[NYTr] Condi vs Dick: Is China the Real Target of Iran Sanctions?

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Counterpunch - Sep 26, 2007
http://www.counterpunch.org/china09252007.html

It's Condi vs. Dick

Is China the True Target of Financial Sanctions Against Iran?

By CHINA HAND

Those with long memories -- that go back, say, three months -- will
remember the last time the U.S. Treasury Department tried to bend an
Axis of Evil member to its will through targeted financial sanctions.

Failure was the outcome.

Now the United States is trying for a do-over with Iran and, though the
techniques-particularly for handling China-may be more sophisticated,
I'm afraid the result will be the same.

As I have amply reported, Stuart Levey's Office of Terrorism and
Financial Intelligence repurposed Patriot Act Section 311
investigations away from their intended goal of perfecting the
international anti-money laundering regime to attacks on the quite
possibly legitimate assets of geopolitical targets and-something that
got surprisingly short shrift from the international press-the assets
and businesses of allies and neutrals who did not share the necessary
enthusiasm for our strategic goals.

The previous intended victim of ad hoc financial sanctions secretly
coordinated by the United States outside of the U.N. sanctions regime
was supposed to be North Korea.

The whole effort imploded messily when sanctions endorsed piecemeal by
Japan, Australia, and a few other countries -- but not China or
Russia -- failed to do anything except encourage Pyongyang to accelerate
its development of a nuclear deterrent.

The flagship enterprise of US financial sanctions -- the two-year
Patriot Act Section 311 investigation of Banco Delta Asia in
Macau -- collapsed when the State Department abandoned the BDA
allegations, which stood revealed as an embarrassing farrago of
cherrypicking, chestthumping, and cynical innuendo.

Even so, it took four agonizing months to get a recalcitrant Treasury
Department to acquiesce to an unfreezing of the North Korean funds in
BDA, even though the investigation could have been terminated and its
measures rescinded overnight by a decision from Treasury.

At the time I speculated that the only reason for all this melodrama
was to preserve Patriot Act Section 311 investigations' aura of
unilateral, unstoppable, and irreversible menace for the purpose of
maintaining their credibility and intimidating power in the case of
Iran.

Judging from the recent spate of articles in McClatchy and the
Telegraph touting the purported successes of the somewhat secret
financial war against Iran, I think I'm right.

But this time there's a difference.

In 2005/2006 the North Korea effort was hijacked by regime-change
hardliners typified by John Bolton, who sought to destroy Kim Jung Il's
regime by cutting off the flow of foreign exchange that they believed
was vital to Kim to purchase the loyalty of his generals.

The only way to achieve a complete financial blockade was to obtain the
cooperation of Beijing.

The hardline approach to the China issue was predictable, less than
subtle, and completely ineffective.

The State Department's point man for the anti-Nork effort at that time,
David Asher, stated that the purpose of the move against BDA was to
intimidate Chinese banks handling North Korean funds with the threat of
being cut off from the US financial markets as BDA had been-"to kill
the monkey in order to scare the chickens", in Mr. Asher's immortal
phrase.

The Chinese didn't capitulate...and it turned out that the Bush
administration was not interested in playing chicken with the Chinese
over the fate of the world financial system, and did not sanction a
further attack on Chinese banks.

So nothing was achieved except alarming and irritating the Chinese
-- and, oh yes, the North Koreans detonated a nuclear bomb and the
sanctions regime fell apart.

However, it appears that U.S. policymakers haven't drawn the lesson
that coerced multilateralism is not only ineffective, it is
counterproductive and, actually, a bad idea.

In fact, the Bush administration, that motherlode of bad ideas,
apparently believes there are no bad ideas -- only bad execution.

So on to Iran.

And this time it's personal!

No, not Bush vs. Ahmadinejad.

Condi vs. Dick!

I think that this time Condi Rice has taken on the challenge of showing
that she can do extra-UN unilaterally directed financial sanctions
smarter, better, and more effectively than John Bolton, Vice President
Cheney's bespoke cat's paw -- and, in a high risk maneuver, she has
staked the success of the diplomatic track in confronting Iran on
showing results from the financial embargo.

Condi probably believes she has the acumen to enmesh China in our
financial sanctions regime and persuade Beijing to abandon its support
of Iran in the UN Security Council.

People who pay attention to the Iran sanctions regime have noted that
pressuring European and Japanese banks to cease transactions with
Iranian entities have simply pushed the business into China's and
Russia's hands.

As Warren Strobel wrote for McClatchy:

Yet in some cases, when Western companies and banks move out of Iran,
Chinese or other Asian firms simply move in and take the business.

And if we were dealing with the same reckless enthusiasts who
controlled foreign policy in 2005-06, that self-defeating outcome would
probably be the end of it.

But I give Condoleezza Rice and Stuart Levey more credit than that.

They're smarter, and they also have the experience of the North Korea
debacle to instruct them.

This time their menace is somewhat silken, in fact inchoate, compared
with the full-bore frothing that characterized the anti-North Korea
effort. From McClatchy:

"The financial war began in earnest a year ago, when Treasury
Department teams began briefing foreign governments and banks on
intelligence the U.S. government had gathered on Iran. Among the
findings was that the Central Bank of Iran was trying to conceal its
role in financial transactions in which it was involved, a practice on
which banks look askance, said the senior Treasury official.

"That's just as suspicious as it sounds," he said."

Huh?

Compare that to the incendiary accusations against Kim Jung Il used to
justify the North Korea financial embargo. The Evil Dwarf of Pyongyang
was accused of running a Soprano State, raping our currency with his
vile Supernotes, peddling fake Viagra and phony smokes, and ruthlessly
trafficking in forbidden rhino horn. Efforts were made to shut down any
access by any North Korean entity to any bank anywhere, apparently on
pretty flimsy pretexts in some cases.

Let's assume that subtlety, stronger dossiers, and a more incremental
approach to chipping away at Iran's access to the world's financial
system is going on today.

Anyway.

My speculation is this:

The U.S. isn't threatening China directly this time.

Instead we are seeking to assemble a coalition of willing and coerced
European and Asian partners to present China with a united front.

The next step in isolating Iran will be to have the European and
Japanese banks go to China and tell Beijing they can't risk doing
business with Chinese banks if there is any fear of Iranian
taint -- because the US government is threatening to land on them like a
ton of bricks.

So the Chinese had better decide whether they want to continue to do
business with fine, enormous banks like UBS, HSBC, and Deutsche Bank
(who have already severed Iran ties, probably under U.S. pressure)-- not
to mention all those US banks required under US law not to handle
Iranian business -- or do they want to risk it for the sake of creepy
little Iran?

Better to back off and back the harsher U.N. Security Council sanctions
the U.S. is now attempting to orchestrate.

I'm sure that Condi Rice is working the diplomatic channels as well,
telling the Chinese as well as a Beltway journalist or two that success
of her financial sanctions strategy is the only thing that stands
between the world and another Dick Cheney-perpetrated military outrage
in the Middle East.

That, I think, would be a futile and dangerous game for Secretary Rice
to play.

For the United States, which prior to 9/11 had not witnessed a large
scale hostile foreign action on its soil since Pearl Harbor, is used to
dishing out violence, not taking it in.

War in the homeland is an existential catastrophe and a terrifying
journey into an unknown territory of fear, confusion, self-doubt, and
danger.

Countries like China and Iran, on the other hand, have living memories
of numerous battles within their boundaries that claimed hundreds of
thousands of lives

A brief review of the "Forgotten Gulf War"in the 1980s (Iraqi
aggression, 8 years, 500,000+ Iranian casualties, chemical warfare,
missile attacks on Teheran) and the Chinese Anti-Japanese War (Japanese
aggression, 8 years, 19 million Chinese fatalities, total war against
civilians in some areas) might provide some useful perspective for our
policymakers.

To countries like Iran and China, war is catastrophic and terrible --
but sometimes it is unavoidable and often it is survivable.

That means that the clocks don't stop and the world doesn't end when
the first bomb falls.

It means victims and bystanders start thinking about the post-battle
challenges -- and opportunities -- before they occur.

Does Beijing want to permanently alienate the Iranians by going along
with a US financial embargo and sanctions regime?

Or does it want to be the steadfast ally who extends a helping
humanitarian, economic, and diplomatic hand to the enraged Iranians as
they dig out of the rubble of the attack?

I wouldn't bet on the first option, Condi.

Hopefully she has another plan to forestall a military attack if the
financial sanctions campaign recapitulates its North Korean failure.
Like engagement, maybe?

But it doesn't look like the debate has been framed that way.
McClatchy, again:

    "More broadly, nations from Cuba to Myanmar have managed to survive
under economic assault, manipulating sanctions to blame outside forces
and rally support from their people.

    "Another obstacle is here at home, where Secretary of State
Condoleezza Rice faces stiff opposition from hard-liners led by Cheney.
The Cheney camp argues that diplomacy and pressure are doomed to fail
to stop Iran from going nuclear."

So, in response to a potential weaponization of Iranian nuclear assets
that will occur, if ever, years after the Bush administration leaves
office, we've got a false choice between a sanctions policy that failed
against North Korea, and an aggressive military strategy that failed in
Iraq.

Remind me, what are we paying these people for?

As a P.S., I realize I haven't addressed the issue of addressing
Russian intransigence on Iran.

"Russia is hiding behind China" is the current administration meme,
which I don't find a particularly persuasive piece of wishful thinking.

It would seem that the U.S. strategy is to peel China away from Iran
and hope that Russia has no stomach for standing alone in the Security
Council to defend Teheran's nuclear program.

Good luck with that. I think that the increasingly assertive Russians
are less interested than ever in dancing the diplomatic quadrille with
the United States.


[China Hand edits the very interesting website China Matters
at http://chinamatters.blogspot.com/ ]