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International sanctions are imposed to countries in order to monitor restrict the legal trading of goods. That is why any time a financial company is looking for a potential partner, especially in an emerging country, it should be aware of them to avoid risks. Sanctions to the targeting goods such as Iranian oil or the blood diamonds in Cote d’Ivoire are still on going. Finbuzz spoke about the reasons why trade embargoes and bans are being placed with James Birkett, Senior Associate at Alaco business intelligence firm and part of the analyst team responsible for the International Sanctions Guide.
How do you define a sanction?
All countries can operate a sanction programme and the idea behind them is to coerce someone to even do something or to stop doing something that you don’t want them to do. Iran for instance is the country that has successfully come out of the sanctions programme imposed by the United Nations, the European Union and the United States by proving to the members of the international community that it is willing to stop its nuclear programme.
Where does the information come from in your research?
The primary information comes from the Office of Foreign Assets Control of the US Department of Treasury (OFAC), the UK treasury or the UN handy guide. Alaco has a strong global network of sources in most countries of the world and a multilingual team in which everyone has a sectoral knowledge to help with. In terms of research is a case of knowing how to navigate public sources and how to put them together in a readable way. There is nothing rare that anyone could find but we hope the strength of the guide is using our expertise to find it from its different places and break it down.
Is there any link between a trading embargo sanction and a human right violation?
There are two reasons why a trading embargo is put into place. The first one, it is a specific measure to hurt a country’s economy and impoverish them –a sanction to the Iranian oil stop their ability to have a revenue industry and have a great shortcut to produce arms of massive destruction. The other reason is if in the production of the goods there is a crazy human rights abuse, for instance, Ivory with the prohibition of exporting blood diamonds or the ivory tusks in South Africa. There is no point of killing elephants to get their tusks or exploit diamond mines because these goods can’t be sold in the open market.
The US embargo against Cuba started in 1960 after Cuba nationalised American-owned Cuban oil refineries. It is one of the oldest and has been ongoing until March this year. Has it been effective?
Cuba is a great example of somewhere where there is an argument against the effectiveness of the trading sanction. Even the UN has risen resolutions against this embargo for its effects on food, clean water, medicine and others economic needs of the Cuban population. The truth is that they haven’t really succeeded in any political change. What has been the point of economic sanctions in Cuba except the hurts of everyone? I think it is not easy to answer this question. The Cuban sanctions is an example where the US was less effective reacting unilaterally and where Cuba has a lot of support from elsewhere. Obviously you never know what happens if you don’t put this program in place.
there is plenty of room and areas, some of them in the UE, that have a reputation fairly or unfairly for being massive hubs for the laundering of Iranian oil.
Subsaharian Africa is also an old scene of sanctions and trade embargos. In countries like Burundi, Liberia or Cote d’Ivoire, where the civil wars break the peace process, are sanctions effective?
This is a long process too. In my opinion these sanctions programmes driven by human rights concerns always have a value even if they only demonstrate the world’s disapproval of groups that seek to commit horrible human right abuses. In Africa there have been a few victories for the world community like the successful enforcement of President Laurent Ggagbo in Cote D’Ivoire, who sought to prevent a democratic transition of power with a civil war between 2002 and 2004, or in Liberia where the former President Charles Taylor was actually convicted in the European Criminal Court for war crimes and crimes against humanity committed during the conflict in Sierra Leone. Things are still imperfect but these ones are quite positive. Although they are not things accomplish to sanctions, sanctions are a part of the world mechanism. There is plenty of room and areas that have a reputation fairly or unfairly for being massive hubs for the laundering of Iranian oil.
Is there any global authority to control that sanctions are respected?
Not really. Trades work quite well by its regulatory procedure. However it is interesting to highlight that one of the big issues in the commodity sector has been the oil: when trading with Iranian oil has been sanctioned to stop the country developing its nuclear programme, lots of different mechanisms have been exploited to try and get it out of Iran and into western markets. A lot of them probably have been successful and the way it works is fascinating! Turning off the transponders so it is hard to monitor exactly where they are going, ships discharging their cargo at sea into other ships… So there is plenty of room and areas, some of them in the UK, that have a reputation fairly or unfairly for being massive hubs for the laundering of Iranian oil.
Is the black trading a gap in the effectiveness of the international sanctions?
Absolutely. In any trade with restrictions people are going to try a second value using the black market and countries have different levels of effectiveness in combating this sort of market. That scenario is a problem where trade embargo can never be 100% secure. However, this kind of restrictions reduces demand because it makes it difficult to access the broad market. It is a huge problem for any company if they are found to be involved in irregularities and immediately they lose access to most of the world markets.