Press "Enter" to skip to content

Posts published in “Day: May 16, 2018”

Eye on the ball


There is no end to the awfulness emanating from the Whitehouse. Even when Trump is right, he manages to make it wrong just by the clumsy, crass manner decisions are being implemented. Consider:

Trump pulled the U.S. out of the Iranian nuclear deal for no good reason, announcing that he intended to reimpose economic sanctions. The international political problems of this move are monumental. But the economics of Trump’s actions are going to present some fascinating opportunities that no one is paying attention to, yet.

By definition, economic sanctions are two-way streets, meaning there are significant economic costs to both the imposing nation and the nation being punished that are functionally equal. It is one thing to impose economic sanctions on a targeted nation as part of a multinational plan where all the allies agree to join in; the cost of the policing action is shared among all the participating nations. But what of unilateral sanctions that are attempted by the United States alone, when the allies do not join in? Trump has announced that he will impose unilateral sanctions upon any company from any friendly country caught dealing with the Iranians.

Exactly how does Trump expect this move to go over with our allies? Or at home? All of our allies in Europe seem determined to keep the Iran deal alive. They have announced a nine-point economic plan to rescue the pact. Although no details are available yet, stripped of the diplomatic trappings the clear intent here has to be for Europe to provide Iran with a means of working around any U.S. sanctions. As this plot begins to thicken, the possibilities multiply. For anyone with inside knowledge and a willingness to bend the rules or take advantage of circumstances, there is money to be made on both ends of any sanction situation.

Take a look at what is happening in the other half of the world. The U.S. Department of Commerce announced a series of economic sanctions against a giant computer electronics manufacturer in China commonly known as ZTE. This outfit has been selling computer equipment to all the countries on the forbidden lists – Iran, North Korea, Syria, Sudan, etc. – for years, and had already paid huge penalties imposed by the world court Then it was revealed that ZTE puts out cell phones with secret devices to capture data that is transmitted to intelligence gathering facilities in China – raising the specter of national security. As a current sanction imposed just by the U.S., ZTE was forbidden to do business with any U.S. resource for a period of seven years.

ZTE immediately began cutting back its operations, which involved cancelling billions of dollars of orders from parts manufacturers in the United States, causing panic and predicted huge losses here. According to the N.Y. Times, it is estimated that 4/5ths of ZTE’s high-tech parts come from U.S. sources. Imposition of the sanctions would result in staggering losses to some U.S. suppliers

So, Trump reversed course and announced that he will step in to help out with ZTE – presumably to lighten the sanctions and thereby save the Chinese company’s bacon. The move was announced as a measure to bring relief to the U.S. suppliers notwithstanding the national security concerns.

Then it was revealed that Trump’s U-turn on ZTE came right on the heels of the announcement of a $500 million investment by China into one of Trump’s golf course and hotel operations in Indonesia. Obviously, the Whitehouse promptly gushed, just a serendipitous coincidence.

Yeah, right. Isn’t it more likely that this fiasco means that unilateral imposition of sanctions on friendly companies in other instances will come with caveats and exceptions and back-doors so that, in the long run, all these deals can turn into one-offs that depend upon pragmatic measurement of the economic turmoil brought upon the related countries, including the U.S?

Since it looks like there might be huge bucks to be made here, why not? U.S. unilateral sanctions can easily be turned into a political morass, with corruption, influence pedaling, pay for play and every other ill that might befall. All anyone has to look at to understand the fortunes that might be at play here are the millions of dollars that Michael Cohen amassed from a handful of gullible companies for absolutely nothing. What are the odds that a substantial part of this money did not find its way into one of Trump’s pockets? Is there anyone about who actually believes that Trump and his minions will resist the opportunities that are going to spring up in the Iran business, once the spinning begins in earnest?

Let us just try to keep our eye on the ball here.