US sanction
INTRODUCTION
US sanction involves imposing some restrictions over another country. The United States first imposed sanctions on Iran activities in 1979 after the capture of the US embassy in Tehran. The United States has been imposing restrictions on Iran for some reason, such as; mitigating the development of nuclear weapons, ballistic missiles, and terrorist activities. In 2015, after the Joint Comprehensive Plan of Action (JCPOA), the Iran sanction was activated because Iran agreed on reducing its nuclear duties. Sanctions have just restricted Iran from enjoying the freedom of participating in the open market. That is in the international market. Sanctions usually harm many of the consumers in the country. Mostly it affects the minority groups since the cost of goods in the country may be so high. The United States government may impose sanctions either through tariffs, quotas, embargoes, and even offering some non- levy boundaries to Iran. The fight between the US and Iran seems to be long-lasting since it involves trade, political, social, and even the geographical factors.
The United States sanctions all the purchasing of Iran oil, and they agreed that no oil waivers would be re-issued from Iran. Due to the imposed sanction, Iran’s export of oil declined by more than 80%. It has affected the Iran economy at a higher rate despite Iran being amongst the largest producers of oil. It has led to Iran declining from the participation in the international market since they cannot export their oil (Katzman, 2010). The leaders view it as an economic war between them and the US, and they believe that they will overcome it in due time. It affects the economy of Iran because the United States forces fear of those countries trading with Iran. Therefore, most of them end up canceling all the trading projects they had with Iran so that they cannot be banned from trading with the United States.
The reason for imposing this sanction against Iran is to fight back for the oil for their essential oil and to force Iran to accept to restrict its nuclear activities, to minimize its ballistic missile program and end its support for proxy forces around the Middle East. The government of the United States explains that the joint comprehensive plan of action offered Iran an alternative to the US sanction on limiting nuclear activities. Hence, the penalty on Iran oil.
The United States has almost a total economic embargo and also restricted the following; sanction on the companies trading with Iran, complete ban on the import of the goods from Iran, financial institutions, and banning the selling of the aircraft materials for repairs to Iranian. In 2011, the US sanctioned the Iran Air and Tidewater Middle East Company because they have transacted with the Islamic Revolutionary Guard Corps, which was already approved by the US. They are accused of having participated in the transportation of illegal weapons (United States, Government Accountability Office, 2008). The main aim of fighting with Iran was just for commercial purposes. The US government was concerned with the businesses or the institutions, which contributes to the higher percentage of the revenue to the Iran government hence imposing sanctions on to those industries. The financial institutions are banned from carrying out transactions from other countries. It makes it hard for the exportation of oil since the country can only carry out a cash transaction, which is impossible since the deal involves a large sum of money. The United State Government disconnects the financial institutions from the system that supports them in carrying out international transactions.
THE LEGAL CHALLENGES OF IRAN
Iran violated the agreement they had with the United States of limiting nuclear activities. It leads to the re-imposing of the sanctions to Iran, which affected the economy of the country at a higher rate. Some of the challenges may include the following;
The redouble sanction leads to threatening the Iran people’s right to health. it is because it is challenging for Iran to finance the importation of humanitarian goods such as medicine. They cannot access the required drugs. Hence, there is a shortage of drugs for the patients in the country, which may lead to the death of some people, mostly those who are suffering from cancer. Sanction prevents them from trading freely, even with other countries. The embargo has affected Iran to transact with the international banks and also the firms because of the fear of suffering the effect of the second sanction by the United States. Therefore, it becomes hard for Iran to make any transaction. Hence, putting the lives of many citizens at risk.
Secondly, it has affected the Non- Governmental Organizations (NGO) in Iran, the Norwegian Refugee Council. Sanction has caused it to be hard for this NGO to receive support from the donors to cater to the need of those people in refugees. It’s because the financial institutions are not willing to transact the transactions between them and the donors. It is because there is no bank or financial institution that is willing to suffer the United States sanction. Hence causing a lot of suffering to those people and it becomes hard for the management to meet all the requirements since also the price of the commodities raises. The NGO hence does not attain its objective because of sanctions, increasing the level of over-dependency in the country.
Sanction has also caused misuse of funds in Iran. It is because the government has been using the resources to import other things such as a car for the officials instead of the budgeted purpose, which is for the purchase of the medicines. Hence, people being in a critical condition of risking their lives because they cannot transact with any financial institution.
IMPACT ON THE ECONOMY OF IRAN AND GLOBAL OIL MARKET
Sanction has led to the reduction of oil in Iran. Because Iran has no access to the materials that are required in the production of oil. The demand for Iran oil in the global market has declined since the companies which were trading with Iran withdraw from purchasing from them. Most of the international markets are unwilling to participate with Iran because of the fear of losing the connection with the significant demand of Western. The revenue collected from oil production decreases at a higher rate. Despite the decrease in tax collected, the oil companies suffer the high cost of production since the US government complicates the process of raising revenue.
Sanction still caused the devaluation of the Iran currency, which caused the public of Iran to panic. At the beginning of the following year, the government decided to raise the interest rate on bank deposits to reduce this effect. It motivated most of the bankers since it gave them a competitive advantage in the market. In the mid of that year, the economic minister of Iran declared an increase in devalue rate due to uncertainty and a decrease in the sale of oil. Therefore, the government has tried to fight against these effects by adding more money to the economy, but the inflation level was uncontrollable (IBP, 2007).
Despite all the efforts put in place, it did not prevent the rise of the price of the commodities, which forced people to rely on black market exchange rate networks. The government tries to balance the market, but the demand outdoes its effort. Due to the closure of the Iran financial institutions, it became tough for them to export oil in the market since no transactions can take place in those banks. Hence, contributing to the collapse of the economy.
Sanction has also affected the shipping of the Iran oil tanks. It’s after the shipping companies refrained from shipping the Iran cargoes. It changed them since their tanks were held up, and they could not export more oil. Iran was left at a lower level struggling to raise the economy of its country. They tried to look at least for a country that can purchase even if it is a quarter of their yearly export, which was still hard since they were afraid to trade with them.
Iran depends on the regional economy as well as the private stated businesses in this country. When the United States it caused more violation mostly for the Tehran people because of the increased price of the energy. People felt the burden because the value of the currency kept on devaluing; hence, life becoming more expensive. It also affected the people trading in that country since they had to pay more for all the goods imported in the country, while the prices of the exported products such as wheat decreased, also causing a rise in the costs of the food staff. Therefore, disadvantaging all the exporters in Iran.
REMEDIES AGAINST SANCTION
Iran faced economic pressure from the United States and the Europe, which led to the decline of oil export and affected their participation in the international market. Therefore, Iran decided to come up with the best solutions to protect themselves against US sanctions and to have control over the flow of capital in their country. Hence they decided to have a resistance economy. It involves ensuring that the goods they were importing are replaced with other domestic products and refraining from importing luxuries goods. The economy of the country will grow from within since most of the people will be looking for the things that are most demanded by the consumers, and they concentrate on those products.
Secondly, the Iran government decided to insurance its import tankers domestically. The national insurance will facilitate the shipping of the tankers even when the shipping companies refraining from shipping the Iran cargo. It will help the importation of oil to continue without any hindrances even when restrictions are imposed. They have also tried to change the consumers of their products by trying to sell more to Chinese and Indian refiners. Even though not so promising since like china have other ways of obtaining the Iran crude oil. The country had to export oil through hidden means so that it can support the economy. Despite the deteriorating economy in Iran, some people are very determined to raise the economy even if the United States continues to restrict it. These people believe that despite all the regulations put in place, they have the freedom to do what they can do in their country to improve its conditions. They say that they are not threatened by war, but what threatens them is the economic condition and the value of the currency. Therefore, these people are focused on ensuring that the economy stabilizes.
CONCLUSION
In conclusion, the United States has the authority and power to impose sanctions over other countries. It involves restricting the country from trading in the international market. That is affecting its import and export. The United States has imposed sanctions on Iran, which has affected its economy. It has restricted the sale of oil by Iran despite being the higher producers of oil. This is after the denied to limit the development of nuclear weapons, ballistic missiles, and terrorist activities. It has also affected the well-being of the citizen of Iran because it was tough for the Iran to import medicine since no transactions could happen between other countries and Iran because of the fear of being sanctioned and losing the international market relationship. The financial institutions were locked down, and no transaction could happen. It caused the devaluation of the Iran currency; hence people suffered due to the inflation effect in the country. Therefore, states should try to avoid being sanctioned so that to protect the economy of their country from deteriorating and imposing the citizens into economic dangers.
REFERENCES
Askari, H. (2003). Case studies of US economic sanctions. Greenwood Publishing Group.
IBP, I. (2007). US-Iran political and economic relations handbook – Strategic information and developments. Lulu.com.
Katzman, K. (2010). Iran sanctions. DIANE Publishing.
United States. Government Accountability Office. (2008). Iran sanctions: Impact good or bad? Nova Publishers.