Hitting Iran in the Pocket

Some of Iran?s problems can be solved if European and American energy companies invest there, but that is exactly what the U.S. is trying to prevent.

WASHINGTON - Two billion people live in our world in abject poverty on less than $2 a day. A cruel war is raging in Darfur, Sudan, and violent clashes threaten global stability, from Turkey fighting the Kurdish rebels to Burma cruelly repressing peace-loving monks. But these issues were not on the agenda of the largest conference in the universe, the conference of the International Monetary Fund that took place in Washington last week.

These issues do not interest the world's largest superpower. What interests President George W. Bush is the danger of Iran's nuclear armament program, and that's what counts. So the finance ministers of the G7 - the seven wealthiest countries in the world - discussed the proposals by U.S. Treasury Secretary Henry Paulson on ways to handle the problem of the Iranian atom.

Bush said there is a real danger of World War III if the international community does not prevent Iran from producing nuclear weapons. His efforts are now being directed at the economic arena to convince the 15 countries on the UN Security Council to join the economic sanctions to be imposed on Iran, which will be so harsh Iran will be motivated to stop its nuclear program.

Since the American interest coincides with that of Israel, Prime Minister Ehud Olmert was seen wandering last week among key countries to discuss the issue. First he met with Russian President Vladimir Putin and tried to convince him to cool his ties with Iran. Then he visited Paris and London and received the support of President Nicolas Sarkozy and Prime Minister Gordon Brown. Both not only support increasing sanctions against Iran, but are working to convince the other Western countries to join them.

One of the most effective ways is to pressure large European banks to stop working with Iran. To date 30 of them have agreed to stop funding transactions with that country. Three of Germany's largest banks have already severed their ties with Iran, French banks are again considering their stance because of the policy change brought about by Sarkozy, and Canada's supervisor of banks wants the banks to examine whether their activity is assisting the Iranian nuclear plan. In other words, the American pressure is working.

Iran is not indifferent to this. The governor of Iran's central bank said at the conference that banks that leave Iran will not be able to return in the future because "Iranians have a long memory." The Iranian governor is concerned because he knows that his country, the fourth largest oil-exporting nation in the world, suffers from a critical shortage of investments. Eighty percent of its export revenue comes from crude oil, but it is forced to import 40 percent of the refined oil products it consumes because it does not have enough oil refineries. It also turns out that Iran's oil production declines by 7 percent annually due to a shortage of pumping facilities and equipment for searching for oil; in other words, a shortage of money and technology.

These problems can be solved by European and American energy companies if they invest in Iran the huge sums necessary to develop the oil fields. But that is exactly what the U.S. is trying to prevent through its pressure on the banks and investment funds.

At the conference another issue that greatly troubles the U.S. was raised: the mortgage crisis. The prevailing opinion is that the crisis is not yet over; the New York Stock Exchange has been stuttering and declining, and two days ago investment bank Merrill Lynch reported a $7.9 billion write-down, the largest in the firm's history. It is even higher than last week's write-down by Citigroup ($6.5 billion). If we add high oil prices, we can assume that private consumption in the U.S. will go into a lower gear and growth rates will decline.

If the U.S. reduces the pace, growth rates in Europe will decline as well. The IMF has even lowered its growth forecast for little Israel. Because when the American giant coughs, the entire world catches the flu.