Steel sanctions cut deep into Iran's economy

Sun Nov 11, 2012 2:34am EST
 
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By Silvia Antonioli and Jonathan Saul

LONDON (Reuters) - Iranian manufacturers and builders face serious shortages of steel and other metals as a new European Union export ban adds to troubles for an economy already reeling from sanctions on its finances and oil exports.

Reliant on imports to make up a shortfall in its own steel production, data shows Iran's purchases of foreign steel already falling as buyers are being hit by EU and U.S. measures which hinder banks, insurers and others supporting trade with Tehran until Iran agrees to alter its nuclear program.

Short of major currencies, some Iranian steel buyers have resorted to barter deals. But explicit sanctions imposed by the European Union on October 15 on sales of steel, aluminum and other key materials have prompted some traders to halt all sales and Iranian businesses now face rising prices and scarce supply.

Given steel's central role in the economy, in the skeletons of new buildings or for constructing machinery, disruption to trade in the metal may cause far-reaching damage - exactly the aim of the Western powers who want to prevent Iran developing nuclear weapons and reject its denials that it has any such aim.

"The ban on metals like aluminum and steel recently imposed by the EU has a sort of ‘multiplier' effect of pushing the Tehran regime into a new cycle of activities to dodge the effect of the sanction, a course which will end up creating new complications and pushing up costs," said J. Peter Pham, a director with U.S. think-tank the Atlantic Council.

"At the current pace, Iran's ... industrial base will be rendered a cripple."

Newly re-elected, President Barack Obama and his allies have resisted calls, notably in Israel, for military action against Iran's nuclear industry but have stepped up economic sanctions to press the clerical leadership into changing diplomatic tack.

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