Is Bush planning an attack on Iran in March?

[Mark Stapleton]

6 Signs the U.S. May Be Headed for War in Iran

by Terry Atlas

Global Research, March 12, 2008

U.S. News & World Report - 2008-03-11

This report by the US mainstream press suggests in no uncertain terms that the US is heading for war with Iran and that opposition within the US high command has been significantly weakened with the forced resignation of Admiral William Fallon.

Is the United States moving toward military action with Iran?

The resignation of the top U.S. military commander for the Middle East is setting off alarms that the Bush administration is intent on using military force to stop Iran's moves toward gaining nuclear weapons. In announcing his sudden resignation today following a report on his views in Esquire, Adm. William Fallon didn't directly deny that he differs with President Bush over at least some aspects of the president's policy on Iran. For his part, Defense Secretary Robert Gates said it is "ridiculous" to think that the departure of Fallon -- whose Central Command has been working on contingency plans for strikes on Iran as well as overseeing Iraq -- signals that the United States is planning to go to war with Iran.

Fallon's resignation, ending a 41-year Navy career, has reignited the buzz of speculation over what the Bush administration intends to do given that its troubled, sluggish diplomatic effort has failed to slow Iran's nuclear advances. Those activities include the advancing process of uranium enrichment, a key step to producing the material necessary to fuel a bomb, though the Iranians assert the work is to produce nuclear fuel for civilian power reactors, not weapons.

Here are six developments that may have Iran as a common thread. And, if it comes to war, they may be seen as clues as to what was planned. None of them is conclusive, and each has a credible non-Iran related explanation:

1. Fallon's resignation: With the Army fully engaged in Iraq, much of the contingency planning for possible military action has fallen to the Navy, which has looked at the use of carrier-based warplanes and sea-launched missiles as the weapons to destroy Iran's air defenses and nuclear infrastructure. Centcom commands the U.S. naval forces in and near the Persian Gulf. In the aftermath of the problems with the Iraq war, there has been much discussion within the military that senior military officers should have resigned at the time when they disagreed with the White House.

2. Vice President Cheney's peace trip: Cheney, who is seen as a leading hawk on Iran, is going on what is described as a Mideast trip to try to give a boost to stalled Israeli-Palestinian peace talks. But he has also scheduled two other stops: One, Oman, is a key military ally and logistics hub for military operations in the Persian Gulf. It also faces Iran across the narrow, vital Strait of Hormuz, the vulnerable oil transit chokepoint into and out of the Persian Gulf that Iran has threatened to blockade in the event of war. Cheney is also going to Saudi Arabia, whose support would be sought before any military action given its ability to increase oil supplies if Iran's oil is cut off. Back in March 2002, Cheney made a high-profile Mideast trip to Saudi Arabia and other nations that officials said at the time was about diplomacy toward Iraq and not war, which began a year later.

3. Israeli airstrike on Syria: Israel's airstrike deep in Syria last October was reported to have targeted a nuclear-related facility, but details have remained sketchy and some experts have been skeptical that Syria had a covert nuclear program. An alternative scenario floating in Israel and Lebanon is that the real purpose of the strike was to force Syria to switch on the targeting electronics for newly received Russian anti-aircraft defenses. The location of the strike is seen as on a likely flight path to Iran (also crossing the friendly Kurdish-controlled Northern Iraq), and knowing the electronic signatures of the defensive systems is necessary to reduce the risks for warplanes heading to targets in Iran.

4. Warships off Lebanon: Two U.S. warships took up positions off Lebanon earlier this month, replacing the USS Cole. The deployment was said to signal U.S. concern over the political stalemate in Lebanon and the influence of Syria in that country. But the United States also would want its warships in the eastern Mediterranean in the event of military action against Iran to keep Iranian ally Syria in check and to help provide air cover to Israel against Iranian missile reprisals. One of the newly deployed ships, the USS Ross, is an Aegis guided missile destroyer, a top system for defense against air attacks.

5. Israeli comments: Israeli President Shimon Peres said earlier this month that Israel will not consider unilateral action to stop Iran from getting a nuclear bomb. In the past, though, Israeli officials have quite consistently said they were prepared to act alone -- if that becomes necessary -- to ensure that Iran does not cross a nuclear weapons threshold. Was Peres speaking for himself, or has President Bush given the Israelis an assurance that they won't have to act alone?

6.Israel's war with Hezbollah: While this seems a bit old, Israel's July 2006 war in Lebanon against Iranian-backed Hezbollah forces was seen at the time as a step that Israel would want to take if it anticipated a clash with Iran. The radical Shiite group is seen not only as a threat on it own but also as a possible Iranian surrogate force in the event of war with Iran. So it was important for Israel to push Hezbollah forces back from their positions on Lebanon's border with Israel and to do enough damage to Hezbollah's Iranian-supplied arsenals to reduce its capabilities. Since then, Hezbollah has been able to rearm, though a United Nations force polices a border area buffer zone in southern Lebanon.

Defense Secretary Gates said that Fallon, 63, asked for permission to retire. Gates said that the decision, effective March 31, was entirely Fallon's and that Gates believed it was "the right thing to do." In Esquire, an article on Fallon portrayed him as opposed to President Bush's Iran policy and said he was a lone voice against taking military action to stop the Iranian nuclear program. In his statement, Fallon said he agreed with the president's "policy objectives" but was silent on whether he opposed aspects of the president's plans. "Recent press reports suggesting a disconnect between my views and the president's policy objectives have become a distraction at a critical time and hamper efforts in the Centcom region," Fallon, said in the statement issued by Centcom headquarters in Tampa, Fla. "And although I don't believe there have ever been any differences about the objectives of our policy in the Central Command area of responsibility, the simple perception that there is makes it difficult for me to effectively serve America's interests there," he said. Gates announced that Fallon's top deputy, Army Lt. Gen. Martin Dempsey, will take over temporarily when Fallon leaves. A permanent successor, requiring nomination by the president and confirmation by the Senate, might not be designated in the near term.

It's ominous. I think another reason can be added, Peter. America's economic troubles will soon have the public asking questions about extravagant military spending. So they might seek to remind the public of their value with an impressive demonstration.

Edited March 16, 2008 by Mark Stapleton

[Len Colby]

Like one of the villagers from the town in “The Boy Who Cried Wolf” after hearing for the last two years an attack was imminent I’m a bit skeptical. Perhaps as in the parable one day I’ll be proven wrong, hopefully not. Ironically Fallon’s appointment was also supposedly a sign of an imminent invasion. It was argued that the only reason for appointing an admiral to command US forces in the region was if a major naval operation was planned.

[Douglas Caddy]

Like one of the villagers from the town in “The Boy Who Cried Wolf” after hearing for the last two years an attack was imminent I’m a bit skeptical. Perhaps as in the parable one day I’ll be proven wrong, hopefully not. Ironically Fallon’s appointment was also supposedly a sign of an imminent invasion. It was argued that the only reason for appointing an admiral to command US forces in the region was if a major naval operation was planned.

Operation Cassandra

by William S. Lind

www.lewrockwell.com

March 26, 2008

Admiral Fallon's (forced?) resignation was the last warning we are likely to get of an attack on Iran. It does not mean an attack is certain, but the U.S. could not attack Iran so long as he was the CENTCOM commander. That obstacle is now gone.

Vice President Cheney's Middle East tour is another indicator. According to a report in The American Conservative, on his previous trip Cheney told our allies, including the Saudis, that Bush would attack Iran before the end of his term. If that report was correct, then his current tour might have the purpose of telling them when it is coming.

Why not just do that through the State Department? State may not be in the loop, nor all of DOD for that matter. The State Department, OSD, the intelligence agencies, the Army and the Marine Corps are all opposed to war with Iran. Of the armed services, only the Air Force reportedly is in favor, seeking an opportunity to show what air power can do. As always, it neglects to inform the decision-makers what it cannot do.

The purpose of this column is not to warn of an imminent assault on Iran, though personally I think it is coming, and soon. Rather, it is to warn of a possible consequence of such an attack. Let me state it here, again, as plainly as I can: an American attack on Iran could cost us the whole army we now have in Iraq.

Lots of people in Washington are pondering possible consequences of an air and missile assault on Iran, but few if any have thought about this one. The American military's endless "we’re the greatest" propaganda has convinced most people that the U.S. armed forces cannot be beaten in the field. They are the last in a long line of armies that could not be beaten, until they were.

Here's roughly how it might play out. In response to American air and missile strikes on military targets inside Iran, Iran moves to cut the supply lines coming up from the south through the Persian Gulf (can anyone in the Pentagon guess why it's called that?) and Kuwait on which most U.S. Army units in Iraq depend (the Marines get most of their stuff through Jordan). It does so by hitting shipping in the Gulf, mining key choke points, and destroying the port facilities we depend on, mostly through sabotage. It also hits oil production and export facilities in the Gulf region, as a decoy: we focus most of our response on protecting the oil, not guarding our army’s supply lines.

Simultaneously, Iran activates the Shiite militias to cut the roads that lead from Kuwait to Baghdad. Both the Mahdi Army and the Badr Brigades – the latter now supposedly our allies – enter the war against us with their full strength. Ayatollah Sistani, an Iranian, calls on all Iraqi Shiites to fight the Americans wherever they find them. Instead of fighting the 20% of Iraq's population that is Sunni, we find ourselves battling the 60% that is Shiite. Worse, the Shiites logistics lie directly across those logistics lines coming up from Kuwait.

U.S. Army forces in Iraq begin to run out of supplies, especially POL, of which they consume a vast amount. Once they are largely immobilized by lack of fuel, and the region gets some bad weather that keeps our aircraft grounded or at least blind, Iran sends two to four regular army armor and mech divisions across the border. Their objective is to pocket American forces in and around Baghdad.

The U.S. military in Iraq is all spread out in penny packets fighting insurgents. We have no field army there anymore. We cannot reconcentrate because we're out of gas and Shiite guerrillas control the roads. What units don't get overrun by Iranian armor or Shiite militia end up in the Baghdad Kessel. General Petraeus calls President Bush and repeals the famous words of Marshal I MacMahon at Sedan: "Nous sorrune dans une pot de chambre, and nous y serron emerdee." Bush thinks he's overheard Petraeus ordering dinner – as, for Bush, he has.

U.S. Marines in Iraq, who are mostly in Anbar province, are the only force we have left. Their lines of supply and retreat through Jordan are intact. The local Sunnis want to join them in fighting the hated Persians. What do they do at that point? Good question.

How probable is all this? I can't answer that. Unfortunately, the people in Washington who should be able to answer it are not asking it. They need to start doing so, now.

It is imperative that we have an up-to-date plan for dealing with this contingency. That plan must not depend on air power to rescue our army. Air power always promises more than it can deliver.

As I have warned before, every American ground unit in Iraq needs its own plan to get itself out of the country using only its own resources and whatever it can scrounge locally. Retreat to the north, through Kurdistan into Turkey, will be the only alternative open to most U.S. Army units, other than ending up in an Iranian POW camp.

Even if the probability of the above scenario is low, we still need to take it with the utmost seriousness because the consequences would be so vast. If the United States lost the army it has in Iraq, we would never recover from the defeat. It would be another Adrianople, another Manzikert, another Rocroi. Given the many other ways we now resemble Imperial Spain, the last analogy may be the most telling.

I have said all this before, in previous columns and elsewhere. If I sound like Cassandra on this point, remember that events ended up proving her right.

March 26, 2008

William Lind is an analyst based in Washington, DC.

Find this article at:

http://www.lewrockwell.com/lind/lind137.html

[Maggie Hansen]

U.S. Army forces in Iraq begin to run out of supplies, especially POL, of which they consume a vast amount.

Pardon my ignorance but what is POL? Pints of larger? Plates of lamb? Pallets of lard?

Very interesting article. Lot's to consider there (even excluding the above) Given that the US military seems to be almost dependent now on recruiting from prisons to keep the numbers up is it really likely that it is not just saber rattling towards Iran? They are not exactly 'winning' in Iraq as it is. While there may be an air attack, with or without Israel, Iran is not entirely defenseless either, even without nuclear arms. There is also the highly probable development of otherwise unlikely alliances on the ground based on 'the enemy of my enemy is my friend'. xxxxe and Sunni, secular and religious, left wing and right wing, Iranian and Iraqi against the common enemy for the moment at least. Iran is also in good standing with China, Russia and others. Pretty serious friends I would say. Whilst capitalism is having a meltdown other economies are doing just fine. Iran has no debt and a healthy (socialist) economy unlike the US which is hugely in hock to China and KSA and lots of unhappy former middle class home owners on the domestic front. The US could win militarily with a pre-emptive nuclear strike but at what cost to themselves? The US is not the only nuclear power and not every country is run by a Dr Strangelove or those seeking to enter the kingdom of heaven through Armageddon. I would not put it past the US to take out others on its way down/out but it doesn't mean that their hostages will go willingly either. They've only got one shot at this to work in their favor and the margin for error is extremely small to non existent. Maybe they will let Israel do it on their own? Maybe they won't. Turkey has an interesting role to play in all this too.

[Maggie Hansen]

Maybe it's already started?

http://www.informationclearinghouse.info/article19630.htm

Day of Infamy

The March 20, 2008 US Declaration of War on Iran

By John McGlynn

28/03/08 "ICH" -- -- March 20, 2008, destined to be another day of infamy. On this date the US officially declared war on Iran. But it's not going to be the kind of war many have been expecting.

No, there was no dramatic televised announcement by President George W. Bush from the White House oval office. In fact on this day, reports the Washington Post, Bush spent some time communicating directly with Iranians, telling them via Radio Farda (the US-financed broadcaster that transmits to Iran in Farsi, Iran's native language) that their government has "declared they want to have a nuclear weapon to destroy people." But not to worry, he told his listeners in Farsi-translated Bushspeak: Tehran would not get the bomb because the US would be "firm."

Over at the US Congress, no war resolution was passed, no debate transpired, no last-minute hearing on the Iran "threat" was held. The Pentagon did not put its forces on red alert and cancel all leave. The top story on the Pentagon's website (on March 20) was: "Bush Lauds Military's Performance in Terror War," a feel-good piece about the president's appearance on the US military's TV channel to praise "the performance and courage of U.S. troops engaged in the global war on terrorism." Bush discussed Iraq, Afghanistan and Africa but not Iran.

But make no mistake. As of Thursday, March 20 the US is at war with Iran.

So who made it official?

A unit within the US Treasury Department, the Financial Crimes Enforcement Network (FinCEN), which issued a March 20 advisory to the world's financial institutions under the title: "Guidance to Financial Institutions on the Continuing Money Laundering Threat Involving Illicit Iranian Activity."

FinCEN, though part of the chain of command, is better known to bankers and lawyers than to students of US foreign policy. Nevertheless, when the history of this newly declared war is someday written (assuming the war is allowed to proceed) FinCEN's role will be as important as that played by US Central Command (Centcom) in directing the wars in Afghanistan and Iraq.

In its March 20 advisory FinCEN reminds the global banking community that United Nations Security Council Resolution (UNSC) 1803 (passed on March 3, 2008) "calls on member states to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, and their branches and subsidiaries abroad."

UNSC 1803 specifically mentions two Iranian state-owned banks: Bank Melli and Bank Saderat. These two banks (plus their overseas branches and certain subsidiaries), along with a third state-owned bank, Bank Sepah, were also unilaterally sanctioned by the US in 2007 under anti-proliferation and anti-terrorism presidential executive orders 13382 and 13224.

As of March 20, however, the US, speaking through FinCEN, is now telling all banks around the world "to take into account the risk arising from the deficiencies in Iran's AML/CFT [anti-money laundering and combating the financing of terrorism] regime, as well as all applicable U.S. and international sanctions programs, with regard to any possible transactions" with – and this is important – not just the above three banks but every remaining state-owned, private and special government bank in Iran. In other words, FinCEN charges, all of Iran's banks – including the central bank (also on FinCEN's list) – represent a risk to the international financial system, no exceptions. Confirmation is possible by comparing FinCEN's list of risky Iranian banks with the listing of Iranian banks provided by Iran's central bank.

The "deficiencies in Iran's AML/CFT" is important because it provides the rationale FinCEN will now use to deliver the ultimate death blow to Iran's ability to participate in the international banking system. The language is borrowed from Paris-based Financial Action Task Force (FATF), a group of 32 countries and two territories set up by the G-7 in 1989 to fight money laundering and terrorist financing. As the FinCEN advisory describes, in October 2007 the FATF stated "that Iran's lack of a comprehensive anti-money laundering and combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability in the international financial system. In response to the FATF statement, Iran passed its first AML law in February 2008. The FATF, however, reiterated its concern about continuing deficiencies in Iran's AML/CFT system in a statement on February 28, 2008."

Actually, the February 28 FATF statement does not comment on Iran's new anti-money laundering law. The statement does say, however, that the FATF has been working with Iran since the October 2007 FATF statement was issued and "welcomes the commitment made by Iran to improve its AML/CFT regime." Moreover, the February 28 statement, for whatever reason, drops the "significant vulnerability" wording, opting instead to reaffirm that financial authorities around the world should "advise" their domestic banks to exercise "enhanced due diligence" concerning Iran's AML/CFT "deficiencies." In linking its March 20 advisory to the recent FATF statements, apparently FinCEN cannot wait for FATF or anyone else to evaluate the effectiveness of Iran's brand new anti-financial crime laws.

Anyway, the "deficiencies in Iran's AML/CFT" is probably the main wording FinCEN will use to justify application of one its most powerful sanctions tools, a USA Patriot Act Section 311 designation (see below).

Hammering away at Iran's state-owned banks is central to US efforts to raise an international hue and cry. Through its state-owned banks, FinCEN states, "the Government of Iran disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection." By managing to get inserted the names of two state-owned banks in the most recent UN Security Council resolution on Iran, the US can now portray the cream of Iran's financial establishment (Bank Melli and Bank Saderat are Iran's two largest banks) as directly integrated into alleged regime involvement in a secret nuclear weaponization program and acts of terrorism.

To inject further alarm, FinCEN accuses Iran's central bank of "facilitating transactions for sanctioned Iranian banks" based on evidence (which for various reasons appears true) gathered by Treasury and other US agencies that the central bank has facilitated erasure of the names of Iranian banks "from global transactions in order to make it more difficult for intermediary financial institutions to determine the true parties in the transaction." The central bank is also charged with continuing to "provide financial services to Iranian entities" (government agencies, business firms and individuals) named in two earlier UN Security Council resolutions, 1737 and 1747. In defense, Iran's central bank governor recently said: "The central bank assists Iranian private and state-owned banks to do their commitments regardless of the pressure on them" and charged the US with "financial terrorism."

So what does all this bureaucratic financial rigmarole mean?

What it really means is that the US, again through FinCEN, has declared two acts of war: one against Iran's banks and one against any financial institution anywhere in the world that tries to do business with an Iranian bank.

To understand how this works requires understanding what FinCEN does. This means going back in history to September 2005, when the US Treasury Department, based on the investigatory work of FinCEN, sanctioned a small bank in Macau, which in turn got North Korea really upset.

FinCEN's mission "is to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity" (FinCEN website).

Under Section 311 of the USA Patriot Act the US Treasury Department, acting through FinCEN, has been provided with "a range of options that can be adapted to target specific money laundering and terrorist financing concerns." Specifically, Section 311 contains six "special measures" to significantly increase the powers of the Treasury (and other US government agencies) to block alleged terrorist financing activities. As explained by a Treasury official during April 2006 testimony before Congress, the most punitive measure requires:

"U.S. financial institutions to terminate correspondent relationships with the designated entity. Such a defensive measure effectively cuts that entity off from the U.S. financial system. It has a profound effect, not only in insulating the U.S. financial system from abuse, but also in notifying financial institutions and jurisdictions globally of an illicit finance risk."

On September 20, 2005 FinCEN issued a finding under Section 311 that Banco Delta Asia (BDA), a small bank in the Chinese territory of Macau, was a "primary money laundering concern." BDA was alleged to have knowingly allowed its North Korean clients to use the bank to engage in deceptive financial practices and a variety of financial crimes (such as money laundering of profits from drug trafficking and counterfeit US $100 "supernotes").

By publicizing its allegations, FinCEN let the world know that BDA was now at risk of having all "correspondent relationships" with US banks severed, a disaster for any bank wanting to remain networked to the largest financial market in the world. Frightened BDA customers reacted by staging a run on the bank's assets.

In the interest of self-preservation, BDA was forced to act. After a quick conference with Macau financial authorities the bank decided to freeze North Korean funds on deposit.

It just so happened that the day before the FinCEN finding was made public the US and North Korea, working through the Six-Party talks process (also involving host China, Russia, South Korea and Japan), had formally agreed on a new diplomatic roadmap that promised to lead to a denuclearized and permanently peaceful Northeast Asia. But because of Treasury's BDA sanctions, North Korea was now labeled an international financial outlaw and the Six Party process stalled.

Other banks began severing their business ties with North Korea, leaving the country more isolated than ever from global commerce and finance. These other banks had no choice. Treasury repeatedly made clear that any bank that continued to do business with North Korea was another potential Patriot Act Section 311 target.

In anger, North Korea withdrew from the Six-Party process. It required 18 months of negotiations before a diplomatic and financial approach was devised that left BDA blacklisted but allowed North Korea to regain access to its frozen funds and rejoin Six Party negotiations.

Neither FinCEN nor anyone else at Treasury has ever publicly produced any evidence in support of the financial crime allegations against BDA and North Korea (articles by this author on BDA, North Korea and Treasury's lack of proof can be found at the Japan Focus website).

If Treasury was eventually forced to back off in the BDA case (apparently because the Bush administration changed its policy priorities), it had discovered that Patriot Act Section 311 could really shake things up.

The "real impact" of the BDA-North Korea sanctions, as Treasury undersecretary Stuart Levey told members of the American Bar Association in early March 2008, was that "many private financial institutions worldwide responded by terminating their business relationships not only with [bDA], but with North Korean clients altogether." Levey and his Treasury colleagues had come up with a way to go beyond governments to use the global banking sector to privatize banking sector sanctions against an entire country (this, by the way, is presidential candidate John McCain's proposed strategy for dealing with Iran as described in the Nov/Dec 2007 issue of the journal Foreign Affairs ). This "key difference" in the "reaction by the private sector" was an exciting revelation. Through a little extraterritorial legal arm-twisting of the international banking community the US was able to put "enormous pressure on the [North Korean] regime – even the most reclusive government depends on access to the international financial system," said Levey. Washington now had "a great deal of leverage in its diplomacy over the nuclear issue with North Korea." Turning to the present, Levey informed the gathering of US lawyers that "we are currently in the midst of an effort to apply these same lessons to the very real threat posed by Iran." However, "Iran presents a more complex challenge than North Korea because of its greater integration into the international financial community."

Stuart Levey

Over the past two years Levey and other Treasury officials have been crisscrossing the globe to make it abundantly clear in meetings (described by Treasury as opportunities to "share information") with banking and government officials in the world's key financial centers that dealing with Iran is risky business. Levey frequently claims that major European and Asia banks, once they hear the US pitch, freely decided to cooperate with anti-Iran banking sanctions for reasons of "good corporate citizenship" and a "desire to protect their institutions' reputations."

But these meetings include quite a bit of browbeating. This can be deduced from some of Levey's public statements, such as his testimony to Congress. On March 21, 2007 Levey told the Senate Committee on Banking, Housing and Urban Affairs that unilateral US financial sanctions "warn people and businesses not to deal with the designated target. And those who might still be tempted to work with targeted high risk actors get the message loud and clear: if they do so, they may be next." Also, the possibility of becoming a Patriot Act Section 311 sanctions victim (which means exclusion from the US market) probably comes up at the meetings, as this part of his testimony indirectly suggests: "Our list of targeted proliferators is incorporated into the compliance systems at major financial institutions worldwide, who have little appetite for the business of proliferation firms and who also need to be mindful of U.S. measures given their ties to the U.S. financial system."

Reportedly, Treasury Secretary Henry Paulson has also been involved in high-level meetings around the world concerning Iran, which presumably includes presentations on the arsenal of US financial sanctions. The message he imparts is unknown, but hints of the likely content can be found in public statements. Among Treasury officials Paulson has used the most dramatic language by making the argument that not only is Iran a danger to the international community but that this danger permeates virtually all of Iranian society. In a June 14, 2007 speech to the Council on Foreign Relations he first makes the point that Iran's Revolutionary Guard Corps (IRGC) is a "paramilitary" organization "directly involved in the planning and support of terrorist acts, as well as funding and training other terrorist groups." Then he offers the alarming revelation that the IRGC "is so deeply entrenched in Iran's economy and commercial enterprises, it is increasingly likely that if you are doing business with Iran, you are somehow doing business with the IRGC." With such language, Treasury lays the groundwork for applying financial sanctions against the entirety of Iran. All this makes clear that the growing coalition of bankers against Iran the US likes to trumpet may not be such a willing group.

Some indication of how unwilling can be found in the pages of Der Spiegel (English edition). In July 2007 the German news magazine reported that "anyone wishing to do business in the United States or hoping to attract US investors had best tread softly when it comes to Iran. Germany's Commerzbank stopped financing trade with Iran in US dollars in January, after the Americans piled on the pressure." One German banker interviewed said: "German financial institutions feel the United States government has been engaging in 'downright blackmail'." The magazine goes on to report: "Anti-terror officials from the US Treasury are constantly showing up to demand they cut their traditionally good relations with Iran. The underlying threat from the men from Washington is that they wouldn't want to support terrorism, would they?"

Also, an April 2007 report from the UK's House of Lords Economic Affairs Committee states that the Confederation of British Industry indicated "strong concern" about Patriot Act provisions and other US extra-territorial sanctions. The Committee recognized the need for "vigorous action" in response to terrorist threats but also "endorse[d] the condemnation by the EU of the extra-territorial application of US sanctions legislation as a violation of international law."

Thus the US will need help from European government leaders to overcome resistance among major European financial institutions to US-led financial sanctions. Such help has already come from German Chancellor Angela Merkel. During her recent state visit to Israel, Merkel told the Knesset that Iran was global enemy number one. "What do we do when a majority says the greatest threat to the world comes from Israel and not from Iran?" she asked. "Do we bow our heads? Do we give up our efforts to combat the Iranian threat? However inconvenient and uncomfortable the alternative is, we do not do that." Iran is public enemy #1 in the world, and everyone – including the European banking establishment it would seem – has to accept that.

To summarize to this point: (1) the March 20 advisory represents a US declaration of war by sanctions on Iran and a sanctions threat to the international banking community, (2) the US has various unilateral financial sanctions measures at its command in the form of executive orders and Patriot Act Section 311 and (3) the BDA-North Korea sanctions were, at least in retrospect, a test run for Iran.

If the US succeeds, an international quarantine on Iran's banks would disrupt Iran's financial linkages with the world by blocking its ability to process cross-border payments for goods and services exported and imported. Without those linkages Iran is unlikely to be able to engage in global trade and commerce. As 30% of Iran's GDP in 2005 was imports of goods and services and 20% was non-oil exports (World Bank and other data), a large chunk of Iran's economy would shrivel up. The repercussions will be painful and extend well beyond lost business and profits. For example, treating curable illnesses will become difficult. According to an Iranian health ministry official, Iran produces 95% of its own medicines but most pharmaceutical-related raw materials are imported.

With a financial sanctions war declared, what happens next? There have been some hints.

On February 25 the Wall Street Journal reported that Treasury was considering sanctioning Iran's central bank (known as Bank Markazi). "The central bank is the keystone of Iran's financial system and its principal remaining lifeline to the international banking system," explains the Journal. "U.S. sanctions against it could have a severe impact on Iranian trade if other nations in Europe and Asia choose to go along with them." In anticipation of future events, the Journal notes: "U.S. officials have begun trying to lay the groundwork for a move against the central bank in public statements and meetings with key allies."

So look for the following to happen in the coming weeks: FinCEN will probably issue a Patriot Act Section 311 finding that Iran's central bank is a "primary laundering concern." The "deficiencies in Iran's AML/CFT" wording lifted from the FATF statement will be a key reason for that finding. The finding may be accompanied by a formal decision to cut off Iran's central bank from the US financial market, or such a decision could come later. Of course, an actual or threatened cut-off has no immediate financial implications for Iran since no Iranian-flagged bank is doing business in the US, except possibly to allow shipments from the US of humanitarian provisions of food and medicine, which, if they exist, probably terminate with the March 20 FinCEN announcement.

But a Section 311 designation of Iran's central bank would have a powerful coercive effect on the world's banks. For any bank in Europe, Asia or anywhere else that goes near the central bank once the 311 blacklist is on, it would be the kiss of death for that bank's participation in the international banking community, as it was (and remains today) for BDA. Not only would that bank be barred from the US financial market, it would also be shunned by European and Japanese financial markets, as government and private banking officials in those markets are likely to cooperate with Washington's intensifying sanctions campaign.

What about China, now one of the world's major financial centers (two Chinese banks ranked among the top 25 in The Banker's 2007 survey of world banks) and a major trading partner for Iran?

China and Japan "were the top two recipients of exports from Iran, together accounting for more than one-quarter of Iran's exports in 2006," according to an analysis of International Monetary Fund (IMF) trading statistics contained in a December 2007 US Government Accountability Office (GAO) report on Washington's anti-Iran sanctions regime. On the import side, the GAO found that in 2006 "Germany and China were Iran's largest providers of imports, accounting for 23 percent of Iran's imports." Airtight global banking sanctions imposed on Iran would presumably make the financial administration of this trade next to impossible.

Will China bend to US sanctions wishes? Early signs suggest the answer is yes.

In December 2007 ArabianBusiness.com reported that Chinese banks were starting to decline to open letters of credit for Iranian traders. Asadollah Asgaroladi, head of the Iran-China chamber of commerce, was quoted as saying that China's banks did not explain the refusal but "if this trend continues it will harm the two countries' economic cooperation and trade exchange." In February, ArabianBusiness.com found that China's cutbacks in its banking business with Iran was affecting a joint automobile production arrangement.

Such disruptions in the Chinese-Iranian banking relationship are minor. Meanwhile, Beijing keeps insisting that peaceful diplomacy with Iran is the best policy and that the only sanctions needed are those mandated under the three UN Security Council resolutions already on the books. Thus, to make China cooperate with Washington's unilateral banking sanctions, the US and the EU, reports the Financial Times, are apparently using a tag-team strategy.

On February 12 the FT told readers that "the US believes that tighter EU sanctions will put pressure on other nations that do more business with Iran - China for example - to curb their activities." Therefore, explained an anonymous diplomat apparently from the US: "We will be pushing the EU to go further than the Security Council," a move intended, the diplomat said, to "gold plate" Security Council requirements.

To explain this move the FT provided an example of "gold plating" from 2007, when the EU implemented UN Security Council resolutions 1737 and 1747 on Iran.

In similar language to the current text on Banks Saderat and Melli, the UN had called for "vigilance and restraint" concerning the movements of individuals linked to Iran's nuclear and missile programmes and members of its Revolutionary Guard. But in implementing the resolutions, the EU subjected all the named individuals to a travel ban - a much tougher measure.

Reading between the lines, the intention behind "gold plating" Security Council resolutions is to put pressure on China to bow to a more aggressive US-EU sanctions program. In the case of the most recent Security Council resolution on Iran, 1803, which put sanctions on two Iranian banks, FinCEN rolled two "gold plating" actions into one. It combined the Security Council's naming of the two banks with the October and February FATF statements to justify its March 20 warning to the world that Iran's entire banking system is a danger. Whether the EU will follow FinCEN's action, and how China will respond to any of this, remains to be seen.

In short, the US has in effect declared war on Iran. No bombs need fall as long as the US strategy relies solely on financial sanctions. But if the US Section 311 designates Iran's central bank as a financial criminal, the impact will be the financial equivalent to the first bombs falling on Baghdad at the start of the US-UK invasion of Iraq in March 2003.

In a 1996 publication written for the National Defense University, Harlan Ullman and James Wade introduced a military doctrine for "affecting the adversary's will to resist through imposing a regime of Shock and Awe to achieve strategic aims and military objectives."

Former US defense secretary Donald Rumsfeld made Shock and Awe famous by invoking it as the US strategy in the attack on Iraq in March 2003 (though weeks later Ullman was claiming Rumsfeld was misapplying the doctrine).

But Shock and Awe's authors (apparently with something like Vietnam or the 1993-1994 Somalia fiasco in mind) also envisioned that "n certain circumstances, the costs of having to resort to lethal force may be too politically expensive in terms of local support as well as support in the U.S. and internationally." Consequently, they wrote:

"Economic sanctions are likely to continue to be a preferable political alternative or a necessary political prelude to an offensive military step . . .In a world in which nonlethal sanctions are a political imperative, we will continue to need the ability to shut down all commerce into and out of any country from shipping, air, rail, and roads. We ought to be able to do this in a much more thorough, decisive, and shocking way than we have in the past . . . Weapons that shock and awe, stun and paralyze, but do not kill in significant numbers may be the only ones that are politically acceptable in the future."

It was only a matter of finding a sanctions strategy systematic enough to make this more obscure portion of the Shock and Awe doctrine operational. What Ullman and Wade could not have imagined was that Washington's global planners would use extraterritorial legal powers and its financial clout to coerce the global banking industry into accepting US foreign policy diktat. North Korea was a test-run for the new strategy of Shock and Awe financial sanctions. As Washington Post columnist David Ignatius put it in February 2007, "[t]he new sanctions are toxic because they effectively limit a country's access to the global ATM. In that sense, they impose -- at last -- a real price on countries such as North Korea and Iran."

What then will the impact be of this US-Iran banking standoff? For the US, almost no impact at all. Treasury bureaucrats will spend some time and a little taxpayer money making phone calls, checking computer screens and paper trails to monitor global banking compliance with sanctions. The cost of financially ostracizing Iran will be a bargain for US taxpayers compared with the eventual $3 trillion cost of the Iraq and Afghanistan wars estimated by Nobel prize-winning economist Joseph Stiglitz and Harvard financial expert Linda Bilmes.

Iran, however, will become another Gaza or Iraq under the economic sanctions of the 1990s, with devastating impact on economy and society. That Iran's complete financial and economic destruction is the goal of US policy was spelled out by the State Department the day before the FinCEN announcement.

During a daily press meeting with reporters on March 19, the State Department's spokesperson was asked about a deal recently signed between Switzerland and Iran to supply Iranian natural gas to Europe. After condemning the deal, the spokesperson explained that the US is opposed to any "investing in Iran, not only in its petroleum or natural gas area but in any sector of its economy" and questioned rhetorically the wisdom of doing business with Iranian "financial institutions that are under UN sanctions or could become under sanctions if it's found that they are assisting or aiding or abetting Iran's nuclear program in any way." A clearer expression of US desires is hardly possible.

John McGlynn is an independent Tokyo-based economic and financial analyst.

[Mark Stapleton]

Maybe it's already started?

http://www.informationclearinghouse.info/article19630.htm

Day of Infamy

The March 20, 2008 US Declaration of War on Iran

By John McGlynn

28/03/08 "ICH" -- -- March 20, 2008, destined to be another day of infamy. On this date the US officially declared war on Iran. But it's not going to be the kind of war many have been expecting.

No, there was no dramatic televised announcement by President George W. Bush from the White House oval office. In fact on this day, reports the Washington Post, Bush spent some time communicating directly with Iranians, telling them via Radio Farda (the US-financed broadcaster that transmits to Iran in Farsi, Iran's native language) that their government has "declared they want to have a nuclear weapon to destroy people." But not to worry, he told his listeners in Farsi-translated Bushspeak: Tehran would not get the bomb because the US would be "firm."

Over at the US Congress, no war resolution was passed, no debate transpired, no last-minute hearing on the Iran "threat" was held. The Pentagon did not put its forces on red alert and cancel all leave. The top story on the Pentagon's website (on March 20) was: "Bush Lauds Military's Performance in Terror War," a feel-good piece about the president's appearance on the US military's TV channel to praise "the performance and courage of U.S. troops engaged in the global war on terrorism." Bush discussed Iraq, Afghanistan and Africa but not Iran.

But make no mistake. As of Thursday, March 20 the US is at war with Iran.

So who made it official?

A unit within the US Treasury Department, the Financial Crimes Enforcement Network (FinCEN), which issued a March 20 advisory to the world's financial institutions under the title: "Guidance to Financial Institutions on the Continuing Money Laundering Threat Involving Illicit Iranian Activity."

FinCEN, though part of the chain of command, is better known to bankers and lawyers than to students of US foreign policy. Nevertheless, when the history of this newly declared war is someday written (assuming the war is allowed to proceed) FinCEN's role will be as important as that played by US Central Command (Centcom) in directing the wars in Afghanistan and Iraq.

In its March 20 advisory FinCEN reminds the global banking community that United Nations Security Council Resolution (UNSC) 1803 (passed on March 3, 2008) "calls on member states to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, and their branches and subsidiaries abroad."

UNSC 1803 specifically mentions two Iranian state-owned banks: Bank Melli and Bank Saderat. These two banks (plus their overseas branches and certain subsidiaries), along with a third state-owned bank, Bank Sepah, were also unilaterally sanctioned by the US in 2007 under anti-proliferation and anti-terrorism presidential executive orders 13382 and 13224.

As of March 20, however, the US, speaking through FinCEN, is now telling all banks around the world "to take into account the risk arising from the deficiencies in Iran's AML/CFT [anti-money laundering and combating the financing of terrorism] regime, as well as all applicable U.S. and international sanctions programs, with regard to any possible transactions" with – and this is important – not just the above three banks but every remaining state-owned, private and special government bank in Iran. In other words, FinCEN charges, all of Iran's banks – including the central bank (also on FinCEN's list) – represent a risk to the international financial system, no exceptions. Confirmation is possible by comparing FinCEN's list of risky Iranian banks with the listing of Iranian banks provided by Iran's central bank.

The "deficiencies in Iran's AML/CFT" is important because it provides the rationale FinCEN will now use to deliver the ultimate death blow to Iran's ability to participate in the international banking system. The language is borrowed from Paris-based Financial Action Task Force (FATF), a group of 32 countries and two territories set up by the G-7 in 1989 to fight money laundering and terrorist financing. As the FinCEN advisory describes, in October 2007 the FATF stated "that Iran's lack of a comprehensive anti-money laundering and combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability in the international financial system. In response to the FATF statement, Iran passed its first AML law in February 2008. The FATF, however, reiterated its concern about continuing deficiencies in Iran's AML/CFT system in a statement on February 28, 2008."

Actually, the February 28 FATF statement does not comment on Iran's new anti-money laundering law. The statement does say, however, that the FATF has been working with Iran since the October 2007 FATF statement was issued and "welcomes the commitment made by Iran to improve its AML/CFT regime." Moreover, the February 28 statement, for whatever reason, drops the "significant vulnerability" wording, opting instead to reaffirm that financial authorities around the world should "advise" their domestic banks to exercise "enhanced due diligence" concerning Iran's AML/CFT "deficiencies." In linking its March 20 advisory to the recent FATF statements, apparently FinCEN cannot wait for FATF or anyone else to evaluate the effectiveness of Iran's brand new anti-financial crime laws.

Anyway, the "deficiencies in Iran's AML/CFT" is probably the main wording FinCEN will use to justify application of one its most powerful sanctions tools, a USA Patriot Act Section 311 designation (see below).

Hammering away at Iran's state-owned banks is central to US efforts to raise an international hue and cry. Through its state-owned banks, FinCEN states, "the Government of Iran disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection." By managing to get inserted the names of two state-owned banks in the most recent UN Security Council resolution on Iran, the US can now portray the cream of Iran's financial establishment (Bank Melli and Bank Saderat are Iran's two largest banks) as directly integrated into alleged regime involvement in a secret nuclear weaponization program and acts of terrorism.

To inject further alarm, FinCEN accuses Iran's central bank of "facilitating transactions for sanctioned Iranian banks" based on evidence (which for various reasons appears true) gathered by Treasury and other US agencies that the central bank has facilitated erasure of the names of Iranian banks "from global transactions in order to make it more difficult for intermediary financial institutions to determine the true parties in the transaction." The central bank is also charged with continuing to "provide financial services to Iranian entities" (government agencies, business firms and individuals) named in two earlier UN Security Council resolutions, 1737 and 1747. In defense, Iran's central bank governor recently said: "The central bank assists Iranian private and state-owned banks to do their commitments regardless of the pressure on them" and charged the US with "financial terrorism."

So what does all this bureaucratic financial rigmarole mean?

What it really means is that the US, again through FinCEN, has declared two acts of war: one against Iran's banks and one against any financial institution anywhere in the world that tries to do business with an Iranian bank.

To understand how this works requires understanding what FinCEN does. This means going back in history to September 2005, when the US Treasury Department, based on the investigatory work of FinCEN, sanctioned a small bank in Macau, which in turn got North Korea really upset.

FinCEN's mission "is to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity" (FinCEN website).

Under Section 311 of the USA Patriot Act the US Treasury Department, acting through FinCEN, has been provided with "a range of options that can be adapted to target specific money laundering and terrorist financing concerns." Specifically, Section 311 contains six "special measures" to significantly increase the powers of the Treasury (and other US government agencies) to block alleged terrorist financing activities. As explained by a Treasury official during April 2006 testimony before Congress, the most punitive measure requires:

"U.S. financial institutions to terminate correspondent relationships with the designated entity. Such a defensive measure effectively cuts that entity off from the U.S. financial system. It has a profound effect, not only in insulating the U.S. financial system from abuse, but also in notifying financial institutions and jurisdictions globally of an illicit finance risk."

On September 20, 2005 FinCEN issued a finding under Section 311 that Banco Delta Asia (BDA), a small bank in the Chinese territory of Macau, was a "primary money laundering concern." BDA was alleged to have knowingly allowed its North Korean clients to use the bank to engage in deceptive financial practices and a variety of financial crimes (such as money laundering of profits from drug trafficking and counterfeit US $100 "supernotes").

By publicizing its allegations, FinCEN let the world know that BDA was now at risk of having all "correspondent relationships" with US banks severed, a disaster for any bank wanting to remain networked to the largest financial market in the world. Frightened BDA customers reacted by staging a run on the bank's assets.

In the interest of self-preservation, BDA was forced to act. After a quick conference with Macau financial authorities the bank decided to freeze North Korean funds on deposit.

It just so happened that the day before the FinCEN finding was made public the US and North Korea, working through the Six-Party talks process (also involving host China, Russia, South Korea and Japan), had formally agreed on a new diplomatic roadmap that promised to lead to a denuclearized and permanently peaceful Northeast Asia. But because of Treasury's BDA sanctions, North Korea was now labeled an international financial outlaw and the Six Party process stalled.

Other banks began severing their business ties with North Korea, leaving the country more isolated than ever from global commerce and finance. These other banks had no choice. Treasury repeatedly made clear that any bank that continued to do business with North Korea was another potential Patriot Act Section 311 target.

In anger, North Korea withdrew from the Six-Party process. It required 18 months of negotiations before a diplomatic and financial approach was devised that left BDA blacklisted but allowed North Korea to regain access to its frozen funds and rejoin Six Party negotiations.

Neither FinCEN nor anyone else at Treasury has ever publicly produced any evidence in support of the financial crime allegations against BDA and North Korea (articles by this author on BDA, North Korea and Treasury's lack of proof can be found at the Japan Focus website).

If Treasury was eventually forced to back off in the BDA case (apparently because the Bush administration changed its policy priorities), it had discovered that Patriot Act Section 311 could really shake things up.

The "real impact" of the BDA-North Korea sanctions, as Treasury undersecretary Stuart Levey told members of the American Bar Association in early March 2008, was that "many private financial institutions worldwide responded by terminating their business relationships not only with [bDA], but with North Korean clients altogether." Levey and his Treasury colleagues had come up with a way to go beyond governments to use the global banking sector to privatize banking sector sanctions against an entire country (this, by the way, is presidential candidate John McCain's proposed strategy for dealing with Iran as described in the Nov/Dec 2007 issue of the journal Foreign Affairs ). This "key difference" in the "reaction by the private sector" was an exciting revelation. Through a little extraterritorial legal arm-twisting of the international banking community the US was able to put "enormous pressure on the [North Korean] regime – even the most reclusive government depends on access to the international financial system," said Levey. Washington now had "a great deal of leverage in its diplomacy over the nuclear issue with North Korea." Turning to the present, Levey informed the gathering of US lawyers that "we are currently in the midst of an effort to apply these same lessons to the very real threat posed by Iran." However, "Iran presents a more complex challenge than North Korea because of its greater integration into the international financial community."

Stuart Levey

Over the past two years Levey and other Treasury officials have been crisscrossing the globe to make it abundantly clear in meetings (described by Treasury as opportunities to "share information") with banking and government officials in the world's key financial centers that dealing with Iran is risky business. Levey frequently claims that major European and Asia banks, once they hear the US pitch, freely decided to cooperate with anti-Iran banking sanctions for reasons of "good corporate citizenship" and a "desire to protect their institutions' reputations."

But these meetings include quite a bit of browbeating. This can be deduced from some of Levey's public statements, such as his testimony to Congress. On March 21, 2007 Levey told the Senate Committee on Banking, Housing and Urban Affairs that unilateral US financial sanctions "warn people and businesses not to deal with the designated target. And those who might still be tempted to work with targeted high risk actors get the message loud and clear: if they do so, they may be next." Also, the possibility of becoming a Patriot Act Section 311 sanctions victim (which means exclusion from the US market) probably comes up at the meetings, as this part of his testimony indirectly suggests: "Our list of targeted proliferators is incorporated into the compliance systems at major financial institutions worldwide, who have little appetite for the business of proliferation firms and who also need to be mindful of U.S. measures given their ties to the U.S. financial system."

Reportedly, Treasury Secretary Henry Paulson has also been involved in high-level meetings around the world concerning Iran, which presumably includes presentations on the arsenal of US financial sanctions. The message he imparts is unknown, but hints of the likely content can be found in public statements. Among Treasury officials Paulson has used the most dramatic language by making the argument that not only is Iran a danger to the international community but that this danger permeates virtually all of Iranian society. In a June 14, 2007 speech to the Council on Foreign Relations he first makes the point that Iran's Revolutionary Guard Corps (IRGC) is a "paramilitary" organization "directly involved in the planning and support of terrorist acts, as well as funding and training other terrorist groups." Then he offers the alarming revelation that the IRGC "is so deeply entrenched in Iran's economy and commercial enterprises, it is increasingly likely that if you are doing business with Iran, you are somehow doing business with the IRGC." With such language, Treasury lays the groundwork for applying financial sanctions against the entirety of Iran. All this makes clear that the growing coalition of bankers against Iran the US likes to trumpet may not be such a willing group.

Some indication of how unwilling can be found in the pages of Der Spiegel (English edition). In July 2007 the German news magazine reported that "anyone wishing to do business in the United States or hoping to attract US investors had best tread softly when it comes to Iran. Germany's Commerzbank stopped financing trade with Iran in US dollars in January, after the Americans piled on the pressure." One German banker interviewed said: "German financial institutions feel the United States government has been engaging in 'downright blackmail'." The magazine goes on to report: "Anti-terror officials from the US Treasury are constantly showing up to demand they cut their traditionally good relations with Iran. The underlying threat from the men from Washington is that they wouldn't want to support terrorism, would they?"

Also, an April 2007 report from the UK's House of Lords Economic Affairs Committee states that the Confederation of British Industry indicated "strong concern" about Patriot Act provisions and other US extra-territorial sanctions. The Committee recognized the need for "vigorous action" in response to terrorist threats but also "endorse[d] the condemnation by the EU of the extra-territorial application of US sanctions legislation as a violation of international law."

Thus the US will need help from European government leaders to overcome resistance among major European financial institutions to US-led financial sanctions. Such help has already come from German Chancellor Angela Merkel. During her recent state visit to Israel, Merkel told the Knesset that Iran was global enemy number one. "What do we do when a majority says the greatest threat to the world comes from Israel and not from Iran?" she asked. "Do we bow our heads? Do we give up our efforts to combat the Iranian threat? However inconvenient and uncomfortable the alternative is, we do not do that." Iran is public enemy #1 in the world, and everyone – including the European banking establishment it would seem – has to accept that.

To summarize to this point: (1) the March 20 advisory represents a US declaration of war by sanctions on Iran and a sanctions threat to the international banking community, (2) the US has various unilateral financial sanctions measures at its command in the form of executive orders and Patriot Act Section 311 and (3) the BDA-North Korea sanctions were, at least in retrospect, a test run for Iran.

If the US succeeds, an international quarantine on Iran's banks would disrupt Iran's financial linkages with the world by blocking its ability to process cross-border payments for goods and services exported and imported. Without those linkages Iran is unlikely to be able to engage in global trade and commerce. As 30% of Iran's GDP in 2005 was imports of goods and services and 20% was non-oil exports (World Bank and other data), a large chunk of Iran's economy would shrivel up. The repercussions will be painful and extend well beyond lost business and profits. For example, treating curable illnesses will become difficult. According to an Iranian health ministry official, Iran produces 95% of its own medicines but most pharmaceutical-related raw materials are imported.

With a financial sanctions war declared, what happens next? There have been some hints.

On February 25 the Wall Street Journal reported that Treasury was considering sanctioning Iran's central bank (known as Bank Markazi). "The central bank is the keystone of Iran's financial system and its principal remaining lifeline to the international banking system," explains the Journal. "U.S. sanctions against it could have a severe impact on Iranian trade if other nations in Europe and Asia choose to go along with them." In anticipation of future events, the Journal notes: "U.S. officials have begun trying to lay the groundwork for a move against the central bank in public statements and meetings with key allies."

So look for the following to happen in the coming weeks: FinCEN will probably issue a Patriot Act Section 311 finding that Iran's central bank is a "primary laundering concern." The "deficiencies in Iran's AML/CFT" wording lifted from the FATF statement will be a key reason for that finding. The finding may be accompanied by a formal decision to cut off Iran's central bank from the US financial market, or such a decision could come later. Of course, an actual or threatened cut-off has no immediate financial implications for Iran since no Iranian-flagged bank is doing business in the US, except possibly to allow shipments from the US of humanitarian provisions of food and medicine, which, if they exist, probably terminate with the March 20 FinCEN announcement.

But a Section 311 designation of Iran's central bank would have a powerful coercive effect on the world's banks. For any bank in Europe, Asia or anywhere else that goes near the central bank once the 311 blacklist is on, it would be the kiss of death for that bank's participation in the international banking community, as it was (and remains today) for BDA. Not only would that bank be barred from the US financial market, it would also be shunned by European and Japanese financial markets, as government and private banking officials in those markets are likely to cooperate with Washington's intensifying sanctions campaign.

What about China, now one of the world's major financial centers (two Chinese banks ranked among the top 25 in The Banker's 2007 survey of world banks) and a major trading partner for Iran?

China and Japan "were the top two recipients of exports from Iran, together accounting for more than one-quarter of Iran's exports in 2006," according to an analysis of International Monetary Fund (IMF) trading statistics contained in a December 2007 US Government Accountability Office (GAO) report on Washington's anti-Iran sanctions regime. On the import side, the GAO found that in 2006 "Germany and China were Iran's largest providers of imports, accounting for 23 percent of Iran's imports." Airtight global banking sanctions imposed on Iran would presumably make the financial administration of this trade next to impossible.

Will China bend to US sanctions wishes? Early signs suggest the answer is yes.

In December 2007 ArabianBusiness.com reported that Chinese banks were starting to decline to open letters of credit for Iranian traders. Asadollah Asgaroladi, head of the Iran-China chamber of commerce, was quoted as saying that China's banks did not explain the refusal but "if this trend continues it will harm the two countries' economic cooperation and trade exchange." In February, ArabianBusiness.com found that China's cutbacks in its banking business with Iran was affecting a joint automobile production arrangement.

Such disruptions in the Chinese-Iranian banking relationship are minor. Meanwhile, Beijing keeps insisting that peaceful diplomacy with Iran is the best policy and that the only sanctions needed are those mandated under the three UN Security Council resolutions already on the books. Thus, to make China cooperate with Washington's unilateral banking sanctions, the US and the EU, reports the Financial Times, are apparently using a tag-team strategy.

On February 12 the FT told readers that "the US believes that tighter EU sanctions will put pressure on other nations that do more business with Iran - China for example - to curb their activities." Therefore, explained an anonymous diplomat apparently from the US: "We will be pushing the EU to go further than the Security Council," a move intended, the diplomat said, to "gold plate" Security Council requirements.

To explain this move the FT provided an example of "gold plating" from 2007, when the EU implemented UN Security Council resolutions 1737 and 1747 on Iran.

In similar language to the current text on Banks Saderat and Melli, the UN had called for "vigilance and restraint" concerning the movements of individuals linked to Iran's nuclear and missile programmes and members of its Revolutionary Guard. But in implementing the resolutions, the EU subjected all the named individuals to a travel ban - a much tougher measure.

Reading between the lines, the intention behind "gold plating" Security Council resolutions is to put pressure on China to bow to a more aggressive US-EU sanctions program. In the case of the most recent Security Council resolution on Iran, 1803, which put sanctions on two Iranian banks, FinCEN rolled two "gold plating" actions into one. It combined the Security Council's naming of the two banks with the October and February FATF statements to justify its March 20 warning to the world that Iran's entire banking system is a danger. Whether the EU will follow FinCEN's action, and how China will respond to any of this, remains to be seen.

In short, the US has in effect declared war on Iran. No bombs need fall as long as the US strategy relies solely on financial sanctions. But if the US Section 311 designates Iran's central bank as a financial criminal, the impact will be the financial equivalent to the first bombs falling on Baghdad at the start of the US-UK invasion of Iraq in March 2003.

In a 1996 publication written for the National Defense University, Harlan Ullman and James Wade introduced a military doctrine for "affecting the adversary's will to resist through imposing a regime of Shock and Awe to achieve strategic aims and military objectives."

Former US defense secretary Donald Rumsfeld made Shock and Awe famous by invoking it as the US strategy in the attack on Iraq in March 2003 (though weeks later Ullman was claiming Rumsfeld was misapplying the doctrine).

But Shock and Awe's authors (apparently with something like Vietnam or the 1993-1994 Somalia fiasco in mind) also envisioned that "n certain circumstances, the costs of having to resort to lethal force may be too politically expensive in terms of local support as well as support in the U.S. and internationally." Consequently, they wrote:

"Economic sanctions are likely to continue to be a preferable political alternative or a necessary political prelude to an offensive military step . . .In a world in which nonlethal sanctions are a political imperative, we will continue to need the ability to shut down all commerce into and out of any country from shipping, air, rail, and roads. We ought to be able to do this in a much more thorough, decisive, and shocking way than we have in the past . . . Weapons that shock and awe, stun and paralyze, but do not kill in significant numbers may be the only ones that are politically acceptable in the future."

It was only a matter of finding a sanctions strategy systematic enough to make this more obscure portion of the Shock and Awe doctrine operational. What Ullman and Wade could not have imagined was that Washington's global planners would use extraterritorial legal powers and its financial clout to coerce the global banking industry into accepting US foreign policy diktat. North Korea was a test-run for the new strategy of Shock and Awe financial sanctions. As Washington Post columnist David Ignatius put it in February 2007, "[t]he new sanctions are toxic because they effectively limit a country's access to the global ATM. In that sense, they impose -- at last -- a real price on countries such as North Korea and Iran."

What then will the impact be of this US-Iran banking standoff? For the US, almost no impact at all. Treasury bureaucrats will spend some time and a little taxpayer money making phone calls, checking computer screens and paper trails to monitor global banking compliance with sanctions. The cost of financially ostracizing Iran will be a bargain for US taxpayers compared with the eventual $3 trillion cost of the Iraq and Afghanistan wars estimated by Nobel prize-winning economist Joseph Stiglitz and Harvard financial expert Linda Bilmes.

Iran, however, will become another Gaza or Iraq under the economic sanctions of the 1990s, with devastating impact on economy and society. That Iran's complete financial and economic destruction is the goal of US policy was spelled out by the State Department the day before the FinCEN announcement.

During a daily press meeting with reporters on March 19, the State Department's spokesperson was asked about a deal recently signed between Switzerland and Iran to supply Iranian natural gas to Europe. After condemning the deal, the spokesperson explained that the US is opposed to any "investing in Iran, not only in its petroleum or natural gas area but in any sector of its economy" and questioned rhetorically the wisdom of doing business with Iranian "financial institutions that are under UN sanctions or could become under sanctions if it's found that they are assisting or aiding or abetting Iran's nuclear program in any way." A clearer expression of US desires is hardly possible.

John McGlynn is an independent Tokyo-based economic and financial analyst.

A very interesting article. Thanks for posting this, Maggie.

Looks like the US will leave no stone unturned in honoring its promise to its masters (Israel), that it will destroy Iran for them. Countries who reluctantly participate in such a cowardly strategy should ponder whether they will become the next "global menace, threat, terrorism sponsor, wearer of bad clothing and all-purpose enemy of the day".

Americans might wonder why Iran has become their specific mortal enemy. They have a different culture, religion, and form of Government to the US, but the same can be said of other many countries. They may desire a nuclear deterrent, but so what? That's no threat to America.

There can be no doubt about the reason for all this. Israel. As usual, Israel benefits from a convenient cloaking cover which runs in tandem---the greed of America and its oil interests in controlling the 'jewel in the crown' of Gulf States and its ample resouces. Israel's strategic interests and US corporate greed seem to compliment each other perfectly--as usual. But who's being wagged, the dog or the tail? And as usual, the psychopaths running Israel and the US give no thought to the consequences which might be suffered by 'collateral' innocent parties who have no stake in this odious conflict. The 70 million people of Iran, for example.

After recieving orders from her masters, Peahen Merkel leads the chorus, hoping the EU and China follows:

"Give us Barabbas, give us Barabbas". "He's not that bad".

Edited March 30, 2008 by Mark Stapleton

[William Kelly]

This article in the Wasington Post about the Pentagon's ex-officers, including generals, doing PR work with the networks, got me thinking.

Retired Officers, Still Doing The Pentaton's Work?

http://www.washingtonpost.com/wp-dyn/conte...8042002131.html

I hadn't heard much about the U.S. Naval War College until professor David Kaiser came out with his new book The Road to Dallas, and then I heard of it twice with the publication of the article on Admiral William Fallon by Thomas P.M. Barnett, also affiliated with the Naval War Collge.

http://www.nwc.navy.mil/

The article on Fallon mentions that Barnett, the author, had known Fallon from having worked with him at the Pentagon, and I didn't put much into it until today when the Washington Post came out with a story about ex-Pentagon officers being groomed for PR work.

http://www.commondreams.org/archive/2008/03/08/7564/

I thought that Barnett's article on Fallon was quite successfull in getting him sacked, if that was its purpose.

In looking closer at Thomas P.M. Barnett, it appears that he began to study military strategy from a Cold War mindset, then didn't know where to go with the fall of the Soviet Union.

In reviewing Barnett's books, articles and military theories, his ideas on asymmetrical warfare and the Big Bang theory of the invasion of Iraq stand out, and make me want o look into his ideas further.

http://www.thomaspmbarnett.com/published/pentagonsnewmap.htm

http://www.thomaspmbarnett.com/weblog/

http://www.thomaspmbarnett.com/glossary.htm#Big_Bang

Asymmetrical Warfare A conflict between two foes of vastly different capabilities. After the Red Army dissolved in the 1990s, the U.S. military knew it was basically unbeatable, especially in a straight-up fight. But that meant that much smaller opponents would seek to negate its strengths by exploiting its weaknesses, by being clever and "dirty" in combat. On 9/11, America got a real dose of what asymmetrical warfare is going to be like in the twenty-first century.

Big Bang refers to the implied (and sometimes openly voiced) strategy of the Bush Administration to trigger widespread political, social, economic and ultimately security change in the Middle East through the initial spark caused by the toppling of Saddam Hussein's regime in Iraq and the hoped-for emergence of a truly market-based, democratic Arab state. Thus, the Big Bang primarily aims for a demonstration effect, but likewise is also a direct, in-your-face attempt by the Bush Administration to shake things up in the stagnant Middle East, where decades of diplomacy and military crisis response by outside forces (primarily the U.S.) had accomplished basically nothing. The implied threat of the Big Bang is, "We're not leaving the region until the region truly joins the global economy in a broadband fashion, leading to political pluralism domestically." The Big Bang was and still is a bold strategy by Bush, one that I support. All terrorism is local, so either deal with that or resort to firewalling America off from the outside world........

At the Naval War College, Dr. Barnett served as Director of the NewRuleSets.Project, an ambitious effort to draw new "maps" of power and influence in the world economy so as to expand the U.S. Military's--and specifically, the U.S. Navy's--vision of where and how it can wield maximum influence across the international security environment of the Era of Globalization. The first phase of the project (January 2000-October 2001) was conducted in partnership with the Wall Street broker-dealer firm Cantor Fitzgerald, which hosted three full-day "decision event" workshops atop World Trade Center 1 (Windows on the World). These workshops brought together elite leaders from the worlds of finance, national security, think tanks and industry to discuss the crucial "flows" of globalization, with a special emphasis on Developing Asia. Phase I yielded three briefings and two published reports: one on Asian Energy Futures and another on Foreign Direct Investment. The second phase of the project (November 2001-June 2003) consisted of Dr. Barnett's follow-on work with the Office of Force Transformation. Prior to this study, Dr. Barnett directed the Year 2000 International Security Dimension Project.

Prior to joining the College in August 1998, Dr. Barnett served as a Project Director in both the Center for Naval Analyses and the Institute for Public Research, the two major divisions of The CNA Corporation (CNAC), a private research firm located in Alexandria, VA. His two major accomplishments during his CNAC career were:

• Serving as a member of the Naval Force Capabilities Planning Effort that developed the new strategic concepts eventually published in the Navy's White Paper . . . From The Sea, the first draft of which he co-authored along with a handful of senior naval officers
  
• Pioneering and managing CNAC's contractual relationship with the U.S. Agency for International Development (USAID).
  

Edited April 21, 2008 by William Kelly

[Mark Stapleton]

I can't help but notice that Jimmy Carter's unilateral mission to visit Hamas, which extracted a promise by Hamas to agree in principle to a two-state solution to the Israel-Palestine problem, has been largely ignored by MSM. Or alternately covered by the likes of Paxman asking Carter: "Would you speak to Al-Qaeda as well?", and an emphasis on Condi Rice's ad hominem attacks on Carter himself for undertaking this initiative. In other words, MSM has largely ignored the momentous, unprecedented, substance of Hamas' statements and concentrated instead on criticizing the process.

Whereas Hillary Clinton gets entirely uncritical top billing for threatening to "obliterate" the men, women and children of Iran.

"In the next 10 years, during which they might foolishly consider launching an attack on Israel, we would be able to totally obliterate them. That's a terrible thing to say but those people who run Iran need to understand that because that perhaps will deter them from doing something that would be reckless, foolish and tragic."

Who needs psyops when MSM's coverage of these crucial matters is framed in such a patently biased manner.

Yes, I agree Jan. The MSM doesn't want any real negotiations or peace for Palestine because the MSM represents the views of the neocons in Washington and Tel Aviv.

How utterly disgraceful and gutless are the mainstream media.

In the West Bank, the Jewish settlements continue at great pace, with Israeli Government approval:

http://mlyon01.wordpress.com/2007/11/09/je...-roadmap-talks/

The justification cited by these cruel and insane fanatics? It's in the bible--God wants us to have this land. Kudos to Jimmy Carter for having a go, at least, but a predictable cold shoulder from the murderers in Tel Aviv and Washington.

As for HRC's tough words, well we all know Iran is planning no such thing and she clearly insulted the intelligence and decieved the voters of Pennsylvania, while sending a plain message to her fellow power elites that it would be business as usual, but with perfume. So what did the voters do? Elected her.

The mainstream media should answer for this.

[John Simkin]

Speaking in Pennsylvania yesterday Hillary Clinton claimed that “I want the Iranians to know that if I’m the president, we will attack Iran… if it attacks Israel.” Clinton added that she promised to “totally obliterate” Iran.

I suppose she wants to show that she will be a tough president. She is also clearly after the Jewish vote. However, the use of the term “obliterate” is a strange one. US politicians mainly use the term surgical strike that suggests that only the “bad guys” are killed. However, “obliterate” means to totally destroy and would result in the deaths of millions of civilians. Will this gain her votes? Does Clinton really think that the American electorate actually reached this stage of depravity?

[Mark Stapleton]

The idea that HRC would retrieve the image of an unthinkable 'worst case scenario' and use it to win the primary is the lowest of tactics. She's a shameless cheap shot artist and worse besides.

But the media's uncritical reporting of this is even worse, imo. It's as if they totally agree with HRC.

And what's wrong with the voters in Pennsylvania? You might be right, John---the Clintons may be right in thinking the electorate has reached a point where bloodlust trumps common sense.

Edited April 24, 2008 by Mark Stapleton

[Ron Ecker]

And what's wrong with the voters in Pennsylvania?

They put Arlen Specter in the Senate. Whatever is wrong with them, it apparently can't be fixed.

[Mark Stapleton]

Looks like it's nearly go time:

http://www.commondreams.org/archive/2008/04/25/8529/

I like the bloggers suggestion---millions should take to the streets.

Edited April 25, 2008 by Mark Stapleton

[Mark Stapleton]

There's also this:

http://latimesblogs.latimes.com/babylonbey...-war-fears.html

It's hard to imagine they would do it.

However,....................................?

[Guest David Guyatt]

Looks like it's nearly go time:

http://www.commondreams.org/archive/2008/04/25/8529/

This was dire reading, Mark. I can only hope that madness does not prevail

[Guest David Guyatt]

During the March 2003 invasion of Iraq by the USA, UK, Australia, and others, armour piercing shells and bombs tipped with depleted uranium (U238) were used. It took 9 days for uranium particles from these weapons in Iraq to reach England, where air sample filters showed a 300% increase in uranium particles attributable to the war. The weather patterns at the time that carried the particles to England passed over central Turkey, the Ukraine, Austria, Poland, Germany, Sweden, and Denmark, to England, then over Norway and Finland to the Arctic. This was reported by The Times, summarizing a study in European Biology and Bioelectromagnetics.

There is growing evidence, apparently, that the fallout from DU munitions used in the former Yugoslavia, as in Iraq, have heavily contributed to the sharp increase in type II diabetes throughout the world.