US Economic Warfare #2: Mafia Diplomacy

By 2006, the US could see that sanctions against Iran weren’t working. That’s when an American civil servant named Stuart Levey realized the US “can leverage the dollar’s role in global financial flows”, says Jordan Schneider’s interview with Eddie Fishman. What does that mean?

 

The US began to threaten banks – stop transactions with Iran or you won’t be allowed to trade in the US dollar. This threat worked with most banks. Why? Because the dollar is the international currency of commerce; and not having access to it would lock a bank out of any international transactions.

 

Notice how it is a unilateral tool? America was using its status as the international currency as a stick (obey us or else you can’t do any transactions using the US dollar).

 

When Obama was President, a lot of members of Congress worried he was too soft on Iran (He’d campaigned saying diplomacy was the way forward with Iran). To thwart Obama, Congress passed many legislations wrt sanctions on Iran. The most important one was something called “secondary sanctions”:

“That’s not sanctions directly on Iran, but sanctions on Iran’s business partners.”

Anyone trading with Iran could now be threatened with US sanctions.

 

Many countries resented this form of mafia diplomacy, but ultimately:

“When the choice is between Iran and the United States dollar, it’s a pretty easy choice for most banks around the world.”

America had found/created a new weapon – “conscripting banks to be frontline infantry of American economic wars”.

 

Such secondary sanctions and mafia diplomacy proved enormously more effective than UN based sanctions, esp. in Iran. While designed for Iran, the US realized the same technique allowed America to impose unilateral sanctions and cripple (or threaten to cripple) more and more countries.

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