Q+A - How will fresh sanctions affect Iran?
The U.S. Congress has passed legislation to impose tough new
sanctions on Iran's banking and energy sectors, seeking to curb
Tehran's nuclear work that Washington suspects is aimed at
bomb-making.
The measure, which goes beyond recent U.N. Security Council and
European Union sanctions, would penalise companies from other
countries that do business with Iran.
Iranian President Mahmoud Ahmadinejad said on Monday the country
wants to delay negotiations for several weeks to punish the West
for imposing new sanctions and warned that inspections of its ships
in connection with the programme could provoke retaliation.
How will Iran be able to cope with fresh sanctions, and will it
find ways to bypass them? Below are some questions and answers on
the issue.
What impact will the fresh U.S. sanctions have?
It will make trading with Iran tougher as international companies
fear falling foul of U.S. sanctions.
"This will increase the already very tough business environment
they are working under," said Samuel Ciszuk, senior energy analyst
for the Middle East and North Africa with consultancy IHS.
Repsol, Spain's largest oil company, said on Monday it had pulled
out of a contract it won with Royal Dutch Shell to develop part of
the South Pars gas field in Iran. Separately, French oil group
Total said it had suspended sales of refined products to Iran.
Iran has already found it harder to secure trade finance, while a
number of oil companies, trading houses and other international
companies have stopped doing business with the country this year in
response to a U.S. drive to isolate Tehran.
"Many European and non-U.S. banks have refused to issue letters of
credit for Iranian-related trades for fear that the funds may be
blocked," Law firm Clyde & Co said in a report this month on
sanctions.
"Sellers of Iranian commodities risk having payment by their buyers
blocked, a refusal by the vessel's master to release bills of
lading, cargo delays and a refusal of insurers to pay out on
claims."
How has Iran coped with previous sanctions?
The combination of U.N. and U.S. sanctions has hurt Iran's economy,
making it more difficult for the Islamic Republic to import and
export a range of commodities and to develop not just its nuclear
industry but also its oil and gas sectors.
Analysts said Iran was finding it hard to replace maturing oil
production.
"Very few projects are still moving forward," IHS's Ciszuk said.
"It is still very tough for Iran get to take hold of the technology
... especially transferring technology and know-how and experience
onto its increasingly isolated workforce."
Iran, the world's fifth-largest crude oil exporter, says its
nuclear programme is a peaceful bid to produce electricity and has
dismissed the new measures as ineffective.
Ali Larijani, parliament speaker, quoted by the semi-official Fars
news agency, said on Monday Iran's nuclear path would not change
direction.
"The issuance of a resolution against Iran's nuclear activities was
pre-planned and is following an agenda to first issue the
resolution and then offer negotiations, to enable them create
obstacles for the Iranian nation," Larijani said.
Can Iran bypass tighter trade restrictions?
U.S. Undersecretary of the Treasury Stuart Levey told a senate
hearing last week Iran's leaders could be expected to step up
efforts to work around the bans with tools such as front companies,
doctored wire transfers and falsified shipping documents.
While U.S. companies and international firms with U.S. interests
have pulled back, previous sanctions did not deter other companies
from regions such as Asia, including Chinese state-owned firms.
Iran also has previously used trading hubs such as the United Arab
Emirates, Singapore and Hong Kong to get past restrictions on
trade.
But the UAE's central bank has told financial institutions in the
Gulf Arab country to freeze any accounts belonging to dozens of
firms targeted by new U.N. sanctions on Iran, a banking source said
on Monday.
"They will have to use small boutiques outside the main trading
hubs," IHS's Ciszuk said. "It will be expensive and time
consuming."
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