Sanctions regime, good business strategy

Who would have thought that imposing sanctions is an easy way to make big buck? The irony is, it is not the party that imposes sanctions gets a lot of the loot, but the third parties swallowing up lion’s share leaving both the aggressor and victim getting substantially less. More follows:

America is credited with the largest number of sanctions originating from her so far.  The West as a whole and EU as a significant group within is not far behind USA. The difference between America and the West differs only in terms of the width and depth to which sanctions burrow in. Expectedly, there are several permutations and combinations that are in play.

America envisages sanctions as the key policy framework where the regime has a labyrinthine architecture, pointedly one item crossing the other bringing more complexities in its wake. But more often than not victim nations find creative ways of bypassing these, resulting in a situation where the intended purpose either has not been met fully or the opposite of that happens.

There are two significant outcomes. One is that America and others who join her are not getting the benefit in terms of any cash revenue expected to accrue during the pendency of the regime. Although the victims are affected initially, overtime they bypass the burden of sanctions to a great extent making the tool of sanctions regime a toothless instrument in the dynamics of geoeconomics.

Second aspect is both Russia and Iran who are the first and second in the pecking order of targeted countries for sanctions are doing excellently well in terms of GDP growth and/or net recipients of foreign revenue, contrary to what the imposers expected to happen.

Third party nations such as India and Saudi Arabia make a big killing by importing Russian oil cheaply and re-exporting to the West. Indian refineries were the pathfinders who brought almost 30% of Russian crude exports refined it and thereafter exported to EU at very high prices. While America which sponsored these sanctions is least affected, EU has to put up with expensive imports due to unavailability of oil & gas in the open market. Additionally India had in previous years received exemptions from CAESER Act as regard to import of crude from Iran till such time the window was shut by the American Department of Commerce.

Stealth also had a part to play. While America imposed blanket ban on Russian imports she exempted uranium from Russia lest electricity generators in US would be affected terribly. The volume of uranium imports in the first half of 2023 is more than double that of corresponding period in 2022. According to industry analysts this amounts to 2.2 fold at 416 tonnes as America is heavily dependent on Russian nuclear fuel for electricity generation.

A startling fact re sanctions regime is that US can give waivers over sanctions that serve her geoeconomics interest. A special exemption is however made regarding allies in the East, Japan & South Korea. For example is the recent waiver allowing South Korea to repatriate US$ 6 Billion frozen in South Korea for the payment of oil previously imported from Iran? In a circuitous manner this transfer was first made to the Swiss Central Bank and thereafter to Qatar in order to administer release of funds periodically for Iranian imports such as food & medicine.   

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist