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US Sanctions on Iran and Its Impact on IB_Anshul Gupta_123

US Sanctions on Iran and Its Impact on IB_Anshul Gupta_123

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Published by Anshul Gupta
US Sanctions on Iran and Its Impact on IB_Anshul Gupta_123
US Sanctions on Iran and Its Impact on IB_Anshul Gupta_123

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Published by: Anshul Gupta on Oct 07, 2013
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Anshul Gupta
Roll No
 
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123
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PGDM-B
Email
 
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US Sanctions on Iran and Its Impact onInternational Business
 
This article outlines economic, trade, scientific and military sanctions against Iranwhich have been imposed by the U.S. Government or by the international communitythrough the United Nations Security Council under U.S. pressure. Sanctionscommonly bar nuclear, missile and certain military exports to Iran, investments in oil,gas and petrochemicals, exports of refined petroleum products, business dealingswith the Iranian Republican Guard Corps, banking and insurance transactions,including with the Central Bank of Iran, and shipping. US has imposed sanctions onIran as US
 
suspect Iran is seeking to develop nuclear weapons and it is a seriousand deepening concern for the world. The US imposed sanctions on Iran followingthe Islamic revolution of 1979, while more recent rounds of sanctions by the U.S.and other entities were motivated by Iran's alleged nuclear weapons program.
Thisarticle will discuss in detail these the more strict Sanctions Imposed by USrecently on June 9, 2012 (fourth round of sanctions) and its effectiveness to
deter Iran’s aim and the impact of sanctions on India
.
Sanctions
- The United Nations Security Council imposed its fourth round of sanctions against Iran to increase pressure on the Islamic Republic to abandon itsprogramme of nuclear fuel enrichment on June 9.
 
The latest round of sanctionsexpanded those imposed under earlier resolutions
 –
1696 (2006), 1737 (2006), 1747(2007) and 1803 (2008)
 –
 
by placing new restrictions on Iran’s import of conventional
arms and bans all activities related to ballistic missiles that could carry a nuclear weapon, imposing a framework for inspection of any suspicious cargo of ships andaircraft in an attempt to
block Iran’s illicit smuggling activities, increases the pressure
on banks to sever ties with
companies related to Iran’s nuclear programme, and
expanded the list of individuals and entities whose assets will be frozen.The new sanctions are important because they cleared the way for the United Statesand other nations to impose their own tougher domestic sanctions.The US Treasury extended sanctions on a number of Iranian organizations andindividuals, which are linked to the c
ountry’s nuclear and missile
programmes. This
was done to highlight for the international community Iran’s use of its
financial sector,
 
shipping industry and Islamic Revolutionary Guards Corps (IRGC) to carry out andmask its proliferation activities, and
respond to the Security Council’s call on
allstates to take action to prevent their own financial systems from being abused byIran. As per Executive Order 13382, which is aimed at freezing the assets of proliferatorsof weapons of mass destruction (WMD) and their supporters thereby isolating themfrom the US financial and commercial systems, the Treasury included Post Bank of Iran for facilitating
business on behalf of Bank Sepah between Iran’
s defenceindustries and overseas beneficiaries for which it was designated by the UN in 2007.The Treasury also included IRGC entities and individuals,two individuals and twoentities for their ties to the IRGC, and five Islamic Republic of Iran Shipping Lines(IRISL) front companies. The Treasury also identified 27 vessels as property blockedbecause of their connection to IRISL and updated the entries for 71 already-blocked
IRISL vessels to identify new names given to these vessels as part of IRISL’s efforts
to evade sanctions.The Treasury also identified 22 entities in the insurance, petroleum andpetrochemicals industries which were determined to be owned or controlled by theIranian government by adding them to Appendix A to the Iranian TransactionsRegulations (ITR). The ITR prohibits transactions between US persons and theGovernment of Iran. These identifications allow US persons and others to identifyIranian Government entities and protect themselves against the risks posed by suchentities.The US Congress is working on imposing even tougher sanctions on Iran. Bothhouses passed individual bills earlier which seek to extend the existing 1996 IranSanctions Act (ISA). These are-
1. HR 2194, or The Iran Refined Petroleum Sanctions Act of 2009
- This actseeks to add authority for the imposition of sanctions against those non-USpersons (entities and individuals) that sell refined petroleum to Iran; provideshipping insurance or other services for the delivery of refined petroleum toIran, or supply equipment to or perform the construction of oil refineries,pipelines and similar facilities in Iran.
2. S 2799 or The Comprehensive Iran Sanctions, Accountability, andDivestment Act
- It includes the main elements of HR 2194 and alsoencapsulates a range of additional
sanctions against Iran’s suppliers.
 Under ISA, the President is required to impose two of any of the six availablesanctions against persons determined to have engaged in activities sought to bedeterred by ISA, the sanctions target(s). The six sanctions which may be currentlyimposed against sanctions targets under ISA are
 –
 1. denial of US Export-Import Bank credits for US exports2. denial of licenses for US exports of military technology3. denial of US bank loans in excess of $10 million per year 4. prohibition on a financial institution serving as a primary dealer in US5. government bonds and as a repository for US government funds
 
6. prohibition on participation in US government procurement7. restrictions on certain imports into the United States from the sanctions targetThe bills will authorize the President to penalize firms, including foreign companiesand/or governments who continue to do business with Iran. A firm is listed to be
having commercial activity in Iran’
s energy sector if any reputable industrypublication
or the firm’s corporate statements reporte
d the firm to have (1) signed anagreement to conduct business; (2) invested capital; or (3) received payment for providing goods or services in connection with a specific Iranian energy project.Five Indian companies, namely, ONGC, Indian Oil, OVL, Oil India Ltd and PetronetLNG Ltd, were listed accordingly. The Secretary of State may waive the sanctions if the Secretary determines it is in the national interests of the United States to do.
EU Sanctions-
EU also imposed new sanctions on Iran based deepening concernsabout
Iran’s nuclear programme. The move came a week after the UNSC sanctions
and a day after the US added Iranian individuals and firms to a blacklist. Although, this decision was criticized by Sweden which is against using sanctionsas an effective foreign policy tool, as well as from Spain, Cyprus and particularlyGermany
which has extensive business interests in Iran’s energy sector. Russia too
has criticized both the European and US action, saying the extra sanctions wouldundermine the Security Council and efforts among its members to act cooperativelyon Iran.The sanctions are targeted at key sectors of the gas and oil industry with prohibitionof new investment, technical assistance and transfer of technologies, equipment andservices in particular, and will target insurance companies, oil firms and shippinglines linked to
Iran’s atomic or missile programmes as well as the IRGC and Iran’s
defence minister Ahmad Vahidi.
Sanctions effect on International Business-
Though the latest round of UN, USand EU sanctions are driving several European firms that were till now engaged in
Iran’s energy sector into reducing their operations or 
renouncing contract renewals,doubts persist whether the sanctions have achieved their target
 –
the denial of access to foreign capital and equipment for the maintenance and expansion of oilproduction and to deny Iran funds to develop WMD and support Islamic groupsabroad. Nor have the sanctions prevented the construction of international oil andgas pipelines in Iran, which according to some analysts was the focus of thesanctions. On the other hand, several studies suggest that they have hurt Westernenergy firms due to lost business opportunities, and have even contributed to thelack of flexibility in the global oil supply system.The sanctions impact
was mainly in Iran’s LNG sector because of 
 embedded US technology in vital parts of LNG downstream plants. Currently, onlyUS and European companies like Royal Dutch Shell and Total are capable of undertaking LNG trains, and much of the relevant technology remains subject to USexport controls.While some European companies say they have the capability of 

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