CYPRUS will come under US scrutiny if we succeed in our bid to entice Iranians to enter our international business and property sectors in a big way.
Washington has used sanctions in a largely unsuccessful attempt to contain the Islamic Republic for the best part of three decades, mostly recently aiming them specifically at Iran’s banking sector as a pressure point to curb Tehran’s nuclear ambitions.
Such concerns were swiftly addressed by Paschalides on his return from Tehran: the agreement he had signed was in line with European regulations, he said.
Nicosia will certainly keep to the letter and even spirit of the law on US and more recent United Nations sanctions against Iran, diplomats and analysts here say. Cyprus would not risk American displeasure or break EU ranks for the sake of some extra easy cash.
“And banking and financial regulations are much stricter here than in somewhere like Dubai because Cyprus has signed up to and applies strict EU regulations,” a Nicosia-based Middle Eastern economist told the Sunday Mail.
Dubai, home to some 450,000 Iranians, has long been the place where Iranians go to escape punitive American sanctions. As a result, the emirate has come under increasing pressure from Washington to crack down.
But sanctions – which have failed to curtail Iran’s nuclear programme – have always been a blunt instrument and are a cause of widespread resentment, including among ordinary Iranians with little affection for their leadership. Iran, for instance, has a high incidence of airline accidents with horrendous fatality rates which most Iranians blame on the US for banning the import of aircraft American-made spare parts.
US sanctions now are aimed primarily at crippling Iranian banks and corporations connected to the regime. But the policy also punishes small businesses owned by individual Iranians from their country’s small and struggling private sector. Often, like many of the Iranian businesses in Dubai, they have no political connections and are often at odds with their government.
In 2002 the EU opened negotiations for a Trade and Cooperation Agreement, which is the EU’s main means of establishing contractual relations with a third country. These negotiations have been on hold since August 2005, when Iran resumed its nuclear activities under its new President, Mahmoud Ahmadinejad.
This move prompted the US to begin pushing for fresh international sanctions against Iran, and resulted in three UN Security Council resolutions. The sanctions concentrated initially on banking restrictions and then were extended to the sale of equipment and technology related to nuclear activities, and to weapons and related material. Cyprus found itself in the international spotlight recently, when the merchant ship “Monchegorsk” was suspected of carrying weapons-related material from Iran prohibited under the UN resolutions.
The EU is Iran’s largest trading partner, accounting for around a third of its exports and around two-fifths of its imports. EU exports to Iran in 2007 reached €10 billion, mainly machinery and transport equipment (around half the total), manufactured goods and chemicals. Iran’s exports to the EU reached €13.8 billion in 2007, mainly oil and gas and energy-related products (around 90 per cent, the sixth-biggest supply of energy products to the EU), carpets, pistachios and caviar.
Although the trade relationship has significant growth potential, the ongoing question of Iran’s nuclear programme has had a serious negative impact on its development. EU exports to Iran declined by an average of about 10 per cent in 2006 and 2007 following the imposition of the UN sanctions.
The lack of formal bilateral trade relations and the fact that Iran is not a member of the World Trade Organisation has not greatly affected EU-Iran trade, since most of Iran’s exports are oil products, for which there is no import duty.
The EU, like the US, has both political and economic reasons to develop closer ties with Iran. One pressing reason is that the drop in EU trade with Iran since 2005 has been offset, almost euro for euro, by rising Chinese sales to Iran, undermining the sanctions. On the strategic level, Iran has the second largest gas reserves in the world (16 per cent of total world reserves), the third largest oil reserves (10 per cent) and holds a vital geostrategic position, with its own strong interests in adjacent areas like Central Asia.
Apart from the nuclear issue, there are three other main areas which in the past the EU has highlighted as potential hindrances to developing co-operation with Iran. Firstly, Iran’s support for Palestinian groups such as Hamas and Islamic Jihad, and Hezbollah in Lebanon. Secondly, the EU would want Iran to pursue a policy of economic liberalisation as a pre-condition for significant foreign investment. Finally, Iran’s record on human still gives cause for concern.
