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> Iran seems to be able to sell nearly as much as it wants, presumably at near-market prices. Not really. I am no expert, but my understanding is that US sanct

> Iran seems to be able to sell nearly as much as it wants, presumably at near-market prices. Not really. I am no expert, but my understanding is that US sanctions bar Iran from accessing any financial services by US institutions or in US dollars. Apparently, they have jurisdiction to enforce that if a transaction uses US dollars. Unfortunately for any country who provokes the ire US, currently USD is the only real option for international trade. Thus, even if Iran sells its oil, it cannot get access to the funds it generates. Some European countries tried to create an alternative for the global financial transaction system specifically for Iran to be able to sidestep the sanctions. It would have had serious limitation, e.g. allowing Iran to only purchase food and medicine. But even that has not been successful. Only a single transaction has been done using the new system so far. https://www.gov.uk/government/news/instex-successfully-concludes-first-transaction https://www.gov.uk/government/news/instex-successfully-concl...

cturner 7y ago
"currently USD is the only real option for international trade" I think you have conflated currency matters with sanction matters. I will attack that here, but much of your point stands. My points here: international business tends to be done in USD only because it is convenient, and no business ever failed to happen due to that convention. International trade tends to happen in terms of the USD because USD is convenient. Factors: (1) The world's largest economy does its business in USD; (2) There are many large lenders in the US and (3) There is a free and liquid FX market for USD. Many companies reduce their friction by working in USD. They borrow some money in USD and then spend some money in USD, and thereby avoid paying a fee to their bank's FX desk. Instead of managing a complex risk situation between their home currency and a dozen others, they concentrate it into a simple risk situation of their home currency vs USD. Iran could put oil in ships, and send it to China. China could put gold in ships and send it to Iran. Or - far more easily - Iran could price its transaction in terms of New Zealand dollars, and the two parties could make adjustments to a ledger in a tax haven. The USD conventions is akin to the role of English as lingua franca. It's convenient., or China The other part of your point is that US sanctions are harsh and far-reaching. No arguments against that here. Would I trust billions of dollars to a tax haven bank, or in countries with a strong rule-of-law tradition? Also, any time you want to spend substantial money in the developed world, the other party is going to need evidence that it is not sanction affected.
- smnrchrds 7y ago
  I think the issue with USD is more entrenched than the role of English language. As I said, I'm no expert. I've just read some articles like this: > The power of U.S. sanctions lies in the use of the U.S. dollar in most international transactions. A foreign company that sends its proceeds from trade with Iran through an international bank would likely face sanctions because part of it would be conducted in dollars. https://www.washingtonpost.com/world/national-security/iran-plans-to-use-other-currencies-to-get-around-us-sanctions/2018/09/29/230df8e4-d4a3-4429-94be-4dbb90ece08e_story.html https://www.washingtonpost.com/world/national-security/iran-...

cturner 7y ago

"currently USD is the only real option for international trade" I think you have conflated currency matters with sanction matters. I will attack that here, but much of your point stands. My points here: international business tends to be done in USD only because it is convenient, and no business ever failed to happen due to that convention. International trade tends to happen in terms of the USD because USD is convenient. Factors: (1) The world's largest economy does its business in USD; (2) There are many large lenders in the US and (3) There is a free and liquid FX market for USD. Many companies reduce their friction by working in USD. They borrow some money in USD and then spend some money in USD, and thereby avoid paying a fee to their bank's FX desk. Instead of managing a complex risk situation between their home currency and a dozen others, they concentrate it into a simple risk situation of their home currency vs USD. Iran could put oil in ships, and send it to China. China could put gold in ships and send it to Iran. Or - far more easily - Iran could price its transaction in terms of New Zealand dollars, and the two parties could make adjustments to a ledger in a tax haven. The USD conventions is akin to the role of English as lingua franca. It's convenient., or China The other part of your point is that US sanctions are harsh and far-reaching. No arguments against that here. Would I trust billions of dollars to a tax haven bank, or in countries with a strong rule-of-law tradition? Also, any time you want to spend substantial money in the developed world, the other party is going to need evidence that it is not sanction affected.

smnrchrds 7y ago
I think the issue with USD is more entrenched than the role of English language. As I said, I'm no expert. I've just read some articles like this: > The power of U.S. sanctions lies in the use of the U.S. dollar in most international transactions. A foreign company that sends its proceeds from trade with Iran through an international bank would likely face sanctions because part of it would be conducted in dollars. https://www.washingtonpost.com/world/national-security/iran-plans-to-use-other-currencies-to-get-around-us-sanctions/2018/09/29/230df8e4-d4a3-4429-94be-4dbb90ece08e_story.html https://www.washingtonpost.com/world/national-security/iran-...