The [...]]]> Cigarettes, Wrigley’s chewing gum, Louisiana hot sauce, weight-loss remedies, body-building equipment, and sports rehabilitation equipment. These are just some of the items which, thanks to a lengthy investigative article published by The New York Times, we now know are exempt from the “biting” sanctions which the Barack Obama administration has imposed against Iran.

The Times explains that:

Despite sanctions and trade embargoes, over the past decade the United States government has allowed American companies to do billions of dollars in business with Iran and other countries blacklisted as state sponsors of terrorism, an examination by The New York Times has found.

But Jo Becker, Ron Nixon and William Yong’s Times article never produces any evidence to suggest that trade with Iran — or any blacklisted country — has actually worked against U.S. interests of pressuring the Iranian leadership to end its alleged nuclear program.

Stuart Levey, the Obama administration’s Under Secretary for Terrorism and Financial Intelligence at Treasury, calls out the absurdity of the reporters’ forensic level interest in sanctions loopholes. He tells The Times that their focus “misses the forest for the trees.”

And the American Popcorn company defended itself against its decision to avail itself of sanctions loopholes.

Henry Lapidos, export manager for the American Pop Corn Company, acknowledged that calling the Jolly Time popcorn he sold in Sudan and Iran a humanitarian good was “pushing the envelope,” though he did give it a try. “It depends on how you look at it — popcorn has fibers, which are helpful to the digestive system,” he explained, before switching to a different tack. “What’s the harm?” he asked, adding that he didn’t think Iranian soldiers “would be taking microwavable popcorn” to war.

The reporters didn’t find any solid evidence that the sanctions loopholes had directly helped either the Iranian nuclear program or the Iranian Republican Guard Corps (IRGC). But they did track down details of how a medical-waste disposal plant in Honolulu may have exerted political influence to gain an exception for its contract for 200 graphite electrodes from a Chinese government-owned company which had been penalized for providing missile technology to Pakistan and Iran.

The Times put a lot of effort into proving, once again, that people in capitalist societies have an incentive, and some would say a responsibility, to seek access to foreign markets. None of the companies listed in the article are exporting weapons to Iran or North Korea, an activity that might be of legitimate concern to U.S. national interests.  Instead, they were participating in free trade. Iran, an active member of the global economy whether the West likes it or not, presents a desirable market for U.S. companies wishing to export products.

While The Times is quick to portray this trade in a negative light — they failed to mention that Israel, a country whose leadership has repeatedly called Iran an “existential threat” continues to import Iranian marble. So the main takeaway from the article appears to be that U.S. companies have no particular desire to curtail their foreign trade with Iran.

The ongoing lesson of the attempts to impose sanctions on Iran are that Iran is more than capable of substituting its Western trade relationships with trade from South America, Africa and Asia, and that no one outside of a small community of Iran-hawks and sanctions architects appear very concerned about the limited trade between the U.S. and Iran.

Perhaps this ongoing trade with Iran is a function of participating in a globalized economy. Sanctions are simply more difficult to implement and nearly impossible to enforce in an increasingly interconnected global trading system.

Levey has served as the chief architect of U.S. sanctions policy under both [...]]]> Flynt and Hillary Mann Leveretts’ blog, The Race For Iran, has had some excellent reflections on the recent Charlie Rose interview with Stuart Levey, Undersecretary of the Treasury for Financial and Terrorism Intelligence. (The full interview can  be viewed here.)

Levey has served as the chief architect of U.S. sanctions policy under both George W. Bush and Barack Obama. The Leveretts blast the U.S. sanctions as “profoundly dysfunctional”, where Levey considers they can work at both formal and informal levels.  While the formal level has proscribed categories of prohibited activities, the “informal level” of sanctions enforcement—deterring banks and businesses from doing business with Iran out of a concern over “reputational risk”– can limit trade in ways that formal sanctions are unable.

Their October 7^th blog post concludes:

The interview underscores just how profoundly dysfunctional U.S. sanctions policies are.  We have criticized sanctions as being futile and counterproductive, in that America’s continued resort to multilateral and unilateral sanctions against Iran undermines whatever credibility U.S. offers of “engagement” might otherwise have.  But, the Levey interview makes clear that the damaging effects of sanctions go beyond even this.  Levey says that sanctions are meant to press Iran to engage in serious diplomacy witht the United States and the international community.  But, he has, in effect, created a sanctions policy which will be very difficult for the United States to walk back, even as part of a process of negotiation and prospective rapprochement.  We suspect that this is precisely what Levey intends.  That President-elect Obama moved so rapidly to retain Levey was a sad indicator of how internally contradictory and incoherent the Obama Administration’s Iran policy would turn out to be.

The Leveretts are correct to point out the Obama administration is painting itself in to a potentially difficult corner. Hooman Majd’s Washington Post blog post last week, as discussed here on LobeLog and on The Race For Iran, outlined the cultural and historical reasons why a confrontational sanctions policy is not likely to force Iran to give up its nuclear program.

The Leveretts’ and Majd’s insights into Iranian history and political trends are useful prisms for understanding the relative effectiveness of U.S. sanctions policy. However, it is important to examine the impact  sanctions will have on U.S. trading relationships and bilateral relationships if, as some Iran-hawks have suggested, the United States should demand total conformity to sanctions from large, and notoriously independent, countries such as Russia and China.

As the extent to which sanctions are intended to “bite” or “cripple” the Iranian economy grows, so too do the challenges of holding other countries to the sanctions regime. Last week’s announcement by South Korea–a country which has a historically far closer relationship with the U.S. than China or Russia–that it will find new ways to finance trade with Iran is just another example of  the challenges facing Stuart Levey and the sanctions regime which he is piloting.