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Iran: International Pressureand an Economic Crisis

Speakers: Stuart LeveyUnder Secretary for Terrorism and Financial Intelligence, Department of the Treasury; Robin WrightJournalist and Public Policy Scholar, Woodrow Wilson Center;Jahangir AmuzegarInternational Economic Consultant and Former IMF Executive

Date & Time

Thursday
Dec. 11, 2008
11:00am – 12:30pm ET

Overview

The Middle East Program hosted a discussion with Stuart Levey, Under Secretary of the Treasury for Terrorism and Financial Intelligence, Department of the Treasury; Robin Wright, journalist, author and Public Policy scholar, Woodrow Wilson Center; and Jahangir Amuzegar, international economic consultant and former executive at the International Monetary Fund. The meeting focused on what Robin Wright described in a recent New York Times article, "Stuart Levey's War," as an effort by the Department of the Treasury to isolate Iran from the international financial system.


Stuart Levey described the strategy as a way to generate the leverage needed to peacefully confront the challenge posed by Iran. Rather than traditional trade-based sanctions, which have acquired a bad reputation, Levey said the Department utilizes "targeted financial measures" to identify specific individuals and agencies within Iran that are engaged in illegal activities. By focusing on specific elements, Levey said the Treasury can more successfully build an international coalition, not just of governments but of private companies, to deny Iran access to foreign capital and credit. Levey stressed the value of engaging the private sector; while private companies traditionally seek to evade sanctions, they are reluctant to be associated with specific Iranian programs once they are revealed to be linked to illicit activities such as terrorism financing, money laundering or nuclear proliferation. The effect of the Treasury's efforts has been to essentially destroy Iran's "credit rating;" there is almost no foreign investment in Iran because no financing is available. Levey also pointed out that these efforts mainly affect those in Iran engaged in international business, people with the means and the resources to exert at least some degree of pressure on the regime. Levey concluded by mentioning that President Mahmoud Ahmadinejad's polarizing rhetoric and economic mismanagement has played an instrumental role in this strategy, both by uniting world opinion against Iran while simultaneously exacerbating the effects of the financial siege on the Iranian economy.


Robin Wright characterized this policy as one of the few promising measures pursued by the Bush administration against Iran. Despite extensive cooperation during the initial campaign in Afghanistan, Wright said that the Bush administration subsequently alienated Iran with hostile rhetoric while failing to consider how the Islamic Republic would be empowered by the outcome of the Iraq War. She described this particular policy as being imaginative and effective, pointing out that over 90 financial institutions around the world have curtailed business with Iran and that some 20% of the value of Iran's imports is now added cost generated by these measures. She cautioned, however, that Iran has displayed an enormous adaptive ability, particularly by relying more on money flows brought into the country by alternative means. Hawala, Arabic for "transfer," is an informal monetary transfer system being utilized by Iranians living abroad, particularly in Dubai. The long-term impact of the Treasury's strategy would, in part, rely on preventing these activities, as well.

Jahangir Amuzegar questioned the real effectiveness of this strategy. He argued that while the Treasury had certainly impacted Iran's economy, Iran remains regionally powerful and has been courted by non-U.S. dominated associations, such as the Gulf Cooperation Council and the Shanghai Group. He pointed out that Iranian reserves in European banks have actually grown this year. He also questioned the target of these measures, claiming that the most affected were individual Iranian entrepreneurs already frustrated with the regime. While the Treasury's strategy is certainly effective, Amuzegar warned that it may alienate people who were already supportive of the changes Washington wants to see.

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Middle East Program

The Wilson Center’s Middle East Program serves as a crucial resource for the policymaking community and beyond, providing analyses and research that helps inform US foreign policymaking, stimulates public debate, and expands knowledge about issues in the wider Middle East and North Africa (MENA) region.  Read more

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