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Motivations
Why we are studying U.S. sanction on Iran ?

• Irans importance (oil, market, military,
  nuclear, multi-ethnicity etc.)
• Geopolitical distinction of Iran
  in Middle East (Iraqs present
  situation, Caspian Sea,
  Afghanistan, Al-Qaeda)
• Success of Libyan experience

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History of U.S. Executive orders against Iran

• Carter Nov.1979 freezing Iranian assets in U.S.
  banks and their foreign subsidiaries.
• Carter April 1979 prohibiting of all financial
  transaction, embargo imports, banning all travel,
  impounded Iranian military equipment (Irans
  claim 12 billion)
• Reagan Oct.1987 embargo all import including
  oil, prohibiting 14 export items. (oil loopholes
  third country, U.S. company)
• Clinton March1995 banned all investment in
  Irans petroleum sector
• Clinton May1995 prohibiting imports exports and
  investment of any kind. get-tough policy ?
  hurting Irans economy
• Clinton ILSA August 1996 closing the third
  country loophole and transforming sanction into a
  multilateral one.

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The impact of sanction on Iran

1. U.S.-Iran direct trade
2. U.S.-Iran indirect trade effect
3. Reduced U.S. and Non-U.S. export financing (no
   U.S. export financing from the U.S. Export-Import
   bank since 1990)
4. Higher Cost and Reduced Availability of
   Commercial Financing (high LC confirmation)
5. Reduced IMF/World bank Financing ( 8 project
   dropped,valued 1 billion)
6. Higher Debt Rescheduling Fees (U.S. rejection
   Paris Club rescheduling payment)
7. Reduced Foreign Direct Investment
8. Pipeline across Iran and oil swaps
9. Reduced Tourism Receipts
10. Non-participation of U.S. entities in
    Iran-Related Business
11. Psychological effects of U.S. sanction on
    Iranians and Non-Iranians
12. Impact on Iranian Economic Policies (high profile
    project with Japan and Europe that may not be
    always in Irans best interest)

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Estimated Reduction in Direct Trade as a result
of Sanction ( billion)
U.S.-Iran direct trade
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Indirect trade Dubai Effect

• In 1998-1999 16.2 percent of Irans non-oil
  export (516million) was going to Dubai.
• UAE exports to Iran totaled 551 million in 1998
  which were almost re-exports from a third part.

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Reduced U.S. and Non-U.S. export financing

• No U.S. export financing from the U.S.
  Export-Import bank since 1990.
• The absence of the U.S. export financing has
  curtailed trade financing for Iran from other
  countries and also raised their rates due the
  absence of competition.
• The estimate is based on the loss in U.S. export
  credit for Iran (4.3 of total credit) plus LC
  confirmation fees (5-10), those will add up to a
  20-30 million yearly loss.
• Similarly in Commercial financing has been
  affected (loss per year 100 million )

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World Bank Financing
Date Approved Project Description Amount million
March91 Earthquake Recovery 250
May92 Tehran Drainage 77
May92 Sistan Flood Control 57.1
March93 Irrigation Improvement 157
March93 Health and Family Planning 141.4
March93 Power Sector Inefficiency 165
May2000 Tehran Sewerage 145
May2000 Health Care 87
Eight World Bank projects with Iran dropped due
to the U.S. opposition valued 1 billion,
considering an interest difference of 2 percent
will give rise to a loss roughly equal to 20
million.
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• Higher Debt Rescheduling Fees
• U.S. rejection Paris Club for rescheduling Irans
  debt payment (1993-1994)
• 13-55 million loss per year
• Reduced Foreign Direct Investment
• GDP wise (or population-wise) Iran should have a
  4.3 billion (8.6 billion) share in the worlds
  FDI. In 1999 global FDI in Iran was only 85
  million while it was 9.2 billion in Middle East.
  
• Lost and delayed in energy FDI due to the
  sanction 700-840 million (out of 10-12 billion
  incul. North Pars excul. Caspian)
• Lost and delayed non-energy FDI 0.5-1 billion

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Pipeline and Oil swap

• Baku-Ceyhan route construction, maintenance,
  transit etc. (300-600 million)
• Oil swap 750,000 b/d saving 90 million

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Summery of Irans loss from U.S. sanction(
million)
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The impact of sanction on U.S.
( millions)

• FDI(non-energy)
• FDI(energy)
• Oil pipeline
• Oil swaps
• Financial services

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Conclusion

• Iranian Economic indicator are healthier than at
  any time since the early 1990s.
• The sanction hasnt brought Islamic republic
  economy to its knees but it may handicap it in
  the race to rapid economic growth.
• Iran can live with U.S. sanction with much less
  difficulty than Cuba or Vietnam, although it
  cant prosper without Washingtons blessing.
• American sanction has not been effective in the
  sense that it hasnt induced a noticeable change
  in Tehrans policies.

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References

• J. Amuzegar. 1997. Adjusting to Sanction
  Foreign Affairs 76 31-41.
• H. G. Askari et al. 2003. Case Studies of U.S.
  economic sanctions the Chinese, Cuban and
  Iranian experience. Praeger Pub. London.
• H. G. Askari et al. 2003. Economic sanctions
  examining their philosophy and efficacy. Praeger
  Pub. London.
• N. Hadian. Oct 2003. Iran Security Threat
  U.S. Policy, Capitol Hill Testimony, U.S. Senate
  Washington D.C.
• Hufbauer et al. 1990. Economic sanction
  reconsidered Washington D.C. Institute for
  International Economics

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Backup Slides