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Report Sees Bonanza for U.S., Iran if Sanctions Scrapped

By Abid Aslam | November 24, 2008

WASHINGTON, (IPS) – Think of it as a stimulus package without deficit spending: Were the United States to normalise trade relations with Iran and were the Islamic Republic to liberalise its economy, Washington could cut its fuel costs and add tens of billions of dollars to its economy, say U.S. exporters.

Such moves could lower world oil prices by as much as 10 percent, the National Foreign Trade Council (NFTC) says in a report aimed at the incoming administration of President-elect Barack Obama.

Obama, who is to take office in January, has signaled willingness to explore new approaches to his country’s long standoff with Iran. During his election campaign, opponents lambasted Obama for favouring appeasement at a time when Washington seeks to tighten the screws on Tehran for its alleged support of terrorism and nuclear ambitions.

Few, if any, expect a radical shift in U.S. policy under Obama but presidential transitions always are seen as opportunities for some degree of change.

In this case, says NFTC president Bill Reinsch, the lobby seeks to persuade the incoming administration that “broad unilateral sanctions intended to change the behaviour of problematic regimes often miss that target, but do succeed in generating a number of significant economic consequences.”

According to the NFTC, if the United States were to scrap its unilateral sanctions and, in turn, Iran were to lift prohibitions against foreign investment, particularly in its oil sector, the Middle Eastern nation could boost its crude oil production by about 50 percent and lower world prices by about 10 percent. This would cut the cost of U.S. oil imports by 38 billion — 76 billion dollars a year.

The pro-trade group further estimates that economic liberalisation in Iran would boost that country’s overall trade by up to 61 billion dollars, adding 32 percent to its gross domestic product (GDP). In turn, U.S. non-oil trade and trade in services with Iran also would shoot up, by about 46 billion dollars or 0.4 percent of U.S. GDP.

“Opening Iran’s marketplace to foreign investment could also be a boon to competitive U.S. multinational firms operating in a variety of manufacturing and service sectors,” says the NFTC study.

The Bush administration, which recently has worked through the United Nations to force Iran to stop enriching uranium, last month imposed sweeping new unilateral sanctions designed to cut off key Iranian military and banking institutions from the U.S. financial system.

Israel and the United States say Iran is enriching uranium in order to build nuclear weapons. Tehran has repeatedly said its purposes are peaceful. Washington also has placed Iran on its list of states sponsoring terrorism, chiefly militant factions in Iraq, Afghanistan, Lebanon, and the Gaza Strip.

Under U.S. law domestic and foreign firms are barred from investing more than 20 million dollars in Iran. For its part, Tehran has taken over the operation of its strategic oil and gas sector, which accounts for roughly 40 percent of the national economy. Governments that have voiced support for the U.S. stance have not curbed their firms’ involvement in Iran. Washington has not prosecuted non-U.S. companies for allegedly breaking the law. Federal lawmakers have been weighing measures to force authorities here to pursue foreign sanctions violators.

The NFTC has long opposed unilateral sanctions and has assailed as futile the Iran measures already in place and those under consideration by legislators.

“As with all economic embargoes, the efficacy of the sanctions in forcing political change is controversial,” write report authors Dean DeRosa and Gary Hufbauer, both economists. “In economic terms, however, both sides lose from the geopolitical standoff.”

Hufbauer has spent decades analysing the use of sanctions. In a report earlier this year, he and colleagues at the Peterson Institute for International Economics think tank examined more than 200 cases over the past one hundred years, including those against Iran. They found that the economic restrictions had contributed to achieving foreign policy goals only about one-third of the time. Most of these instances involved only partial success.

Critically, the study released in July found that sanctions tended to work when aimed against friendly and democratic countries, but not when they were brought to bear on adversaries and autocrats. In recent years, the record for multilateral sanctions has been better than that for unilateral U.S. sanctions, it added.

Not that the alternatives have been attractive. Said Hufbauer and colleagues: “Our success rate of one-third overall indicates that in about two-thirds of the cases the foreign policy goal was not achieved or, if it was achieved, other means were decisive — usually military force.”

http://www.ipsnews.net/news.asp?idnews=44832



February 1, 2010 - Posted by aletho | Economics, Wars for Israel