Yves here. Media reports in the US stress how tightening sanctions against Iran, particularly on banks, are increasingly isolating Iran, leading its currency to fall sharply. This article describes a key break in the cordon, that of electricity exports. But Iran’s major source of foreign exchange, its official dollar oil-related payments, via Standard Chartered, were roughly $500 million a day. The electricity trade is small relative to this total, but it is also an interesting act of defiance among American “allies”.
Few people are aware that Iran is currently subjected to not one, but three sets of sanctions imposed by U.S., the United Nations and the European Union, the latter two over concerns about Iran’s civilian nuclear energy program, which both Washington and Israel allege masks a covert nuclear weapons program, a charge Iran steadfastly denies.
The first U.S. economic sanctions against Iran were instituted in 1979 following the overthrow of the Pahlavi monarchy and its replacement by an Islamic Republic, while the first United Nations Security Council sanctions again Iran were implemented by Resolution 1737, voted in 23 December 2006. Earlier this year, European Union foreign ministers agreed to place sanctions on Iranian oil and oil products because of Iran’s purported non-compliance with its obligations of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), and the EU sanctions entered into force on 1 July.
The collective effect of the trio of legislative restrictions is to impede Iranian oil and natural gas exports, the source of the majority of its foreign currency earnings until Tehran suspends its uranium enrichment activities. Iran maintains that by signing and ratifying the NPT, its Article IV permits its current nuclear activities.
But while the legislation has increasingly shut off Iranian hydrocarbon exports, there is one sector of Iran’s energy industry that is flourishing – electricity exports.
And this trade, lucrative as it is, stymies Washington’s efforts to squeeze Iran’s economy because, in four out of five instances, the trade is with U.S. allies.
According to the U.S. government’s Energy Information Administration, “Iran is a net exporter of electric power and currently exports electricity to neighboring states including Armenia, Pakistan, Turkey, Iraq, and Afghanistan.”
And exactly who are these miscreant states aiding and abetting the Iranian economy?
Related Article: Iran Finally Blinks in Terms of Sanctions Pressure
Turkey, like the U.S., is a member of North Atlantic Treaty Organization, while former Soviet republic Armenia has been a member of NATO’s Partnership for Peace affiliate program since 1994.
The U.S.–Iraq Status of Forces Agreement (SOFA, official name: “Agreement Between the United States of America and the Republic of Iraq On the Withdrawal of United States Forces from Iraq and the Organization of Their Activities during Their Temporary Presence in Iraq”) was signed in 2008, and the U.S. signed a similar SOFA agreement with Afghanistan earlier this year.
As for Pakistan, the military cooperation between Washington and Islamabad is self evident.
So then, five U.S. “allies” are purchasing Iranian electricity.
To give but one instance, Turkey and Iran agreed in August 2007 to jointly pursue an electricity designed to produce 6,000 megawatts, of which a percentage would be exported to Turkey’s relatively isolated eastern provinces adjacent to its 312-mile long frontier with Iran.
And how valuable are these power exports?
From 20 March 2012, the beginning of the current Iranian calendar year to 23 October,Iran exported 6,624 gigawatts of electricity to the quintet of neighboring countries, a 44 percent rise compared to the same period in 2011. On 27 October Deputy Energy Minister Mohammad Behzad announced in Tehran that Iran’s electricity exports were worth $5 billion since the beginning of the current Iranian calendar year.
Behzad disclosed the data on the sidelines of 12th International Electricity Exhibition (IEE) currently underway in Tehran. And among those nations attending are Italy, France, Germany and Turkey, all NATO members, along with representatives from China and South Korea.
Expect to see more growth in Iran’s electrical sector. According to Iranian Energy Ministry officials, Iran will become self-sufficient in manufacturing equipment and goods, which are used in the electrical power industry by the end of the current Iranian year, which finishes in March 2013.
Iran’s rising electrical exports to its neighbors presents Washington policymakers hawkish on Iran with the unpleasant reality that the nations importing Iranian electricity are all involved to a lesser or greater degree with regional U.S. military policies, whose cooperation could be endangered if the American administration pressured them too far to downgrade their energy relations with Tehran.
So, for the foreseeable future, Turkish lira, Armenian drams, Pakistani rupees, Iraqi dinars and Afghan afghanis will continue to flow into Iran’s treasury in return for reliable supplies of electricity.
And more deals are on the way, as on 27 October Iran and India signed a Memorandum of Understanding that Iran would provide 4,000 megawatts of electricity exports to India via Pakistan, which as part of the agreement receive 2,000 additional megawatts for its role in facilitating the transfer.
Apparently Iran’s neighbors have concluded that their value to Washington transcends the American administration’s ability to punish them for interacting with Iran.
At least electricity, unlike uranium, is not “dual use.”
This piece is cross-posted from Naked Capitalism with permission.