Shares of UK bank Standard Chartered (SCBFF) plunged Tuesday - one day after the New York State Department of Financial Services accused the London-based bank of being involved in laundering money for Iran.
In FORTUNE magazine's latest edition, CNN's Erin Burnett discusses why harsh economic sanctions by the U.S. against Iran won't have its intended effect unless nations stop doing business with Iran.
Washington gets tough on Iran (sometimes)
The U.S. and Europe are implementing the toughest sanctions yet on Iran to stop its leaders from developing nuclear weapons. The measures have succeeded in making life harder for regular Iranians; according to Iranian news sources, milk prices are rising daily, and citizens boycotted bakeries and grocery stores in protest in June.
As difficult as sanctions have made life for Iranians, they could be tougher and more effective. That's because the U.S. government, the leader of the international sanctions program, is applying its policies inconsistently. First are the exemptions that the State Department granted to the top three buyers of Iranian oil: China, Japan, and India. If the U.S. really wanted to apply pressure on President Mahmoud Ahmadinejad's nuclear program, it could insist that China, Japan, and India cease all oil imports (oil is the lifeblood of Iran's economy, accounting for 80% of Iranian foreign-exchange earnings - and China alone buys half of Iran's crude exports) and pledge to deny those countries access to U.S. banks if they don't comply. The U.S. already bars Cuba from tapping our financial system, for example, but Havana, unlike Beijing, doesn't own $1.17 trillion of U.S. debt. And so our diplomats praise China, Japan, and India for merely reducing their dependence on Iranian oil imports and look the other way.