Vietnam and the engagements in Afghanistan, Iraq and other regions caused and are still causing. There is not much support from Saudi Arabia and other Arabian nations. You might remember that Bin Laden was himself a member of a rich Saudi Arabian family and that Al Qaeda - the precursor of Isis - is financed by Arabian oil money. Btw who is financing the weapons of Isis?

Teheran has a huge interest to fight Isis because the country itself is threatened by this organization (nytimes). Being a neighbor gives Teheran opportunities to strike against Isis. Iran is already joining Iraqi forces to fight the terrorist organization. A deal between US & Iran could help to counter the Isis offensive before it spreads to other regions.

3. The Iran conflict and the sanctions against the nation did already considerable damage to the economy of the US and other western states. The begin of the Iran sanctions in 2006 and the sharpening in the following years  - especially the curbing of Iranian oil exports - lead to a sharp rise of oil prices in the years 2007 and 2008  (   youtube).  Speculation on a possible war against Iran - which could disturb oil supply significantly - caused the oil price to jump to a record high of $146 in summer 2008. The oil price explosion worsened the recession and was one of the causes of the financial crisis. A study by Prof. James Hamilton shows that in 2008 the oil price hike turned the economic slowdown into a severe recession (econbrowser) ( freakonomics ).

In the years 2009-2011 the price of oil rose again fueled by continuing sanctions against Iran - and more war scare. Geopolitical scares - especially the Iran conflict - caused oil prices to float above $100 (driveby  treaty). For years the oil price had a significant Iran premium, some additional dollars because of reduced oil exports and the risk of a war.  Expensive energy curbed the recovery of the global economy and  slowed down the global growth in the recent years. A treaty which would end Iran sanction and relax the political situation could send oil prices further south which would be a boost for the global economy.

                                                           Cui Bono?

I am aware that a lot of powerful hedgefunds and other speculators are betting on higher oil prices. They all would benefit from an ongoing Iran conflict - and would even more from a war - and they are also would gain if Isis expands their territory (the Isis scare is also driving oil prices higher, because the terrorists want to controll oil rich areas). It is  no surprise that there is a lot of opposition against an Iran treaty and against ending the  sanctions.

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