Barack Obama has decided to keep on Stuart Levey, the Bush Administration’s Treasury Department undersecretary for terrorism and financial intelligence. Levey’s pet project was implementing a set of informal sanctions whereby U.S. officials attempt to persuade foreign banks and firms – many of which are UAE based – to stop doing business with Iran.
For the best outline of the program, I’d refer you to Robin Wright’s article from a few months back. At the time I wrote a post on my objections to it, namely that (among other things) it empowers Iran’s Revolutionary Guards to take on a bigger role in the economy since they can muster state resources to do things like smuggle goods, set up front companies and launder money.
Others no doubt celebrating the move are the smugglers, hawala operators, and countless other individuals who take part in the massive informal trade between the UAE and Iran. I can almost hear the champagne corks popping from Cairo.
The theory behind sanctions, both the formal kind and the informal sort spearheaded by Levey, is that business interests will pressure the government to change its naughty ways. That pressure no doubt exists to some extent. But I am constantly surprised that policymakers rarely take into account (at least publically) the knock on effects that sanctions have within the targeted societies and their economic neighborhoods. For me, the interesting question is who benefits from the re-channeled economic activity shaped by sanctions. A lot of this happens across the Gulf, and is something we should be thinking about more carefully.
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