US tries to force other countries to follow its sanctions against Iran

The US special envoy to Iran Brian Hook spent the last week spreading the idea that Iran was a threat to the US and the world. Now, Hook is threatening other nations directly.

Choose to do business with the US or Iran

Hook is now warning that if countries do business with Iran they will not be able to do business with the US. In particular Hook warned the EU about trading with Iran.

The P5 +1 nations

Wikipedia describes the P5 +1 nations: "The P5+1 refers to the UN Security Council's five permanent members (the P5); namely China, France, Russia, the United Kingdom, and the United States; plus Germany. The P5+1 is often referred to as the E3+3 by European countries. It is a group of six world powers which, in 2006, joined together in diplomatic efforts with Iran with regard to its nuclear program."

The US withdrew from the agreement with Iran. However France Russia and Germany all members of the EU are put in a difficult position as the Iran deal gives it relief from sanctions. Now the US is demanding that the three countries implement US sanctions. This is an extraterritorial application of laws that apply only to the US. The US is not just itself refusing to trade with Iran but demanding that everyone else do so as well. Hook says that the US will sanction any country that tries to purchase Iranian oil.

The EU attempt to circumvent US power

Most financial arrangements arising from trading go through what is called the SWIFT system. This is described by Wikipedia as follows: "The Society for Worldwide Interbank Financial Telecommunication (SWIFT), legally S.W.I.F.T. SCRL, provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment. SWIFT also sells software and services to financial institutions, much of it for use on the SWIFTNet network, and ISO 9362. Business Identifier Codes (BICs, previously Bank Identifier Codes) are popularly known as "SWIFT codes". The majority of international interbank messages use the SWIFT network. As of 2015, SWIFT linked more than 11,000 financial institutions in more than 200 countries and territories, who were exchanging an average of over 32 million messages per day (compared to an average of 2.4 million daily messages in 1995). "

While SWIFT itself is neutral, the US will be able to see if banks are trading with Iran if transactions go through it and the US can take action against the bank by cutting off any business with the US. US threats frighten the banks so the EU has developed a clearing house that will allow trade with Iran without money crossing borders. With no role for the banks SWIFT is not involved either.

US threats may not be enforceable

China is continuing to buy oil from Iran despite US warnings about doing so. Other countries that need Iranian oil such as India may follow suit.

If the EU is to convince Iran to stay in the nuclear agreement it must continue trade in spite of the threats of the US. The US is creating a great deal of friction with its policies. It may end up not only creating new financial systems to avoid US power in the financial area but also encourage the use of monetary units other than the dollar in international trade. China and Russia have already agreed to trade in their national currencies.

Previously published  in the DIgital Journal

Trump's Huawei ban may be planned as a negotiating tactic

US President Donald Trump met with Xi Jinping the Chinese president as the G20 Summit in Japan wrapped up today. Trump announced after the meeting that the two countries would resume trade talks and hold off implementing new tariffs indefinitely.

Was the Huawei ban just a negotiating tactic?

Trump also indicated that US companies would be allowed to resume sales to Huawei. However, he did not make it clear when or how this will happen. How can these sales resume if Huawei is a huge security threat as Trump claims? He has even used the security threat as a reason to convince other countries not to use Huawei's 5G networks.

Trump's position

In May, Trump signed an executive order allowing the US government to block sales by US companies to foreign firms considered a security risk. This was applied to Huawei. A recent article in Verge quotes Trump explaining his position: "TRUMP: Huawei is something that’s very dangerous. You look at what they’ve done from a security standpoint, from a military standpoint, it’s very dangerous. So it’s possible that Huawei even would be included in some kind of a trade deal. If we made a deal, I could imagine Huawei being possibly included in some form, some part of a trade deal."

Trump claims Huawei's technology could be used for spying in spite of Huawei's denial of this. However, Trump's position makes no sense. If Huawei is so dangerous, it will be no less dangerous after a trade deal. Trump's position makes sense only if Huawei is not as he claims a threat to US security and the ban was used as a bluff and a lever to get a better deal from China.

The Verge article concludes: "Trump’s executive order has caused immense chaos and concern, not just for Huawei but for its suppliers in America and users around the world. He owes those people an honest explanation for why this was done. So far, they haven’t gotten one." Given the way Trump operates it is unlikely that he will ever give such an explanation. No doubt he cannot in any event.

No sign of lifting the ban as yet

So far it is not clear what if any steps Trump has taken to lift the restrictions. According to the Washington Post Trump told reporters that he will be meeting with Huawei officials to ease pressure on Huawei but there has not been a formal decision to lift the ban as yet. On the other hand he told the Wall Street Journal that the two countries will leave what to do about Huawei until the end of the negotiations. This sounds as if Trump is continuing to use the ban as leverage even though it is a bluff to get China to accept a better deal for the US.

China said to make reprieve from ban a condition of further talks

However, China has reportedly made a reprieve from the Huawei ban a condition of returning to the bargaining table. Trump said last month that the US could lift restrictions if there were some forward progress in negotiations with China. Now that there seems to be some progress with talks continuing Trump may say that there will be a reprieve from a ban. However in reality he has done nothing leaving the ban as a threat and leverage in the negotiations.

Meanwhile not only China but many US companies who supply parts for Huawei are being hurt by the Trump. Trump is supposed to be known as a deal maker. Perhaps he should be known as the dirty deal maker.

Previously published in the Digital Journal