Sanctions are one of the most powerful tools in the US toolbox short of war. In fact it's more important than war when dealing with Great Power adversaries because they have nukes. The US should aggressively block any attempt to get around it.
Trump shouldn't have pulled out of the Iran deal, but preserving that power for the future is more important.
Here's a good article about OFAC, the Treasury Department group that handles sanctions:
I've always found it fascinating to link the stand of an entire country to a single person or a group of people. For instance when we say, the U.S. has imposed X sanctions, it's weird to think that it's simply the work of a small group of people. I am doing an awful job at wording my thought, but what I am trying to say that putting a human face/name on an entire country's action makes it interesting.
I think I get (and agree) with that you're putting down. Maybe this phrasing? :
"It's weird to think that the actions of the few who wield the most - but not the majority - of the power in the US are talked about as if they are the US."
Sometimes, we narrow this down; we say, the X administration. But is that accurate? Does it convey the emotional reality?
Maybe we should say; [Person], acting in their duty as [Role] on behalf of the US, has [action].
But, does this have the inevitable effect of distancing those people from the country that has given them power?
More than half the voting-power of the US voted for Trump, and some portion of that power is then invested in these decisions; at the same time, less than half the voting-power of the US voted for trump, and some portion of that power is then disinvested in those decisions.
It's almost like we need different words to describe the national entity when that entity is democratic than the words we inherited from monarchies.
Maybe we take a page from swarms - perhaps instead of "The US imposed sanctions", we say, "From the US emerged sanctions", or, "Those empowered by the US imposed sanctions". But, none of these use as few words as: "the US did X". Brevity wins.
You are describing a problem I see often when people try to discuss international relations - they get addicted to using grouping or personal terms to describe truly massive numbers of people, organizations and agendas which at an extremely high level can perhaps some some simple motivation ascribed to them.
Sanctions are a type of war on civilians. Great power adversaries are no worse than allies like Saudi Arabia. American unilateralism is evil, and it has to end. The sooner the better!
Russia invades another country. You are the President of the US. Your options are:
1.) Do nothing. Poland, and the parts of Germany that used to be East Germany, might not like the long term consequences of this plan.
2.) Start a nuclear war, killing hundreds of millions of people. A few disadvantages to this plan as well.
3.) Economic sanctions. You can certainly say this will kill people by way of depressing GDP growth. Will it kill fewer people than a full nuclear exchange between the US and Russia?
Probably, but there's a difference between "US doing whatever it feels like whenever it feels like it" and "US acting in concert with the rest of the world".
yeah, the difference is that allies will comply, enemies will not and neutral countries will trade favours for compliance. How is that an improvement? It's just going to be politicking. International affairs are not generally an exercise in everyone teaming up to stand up to the baddies.
In 1)-3) you assume that US is the world's global policeman who is always right because it is right.
4) The democratic way: ask people in this "another" country and if the opinions split then restructure it: either convert it peacefully into two countries (like Czechoslovakia) or confederation/federation.
Except in reality, countries close to Russia are desperate to have as much NATO and American presence as possible. Why? Because the Soviet Union and the Russian Empire preceding it were a universal net negative.
So what these countries are currently doing is replacing the "Russian Empire" by the "NATO Empire" (NATO/US invasion) instead of simply turning into a democracy and asking people how they want to live.
There's good and bad to America being able to do things unilaterally. The bad is stuff like the Iraq War. But two examples of its good are the Foreign Corrupt Practices Act, which has global reach and has been used in enforcement actions against international businesses operating internationally, and more recently the Magnitsky Act.
Both of these are the best exports of American influence and require the US to be at the center of all things financial.
Both of these are the best exports of American influence and require the US to be at the center of all things financial.
That was all nice and fine. Unfortunately it's no more sustainable with a president, who can kill a country's economy with an early morning twitter tantrum.
The US gets to unilaterally decide because they've underwritten global stability and security in the post-WW2 era. Europe being one of the biggest beneficiaries of that.
And this isn't even me being a jingoistic American, I was born in Canada.
2 wrestlers fight for some good amount of time. When they're tired enough, a 3rd wrestler gets in and beats both.
That was World War II for the most part. After World War II, most of the world was destroyed except for the US.
After the war, the US never left. Overseas bases still exist in Germany, Japan and many other places.
They had everyone adopt a financial system (Bretton Woods) which was largely abused making the US absurdly rich for a few decades... highways, higher education for a bunch of people, space exploration, absurd wars thousands of miles away, a gigantic navy and air force, you name it.
After other countries realized it was a scam (aka "exorbitant privilege"), this golden era ended and the US started to slowly meet reality, rapidly accumulating debt.
The inevitable fate of the US is to collapse in the same way the Soviet Union did in 1989. This will likely happen before 2050 and you read it first in the comments section of HN.
Once the US collapses, the Inter-American Treaty of Reciprocal Assistance will be worthless and South America will be taken apart in a giant pinata party starting by the Argentinean Patagonia.
Wow, that's the biggest horseshit I've seen since Trump inauguration lies. There's enough uncited storytelling in there to be a nice conspiracy theory documentary.
>The inevitable fate of the US is to collapse in the same way the Soviet Union did in 1989.
While the final phase took several years, USSR collapsed in 1991. 1989 was de-facto collapse of Warsaw Pact (Berlin Wall).
I lived in USSR/Russia back then, and for the last almost 2 decades i've been living in the US. While a bunch of things went downhill during that time here, the US and USSR doesn't even come close. Specifically, in major part the USSR collapse was due to lowest (at least among developed countries) productivity of its economy, from agriculture to high-tech. The country basically ran out of food. Compare that to the US where economic productivity, from agriculture to high-tech is among highest in the world. Granted, the current administration seems to be hell-bent on doing as much damage to the US economy as possible, yet i think the US economy will be in pretty good shape even after those 6 more years that Trump is going to spend in the office (the damage he is going to do in the next 2 years wouldn't be enough for his electorate to trim their enthusiasm).
People in Argentina enjoyed a pretty good living standard until they experienced the "Argentine great depression", that was tragic and forced many people to look for food in the trash.
The US is largely living beyond its means at the moment and this situation is not sustainable in the long term.
Great summary, do you have any book recommendations further on this? I've got "confessions of an economic hitman" to read but wondering if you have any other suggestions?
> The US should aggressively block any attempt to get around it.
The ubiquity of US dollars in international trade allows US to torpedo the economy of any country it so desires. It is like the US has a kill switch to shut down any economy it wishes to. But the only reason the rest of the world plays along and allows the kill switch to exist is that they trust the US to use it responsibly and only in extreme circumstances. Now with the erosion of that trust, it is to be expected for the world to move towards eliminating that threat.
I disagree. I think the only reason the rest of the world plays along is because the rest of the world is weak. The US are simply a bully.
But it's true that the advent of Trump makes the bullying more difficult to accept because it's now absurd and incoherent; if some other powers unite and find a way to resist the bullying, then at least some good will have come out of trumpism.
I don't think we've been a bully so much as the rich kid that indirectly paid people to be their friend. I think Trump is accurate in pointing out that many of our arrangements are detrimental to the US on the first level, but at the same time those arrangements, and the unstated threat of their removal, is what gave the US the power to arbitrarily exert its influence. This became even more true as other nations started to take those arrangements as a given and became reliant upon them.
In the grand scheme of things I'm also happy the rest of the world seems to be becoming less dependent on the US. It removes single point of failure scenarios. Economies and nations keeping each other more at arm's reach would help ensure the world acts in a more democratic fashion while simultaneously also providing insulation against the failing of any given nation's poor decisions - be those social, political, economic, or military.
>It removes single point of failure scenarios. Economies and nations keeping each other more at arm's reach would help ensure the world acts in a more democratic fashion while simultaneously also providing insulation against the failing of any given nation's poor decisions - be those social, political, economic, or military.
This is completely ahistorical. You're describing the "balance of power" system that governed international relations and we know what happened: hundreds of years of European wars culminating in two world wars.
The reason you call the Cold War the Cold War and not World War 3 is because of what stopped the system of wars you refer to, and what immediately ended the second world war: nuclear weapons. Nuclear weapons prevent countries from militarily exerting influence against another nuclear nation. Nuclear weapons are the great equalizer of power. Pakistan was harboring Osama Bin Laden next to a military related facility - a man we destroyed two countries seeking, one under completely false pretenses. Yet when we finally found him, in Pakistan, our response was a silent and rapid in and out followed by mostly token gestures. Iraq and Afghanistan did not have nuclear weapons. Pakistan does.
All our current system of relations has done is turn US into the world's final word on everything. This creates more of an autocratic than a democratic system of world relations. That Saudi Arabia sits on UN human rights council, chairing their advisory committee (which chooses appointed 'independent experts') speaks to how functioning our international institutions are. They are a little more than a proxy for US influence. I do not think any single government should have such a unilateral influence on the happenings of the world.
It’s been a fair trade off of benefits/drawbacks in the past - you don’t have to hold gold, you can hold a currency that is stable and reliable, you can use it to trade around the world for modern goods and services. You put yourself at the mercy of the US, but if the US follows international rules and acts multilaterally and you’re not North Korea, the risks are small.
>It’s been a fair trade off of benefits/drawbacks in the past - you don’t have to hold gold, you can hold a currency that is stable and reliable
I'd contend that holding a basket of currencies is even more stable and reliable. Basic diversification logic would suggest that a basket of USD / EUR / GBP / AUD / CAD / NOK is safer than just USD.
This is just factually wrong. There is great beliefe in some groups about economic sanctions but economists and political sientists mostly agree about this, it not.
The data is pretty clear on this, it does not lead to regimn change or whatever else the country wants.
Now people will claim that the Iran deal is a counterexample, but it is not. I was the US who realied that their sanction had no effect on the nuclear program was going fast. The US then compromised even more.
The US is very good at making sanctions, but bad at removing them.
The way the do it in the Iran case is directly and clearly against all the international laws the US claims to stand for.
Its a sad state of affairs when Iran observes international law and the US spits on it.
US has this clout because it controls a large part of the organizations for international cooperation.
With Trump, it is clear that he only wants to exercise such power without considering the consequences of it.
With the trust towards US fading, in and out of West, a complimentary mechanism will be created. US will control/influence where its hard power can still reach, but not beyond.
Trump is an aberration and will likely be out of office in 2020, worst case 2024. No one is going to blow up old alliances because of Trump. Every foreign capital is just trying to ride out the storm.
I think it's not a clandestine operation but just a challenge to the US demands, therefore it's public?
US: Don't trade with Iran because politics
UK, DE, FR, CN, RU: Sorry, We like the deal we made and we would like to trade with Iran.
US: If any company trades with Iran, won't be able to trade with the USA. Make your choise.
UK, DE, FR, CN, RU: Okay then, we will create an infrastructure where the USA won't be able to legally identify and sanction our companies that trade with Iran.
How ironic that you do not even realise how entitled you are to make such a remark. The EU is regulating its own markets. The US is trying to stop the EU from trading with Iran.
Think about what you're saying. If you read British history, the empire before this one, we used military dominance to force China to allow our companies to deal opium to their society, totally ravaging it. You're makinga similar argument except instead of opium it's surveillance capitalism. Whether or not you think SC is bad, it's hard to justify why countries shouldn't be allowed to take their own approach to what's allowed through their borders. And why countries should allow companies with natural monopolies and mayb massive profit margins to basically milk their citizens. Honestly I wish the EU /really/ did tech protectionism.
That is because your are looking in the wrong place. Please refer to the Joint Comprehensive Plan of Action. In the JCPOA sanctions are regulated.
As long as Iran agrees to nuclear restrictions in exchange for the financial benefits of sanctions relief (as agreed in the JCPOA), the other members should be safe from a legal standpoint.
Additionally, the EU Blocking Statute [1] came into force, mitigating any sanctions that the US might impose due to companies trading with Iran.
Certainly sanctioned or fined European banks would have the ability to challenge the measures in a US court.
On the other hand, sanctions on a state are usually met with an equivalent response, and the only question is how powerful the other side is. In the case of the EU, the answer is, not powerless.
Look, the US has a lot of cards to play. But randomly bullying banks who didnt do anything wrong, as per your suggestion, is not a particularly effective one, so they won't do that.
These measures usually have 2 unpleasant side-effects for the initiator: they trigger some form of retaliation and they push the other party closer to the enemy.
In this case it could come back to harm the US tech sector for example, and it would push EU closer to China and Russia.
« pushing closer to the ennemi », yet i don’t think any european citizen will understand why we prefer to start a judiciary war against the US just so that we can help a muslim theocracy broaden its influence in the middle east.
It doesn’t serm to me that the public opinion in europe is really heading toward that kind of opinion.
Public opinion in Europe ain't very positive about Trump either, every other day its another eye roll because of what that ego maniac did/said/didn't, how rude and unfair he is. This is what people see.
On the other side, what specifically Iran did do to deserve this? Yes they meddle around their neighbors, just like every other country. US is the last who should be blaming others for this, Iran is at least home and not inciting civil wars in Mexico or Cuba. In the same time Saudi Arabia doing some small-scale genocide in Yemen, bombing civilians left and right gets a free pass and very friendly attitude, yet they are the one of the biggest exporters of terrorism and country is as far from freedom and equality as one can be in 21st century.
I'll add that sanctions were imposed because Iran was getting greedy with nuclear power. Now that Iran backed off, there is no reason to continue these sanctions. Moreover everyone voted to lift said sanctions in 2015, and now some orange dude said 'no fuck u' despite his country having signed the arrangement and wants to force everyone else to unilaterally accept his own conditions.
It's good to see that Europe finally grew a spine.
you do realize iran is trying to get the maximum influence by destabilizing its neighbours ( such a lebanon and yemen), in a region crippled by war for centuries, while at the same time oppressing its own people (and women in particular) ?
i really don’t think europe should go to economical war against the US to save this regime’s *ss and sell them a few cars. Note that my reasoning would be absolutely identical if US decided to do the same with saudi arabia...
> while at the same time oppressing its own people
That's the thing, though. Iran clearly isn't some redeemable den of evil, the populace used to be both well-educated and friendly towards the west. It might take a (democratic) regime change to restore relations to anywhere near "good", but at this rate you could say the same about the US.
> BERLIN (Reuters) - The German government is taking steps to counter a surge in Chinese bids for stakes in German technology companies, including the creation of a billion-euro fund that could rescue such firms in financial trouble, a government source told Reuters.
I don't think this a true at all. The EU, certainly as an institution, has still has a very strong, open and positive relationship with the US. Sure Trump is adding a lot of uncertainty and putting a strain on that, but most people a) interact with more stable parts of the government bureaucracy rather than directly with the White House and b) consider Trump an anomalous outlier and within 5-10 years we'll be back to business as usual.
The EU can only work with what it is given, Trump plainly hates the EU, you can't have an open and positive relationship with someone who hates you. Regardless of what anyone else in America thinks, Trump as President has the power to unilaterally sour the EU/US relationship and he is doing that quite effectively with his policies. Yes if America elects someone who is not openly hostile towards the EU then the relationship will recover but a lot of trust has been lost.
Well you are soverign, and thus free to trade with Iran over the USA. It is really up to Europeans to decide if leaving their closest historical ally and trading partner is a good thing, just ao they can grow closer to Iran.
I would be really disappointed if it goes that way though.
It would appear that one man was allowed to turn an alliance into a hostage situation. So I guess all bets are off. And again, this is not about getting close to Iran. It's about not having your "ally" try to dictate all critical aspects of your existence.
You wouldn't want your friends overriding you on what to eat, what you drink, where you sleep, and who you talk to, would you? You'd question the nature and value of that friendship.
I wouldn't think that is a likely possibility given the impact tariffs would bring to all of us. What is more likely (and lets keep in mind we are discussing public policy of economical super powers) is that we would reach an agreement that the unilateral blockades and sanctions are really unilateral.
Also about USA living at the expense of the rest of the world, printing their currency willy-nilly without the risk of devaluing it because all the main goods are priced in usd.
See how dollar plunges and US deficit becomes painful when usd is detangled from oil.
Then we will finally know if one can eat aircraft carriers and holywood movies.
Very few people love the US' meddling in politics. If we have good trade deals, presumably those were made by our politicians deciding they are alright. We can have opinions about that, but they are separate from this issue. This is the US trying to bully the EU into doing what they want, which is something that should be opposed.
> i don’t think any european citizen will understand why we prefer to start a judiciary war against the US just so that we can help a muslim theocracy broaden its influence in the middle east.
European citizens don’t seem to care that much about the EU’s tight relationship with Saudi Arabia... Why should they feel differently about Iran?
>> US: Nice. Then we will just roll the dice once a week and point our finger to random big company of yours.
This is exactly the kind of bullying attitude that is pushing US allies away from the US. Using the dollar as a weapon causes everyone to desperately seek alternatives.
Ask the other question: Why make it secret? Suppose there is a goal, call it X.
Do you think thirty-some countries could negotiate establishing a new international organisation without the US learning about it? I think not, therefore it's better to try to achieve X without secrecy.
That is not what is going to happen over the reopened Iran deal. What is going to happen is that the EU will fall in line and Iran will be forced to withdraw its activities in Syria, Iraq, Yemen ... due to the severity of the economic hardship caused by the sanctions.
It’s about Europe choosing sovereignty over their own international politics rather than cow towing to the US. It’s not the EU preferring Iran over the US
But if the means you choose to demonstrate your sovereignty is to defy a new wave of American sanctions on Iran, then you certainly are choosing Iran over the United States, as a brief glance at any recent news headlines will tell you. The current POTUS, and the large number of congressmen who hate Iran with a rather deranged fervour, will certainly interpret it that way.
You're twisting the narrative here. US are the one who decided to quit the deal they signed in 2015. The one defying everyone else is the US, not the EU.
So either the EU decides to submit to the US or decides to grow a spine. It appears it's the latter. Too bad for the US.
Besides which - what is Macron going to do if half the board of BNP Paribas is arrested when they land on US soil for sanctions busting? Invade?
This seems like a very good way for the Europeans to learn how much of the international financial system relies on American goodwill to work as planned.
While we're considering hilarious and entirely unrealistic moves by those in power: Ask Germany (who's also part of the project) to round up Ramstein Air Base?
I think it's the opposite of choosing, they are taking a measure to help their companies to privately trade with Iran so that they don't have to make choices between the USA and Iran.
Politically though, it's very interesting, right? But I hope that we are not discussing that sort of politics here on HN because it rarely produces a good discussion.
As if world power had something to do with technicalities, IT-systems, which currency to transact in.
Sorry guys. This is not how the world works.
The USD is dominant currency not because of the lack of alternatives.
The USD is the dominant currency because USA is the dominant military power by an order of magnitude.
As long as that is the case it means the EU can get only token independence. Ultimately if the US says no - you cannot deal with Iran. Then that is the way it is.
Does it mean that the EU is going to be nuclear bombed by the US? Of course not. It is much cheaper to go: One of your banks. It is not allowed to trade in USD anymore.
You know the brits used to have such delusions back in the day. Look where they are at now.
>The USD is the dominant currency because USA is the dominant military power by an order of magnitude.
Wrong. The USD was dominant currency because USA was the only major country untouched by WW2. Every other major country had it's infrastructure bombed and shattered. It is the dominant currency today because everyone is lazy to change the status quo as long it is working.
If USA upsets the status quo it will be replaced. Just ask your cousins across the Atlantic how that works.
P.S. your armed superiority is a joke. You were unable to defeat a bunch of untrained rice farmers. Your only armed victories in the last 50 years were against civilian militias. Any serious war with the standing armies of Russia, China or India will get you creamed. The only reason you are tolerated is because no one wants to be the one to start a war.
The EU will fall in line once Iran leaves the deal as well, and not a second before - that much is clear already. They have committed themselves to their strategy.
Large internationals will stop dealing with Iran, some small businesses with no US market will continue. And the set of companies is not static. We all have to earn a living. If you don't want to import Iranian pistachios anymore, someone else will.
Which is why the sanctioneers are so obsessed with shutting down SWIFT, and angry at the proposed vehicle. Because unless it's prohibitively costly to exchange money with Iran, someone will do it.
Iran is going to sit still for a while. They will navigate the waters as best they can, which may include showing some restraint at times, but things have to get much much worse economically before you see the total withdrawal you are predicting.
Assuming their internal situation stabilizes, which is not an unreasonable assumption at this point, Iran will at some point in the future declare that they do not consider themselves bound to the deal anymore, while emphasizing again that they do not seek a nuke and never have, and without initially escalating. They will then rebuild their nuclear infrastructure in steps and initially in secret whenever, trying to limit then fallout, as they have done before.
Because they would not like to have a (nuclear) war in their neighborhood, it's easy for the US to stirr up war for 50y in the middle east when the middle east is far away.
Like I've said, the EU said the same thing about an EU army and that army is nowhere to be found. Even on the petty insults Europe falters, like when they all got pissed about the US leaving the Paris Climate Accords and yet the US lead the world on reducing climate emissions.
The unfortunate (for them) truth about the EU is that outside of its economy, the EU is irrelevant on the international stage. People want access to their market, but Europe cannot project any force outside of their own borders. Outside of maybe Iran, there isn't a single country in the world that curbs their actions due to fears about what the EU will do. Even countries inside the EU act without fear of what the EU will do, just look at Poland.
I'd even venture to say most people in the world don't even know it exists. People know about Germany, France, and those countries individually, but people only know about the EU because of the news Brexit caused.
The United States has allies AND leadership in every region of the country - Europe doesn't. If all this commotion has to do with the Iran deal, the other major players in the region (Israel, Saudis, and UAE) all have close ties to the US and will be following American leadership and ignoring whatever Europe says. So I don't even see how Europe successfully protects Iran in this case.
So sure, Europe can talk all it wants about how they want to get rid of US leadership. But American leadership is felt all over the world, and major countries in almost every region will follow the US and not Europe.
Sometimes having a big ass army, economic and cultural hegemony, and a history of being in other people's affairs gives you some clout.
I wonder if Russia could use banks of Crimea to trade with Iran. USA does not want anything to do with those anyway. So they already exist as clean room institutions.
"Germany, France, Britain, China and Russia to create special financial infrastructure to work with Iran"
hmmm... There's a story here about Iran-US, a story about the "western coalition," a story about the dollar's special status (maybe). There's also a story about this "special financial infrastructure/ vehicle."
WTF is that infrastructure? Why are Germany, France & Britain and keen on this? These thing can (often) have ulterior motives or outcomes. Other than trading in other currencies, what does this do?
On the diplomatic "story" this really demonstrates the new multipolar world, once you step out of the military realm and into an economic one. China, the EU & the US are similar size/strength. No stable teams...
Or perhaps significantly stronger. The UK was historically the naysayer of the EU, opposing more integration. Now the strongest Economies are Germany and France which are both very much in favor of a closer EU. If this leads to the EU being quicker in decision making and pooling more of their resources it could mean a big boon to the EU.
On the other hand the UK used to be kind of a watchdog of the EU so that role might have to be filled by either someone else or one can hope that the EU politicians will have enough pressure from their own countries.
Lastly even though the UK is in the process of leaving, basically all the politicians responsible for it have either back paddled or just quit. The UK might yet fall back into the fold, only this time without their special status.
Given the unpopularity and utter ineptitude of the UK's brexit "negotiations" I'm tempted to say might be in the process of leaving.
They're making such a mess, I would not be the least surprised to see the DUP withdraw support and a surprise election result. The Labour conference seems to be moving them towards a second referendum.
18 months ago I thought claims "it might not happen" foolish, now I'm starting to think it might not happen. :)
They are in the process of leaving. They activated article 50, which automatically starts a process of departure lasting 24 months. This period can only be prolonged by unanimity vote, I'm not even sure it can be cancelled. Concerning the prolongation, not going to happen.
Also there's no way the rest of EU is going to accept for UK to stay in the EU with the same privileges as previously (non use of euro, tax exemptions...). Especially since UK was one of the most critical members, now EU has more incentive to move forward.
Personally I can't see how UK can rejoin the EU without applying from scratch like Serbia and so on.
No way to one of the largest net contributors of the EU budget? I wouldn't take that bet. Sure things in politics have a way of biting back.
It's vanishingly unlikely in the time remaining, but I would not be surprised to see huge amounts of flexibility magically appearing, if the UK somehow gained a different administration supporting remain or a second referendum. Even at this stage.
Both Junker and Tusk have repeatedly stated that they'd be happy to cancel the Article 50 negotiations at any time and let the UK stay in the EU under its current terms.
Yes but given that prolongations must be voted by unanimity, wouldn't be logical that cancellation should be, too? I really don't know if that would be attainable.
The only thing Europe has going for it is the size of its economy, and Europe is about to lose almost 16% of it. For comparison, that's a larger decrease than California leaving the United States economy. That's before we talk about how how the UK was their biggest cultural driver and had one of the strongest (maybe the strongest) militaries.
It's a very coherent piece IMHO, just assumes some context knowledge from its readership. About what this does, may I suggest you please look up "exorbitant privilege"?
About a new multipolar world I differ: the world is very much unipolar now, the petrodollar got defended tooth and nail.
There is no such thing as a separate military realm, it's all about power, soft or hard as required to extract tribute.
> The cost of defying American sanctions can be steep: in 2015, BNP Paribas SA, the French bank, paid a penalty of almost $9 billion for violating U.S. sanctions against Iran, Cuba and Sudan
I'm cruious, who imposes that fine and how do they enforce payment?
Can the US Government FORCE a French Bank to pay them a fine? Surely a French bank could just say "no thanks".
The executive branch can ( via executive order, treasury sanctions, etc ) and of course congress can.
> and how do they enforce payment?
By threat of financial collapse.
> Can the US Government FORCE a French Bank to pay them a fine?
Yes and no. Are we going to invade france and force the bank to pay the fine? No. Could we threaten to place sanctions on the bank and exclude it from international financial system. Yes.
> Surely a French bank could just say "no thanks".
It can. But then it would immediately collapse. No international bank can survive a US sanction because the US runs the international finance system. There is reason why the swiss banking system submitted to US demands to turn over customer data a few years ago. Economic sanctions on switzerland would turn it into north korea or venezuela.
People mistakenly think that US sanctions means that the US won't do business with a certain country. US sanctions means that everyone doing business with the US can't do business with a certain country.
US sanctions essentially forces the world to choose between the US and country X. The US being the largest economy and the heart of the international financial system wins every time.
It's why there is so much drama with US sanctions on iran. It's not that we won't do business with iran. It's that everyone who wants a business relationship with the US can't do business with iran.
The US cannot sustainably force the EU to suspend trade with a third country. Sanctions, at least employed in this way, is a weapon which use reduces its effectiveness. Like everything the Trump administration does, reneging on the JCPoA represents an extreme trade-off in favor of short-term gain at greater expense in the long-term.
Historically the US-Dollar became dominant in the 50/60ties when the oil exporting countries were partially forced, partially by their own preference staring factoring their oil bills in USD. One reason among others was that only the USD market was big enough to provide enough liquidity for the oil market. Other exporters then started billing their export goods in USD Dollars so they could pay their oil bill with the Dollars earned.
Ever since this becoming more a self sustainable system by which more goods were billed in USD because more exporters wanted to buy imports billed in USD. The US itself as only country as extraordinary privilege in the world could just print the currency at will, while others had to sell products to earn the currency.
The other side of the deal was, that Europe an Japan were using their economic capacities producing civilian goods, whereas the U.S. could buy these goods with printed money and could use the capacities to build up an otherwise unsustainable large military sector to protect their allies.
As another effect, USD trades are ultimately settled buy the U.S. Fed, so the U.S. can effectively get countries or companies out of the market as long the settlement is done in USD.
Fast forward today: The Euro is as big as USD. With EUR or CNY you can buy all products you want to have. When Russia, Venezuela and Iran decide to sell Oil or Gas there is little technical need to stick for USD. Further Trump cutting the U.S. side of the deal. Why should Europe other further grant the extraordinary privilege to the U.S? And why it would put it's own countries and companies a the risk of Feds goodwill to perform the settlement? Given Trumps apparent will to use the USD as a weapon, it is a question of national security for Europe, UK, Japan, Iran and the BRICS to change to a different regime.
My personal expectation is that settlement in EUR will be only transitional before SDRs issued by the BIS will become the final currency of choice. These will resemble the "Bancor" proposed by Keyenes before the Bretton Woods system was implemented
There is similar premise in James Rickards 2014 book The Death of Money. He describes trade dynamics and international organizations, including the Bank for International Settlements and their unit/basket of reserve currencies called Special Drawing Rights. Several years ago China was on about having the Yuan declared a reserve currency so it would be included as one of the currencies which comprise an SDR unit.
150 comments
[ 3.9 ms ] story [ 299 ms ] threadTrump shouldn't have pulled out of the Iran deal, but preserving that power for the future is more important.
Here's a good article about OFAC, the Treasury Department group that handles sanctions:
https://www.reuters.com/article/us-usa-sanctions-insight-idU...
"It's weird to think that the actions of the few who wield the most - but not the majority - of the power in the US are talked about as if they are the US."
Sometimes, we narrow this down; we say, the X administration. But is that accurate? Does it convey the emotional reality?
Maybe we should say; [Person], acting in their duty as [Role] on behalf of the US, has [action].
But, does this have the inevitable effect of distancing those people from the country that has given them power?
More than half the voting-power of the US voted for Trump, and some portion of that power is then invested in these decisions; at the same time, less than half the voting-power of the US voted for trump, and some portion of that power is then disinvested in those decisions.
It's almost like we need different words to describe the national entity when that entity is democratic than the words we inherited from monarchies.
Maybe we take a page from swarms - perhaps instead of "The US imposed sanctions", we say, "From the US emerged sanctions", or, "Those empowered by the US imposed sanctions". But, none of these use as few words as: "the US did X". Brevity wins.
When someone wants to know how americans currently think and look like, then they just take a look at their current president. /s
1.) Do nothing. Poland, and the parts of Germany that used to be East Germany, might not like the long term consequences of this plan.
2.) Start a nuclear war, killing hundreds of millions of people. A few disadvantages to this plan as well.
3.) Economic sanctions. You can certainly say this will kill people by way of depressing GDP growth. Will it kill fewer people than a full nuclear exchange between the US and Russia?
4) The democratic way: ask people in this "another" country and if the opinions split then restructure it: either convert it peacefully into two countries (like Czechoslovakia) or confederation/federation.
Both of these are the best exports of American influence and require the US to be at the center of all things financial.
That was all nice and fine. Unfortunately it's no more sustainable with a president, who can kill a country's economy with an early morning twitter tantrum.
Europe has a lot more to loose on an unstable Iran than the US and can't risk deals being undone because the US has a new regime every 4 years.
And this isn't even me being a jingoistic American, I was born in Canada.
2 wrestlers fight for some good amount of time. When they're tired enough, a 3rd wrestler gets in and beats both.
That was World War II for the most part. After World War II, most of the world was destroyed except for the US.
After the war, the US never left. Overseas bases still exist in Germany, Japan and many other places.
They had everyone adopt a financial system (Bretton Woods) which was largely abused making the US absurdly rich for a few decades... highways, higher education for a bunch of people, space exploration, absurd wars thousands of miles away, a gigantic navy and air force, you name it.
After other countries realized it was a scam (aka "exorbitant privilege"), this golden era ended and the US started to slowly meet reality, rapidly accumulating debt.
The inevitable fate of the US is to collapse in the same way the Soviet Union did in 1989. This will likely happen before 2050 and you read it first in the comments section of HN.
Once the US collapses, the Inter-American Treaty of Reciprocal Assistance will be worthless and South America will be taken apart in a giant pinata party starting by the Argentinean Patagonia.
[0]: https://www.youtube.com/watch?v=feU7HT0x_qU
While the final phase took several years, USSR collapsed in 1991. 1989 was de-facto collapse of Warsaw Pact (Berlin Wall).
I lived in USSR/Russia back then, and for the last almost 2 decades i've been living in the US. While a bunch of things went downhill during that time here, the US and USSR doesn't even come close. Specifically, in major part the USSR collapse was due to lowest (at least among developed countries) productivity of its economy, from agriculture to high-tech. The country basically ran out of food. Compare that to the US where economic productivity, from agriculture to high-tech is among highest in the world. Granted, the current administration seems to be hell-bent on doing as much damage to the US economy as possible, yet i think the US economy will be in pretty good shape even after those 6 more years that Trump is going to spend in the office (the damage he is going to do in the next 2 years wouldn't be enough for his electorate to trim their enthusiasm).
The US is largely living beyond its means at the moment and this situation is not sustainable in the long term.
The ubiquity of US dollars in international trade allows US to torpedo the economy of any country it so desires. It is like the US has a kill switch to shut down any economy it wishes to. But the only reason the rest of the world plays along and allows the kill switch to exist is that they trust the US to use it responsibly and only in extreme circumstances. Now with the erosion of that trust, it is to be expected for the world to move towards eliminating that threat.
But it's true that the advent of Trump makes the bullying more difficult to accept because it's now absurd and incoherent; if some other powers unite and find a way to resist the bullying, then at least some good will have come out of trumpism.
In the grand scheme of things I'm also happy the rest of the world seems to be becoming less dependent on the US. It removes single point of failure scenarios. Economies and nations keeping each other more at arm's reach would help ensure the world acts in a more democratic fashion while simultaneously also providing insulation against the failing of any given nation's poor decisions - be those social, political, economic, or military.
This is completely ahistorical. You're describing the "balance of power" system that governed international relations and we know what happened: hundreds of years of European wars culminating in two world wars.
All our current system of relations has done is turn US into the world's final word on everything. This creates more of an autocratic than a democratic system of world relations. That Saudi Arabia sits on UN human rights council, chairing their advisory committee (which chooses appointed 'independent experts') speaks to how functioning our international institutions are. They are a little more than a proxy for US influence. I do not think any single government should have such a unilateral influence on the happenings of the world.
And that's exactly why this is necessary. The above is only cool if you're part of the ~5% of the world that is American.
I'd contend that holding a basket of currencies is even more stable and reliable. Basic diversification logic would suggest that a basket of USD / EUR / GBP / AUD / CAD / NOK is safer than just USD.
The data is pretty clear on this, it does not lead to regimn change or whatever else the country wants.
Now people will claim that the Iran deal is a counterexample, but it is not. I was the US who realied that their sanction had no effect on the nuclear program was going fast. The US then compromised even more.
The US is very good at making sanctions, but bad at removing them.
The way the do it in the Iran case is directly and clearly against all the international laws the US claims to stand for.
Its a sad state of affairs when Iran observes international law and the US spits on it.
With Trump, it is clear that he only wants to exercise such power without considering the consequences of it.
With the trust towards US fading, in and out of West, a complimentary mechanism will be created. US will control/influence where its hard power can still reach, but not beyond.
True, but they're also starting to think seriously about building storm shelters for the next time a storm blows through.
Then why make this plan public?
US: Don't trade with Iran because politics
UK, DE, FR, CN, RU: Sorry, We like the deal we made and we would like to trade with Iran.
US: If any company trades with Iran, won't be able to trade with the USA. Make your choise.
UK, DE, FR, CN, RU: Okay then, we will create an infrastructure where the USA won't be able to legally identify and sanction our companies that trade with Iran.
As long as Iran agrees to nuclear restrictions in exchange for the financial benefits of sanctions relief (as agreed in the JCPOA), the other members should be safe from a legal standpoint.
Additionally, the EU Blocking Statute [1] came into force, mitigating any sanctions that the US might impose due to companies trading with Iran.
[1] http://europa.eu/rapid/press-release_IP-18-4805_en.htm
On the other hand, sanctions on a state are usually met with an equivalent response, and the only question is how powerful the other side is. In the case of the EU, the answer is, not powerless.
Look, the US has a lot of cards to play. But randomly bullying banks who didnt do anything wrong, as per your suggestion, is not a particularly effective one, so they won't do that.
It depends. If that would make some voters happy enough to vote Republicans in November, wouldn't it be effective?
In this case it could come back to harm the US tech sector for example, and it would push EU closer to China and Russia.
It doesn’t serm to me that the public opinion in europe is really heading toward that kind of opinion.
On the other side, what specifically Iran did do to deserve this? Yes they meddle around their neighbors, just like every other country. US is the last who should be blaming others for this, Iran is at least home and not inciting civil wars in Mexico or Cuba. In the same time Saudi Arabia doing some small-scale genocide in Yemen, bombing civilians left and right gets a free pass and very friendly attitude, yet they are the one of the biggest exporters of terrorism and country is as far from freedom and equality as one can be in 21st century.
It's good to see that Europe finally grew a spine.
i really don’t think europe should go to economical war against the US to save this regime’s *ss and sell them a few cars. Note that my reasoning would be absolutely identical if US decided to do the same with saudi arabia...
That's the thing, though. Iran clearly isn't some redeemable den of evil, the populace used to be both well-educated and friendly towards the west. It might take a (democratic) regime change to restore relations to anywhere near "good", but at this rate you could say the same about the US.
> BERLIN (Reuters) - The German government is taking steps to counter a surge in Chinese bids for stakes in German technology companies, including the creation of a billion-euro fund that could rescue such firms in financial trouble, a government source told Reuters.
I would be really disappointed if it goes that way though.
You wouldn't want your friends overriding you on what to eat, what you drink, where you sleep, and who you talk to, would you? You'd question the nature and value of that friendship.
See how dollar plunges and US deficit becomes painful when usd is detangled from oil.
Then we will finally know if one can eat aircraft carriers and holywood movies.
European citizens don’t seem to care that much about the EU’s tight relationship with Saudi Arabia... Why should they feel differently about Iran?
This is exactly the kind of bullying attitude that is pushing US allies away from the US. Using the dollar as a weapon causes everyone to desperately seek alternatives.
Do you think thirty-some countries could negotiate establishing a new international organisation without the US learning about it? I think not, therefore it's better to try to achieve X without secrecy.
The EU chosing Iran over the US?!
That is not what is going to happen over the reopened Iran deal. What is going to happen is that the EU will fall in line and Iran will be forced to withdraw its activities in Syria, Iraq, Yemen ... due to the severity of the economic hardship caused by the sanctions.
So either the EU decides to submit to the US or decides to grow a spine. It appears it's the latter. Too bad for the US.
I like that, but the English word is "kowtow", borrowed from Chinese.
https://en.wiktionary.org/wiki/kowtow
This seems like a very good way for the Europeans to learn how much of the international financial system relies on American goodwill to work as planned.
If France was the dominant world power we would be transacting in euros or francs and they would get to decide who was in the club. Until then ...
Politically though, it's very interesting, right? But I hope that we are not discussing that sort of politics here on HN because it rarely produces a good discussion.
As if world power had something to do with technicalities, IT-systems, which currency to transact in.
Sorry guys. This is not how the world works.
The USD is dominant currency not because of the lack of alternatives.
The USD is the dominant currency because USA is the dominant military power by an order of magnitude.
As long as that is the case it means the EU can get only token independence. Ultimately if the US says no - you cannot deal with Iran. Then that is the way it is.
Does it mean that the EU is going to be nuclear bombed by the US? Of course not. It is much cheaper to go: One of your banks. It is not allowed to trade in USD anymore.
>The USD is the dominant currency because USA is the dominant military power by an order of magnitude.
Wrong. The USD was dominant currency because USA was the only major country untouched by WW2. Every other major country had it's infrastructure bombed and shattered. It is the dominant currency today because everyone is lazy to change the status quo as long it is working.
If USA upsets the status quo it will be replaced. Just ask your cousins across the Atlantic how that works.
P.S. your armed superiority is a joke. You were unable to defeat a bunch of untrained rice farmers. Your only armed victories in the last 50 years were against civilian militias. Any serious war with the standing armies of Russia, China or India will get you creamed. The only reason you are tolerated is because no one wants to be the one to start a war.
Spain? Portugal? Brasil? Australia?
> your armed superiority is a joke.
Ah, comrade, I understood now. Check the score of recent clash with your "Wagner" mercs. How many US lost? Yes, zero.
Large internationals will stop dealing with Iran, some small businesses with no US market will continue. And the set of companies is not static. We all have to earn a living. If you don't want to import Iranian pistachios anymore, someone else will.
Which is why the sanctioneers are so obsessed with shutting down SWIFT, and angry at the proposed vehicle. Because unless it's prohibitively costly to exchange money with Iran, someone will do it.
Iran is going to sit still for a while. They will navigate the waters as best they can, which may include showing some restraint at times, but things have to get much much worse economically before you see the total withdrawal you are predicting.
Assuming their internal situation stabilizes, which is not an unreasonable assumption at this point, Iran will at some point in the future declare that they do not consider themselves bound to the deal anymore, while emphasizing again that they do not seek a nuke and never have, and without initially escalating. They will then rebuild their nuclear infrastructure in steps and initially in secret whenever, trying to limit then fallout, as they have done before.
Go do the world police thing somewhere else while you get over this weird phase your going through, leave this one to us.
The EU constantly talks about challenging US power (Macron and Merkel in particular), but almost never do. I'm sure this will be more of the same.
True independence of the us requires a military that the eu does not have (and even less now that the brits are leaving).
The unfortunate (for them) truth about the EU is that outside of its economy, the EU is irrelevant on the international stage. People want access to their market, but Europe cannot project any force outside of their own borders. Outside of maybe Iran, there isn't a single country in the world that curbs their actions due to fears about what the EU will do. Even countries inside the EU act without fear of what the EU will do, just look at Poland.
I'd even venture to say most people in the world don't even know it exists. People know about Germany, France, and those countries individually, but people only know about the EU because of the news Brexit caused.
The United States has allies AND leadership in every region of the country - Europe doesn't. If all this commotion has to do with the Iran deal, the other major players in the region (Israel, Saudis, and UAE) all have close ties to the US and will be following American leadership and ignoring whatever Europe says. So I don't even see how Europe successfully protects Iran in this case.
So sure, Europe can talk all it wants about how they want to get rid of US leadership. But American leadership is felt all over the world, and major countries in almost every region will follow the US and not Europe.
Sometimes having a big ass army, economic and cultural hegemony, and a history of being in other people's affairs gives you some clout.
I wonder if this will end with a bang or a whimper.
hmmm... There's a story here about Iran-US, a story about the "western coalition," a story about the dollar's special status (maybe). There's also a story about this "special financial infrastructure/ vehicle."
WTF is that infrastructure? Why are Germany, France & Britain and keen on this? These thing can (often) have ulterior motives or outcomes. Other than trading in other currencies, what does this do?
On the diplomatic "story" this really demonstrates the new multipolar world, once you step out of the military realm and into an economic one. China, the EU & the US are similar size/strength. No stable teams...
On the other hand the UK used to be kind of a watchdog of the EU so that role might have to be filled by either someone else or one can hope that the EU politicians will have enough pressure from their own countries.
Lastly even though the UK is in the process of leaving, basically all the politicians responsible for it have either back paddled or just quit. The UK might yet fall back into the fold, only this time without their special status.
They're making such a mess, I would not be the least surprised to see the DUP withdraw support and a surprise election result. The Labour conference seems to be moving them towards a second referendum.
18 months ago I thought claims "it might not happen" foolish, now I'm starting to think it might not happen. :)
Also there's no way the rest of EU is going to accept for UK to stay in the EU with the same privileges as previously (non use of euro, tax exemptions...). Especially since UK was one of the most critical members, now EU has more incentive to move forward.
Personally I can't see how UK can rejoin the EU without applying from scratch like Serbia and so on.
It's vanishingly unlikely in the time remaining, but I would not be surprised to see huge amounts of flexibility magically appearing, if the UK somehow gained a different administration supporting remain or a second referendum. Even at this stage.
Both Junker and Tusk have repeatedly stated that they'd be happy to cancel the Article 50 negotiations at any time and let the UK stay in the EU under its current terms.
The EU will not be stronger after the UK leaves.
I'm cruious, who imposes that fine and how do they enforce payment?
Can the US Government FORCE a French Bank to pay them a fine? Surely a French bank could just say "no thanks".
Plenty of places to send the bailiffs to, or whatever the US equivalent is.
Sure, and lose their banking license in the US and quite probably have their US assets seized.
The executive branch can ( via executive order, treasury sanctions, etc ) and of course congress can.
> and how do they enforce payment?
By threat of financial collapse.
> Can the US Government FORCE a French Bank to pay them a fine?
Yes and no. Are we going to invade france and force the bank to pay the fine? No. Could we threaten to place sanctions on the bank and exclude it from international financial system. Yes.
> Surely a French bank could just say "no thanks".
It can. But then it would immediately collapse. No international bank can survive a US sanction because the US runs the international finance system. There is reason why the swiss banking system submitted to US demands to turn over customer data a few years ago. Economic sanctions on switzerland would turn it into north korea or venezuela.
People mistakenly think that US sanctions means that the US won't do business with a certain country. US sanctions means that everyone doing business with the US can't do business with a certain country.
US sanctions essentially forces the world to choose between the US and country X. The US being the largest economy and the heart of the international financial system wins every time.
It's why there is so much drama with US sanctions on iran. It's not that we won't do business with iran. It's that everyone who wants a business relationship with the US can't do business with iran.
So it seems likely that nothing will change until the US is not the heart of the international financial system...
Ever since this becoming more a self sustainable system by which more goods were billed in USD because more exporters wanted to buy imports billed in USD. The US itself as only country as extraordinary privilege in the world could just print the currency at will, while others had to sell products to earn the currency.
The other side of the deal was, that Europe an Japan were using their economic capacities producing civilian goods, whereas the U.S. could buy these goods with printed money and could use the capacities to build up an otherwise unsustainable large military sector to protect their allies.
As another effect, USD trades are ultimately settled buy the U.S. Fed, so the U.S. can effectively get countries or companies out of the market as long the settlement is done in USD.
Fast forward today: The Euro is as big as USD. With EUR or CNY you can buy all products you want to have. When Russia, Venezuela and Iran decide to sell Oil or Gas there is little technical need to stick for USD. Further Trump cutting the U.S. side of the deal. Why should Europe other further grant the extraordinary privilege to the U.S? And why it would put it's own countries and companies a the risk of Feds goodwill to perform the settlement? Given Trumps apparent will to use the USD as a weapon, it is a question of national security for Europe, UK, Japan, Iran and the BRICS to change to a different regime.
My personal expectation is that settlement in EUR will be only transitional before SDRs issued by the BIS will become the final currency of choice. These will resemble the "Bancor" proposed by Keyenes before the Bretton Woods system was implemented