US Iran sanctions in trouble as Sri Lanka latest country to sidestep
Al Akhbar | February 5, 2012
Sri Lanka may follow India in avoiding US sanctions on Iranian crude by purchasing it in a currency other than dollars, officials said on Sunday.
In a sign that US officials will struggle to enforce the ban, a number of countries are seeking ways to avoid the sanctions.
The Indian Ocean island nation is facing the most potential collateral damage from the sanctions, which are meant to cut off the dollars Washington claims are used to fund Iran’s nuclear ambitions.
Sri Lanka imports 93 percent of its oil from Iran, OPEC’s second biggest producer, and its sole refinery, the 50,000 barrel-per-day Sapugaskanda plant, can only refine Iranian crude and three or four others that are in short supply.
US Deputy Assistant Secretary of the Treasury for Terrorist Financing, Luke Bronin, flew in for a one-day visit on Thursday to meet a host of government officials to explain the options available and the impact on Sri Lanka.
A senior government official directly involved in Sri Lanka’s payments to Iran who met with Bronin said he offered a potential solution.
“I don’t know whether it was deliberate or it was accidental, but he said they are only concerned about transactions done in dollars, so that was a hint to us,” the official told Reuters on condition of anonymity.
Sri Lanka’s central bank pays its Iranian counterpart on behalf of the state-owned Ceylon Petroleum Corporation through the Asian Clearing Union (ACU), a nine-nation trade clearing house set up in Tehran in 1974.
Sri Lanka would be following India’s lead in seeking to avoid the sanctions. New Dehli is currently considering rupee-denominated transactions and other similar options to pay for its Iranian crude needs.
“It gives us the option of doing it in Indian rupees or some other currency, although we would prefer to do it in Sri Lankan rupees,” the official said.
President Mahinda Rajapaksa last week complained Sri Lanka and other small nations were being unfairly squeezed in a fight not of their making, and said he had asked his officials to find out what alternatives the United States could offer.
The effectiveness of the sanctions depends largely on how well policed they are internationally. Russia has already stated its opposition to the sanctions, with Foreign Minister Sergey Lavrov saying last week they would only “stifle” the Iranian economy and hurt the population.
If a number of larger economies avoid the sanctions and continue trading with the oil-rich nation then the West will struggle to inflict further damage on the Iranian economy.
(Reuters, Al-Akhbar)
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