US announces new sanctions on Iran

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US announces new sanctions on Iran

On Monday, 24th June 2019, US president Mr. Donald Trump signed and confirmed the imposition of new sanctions on Iran in its effort to increase the pressure on Tehran. As mentioned by the Trump administration, the newly imposed sanctions will hit the economy of Iran harder.

Click here to know the basic information on What are Sanctions?

What are these sanctions?

The new sanctions restrict the Foreign financial institutions from facilitating any significant financial transaction to the Iranian entities mentioned in the order. In other words, any foreign financial institution that facilitates the financial needs of the Iranian entities mentioned will be cut-off from the U.S. financial system.

These sanctions are aimed at barring Ayatollah Ali Khamenei, the supreme leader of Iran, access to the international financial system. This will prevent some top Iranian officials of Iran to obtain finance using European and other foreign financial institutions and special purpose vehicles.

USA has already imposed several sanctions against Iran and with the new sanction, it will hit almost 80% of the economy of Iran. Earlier USA had sanctioned foreign countries from buying oil from Iran.  This had restricted many Asian countries including India and China to buy Crude oil from Iran.

Click here to read how earlier sanctions impacted India?

What made the USA impose such “hard-hitting” sanctions?

A week before the imposition of these sanctions, Iran shot down a US drone. As per USA, the drone was flying in international space and not over Iran. Whereas Iran believes that the drone was one most sophisticated and most complicated surveillance aircraft sent to spy on Iran.

On June 13, two commercial tankers near the Strait of Hormuz were attacked. USA blames the act on Iran whereas Iran denies any involvement.

How will this impact USA and Iran? Will these sanctions have any impact on the Indian economy?

The new sanctions are primarily aimed at preventing some top Iranian officials from using the international banking system. Hence, any bank or any financial institution or any financial vehicle set up (by India or by any other country) to provide finance to the sanctioned entities, then such financial institutions will be barred from carrying any kind of transactions with USA.

In simpler terms, if a bank in India provides a loan or other banking facilities to the entities mentioned in sanction order, then that bank in India will be barred from carrying any transaction with the USA.

This will ensure that Iran comes under tremendous financial pressure. Already USA has sanctioned the import of oil from Iran. Oil export was a major revenue for Iran and with all these sanctions, almost 80% of the economy of Iran will collapse.

Personally, I believe that imposing sanctions has become a new method to attack the country or carry on a war.. what say?

 

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The author of the article is CA Janhavi Phadnis. If you have any queries concerning the above article. Please write to us either in the comments section below or email us on info.financepost@gmail.com.

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CA Janhavi Phadnis