March 26, 2007
The Washington Post reports: Iran Feels Pinch As Major Banks Curtail Business.
More than 40 major international banks and financial institutions have either cut off or cut back business with the Iranian government or private sector as a result of a quiet campaign launched by the Treasury and State departments last September, according to Treasury and State officials.What are the dangers? Any project started now could be repudiated by the next government in Iran. Who is scaring the bankers the most? Iran's President. The feller I like to refer to as Ahmanutjob.
Ahmadinejad's rhetoric -- from denying the Holocaust to comparing Iran's stock exchange to gambling -- has helped, experts say. "There is very little foreign investment in Iran not because of sanctions, but because of the atmosphere created by Ahmadinejad's crazy statements," said Jahangir Amuzegar, former Iranian finance minister and executive director of the International Monetary Fund.In recent news a possible naval blockade due to the capture of 15 Bitish marines by the Iranians could hasten their decline.
The Bush administration has taken several other actions in recent months to contain Iran, including deploying two Navy carrier strike groups near the Persian Gulf, arresting operatives of the Revolutionary Guards' al-Quds Force in Iraq and pressing for two U.N. resolutions to punish Iran for not suspending its uranium enrichment program.Iran is having problems with its gasoline supply. For another it is not maintaining its oil production infrastructure. Iranian net oil output is declining at better than 10% a year. By no later than 2015 its net oil output will be zero. Since oil accounts for 80% of Iran's export revenues the pinch is already starting to hurt and will only get worse.
In December, Iranian oil minister Kazem Vaziri Hamaneh acknowledged that Tehran was having trouble financing petroleum development projects. "Currently, overseas banks and financiers have decreased their cooperation," he told the oil ministry news agency Shana.This is a regime on the decline. The question is how fast. In the early days of any blockade the pinch does not seem serious. The longer things go on the more trouble multiplies. Production is cut in industry A due to lack of resources which affects industry B which has not felt the external crimp. This cascades.
Iranian importers are particularly feeling the pinch, with many having to pay for commodities in advance when a year ago they could rely on a revolving line of credit, said Patrick Clawson, a former World Bank official now at the Washington Institute for Near East Policy. The scope of Iran's vulnerability has been a surprise to U.S. officials, he added.America has a lock on the international banking system. Only friends get to play.
Let me add the biggest risk factor. What do socialist countries (which Iran is) do when economics gets tough? They nationalize. i.e. they steal the investment. Returns have to be very high to make such risks worth while.
H/T Captain's Quarters where ajacksonian has left a very good comment, as have others.
Cross Posted at Power and Control
posted by Simon on 03.26.07 at 05:25 PM
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