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June 29th, 2012
08:00 PM ET

Iranian sanctions filled with loopholes, exemptions

This is supposed to be a breakthrough weekend – the toughest sanctions in HISTORY set to take affect against Iran, as Europe will finally stop buying Iranian oil.

The goal is to cripple Iran's oil-based economy (80% of the iranian government's export revenues) and force the government to end its nuclear program.

Losing that money is hurting. Officially, inflation in Iran is 22 percent. But a source tells OutFront it may be more than 50 percent. Things have gotten so bad that the $39 monthly government subsidy to help Iranians buy food has been scaled back due to a shortage of cash.

So sanctions are working, there's no question. But not nearly as much as they could. Because the problem is that the sanctions just don't add up.

First, the US gave an exemption to China. Yes, China is allowed to buy Iranian oil and still access the American financial system. And yes, China is the single biggest buyer of Iranian oil, even though they've cut imports under US pressure.

In fact, we've exempted all three of the top three buyers of Iranian oil: China, Japan, and India. The State Department made this decision, no one else did.

Second issue? Enter, Samsung. When Erin was in Iran 18 months ago, the Korean electronics giant had a store in a mall she visited. We confirmed that store was a legit Samsung store, not a counterfeit. And all the televisions in hotel rooms, homes, stores, were Samsung.

Samsung operates openly in Iran. It confirmed to OutFront that it has stores and sells smartphones, printers, cameras, televisions, and other electronics.

This isn't Samsung's fault. This is totally legal and above board – we want to emphasize that. The issue is with the United States government. While the US was putting the harshest sanctions in history on Iran, it signed a free trade deal with Samsung's home country, South Korea.

It was the biggest free trade deal for America, since NAFTA. South Korea got preferential access to US markets, and in exchange, the US did not demand Korean companies choose between doing business in the US or Iran.

And so Samsung, Hyundai, KIA...keep selling in Iran. Get ready for this. Iranian imports from South Korea surged 49% in the first 3 months of this year according to Reuters, which also notes that 2000 South Korean companies do business in Iran.

You'd think that if the US wanted to get the world on board with sanctions, it would use its powerful financial leverage. Something along the lines of "we'll sign a free trade deal with you, South Korea, if you cut your ties to Iran."

SEE THE ACCOMPANYING INTERVIEW WITH DAVID COHEN, AMERICA'S "SANCTION CZAR." 


Filed under: China • Economy • International • Iran • Military
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