Iran: U.S Sanctions Against Iran Are Powerless; Iran’s Use of Euro Potential Cause of U.S.’s Antagonism

The Bush Administration announced its imposition of sanctions against the Iranian Government. According to the BBC, The Bush Administration alleges that a division of the Iranian military (Quds Brigade) supports terrorism and that Iran is “pursuing nuclear activities.” [Author’s note: the U.S. Senate passed a non binding sense of the Senate resolution (S. Amdt. 3017) to state “that the United States should designate the Islamic Revolutionary Guards Corps as a foreign terrorist organization.” (for full text of the resolution, as passed, click here (see pages S11827- S11828))].

Reaction to the decision of the Bush Administration was swift. Russian President Vladimir Putin stated that sanctions against are not necessary.

Arriving for a summit with European Union leaders, the Russian leader did not make any direct reference to the U.S. announcement, but he said the standoff with Iran will have to be resolved through patient talks.

‘Why worsen the situation and bring it to a dead end by threatening sanctions or military action?’ Putin asked. ‘Running around like a madman with a razor blade, waving it around, is not the best way to resolve the situation.’

According to the BBC, The Iranian government also disagreed with the sanctions.

Spokesman Mohammad Ali Hosseini said: ‘The hostile American policies towards the respectable people of Iran and the country’s legal institutions are contrary to international law, without value and, as in the past, doomed to failure.’

The head of the Revolutionary Guards, Mohammad Ali Jaafari, said the corps was ready to defend the ideals of the revolution more than ever before.

Ultimately, though, the sanctions are akin to a toothless tiger because the United States (U.S.) has had little contact with Iran since 1979. Also, Iran has its currency reserves (and prices its oil transactions) in Euros rather than the U.S. dollar. See BBC articles on this point here and here.

This currency issue is a crucial detail. Oil is priced in the U.S dollar, giving the U.S. a profound advantage. Here is a brief summary by Coilin Nunan. Pricing of oil in Euros threatens the superior power of the United States in the oil markets.

Those who threaten the U.S. dollar’s supremacy in oil transactions face serious consequences. Saddam Hussein, while President of Iraq, used the Euro in Iraq’s oil transactions. Iraq made billions as a result. Hussein also gained the ire of the United States (and war). [Note: For full discussion of this complex yet extremely important issue, read William Clark’s book, “Petrodollar Warfare: Oil, Iraq and the Future of the Dollar.” Mr. Clark does an excellent job in explaining this issue for the average reader to understand.] After the war, Iraq’s oil transactions were priced using the U.S. dollar.

The currency back story provides powerful context for the current actions of the U.S. against Iran.

Post Script:
The use of military force to defend dollar supremacy is not a sufficient reason for the terrible misery, injury, and death of war. I read Clark’s book and was deeply shocked as this currency topic was not discussed while I was in school (including college).

Related Links

The Real Reasons for the Upcoming War With Iraq

The Real Reasons Why Iran is the Next Target

Oil Producers Shun Dollar

From Petrodollars to Petroeuros: Are the Dollar’s Days as an International Reserve Currency Drawing to an End?

Iran turns from dollar to euro in oil sales