Iran’s Cash Squeeze

Iran’s economic house of cards was the topic of two of my recent posts (here, here).

An article (”Iran Feels Pinch As Major Banks Curtail Business“) in today’s Washington Post indicates that Iran is experiencing a credit collapse as more than 40 major international banks and financial institutions have either cut off or cut back business with the Iranian government or private sector as a result of a quiet campaign launched last September by the U.S.Treasury and State departments.

Says Stuart Levey, the Treasury’s undersecretary for terrorism and financial intelligence:

All the banks we’ve talked to are reducing significantly their exposure to Iranian business. It’s been a universal response. They all recognize the risks — some because of what we’ve told them and some on their own. You don’t have to be Sherlock Holmes to see the dangers.

The financial institutions cutting back business ties are mainly in Europe and Asia, U.S. officials say. UBS last year said it was cutting off all dealings with Iran. London-based HSBC (which has 5,000 offices in 79 countries) and Standard Chartered (with 1,400 branches in 50 countries) as well as Commerzbank of Germany have indicated they are limiting their exposure to Iranian business, Levey said. The rest have asked the United States not to publicize their names.

In a related effort, the Bush administration has warned “relevant companies and countries” about the risks of investing in Iran’s oil and gas sector, R. Nicholas Burns, undersecretary of state for political affairs, said in congressional testimony Wednesday. Washington is generally trying to drive home to Tehran that its policies will lead to serious “financial hardship,” he said.

No credit, no money.

No money, no nuclear program.

Financial “shock and awe” seems to be working a lot better than did the military version. The Bush Administration may be remembered for having peacefully prevented Iran from joining the nuclear weapons club. If so, the Republican presidential candidate in 2008 will have something to crow about and Iraq won’t be the only foreign affairs issue in the campaign.

Cross-posted at American Future.

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