The United States Senate voted today 100-0 to sanction the Central Bank of Iran (CBI) in what is deemed as a further step in ramping up pressure on Iran for its continued defiance in the light of United Nations Security Council (UNSC) resolutions calling for it to suspend uranium enrichment. The administration opposed this move and it remains as to whether this will become law.
The theory is that by sanctioning the CBI, Iran would no longer be able to receive payments for oil exports to third countries. How would this work unilaterally? Effectively the US would impose strict restrictions and prohibitions on third country banks that deal with the CBI. It would be interesting to know how many banks indeed still work with the CBI given that it is reportedly nearly impossible to wire money out of Iran through the Swift banking system, and it has been years since most of the major banks in the world stopped accepting Iranian–origin letters of credit. There will likely always be banks willing to work with Iran and there will be buyers, but some argue the thought is that the CBI’s (and subsequently the Islamic Republic’s) isolation would in fact cause Iran to sell its oil cheap, in large part due to the narrowed slate of potential buyers of Iranian oil. In a country where little if anything has been done to diversify from oil since 31 years ago, this could be disastrous.
The United States’ concerted effort over the past 5-6 years to shut Iran off the world financial system has arguably been one of its most successful actions in terms of sanctioning Iran. Financing business with Iran has become exceptionally difficult and this will increasingly bear pressure on the Iranian government. Although it is very unlikely that the United Nations (or even the European Union) will sanction the CBI, any unilateral action by the US could potentially have a substantial impact on Iran. What remains to be seen is what position the Obama Administration ultimately takes.