How can you measure a country’s power?
I mean its ability to impose its will over other countries.
We could measure their GDP, their economic growth or the size of their army.
But I have another idea.
The best way of showing your power is forcing other countries as large as yours to make
a big sacrifice.
Something that goes against their will but that they’ll do just because you want them
to.
Well… this is what Trump is trying to do with the European Union.
And what is this big sacrifice he wants the Europeans to make?
Easy: cut their ties with the Islamic Republic of Iran.
But… is it really that big of a sacrifice?
And most importantly…
Can he win this bet?
Well, we’ll answer those questions in this video.
Iran is a country famous for all of those independent movies you say you liked but…
actually you haven’t even watched.
But there is something even more important to Iran’s economy: automobiles.
Yes, my dear viewers, Iran is one of the biggest car manufacturers in all of the Middle East.
Yes, I know what you’re thinking…
Iran?
That’s a… developing country, isn’t it?
They are… virtually isolated… aren’t they?
But surprised as you might be, they even have their own brands.
For example, this car you see here is the KHODRO SAMAND, a sedan that is sold in Iran,
Azerbaijan, Russia and…
Venezuela!
OK, don’t expect anything amazing.
The engines are old and the manufacturer has a lot to improve.
But look, what can you expect for 7000 USD?
Yes,this is its price.
Can you imagine what would happen if we improved it a bit
with modern technology?
Such a cheap sedan could sell like crazy in many developing markets.
And this is why, since 2015, when most of Iran’s sanctions were lifted, many European
companies started investing in the country.
Renault to enter new joint venture in Iran
Peugeot-Citroen back on the road in Iran with deal to build cars
But there is way more than cars here!
You see, the Iranian stock market has a market capitalization 3 times bigger than the Egyptian
one.
And they have all kinds of companies.
Unlike other oil rich countries in the region, Iran’s economy is surprisingly diversified:
banks, mining companies and even telecoms.
And this has attracted other European companies too.
Vodafone marks entry into Iran with HiWEB partnership
If this wasn’t enough, Iran has a well educated population.
The literacy rate is way higher than that of Syria, Iraq and many other neighbouring
countries.
More than 4 million citizens study or have studied at a University.
And this means a well trained workforce that can work for lower wages.
Add to this the fact that the country has over 80 million people and you have a great
destination for investments.
Nonetheless, this wave of European money has just stopped all of a sudden.
Trump: US will 'absolutely' sanction European companies that do business with Iran
But wait a minute!
Let’s see…
Donald Trump is the American president, right?
He can make rules for American companies but… the European ones?
How can he impose his rules over countries he doesn’t govern?
Well, today we will answer these questions but before we do, let’s take a look back
at history.
A LEGAL DUEL
In March 2018, ZTE, a Chinese phone manufacturer, had to pay a 1 billion fine to the US.
Why?
They imported microchips from America and sold them to Iran.
The White House saw it and said…
(((PRETEND TO BE OFFENDED/PASSIVE AGGRESSIVE)))
‘Aha!
So… doing business with the baddies, huh?
So now you gotta choose, you pay a crazy fine or…
I won’t let you sell your stuff in my country’.
Not selling in America, the World’s richest country, is just not an option.
So ZTE was willing to pay anything in order to stay in the market.
And the same is happening with many other companies.
But as we said, European companies started doing Business with Iran since 2015.
And we aren’t talking about buying oil here, but investments of all kinds.
This is why, as soon as Trump passed new sanctions, the EU confronted him.
Europe requests exemptions from Trump's Iran sanctions for energy, aviation and more
Basically, European leaders wrote a letter to the White House asking America to respect
their economic interests.
As you know, Trump is no big fan of the European Union.
So you can imagine his answer.
This is why in August 2018, the European Union took action.
It was…time… for…
Regulation 2271/96
What?
Oh… wait a minute… you don’t know what regulation 2271/96 is all about?
Oh don’t worry!
No problem!
That’s what I’m here for!
You see, Regulation 2271/96 is something like a legal shield against trade wars.
For example: let’s say CHEVROLET discovers that RENAULT has a factory on Iranian soil.
They could take the French company to an American court that would make them pay a fine.
Well… in that very same moment, the European Union would impose an equivalent fine to Chevrolet.
But this is not the end of the story!
Say RENAULT says… ‘oomph…
I think I’ll leave Iran anyway, there’s too much trouble here!’
Well… in that case, the European Union could also fine the company because, technically,
they are complying with Washington’s sanctions.
In other words, all the companies doing business with Iran are in dire straits.
If they stay, Washington will screw them.
If they leave, Brussels will screw them.
This is a political duel.
Who is more powerful?
Who do the European companies prefer to be screwed by?
Well… now we’ll see.
REALITY CHECK
I’m sure all of you have made an International transfer at some point.
Let’s say you live in Canada and you need to get paid by an Australian company.
When you do the invoice, you don’t give your normal bank account, right?
Instead, you give a very long number with some letters.
Something like this.
IMAGEN DE UN CÓDIGO SWIFT RZBCCZPPXXX
Well, these letters are the so called SWIFT code.
The SWIFT system is what we use for international transfers.
It’s a network that connects all of the World’s banks.
For years, Iran was disconnected from this network.
This means that even if you wanted to do business with them… you just couldn’t!
How can you do business with somebody you can’t transfer money to?
Of course, you can send money in a briefcase but… it’s not very convenient.
In 2015, when the nuclear deal was signed, Iran returned to the SWIFT system.
And this was the moment when Iran could go back to the international business scene.
And now you might wonder…
Who controls this SWIFT system?
Well… you guessed it!
A company called SWIFT!!!
Society for Worldwide Interbank Financial Transactions.
And guess where they have their headquarters!
Yeah, you guessed it!
In Brussels, Europe.
So yes, I know what you’re thinking now… if all the international transactions are
managed in Europe, then America doesn’t have to do much to avoid business with Iran,
right?
Wrong!
You see, SWIFT is a cooperative society.
That means all the important decisions are made by a board of managers with 25 representatives
from the most important banks.
And inside of this board of managers there are two Americans.
One is from CITY BANK and another is from J.P. MORGAN.
And these two representatives will have to pay crazy fines if they cannot convince their
colleagues to disconnect Iran from the SWIFT system.
If this happened, Iran would be isolated from the International market.
If you can’t make transactions, you can’t do business.
It’s that simple.
This is such an important matter that the European Union is already trying to come up
with an alternative system for international transactions.
Something like a modern day barter system.
They call it SPV or Special Purpose Vehicle.
The idea is, instead of exchanging goods for Money, Europe wants to pay with credits over
other goods.
For example, let’s say REPSOL, a Spanish company, wants to buy oil from Iran.
Well, instead of paying with cash, they could pay with an equivalent sum in machinery.
Can something like this work?
Well, only time can tell.
But… let’s assume it does.
Let’s say that companies start using this SPV system to trade with Iran.
Let’s go back to the REPSOL example.
This dinosaur juice they just bought has to arrive somehow, right?
Somebody has to transport it on a tanker to Barcelona’s harbour.
Well…
most of the oil tankers on the planet are managed by a Danish company called MAERSK.
Yes, I know, Denmark is in Europe.
But… guess what!
No harbour would accept an oil ship if it’s not insured.
And it turns out most of the insurance companies that work with oil tankers are American or
have a lot of interests in America.
Which explains news like this.
Shipping giant Maersk to abandon Iran as threat of sanctions grows
Other countries like China have already found alternatives.
They have enough at stake to convince them to do everything they can to keep oil supplies
coming in from Iran.
It’s their 6th largest provider.
7% of their dino juice imports come from Tehran.
But Europe is a different animal.
In their case, Iran isn’t important enough to risk so much on this.
In other words, if Europe wanted to keep buying crude oil from Iran… they would have to
find: one, new transport companies, two, new insurance companies and three, they would
have to use…….
BARTERING?
OK, look… just about anything is possible.
But so far, it seems that America and Donald Trump is winning this match against the European
Union.
And all of this has many consequences.
On a previous video, we talked about what is happening with the international oil markets.
In the following weeks, we will talk about what could happen to the Iranian regime.
Meanwhile, the big question is…
Can these sanctions end the Iranian regime?
How much can oil prices go up?
You can write me your theories and, in the following days, we’ll see if they match
with ours.
Meanwhile, visit the RECONSIDER MEDIA website: the podcast that provided the voices in this
episode that were not mine.
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