France wants US guarantees on Iran sanctions (by CP)

The US has many problems at their hands right now. Some of these problems just happened, emerged over time while some of them are entirely self-inflicted. Amongst the self-inflicted wounds is the fact that the US is no longer a reliable or trustworthy party.

The US has made its deal with Iran. But will they stick to it?

Given the fulminations against Iran and the so-called 'bad deal' coming out of the mouths of congresscritters, US presidential aspirants and given their craven sucking up to Bibi Netanyahu, a declared enemy of the aforementioned agreement,  the French have reason to question US reliability.

"Western firms have sought to renew commercial ties with Tehran in light of the deal, but last month Washington cautioned against rushing to invest in Iran until it fully complies.

French firms, once very active in Iran, were among those to have faced heavy penalties for violating sanctions.

"The attitude of the Americans is cooperative, but now we want that to be turned into something concrete so that the same thing doesn't happen again," Fabius told lawmakers ahead of next week's visit by Iranian President Hassan Rouhani to France.

BNP Paribas was fined almost $9 billion in 2014 for transactions violating U.S. embargoes. This week, Deutsche Bank paid a $258 million penalty to settle charges that it did business on behalf of entities in U.S.-sanctioned countries like Iran and Syria.
...
Immediately after the nuclear deal U.S. Secretary of State John Kerry had pledged that the U.S. authorities would ensure European firms would not be subject to penalties once sanctions had lifted.

But diplomats and executives say firms also want guarantees from the United States that they would be safe if sanctions were re-imposed. Without such assurances, businesses would remain prudent before committing themselves, they said."

To wit: Paribas was fined in the US for transactions that neither violated French law, nor European law nor international law but unilateral US sanctions law. Every action took place outside the US, by outside actors. The US claimed jurisdiction pretty much because a digital dollar of the transaction touched a US computer for a virtual second. Such arbitrary imposition of fines is a risk that all multinationals doing business with Iran face.

Obama wants the agreement with Iran, but will he be able to have it move forward in light of the hostility in Congress and from the pro-Israel quarters? There isn't much cause to expect reason in that quarter. And what will happen after Obama?

In light of these imponderables the French prudently want US guarantees, in writing, that the US won't prey on go after French companies for violating re-imposed or new US sanctions, just because whoever may succeed Obama happened to change his mind and reset to the US default mode - regime change, or - an unlikelier case, but in fairness - should the Iranians renege on their part of the deal.

The US today find themselves in a situation where they have a record of arbitrariness, incoherence and of reneging on commitments they made. That is not a legitimate hegemonic entitlement but a liability, and should be understood as such.

by confusedponderer

Comments

[The Beaver]

CP

France is hoping to sign a deal for the sale of some Airbus planes (80 to 90) to Iran. President Rouhani will be in Paris next week.

[J Villain]

All new trade deals the US signs now have clauses that allow trade sanctions against the signing countries if they boycot or sanction Israel even the illegal settlements meaning the US has recognized as legal the annexation of the West Bank.

http://www.jpost.com/Israel-News/Politics-And-Diplomacy/US-Congress-passes-rare-law-targeting-boycotts-of-Israel-407056

confusedponderer is correct that this is a liability. While this stuff may work over the short term, every time the US pulls one of these stunts it pushes it's friends and allies farther away and chops away at the greatest advantage the US currently has being the worlds reserve currency. Once that was weaponized it was only a matter of time before people started looking for alternatives to US financial institutions and USD.

http://www.nytimes.com/2015/03/20/opinion/us-allies-lured-by-chinas-bank.html

[The Beaver]

@ J Villain

Look what the EU did:
http://www.nytimes.com/2015/11/12/world/middleeast/eu-labels-israeli-settlements.html?_r=0

[Toivos]

You beat me to this important point. The US is most certainly creating incentives for other nations to transact business in other currencies. If too many nations start doing that then there goes the reserve currency status of the US dollar.

Now that would be one massive sacrifice for the US congress to make to show their fealty to Israel.

[J Villain]

Yes but that is just labelling. Lots of stuff going from Canada or any where to the US has to have origin markings on it. Israel is freaked about it but it will only have a marginal effect. I also wouldn't be surprised if they rescind it in the next few days. They always back off when Israel gets mad.

[Jack]

CP

The US does not have any coherent strategy on any matter. Policies and actions are all based on short term thinking and primarily how it plays in the media echo chamber and among the big political campaign cash donors.

No guarantee, even a written agreement can be relied on. For example if Hillary or Rubio or Cruz win they will feel no obligation to comply with past deals. It's quite likely they will launch another era of hostility towards Iran.

[confusedponderer]

Yes, of course they do, and not just them since Airbus is a Europoean project (about at least a third German).

They don't want Airbus - the big competitor to Boeing - be fined for some 30 billion dollars for having been stupid enough to assume the US have been serious when they said the sanctions were over, and thus subsidise the US federal budget in a time of cutbacks.

Just as bad, they also don't want to see Airbus fined out of a deal - and then have Boeing get the deal.

These sanctions violation fines can be utilised in various ways: Purely predatory, capriciously punitive or just for screwing over Eurpopean competitors to benefit US corporations.

[confusedponderer]

The EU's reasoning is this:

The West Bank (or the Golan) is not part of Israeli territory. The settlements and their expansion are *illegal* under international law. Thus products manufactured in the territories are not Made in Israel.

The Izzies bitch and moan about how this is a discriminaton or even antisemtitc. That's BS.

For one this is just accurate labelling that will allow consumers in the EU to boycott (divest and sanction). The Israelis are paranoid afraid of that, and that is why they freak out.

Secondly, it is an obvious legal case that the EU is making, and they are expressing their dissent with Israeli annexations that way. If the EU accepted produce made in West Bank settlements as Made in Israel, they would implicitly legitimise Israeli annexations, as the Israelis will hurry to point out. The EU isn't going to do that.

And the EU is reasonable to be weary since Israel is entirely overt in expressing its craving for more territory.

Just look at what Bibi says about the Golan nowadays - he points out that it is practially Israeli already, that Syria is a mess (with some Israeli contribution) and (rather brazenly) calls on the US and the EU to just get over themselves and formally legitimise the Israeli annexation of Syrian territory, also illegal under international law.

http://www.haaretz.com/israel-news/.premium-1.685267

The Izzies will find obvious ways around the labeling, like having the West Bank manufacturing parts, and have the products completed in Israel proper, and then label it Made in Israel.

[Ulenspiegel]

"They always back off when Israel gets mad"

Here you underestimate the inertia of a bureaucracy. If the deed is done it stays. :-)

IMHO it is a stupid move of Isreal to label the EU decision as "antisemitic".

[MRW]

The only thing that will cause the US to lose its reserve currency status is if other countries no longer *specifically* want to net save in US dollars. That means these other countries either will not want to trade their goods for US dollars, or they will demand payment in the currency of their choice.

[confusedponderer]

MRW,
I don't think it is about reserve currency status. To some extent it sure is, given the extent to which international trade is being delt with in dollars.

But the actual problem is that the expansive US claim to jurisdiction, and with that, the US claim of puntitive authority over transactions taking place abroad, amongst foreigners, in foreign countries - basically for as far as the dollar reaches, or where a subdivision of a US corporation operate, irespective of where it actually is incorporated.

The US simply puts multinationals before a choice:

In which market you make more money, the US or Iran? Here the answer most likely is the US. Is it worth risking the business in the US over some business with Iran? The answer probably is no.

Well, if you know what's good for you, comply with our law even when it isn't aplicable where you go, because, whatever else you do, you engage in the US market, too.

That chilling effect, which on part of the US is entirely deliberate, deters multinations from dealing with Iran for as long as the US do not give the sort of guarantees that the French prudently call for.

The case of BNP Paribas has shown that even when these trades are fully legal under French, European or international law that won't prevent the US from asserting jurisdiction, illegally under international law.

This is putting a gun towards the head of such corporations - even more so as US sanctions legislation usually carries some steep criminal charges for personnel involved also.

The EU has for instance long held the position that this boundless US jurisdiction under laws like Helms-Burton is a violation of international law. The US don't care, and the EU has consistently protested and reserves their right to retaliate if these things get out of hand.

We're not speaking not so much of incoherence but of legalistic lawlessness on part of the US so to speak.

[confusedponderer]

A written, formalised guarantee by the US would be justiciable in international court or trade dispute.

Domestic incoherence, momentary expediency or a claim to an entitlement to arbitrariness have never been accepted as a justification for not meeting a commitment under international law.

[Balint Somkuti]

A fine example of an ever declining US soft power. Ever since the imperial hubris became obvious the creation of TTIP gets more and more less likely.

"The more you tighten your grip, Tarkin, the more star systems will slip through your fingers." Senator Leia Organa to Grand Moff Tarkin

Living under soviet rule, when Star Wars was premiered in Hungary around 1979, I have never ever thought the above sentence will be about an American Empire ruled by fear.

[William R. Cumming]

The Clinton faction subscribes to a postulate put forwards by then Deputy National Security Adviser Sandy Berger: Whatever the President wants to do is legal? Perhaps this is taught at Yale law School attended by both Clintons?

BTW Mr. Berger was charged with theft from the National Archives and pled guilty.

[confusedponderer]

WRC,
It is not just Berger.

Try Posner, Goldsmith, Vermeule, and Yoo who are essentially arguing that, since states are motivated primarily by rational self-interest, compliance with international law is entirely optional.

You got the imperial conceit (merged with Chicago school ecomnomic thought) right there.

They could have quoted Thucydides right away, saying that 'the strong do what they can and the weak suffer what they must'.

If the US was not strong - a global hegemon! - our four aformentioned courtiers would have made a very different argument, after all - from a position of weakness their propositions are distinctly unattractive.

[Babak Makkinejad]

There will be jointly owned banks between Iran & Russia and Iran and China to conduct business.

Already, train locomotives in Iran are based on Chinese imports and not those diesel-electric American ones that were in use for decades in Iran.

I imagine that would be the case in other sectors or soon will be.

EU will not do create jointly owned banks with Iran to circumvent US; it is not worth the trouble to them.

I also do not think that the effects of EU economic war against Iran - the instrumentalities used etc. as well as their impact - can be un-lived. Nor do I expect that Iran will get much economic benefits from this JCOPA.

About airplanes specifically, we will really have to wait and see.

[Babak Makkinejad]

I agree with MRW.

[Babak Makkinejad]

EU will not retaliate against US in case of Iran. This discussion is a storm in a tea cup.

So there will not be very many multinationals in Iran anytime soon. Even Peugeot-Citroen may not be able to reclaim her previous position in that market.

In business, sometimes an entire business unit or transaction is written off as a loss.

Iran, her potential market & associated opportunities etc. were written off about a decade ago.

I doubt that it can now be revived; going back, in effect, to status quo ante of 2001.

[William R. Cumming]

The bottom line is that the DEEP STATE will continue its control and evolution under the next President.

In the debate Rand Paul nailed it IMO when he argued another Trillion Dollars mispent is NOT and should not be the mark of a Conservative. The Rubio response--We must be safe before all is a formal renunciation of the ENLIGHTENMENT IMO!

[walrus]

Excellent post CP. ….And people wonder why the American economy is stagnating.

In my opinion, the United States does not realise that it is staring at a number of inflexion points that are going to destroy its economy and society.

1. The day when the best and brightest of academics will head for Beijing or Moscow instead of Harvard, MIT or Yale.

2. The day when entrepreneurs with new products and inventions automatically head for China or Russia and their capital markets and nurturing environments instead of Silicon Valley.

3. The day when "Made in China" and "Made in Russia" are taken as guarantees of superior quality to American made goods.

4. The day when investors and companies seek out Russian and Chinese stock markets instead of Wall Street because of the superior regulation and governance of the former.

5. The day when people seeking superior medical treatment head for CHina and Russia and avoid America.

Think I'm joking? It's already starting to happen, but eventually the trickle will become a flood.

[confusedponderer]

"EU will not retaliate against US in case of Iran"

No, not for that but because of US attempts to unilaterally regulate European trade trough funny ideas like Helms-Burton - i.e. the EU will at some point retaliate to defend and preserve sovereignty. They won't be doing it for Iran trade.

That fine on BNP was 9 billion. There needs to be a lot of Iran trade deals to generate that in terms of wealth, and there isn't.

For the time being, and in the absence of guarantees, European corporations will play it safe and choose the safe US market over a more volatile Iranian market - precisely the effect that US claims for basically global jurisdiction aim at.

[Babak Makkinejad]

You are looking at it the wrong way.

The issue is not the potential size of the Iranian Market.

The issue is that EU leaders lack "The Will to Power".

EU has twice the population of the United States and almost the same GDP; she is capable of independent action; as her economic war against Iran has quite amply demonstrated.

[Babak Makkinejad]

None of those will ever happen - you evidently have not been paying attention to my discourse on the Platonic Academy and the Diocletian Line.

[Jack]

Walrus

The answer to why the core of the American economy is stagnating can be answered with two words - financialization and cronyism. Specifically, the big money is made by financial speculation around the massive government instigated and backed systemic financial leverage that permeates throughout; as well as through using the coercive power of the State to enforce cartels - banking and healthcare being the best examples.

Entrepreneurial capitalism requires competition and the rule of law. As government intervenes more and more in all aspects of the economy to favor those with political influence both competition and rule of law are eroded. The consequence is best seen in the growth of real median household income in comparison to the growth in real incomes of the top 0.01% over the past 50 years. As our WRC calls the Deep State, the revolving door of elites entrench big government with a big oligarchy.

Having said that, I know that today in any case, Chinese and Russian and Indian technology entrepreneurs would rather setup shop in Silicon Valley than anywhere else in the world. The dynamism, the tolerance of failure and the infrastructure of incubation is unmatched.

[different clue]

William R. Cumming,

Nixon argued it too. He said so in a post presidential interview with David Frost. "If the President does it, it is not illegal."