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Iran Adapts to Economic Pressure: Oil Market Could Help It Weather U.S. Sanctions

[Washington Post] Steven Mufson and Robin Wright - Confronted by mounting U.S. and UN pressure, Iran has been steadily shifting its trade from West to East and, with the benefit of record high oil prices, is likely to be able to withstand the new U.S. sanctions, according to U.S., European and Iranian analysts. China is expected to overtake Germany as Iran's biggest trading partner this year. The U.S. Treasury said that more than 40 banks, mostly in Europe, have curbed business with Iran as a result of U.S. pressure, but smaller banks, Islamic financial institutions and Asian banks are likely to step in and replace Western financial institutions. "Given particularly the price and demand for oil, Iran clearly has leverage with countries that need Iran's oil," said Shaul Bakhash, a George Mason University historian and author of The Reign of the Ayatollahs. In addition, he said, "Iran has a huge cushion of foreign-exchange reserves." On Friday, oil settled above $90 a barrel. Iran has also moved to protect its Achilles' heel - gasoline imports. The government has trimmed gasoline subsidies, which has curtailed consumption and smuggling, cutting imports of gasoline in half. Karim Sadjadpour, an associate at the Carnegie Endowment for International Peace, said: "These sanctions are not negligible, and they're not going to be pain-free for Iran. The question is: Will they be substantial and painful enough to change Iranian behavior? No, I don't think they will be."
2007-10-29 01:00:00
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