IND:   What an impact in just 10 days!  Washington’s efforts to sanction Iran’s central bank and the Europeans’ steps to place an embargo on the purchase of the Iranian oil have proved more effective, thus far, than any other policy the US and Europe have tried in 30 years.

TEHRAN, Jan 10 (Reuters) – Iran’s currency has slid 20 percent against the dollar in the last week despite central bank intervention, and Iranians concerned about the economy said on Tuesday attempts to send text messages using the word “dollar” appeared to be blocked.

The central bank reportedly pumped $200 million dollars into the market last Wednesday after new and much tougher U.S. sanctions prompted nervous Iranians to change rials into hard currency, accelerating a rise in the price of dollars on the open market.

Saying it would act to stabilise the currency, the Central Bank of Iran (CBI) imposed a rate of 14,000 rials to the dollar – up from record lows of around 18,000 rials – but many exchange offices would not sell at that price.

By Tuesday the exchange rate had risen again to around 17,000 rials, according to exchange bureaus, 50 percent more than the CBI’s “reference rate” of 11,240 rials.

The currency slide is a huge risk for consumer prices in a country where the official inflation rate – considered an underestimate by many economists – is already around 20 percent and rising…

An interesting piece in today’s WSJ by Ilan Berman, who is vice president of the American Foreign Policy Council in Washington, D.C.

…China’s recent energy moves, however, suggest that its traditional calculus in cooperating with Iran may be changing, and for good reason. Policy makers in Beijing have sensed for some time that their cozy ties to the Iranian regime have the potential to become a serious geopolitical liability.

China may grasp that the U.S. Congress, now exhibiting a growing appetite for strong economic pressure on Iran over its nuclear program, could soon sanction Tehran’s enablers, Chinese firms chief among them. Chinese officials can’t but notice that Iran’s nuclear quest—and the supporting role of countries like China—is fast becoming a major campaign issue for President Obama’s Republican challengers.

Perhaps weighing most heavily on Beijing’s mind is Iran’s recent bluster regarding the potential closure of the strategically vital Strait of Hormuz. This is likely to have spooked Chinese officials concerned above all with ensuring the steady flow of oil necessary to sustain their country’s economic dynamism.

Whatever the reason, China’s curtailment of energy ties with Iran is a welcome development and a major step forward for Western efforts to tighten the economic noose around the Islamic Republic. At long last, the Chinese leadership appears to be waking up to the fact that cooperation with Iran carries real risks.

Washington and European capitals must seize the moment to amplify that message and to support Beijing’s inevitable quest for different energy suppliers that can provide more stable alternatives to Iranian crude. After all, it is only by convincing China that its energy future does not lie with Iran’s ayatollahs that the international community can hope to make Beijing’s recent course correction permanent.

From a separate article also in today’s WSJ, the following graph shows China’s overall trade surplus and its trade surplus with the US only.  The conventional wisdom says that the Chinese own us and what happens if they dump all their treasuries or stop buying our treasuries, blah, blah.  This graph shows otherwise.  If push comes to shove and trade relations between Beijing and Washington deteriorate badly, the consequences for the US and China are quite different.  Most likely, America will buy most of the the stuff from different countries, its savings rate will go up and its unemployment rate will be essentially the same – with the exception of the retail sector – but the Chinese will get killed.  Their trade surplus will most likely plummet or possibly go negative and their unemployment will shoot up.  Looking it at from this angle, who do you believe has the leverage now?

America should pressure China on Iran now before the Chinese wisen up and boost their domestic consumption.  By then, America’s leverage with China will dissipate quite a bit. (On a separate note, it is shocking to me how we are financing potentially the biggest foe America has ever faced.  What happens if the Chinese don’t become democratic as they get richer?  This is not nature’s law that as societies get richer, they become democratic.  It’s too much at stake to simply rely on the experience of a few right wing dictatorships transitions to democracies.)

From Bloomberg: The regime has to lower its selling prices for Feb vs. Jan:

Iran Pricing

Producers such as Saudi Arabia and Iran sell the majority of their crude under long-term contracts to refiners. As the largest producer in the OPEC, Saudi Arabia creates the standard for the region. NIOC pegs selling prices to Saudi Arabian grades for Asian customers using differentials that are adjusted quarterly. For the first quarter, NIOC set Iranian Light 21 cents above Saudi’s Arab Light. Iranian Heavy cost 1 cent below Arab Medium and Forozan 17 cents above the same grade.

The following table gives differentials of Iranian crude supplied to five regions in relation to benchmark prices and the month-on-month change. Prices are in U.S. dollars a barrel.

Asia

Grade               February       January      Change
Iranian Light       +2.26          +4.36        -2.10
Iranian Heavy       +0.74          +2.74        -2.00
Forozan Blend       +0.92          +2.92        -2.00
Soroosh             -4.19          -3.89        -0.30
Norooz              -4.19          -3.89        -0.30

Prices for customers in Asia are expressed as a differential to
the average of the Oman and Dubai benchmark assessments
published by Platts, except for Soroosh and Norooz, which are
priced against Iranian Heavy.
----------------------------------------------

Northwest Europe

Grade               February       January      Change
Iranian Light       -2.35          -0.80        -1.55
Iranian Heavy       -3.85          -2.30        -1.55
Forozan Blend       -3.75          -2.20        -1.55

Prices for customers in Europe are expressed as a differential
to the Intercontinental Exchange’s Brent weighted average.
----------------------------------------------

Mediterranean

Grade               February       January      Change
Iranian Light       -4.00          -2.00        -2.00
Iranian Heavy       -5.45          -3.85        -1.60
Forozan Blend       -5.35          -3.75        -1.60
Soroosh             -4.00          -3.85        -0.15
Norooz              -4.00          -3.85        -0.15

Prices for customers in the Mediterranean are expressed as a
differential to the Intercontinental Exchange’s Brent weighted
average, except for Soroosh and Norooz, which are
priced against Iranian Heavy.
-------------------------------------------------------------

Sidi Kerir

Grade               February       January      Change
Iranian Light       -1.90          -0.05        -1.85
Iranian Heavy       -3.35          -1.90        -1.45
Forozan Blend       -3.25          -1.80        -1.45

Prices for Middle East customers are expressed as a differential
to the Intercontinental Exchange’s Brent weighted average.
---------------------------------------------------------------

South Africa

Grade               February       January      Change
Iranian Light       -2.35          -0.80        -1.55
Iranian Heavy       -3.85          -2.30        -1.55
Forozan Blend       -3.75          -2.20        -1.55

Prices for customers in South Africa are expressed as a
differential to the Intercontinental Exchange’s Brent weighted
average.

IND: China will this week launch its highest-level diplomatic visit to the Persian Gulf in more than two years.  This trip comes right after Treasury Secretary Tim Geithner arrived in Beijing on Tuesday to press China on Iran.  Interesting timing!

This trip is all about China hedging its bets. Most probably, the Chinese will want to receive first hand assurances from the Saudis that they could ramp up oil production in the event that the sanctions on the regime gain traction – so the Chinese won’t be stuck with a higher oil bill. Seeing the writing on the wall and sensing that this time Washington’s approach could seriously undermine the regime, the Chinese are, wisely, choosing to gradually distant themselves from the regime.  Although I have been a longtime critic of President Obama’s Iran policy, especially during the Green protests (and President Bush’s policy in general), I think Washington is now – for a change – playing its hand brilliantly.

China will this week launch its highest-level diplomatic visit to the Persian Gulf in more than two years, seeking to bolster its growing energy ties to the region amid jitters over possible Western sanctions against Iranian oil and Tehran’s counter-threat to block the Strait of Hormuz.

Premier Wen Jiabao’s six-day trip will take him to Saudi Arabia, Qatar and the United Arab Emirates, while China’s state-owned Sinopec is poised to sign a joint-venture deal to develop a big refinery on the Saudi Red Sea Coast.

…Although few details have been disclosed about Wen’s visit — the most senior Chinese mission to the Middle East since President Hu Jintao went to Saudi Arabia in 2009 — the premier’s choice of countries suggests energy will be high on his agenda. Saudi Arabia is China’s largest supplier of crude, and Beijing is expected soon to overtake Washington as the biggest buyer of Saudi oil. Qatar also recently became China’s largest supplier of liquefied natural gas.

China’s crude-oil purchases from Tehran have also drawn closer scrutiny this week after the United States announced sanctions against Iran’s Central Bank. U.S. Treasury Secretary Tim Geithner arrived in Beijing on Tuesday to press China to support the move.

Even though Wen is reportedly skipping Tehran on this visit, many observers say they do not expect Beijing to abandon its historic policy of seeking good relations with both Iran and the Gulf Arab states, whatever the antagonism between them. Go to Washington Post.

SFGate:…The official rial-to-dollar rate was 11,030 on Dec. 21, while the market rate at currency bureaus soared to 15,300 the same day. That gap narrowed yesterday to 11,100 and 15,150, a 36 percent difference, according to Donya-e-Eqtesad. The 39 percent gap last week was the widest in about 20 years and it underscores that Iranians don’t trust politicians and finance officials to stabilize the economy, said Raghfar…

IND: As this site has been advocating for a long time, the regime’s Achilles’ heel is its oil income.  And the regime knows it – hence, all the empty threats about blocking all the oil that goes through the straits of Hormuz.  At long last, the US is on the right track: isolate the regime’s central bank and support a worldwide embargo on the purchase of the Iranian oil. Don’t bomb Iran and don’t engage this regime.

IND:  Today’s WSJ had an interesting piece on efforts being taken to place an oil embargo on the regime.  This site has long advocated such a policy as the real solution to confront the regime; but it is absolutely critical how the reasoning  for such an oil embargo is framed for the Iranian people.  The oil embargo must not be tied to the nuclear issue alone.  The West needs to tie the proposed oil embargo  to the regime’s domestic policy as well so it doesn’t squander such an excellent opportunity to create a wide, deep wedge between the regime and the Iranian people.  The West shouldn’t think just tactically and short-term but strategically and long-term.

…The Obama administration has been reluctant since taking office to directly sanction Iran’s oil exports or its central bank, which facilitates most Iranian energy sales, due to fears this could drive up global energy prices and imperil the U.S. economic recovery…

…France and Britain this month formally presented a plan to the EU to enact a total embargo on both Iran’s oil exports and its central bank. The U.S. Congress, meanwhile, approved legislation last week obligating the White House to also blacklist Bank Markazi, the Iranian central bank…

…U.S., European and Arab officials involved in the discussions on targeting Iran’s oil exports said there is a growing recognition that China, India and other major developing countries will continue to buy Iranian oil irrespective of any unilateral steps taken by the U.S. or EU. As a result, a major focus of the Obama administration and Europeans is to find unanimity among the EU states and the West’s closest Asian allies, particularly Japan and South Korea, to end all Iranian oil purchases.

This would cut off around half of Tehran’s total oil exports and force Iran to sell its supplies at discounted rates to the Chinese and others, said these officials. European countries most dependent on Iranian oil are Greece, Spain and Italy, said European officials… Go to WSJ.

…The implications of that position–”militarily” replacing the Iranian regime–are even more dramatic. Does Newt really entertain the idea of going to war with Iran to change its government and somehow install a friendlier one? It seems so. Gingrich he has said previously that any strike on Iran’s nuclear program should be undertaken “only as a first step towards replacing the regime.”

This leaves Gingrich with a position that is perhaps unique, and quite dramatic. He’s skeptical about military action to take out Iran’s nuclear complex. But he thinks war with Iran to replace its regime might be necessary. Amid the freak show of the Republican presidential campaign, that’s a sobering reminder of the underlying stakes. IND:  Attacking Iran to replace the regime!!!  Has Gingrich learned nothing about the wars in Iraq and Afghanistan and all their unintended consequences? Go to Time.

Interesting video by Ted Koppel analyzing Iran’s deep influence in Iraq. Go to MSNBC.

A Message from the Network of Iranian Labor Association:

…As you know, the Iranian regime is in the throes of its worst ever crisis. In fact we are dealing not with one but multiple crises: economic, political and ideological ones. This is beginning to hit the very heart of the regime: i.e. its social and political support base. This year, for example, the Ashura mourning ceremonies, devoted to the martyrdom of Shi’ism’s Third Imam, was the most lackluster ever. While this may be greeted by outsiders as welcome news, in reality it makes the regime far more dangerous than in the past.

The recent attack on the British embassy in Tehran should be seen as a warm-up for what is planned. They are preparing themselves for war. The bloodier, the better, from their perspective. It would be their savior, a lifeline to the regime. Under the circumstances, it would be sheer folly for either Israel or the United States to go to war with Iran. Why give the Islamic Republic’s leaders a fresh lease on life when every visible sign points to a terminal state of being? Unfortunately there are indications that this doomsday scenario is not so far-fetched. Despite denials in the last few days, Israel’s right-wing government is actively preparing itself for that very option. It may do so for both domestic and strategic considerations, dragging the Obama Administration with it into the abyss. What would an attack on Iran achieve? It certainly can not destroy the country’s nuclear program. It would only set it back for a very short time while giving every pretext for that regime to resume it feverishly afterward. It would consolidate the regime for many years to come and it would radicalize the Arab Spring into a radical Islamic fundamentalist nightmare.

It is incumbent on us, in the weeks and months to come, when war drums are rolling, to alert our public to the dangers of the war option. There would be no room for campaigning for human rights when cities are bombed and civilians slaughtered.

Therefore let us not forget to publicize this dreadful threat as we highlight the many cases of human rights abuses in Iran. Go to original article.

A scathing attack on the VOA Persian service by Mehdi Khalaji.  Two parts stood out in particular.

• While the average age of VOA employees is 64, the age of average Iranians is 32.
• In September 2010, when President Barack Obama wanted to talk with Iranians, he chose BBC Persian over its own Voice of America Farsi station. Policymakers should think about how they can make Voice of America so credible and trustworthy that when American officials want to communicate with other nations they would not have to resort to the media of another country.

Go to Washington Institute.

Sir, David Miliband and Nader Mousavizadeh correctly point out the potential dangers of increased sabre-rattling about attacking Iran but their solution, “a concerted diplomatic effort”, misses the point (“The risks of sleepwalking into a war with Iran”, December 2).

What more can the west do to reach out to the regime than what President Barack Obama has done since he came to office? Nothing!

.

Ayatollah Ali Khamenei is not going to consider abandoning Iran’s nuclear development until the regime has, at the very least, mastered the entire nuclear weaponisation process. He has seen what happened in Iraq and Libya versus North Korea.

He is also not going to consider opening up to the west in the hope of having sanctions lifted so long as he has access to Iran’s oil income.

Mr Khamenei is shrewd and cunning and knows that opening up to the west would significantly increase pressures for domestic liberalisation, the start of a slippery slope, which, ultimately, leads to the loss of his grip on power or even the demise of the regime itself.

It is time for western leaders to abandon their futile, bipolar Iranian policies of either engagement or threats of military strikes. The solution is to renounce both war and engagement and, instead, concentrate on cutting the regime’s cash flow by placing a worldwide embargo on the purchase of Iranian oil.

Without its oil income, the regime cannot pursue its nuclear development, destabilise Afghanistan and Iraq, support radical groups, and, above all, continue to repress the Iranian people. Fortunately, at long last, European leaders are waking up to the oil embargo option.

This is the critical context for the escalation in the nuclear crisis now threatening to replace diplomacy with war as the west’s response to the Iranian threat. The recent comprehensive International Atomic Energy Agency report on Iran’s nuclear programme; public debate in Israel about the wisdom of a military strike, without much pushback from outside the country; private mutterings about the best “window” for such an attack; and now the serious diplomatic consequences of the assault on the British embassy and its staff, are combining to deepen the chasm of distrust to new and dangerous levels.

But that is not an argument for military action now or in 2012. We are not talking about a discrete – or discreet – strike here. Avowed Iranian nuclear facilities are numerous and the regime does not lack for ammunition or targets in return. In addition to its own missile stores, Iran is invested in regional proxy armies, such as Hizbollah. All the war games show that targets as diverse as Saudi Arabia and the Emirates, Israeli and US facilities and the Straits of Hormuz would come into play.

For these reasons we must avoid military action becoming a self-fulfilling prophesy. Diplomacy must take the lead in preventing a major war with Iran – for that is what it would be. What is more, the regime faces at least four serious challenges of its own. First, it is clear that sanctions, cyberwar and covert operations have impaired Iran’s progress towards a nuclear weapons capability, with most estimates holding that the regime is at least two years away from achieving it. To be clear, no one has made the case such an achievement is imminent.

Second, IAEA inspectors continue to monitor key installations and operations, providing a tripwire presence able to signal any dramatic change in policy or practice by Tehran. It would be disastrous if the fallout from the Iranian storming of the British embassy included the harassment or expulsion of inspectors by the regime.

Third, Iran’s strategic influence in the region is waning. Its sole ally in the Arab world, the Syrian regime, is badly weakened and probably entering an end game. Among the Arab public, Iran’s popularity has plummeted since the highs of the 2006 Lebanon war.

Fourth, and too often neglected, are the aspirations of the Iranian people. They have often shown that they do not share the regime’s hostility to the world and instead aspire to the same kinds of open government that the youth of the Arab world are reaching for.

At a time like this, diplomatic drive and creativity are needed more than ever. Now is the time to support, directly and indirectly, the pressures on a regime currently fractured on all matters except the nuclear programme. And in this endeavour, war talk weakens our hand – strengthening the most uncompromising forces within Iran and corroding global cohesion in opposition to the programme.

Non-military options have not yet succeeded, but nor have they failed. However, exasperating the diplomatic track growing talk of a military option risks creating a logic all of its own, where the appalling consequences of a military strike are set to one side and a precipitate and unwise move to war becomes acceptable wisdom.

Nature abhors a vacuum and so does international politics. It cannot be filled by nudges and winks about military options. A concerted diplomatic effort on Iran is needed now to prevent the world sleepwalking into another war in the Middle East.

David Miliband, MP for South Shields, was British foreign secretary from 2007-10. Nader Mousavizadeh is chief executive of Oxford Analytica and was special assistant to former UN secretary-general Kofi Annan from 1997-2003 Go to Financial Times.

WASHINGTON—More than 90 U.S. senators signed a letter to President Barack Obama pressing him to sanction Iran’s central bank, with some threatening legislation to force the move, an outcome that would represent a stark escalation in tensions between the two countries.

Such a measure, if effectively implemented, could potentially freeze Iran out of the global financial system and make it nearly impossible for Tehran to clear billions of dollars in oil sales every month, said current and former U.S. officials.

Many American officials view the blacklisting of Bank Markazi as the “nuclear option” in Washington’s financial war against Tehran. Some Iranian leaders have said they would view such a move by the Obama administration as an act of war.

IND:  As this site has consistently argued, cut off the funding of the regime and watch it implode.  Without its petrol-dollars to buy off support, we’ll see how many people in Iran genuinely support this regime. Go to WSJ.