WASHINGTON - The threat of the Iranian nuclear program is the talk of Washington at the International Monetary Fund conference, though the subject isn't a purely economic one. But when the United States wants to push a topic, it can. Israeli Finance Minister Roni Bar-On is in Washington too, doing what he can to build an economic front against Iran's nukes.
Israel naturally stands by America's side regarding Tehran, which has its vulnerabilities. It's general knowledge that Iran's economic situation is shaky because it's starved for foreign investments. That renders the Middle Eastern power more vulnerable, and that's why economic sanctions could be meaningful. Some 80 percent of Iran's revenues from exports comes from oil. So 50 percent of the Iranian government's budget originates from the oil business.
Even though Iran is oil-rich, its yawning hole in investment means it has to import 40 percent of its distilled oil products: it doesn't have enough refining facilities.
On Tuesday this week Bar-On will be meeting with Barney Frank, a 30-year Congress veteran and Democrat who heads the House Financial Services Committee. His colleagues consistently vote him "smartest man in Congress," and now he's promoting legislation that would shield from lawsuits fund managers (such as the managers of pension funds) who yank their investments related to Iran. The problem fund managers face is that if they dump shares in companies that invest in Iran, their unit holders might sue for loss of profit following the (possibly) politically, not economically, motivated decision. Frank's proposal would shield them from lawsuits and Bar-On is encouraging the congressman to proceed.
The idea is based on suggesting that the fund managers replace any Iran-associated energy investments with other energy investments, for instance in companies such as Exxon, in order to protect the fund's returns. Another idea is to penalize funds that invest in companies that do business with Iran through tax; they wouldn't be able to recognize their costs related to such investment in Iran.
Bar-On will also be meeting with Senator Joe Lieberman, hoping to persuade the former presidential hopeful of the topic's importance.
So far Washington has eschewed slapping penalties on companies that do business with Iran, preferring to exert pressure instead. The U.S. has tried to persuade major European banks to stop working with Tehran: No less than 30 major banks will stop financing transactions with Iran, including Deutsche Bank, Credit Suisse, Barclays and UBS.
As said above, Tehran is heavily dependent on oil, but in the absence of foreign investment, it's oil production is shrinking by some 7 percent a year. It doesn't have enough exploration and oil extraction technology. Europe could invest massively but America and Israel have joined hands in preventing any such ambitions from flowering.
Iran can't genuinely threaten the world with withheld oil because oil is its staff of life. Without exporting it, Iran would wither. Tehran says it has found the solution to all these problems: nuclear power (not bomb), which would reduce its own dependence on oil.
A year ago, after Washington accused it of financing terrorism, Iran hit back, saying that it would be replacing U.S. dollars in its foreign currency reserves with a host of other currencies. Yesterday Iranian's central bank said it had done the deed.
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