Economic Sanctions against Iran | 50

Summary

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Podcast Summary: Economic Sanctions Against Iran | Down to Business English #50

Date: January 27, 2012
Hosts: Skip Montreux (Tokyo, Japan) & Des Morgan (Abu Dhabi, UAE)

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Episode Overview

This episode of "Down to Business English" explores the escalating economic sanctions imposed by the US, EU, and the UN against Iran, focusing on their causes, impacts, and implications for global oil prices. The hosts also unpack the historical context, the strategic importance of the Straits of Hormuz, and the internal dynamics shaping Iran’s response.

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Key Discussion Points & Insights

The Geopolitical Importance of the Straits of Hormuz

• Description: Skip asks Des about his proximity to the Straits of Hormuz, setting the stage for the discussion.
• Insight: Around 35% of the world’s seaborne oil shipments pass through this chokepoint daily, highlighting its global economic significance.
• Quote:
  • "35% of the world's seaborne oil shipments need to travel through the straits on a daily basis, making them the biggest chokepoint in the world." (Skip, 02:06)

Background of the US-Iran Crisis

• Escalation Level:
  • Skip asserts that the current situation is "the most serious US Iran crisis since the fall of the Shah in 1979." (01:36)
• Nuclear Tensions:
  • The West demands that Iran halt its nuclear development, suspecting ambitions for nuclear weapons, while Iran insists their intentions are peaceful.
• Historical Irony:
  • Des notes the irony that Iran’s nuclear program was initially backed by the West under the Shah, and the revolution halted the projects for religious reasons.
  • "It was the Iranians themselves that halted the building under the Ayatollah Khomeini as he considered it to be the work of the devil." (Des, 03:25)

Reasons for Rising Tensions Now

• Economic Pressure:
  • Iran faces heavy economic woes, including a major currency devaluation, reducing the value of oil sales.
  • "The Iranian rial has appreciated 80% against the US dollar over the past 12 months. Meaning there has been a depreciation in the value of their oil sales." (Skip, 03:56)
• Internal Corruption and Politics:
  • Major corruption cases, including those involving President Ahmadinejad’s advisors, further destabilize the government.
  • "President Ahmadinejad is also involved in an all out political war with Iran's religious leader Ayatollah Khamenei which is making the country even less stable." (Skip, 04:33)

The Nature and Impact of Sanctions

• Banking & Trade Restrictions:
  • Iran has been cut off from global banking systems essential for oil trade.
  • "The US, EU and United nations have effectively cut Iran off from international banking, which is essential as oil sales are in US dollars." (Skip, 04:53)
  • Loss of financial clearing methods and closure of key banks limit Iran’s revenue streams.
• Global Cooperation:
  • Other nations, notably Japan and Germany, are also reducing oil imports and closing Iranian bank branches under US pressure.
• Strategic Fallout:
  • These measures aim to destabilize Iran’s regime (targeting “regime change”).
  • Iran threatens to retaliate by closing the Straits of Hormuz, escalating potential global oil crises.
  • "That is the aim, of course, to destabilize the government and so lead to a regime change." (Skip, 06:16)

Potential Outcomes and Risks

• Escalation Likely:
  • Skip believes the situation is likely to intensify:
    • "If Iran does attempt to close the straits, then Saudi Arabia will respond... US has a base in Bahrain, so needs to transit through the straits." (Skip, 06:34)
  • Destabilization could involve terrorist proxies funded by Iran (Hezbollah and Hamas).
• Oil Prices:
  • Any conflict or even tension in the Strait would raise global oil prices.
  • "It's a fair bet that the price of oil will rise." (Des, 06:58)
• Call for Calm:
  • Emphasis on hoping for diplomatic de-escalation:
    • "Let's hope that Iran backs down first, or at least that cooler heads prevail on both sides." (Skip & Des, 07:10 & 07:12)

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Memorable Moments & Notable Quotes

• Des’s Joking Anxiety (01:53):
  • "I think I can hear fighter jets in the distance."
• Sanctions Definition Lesson (07:20):
  • "Sanction has two opposite meanings... as we used it, it means an official penalty, but the second definition is to give official permission." (Skip)
• Summary of Internal Iranian Turmoil (04:33):
  • "President Ahmadinejad is also involved in an all out political war with Iran's religious leader Ayatollah Khamenei..." (Skip)

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Important Vocabulary & Usage (Vocabulary Segment, 07:20–13:10)

• Sanction (07:20): Both penalty and permission
• Peninsula (08:31): Landform sticking into the sea, e.g., UAE, Cape Cod
• On top of something (08:47): To be knowledgeable or in control
• Shah (09:24): Persian term for king, referencing pre-1979 Iranian ruler
• Corruption (09:54): Illegal, immoral gaining of profit (noun, verb, adj. corrupt)
• Fraud (10:42): Illegal money gain; a form of corruption
• Destabilize (11:19): To make less stable
• Regime (12:03): Government in power
• Intensify (12:34): To become stronger or more severe

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Timestamps for Key Segments

• Straits of Hormuz significance: 02:06
• Roots of the crisis / nuclear background: 03:04
• Present economic and political context in Iran: 03:56–04:51
• Impact and details of the latest sanctions: 04:53–06:16
• Possible scenarios and oil impact: 06:31–07:10
• Vocabulary breakdown: 07:20–13:10

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Overall Tone & Language

Informal, conversational, and slightly humorous between two knowledgeable hosts. Skip plays the expert, Des the curious layman, facilitating clear explanations with a relaxed rapport.

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For further details and the full script, check their website at downtobusinessenglish.com.

Transcript

[A]

Hello everyone, this is Skip Montreux coming to you from Tokyo, Japan.

[B]

And this is Des Morgan reporting from Abu Dhabi in the uae.

[A]

Welcome everyone to an all new episode of down to Business. English.

[B]

Yes, welcome everyone.

[A]

Des, can I ask you a question? Far away, I was wondering, how close are you to the Straits of Hormuz?

[B]

Pretty close really. If you went north from Abu Dhabi, passed Dubai to the end of the peninsula and looked into the sea, then you would be looking at the Straits of Hormuz.

[A]

Now I'm sure you know why I asked that question.

[B]

Something to do with the country on the other side of the straits.

[A]

That's right. And that country, Iran, has a big disagreement with the west and especially the us.

[B]

And that is our topic for today. So let's do it. Let's get D2B down to business with the economic sanctions against Iran and how they could affect the price of oil in the future. Although I'm living right on Iran's doorstep, I have to admit that I'm not fully on top of this story.

[A]

Well, lucky for you, I have been following the situation recently, so I should be able to shed some light on it for our listeners. And you too, Des.

[B]

Great. So I guess the first question would be how serious a problem is it?

[A]

I don't think it is an understatement to say that this is the most serious US Iran crisis since the fall of the Shah in 1979.

[B]

Really? That bad? Do you think I should be looking for another job? Should I get out of the Middle East?

[A]

Oh, come on, Des, calm down.

[B]

I think. I think I can hear fighter jets in the distance.

[A]

Des, relax. Take a breath.

[B]

Oh, sorry about that. So why do you say it's the worst now since 1979?

[A]

First off, let me back up a bit and give some background information on the Straits of Hormuz. Now, believe it or not, 35% of the world's seaborne oil shipments need to travel through the straits on a daily basis, making them the biggest chokepoint in the world.

[B]

Wow. Pretty significant.

[A]

Then think about it. Saudi Arabia, Kuwait, Qatar, the UAE and Iran itself all need to use the Straits to ship their oil.

[B]

I can see why it's so important, but my questions are, what is the fight about and why now?

[A]

Fundamentally, it comes down to the US and Europe demanding that Iran stop developing nuclear technology. While Iran ardently claims their program is solely for peaceful purposes, the US is equally convinced that they are trying to develop the capability to build nuclear weapons.

[B]

Wow, that is a bit rich. Considering the nuclear power industry was started under the Shah and was fully backed by the West. In fact, it was the German company Siemens that was building the first power station there.

[A]

Impressive. Des, I didn't even know that.

[B]

And I bet you won't know why the development was halted.

[A]

No, I don't. Why was it stopped?

[B]

Well, unbelievably, it was the Iranians themselves that halted the building under the Ayatollah Khomeini as he considered it to be the work of the devil.

[A]

Well, that is certainly a bit of interesting background.

[B]

It is. But getting back to today, from the West's perspective, Iran with nuclear weapons would not be a positive step in the region. But back to my second question. Why now? The US has had sanctions in place against Iran for years. Why is Iran pushing back so hard now?

[A]

From Iran's perspective, there are two main issues motivating them to stand up to the us. Firstly, Iran has significant economic problems at the moment. The Iranian rial has appreciated 80% against the US dollar over the past 12 months. Meaning there has been a depreciation in the value of their oil sales. And secondly, widespread corruption in the Iranian government.

[B]

I did read that several of President Ahmadinejad's closest advisors will soon find themselves in court on corruption charges.

[A]

Yes, they will be tried for the largest case of banking fraud in the country's history. Furthermore, President Ahmadinejad is also involved in an all out political war with with Iran's religious leader Ayatollah Khamenei which is making the country even less stable.

[B]

Doesn't look too good.

[A]

On top of all that is the effect that the sanctions are having on the country. The us, EU and United nations have effectively cut Iran off from international banking, which is essential as oil sales are in US dollars. Of course Iran was removed from the Asian Clearing Union or ACU which covered the clearing transfer of American dollars into rials, which means that it is increasingly difficult for Iran to get paid.

[B]

That was part of the sanctions.

[A]

It was. And Iran now has to use more expensive means to transfer money, mostly through Dubai or Turkish based intermediary banks. On top of that, Germany under pressure from Washington, closed the Hamburg based but Iranian owned Europash Iranchi Handels Bank.

[B]

That seems a bit harsh.

[A]

Well, American intelligence agencies believe that through this bank the Iranians were funding arms deals, buying nuclear materials and subsidizing Hezbollah and Hamas.

[B]

Oh, maybe not so harsh then.

[A]

The EU has stopped importing Iranian oil altogether and now Japan has pledged to reduce their imports as much as they possibly can.

[B]

The that must be making it very difficult for the leadership in Tehran.

[A]

That is the aim, of course, to destabilize the government and so lead to a regime change, which, of course, the leadership in Tehran is resisting with every asset at their disposal, including the threat of closing the straits.

[B]

I see. So what do you think will happen next?

[A]

It's hard to say, but it seems likely that the crisis will intensify. If Iran does attempt to close the straits, then Saudi Arabia will respond. The terrorist groups Hezbollah and Hamas both receive funding from Iran, so they won't stand by while their main sponsor is under attack. The US has a base in Bahrain, so needs to transit through the straits.

[B]

So whatever happens, it's a fair bet that the price of oil will rise.

[A]

Unfortunately for the world economies, that does seem likely. But that was the gamble the US Took when it increased the sanctions.

[B]

Let's hope that Iran backs down first,

[A]

or at least that cooler heads prevail on both sides.

[B]

Thanks for that story, Skip. I certainly understand the issue better now.

[A]

My pleasure. But now it is time for us to get D2V down to vocabulary. I will start things off with a very important word for understanding today's story, the noun sanction. It is interesting to note that sanction has two opposite meanings. As we used it. In today's story, it means an official penalty. The US And Europe are penalizing Iran for developing nuclear technology. But the second definition of sanction is to give official permission.

[B]

For example, the pga, the Professional Golf association in the US Sanctioned a new type of golf ball last year that is designed so that it will always go straight. They've given players official permission to use it in tournaments.

[A]

Cool. Now I should point out that sanction is commonly used as both a noun and a verb.

[B]

Our next word is the noun peninsula, which is a long, usually thin piece of land that sticks out into the sea. In the story, I talk about the northernmost tip or peninsula that makes up the landmass of the UAE and Oman.

[A]

Another famous peninsula is Cape Cod in Massachusetts in the United States, which is a long, curved peninsula and is popular in the summer for vacations. Next, I have the idiomatic phrase to be on top of something, which means to know about something or be in control of it. In the story, Des said he wasn't on top of the information surrounding this issue, meaning he didn't know about it.

[B]

I do now, of course. And did you ever get on top of the web designing software Dreamweaver?

[A]

I'm slowly getting there.

[B]

Now I have the noun shah, which is derived from the Persian word for king or ruler in the story, Skip was referring to the leader of Iran before it became an Islamic Republic in 1979.

[A]

I don't think I can think of another famous Shah.

[B]

Me neither.

[A]

Okay, for our next two words, our regular listeners should be able to quickly, quickly recall them as they are. A review of vocabulary from our D2B46

[B]

cybercrime and to review vocabulary is always a good thing.

[A]

So the first word is corruption. The noun corruption refers to the activity of profiting in an illegal or immoral way. We can also use the adjective to be corrupt and the verb to corrupt. In the story, Des talks about the corruption charges against several of President Ahmadinejad's close advisors.

[B]

In our last episode, primarily on unemployment, we talked about a BBC survey on what issues people worried about around the world.

[A]

Yes, I remember that.

[B]

Well, corruption was still the biggest concern, especially in the following India, Turkey, Indonesia, Nigeria, and Peru.

[A]

Interesting.

[B]

The second of those review words is the noun fraud, which is the action of gaining money from another party through illegal means.

[A]

So fraud is a more specific subset of corruption.

[B]

That sounds about right. In the story, Skip talked about the banking fraud that the Iranian government officials were being investigated over.

[A]

For my further example, I will use the adjective fraudulent. There are a lot of fraudulent practices on the Internet where people try to get access to personal details and bank account numbers.

[B]

Following on, I have a verb to destabilize, which I will break down for you. The root is the adjectivestable. So the verb to stabilize would mean to make something more stable. And then we add the prefix d and we end up with the opposite to make less stable or balanced. In the story, Skip talks about how the aim of the US Government is to make the political system in Iran less stable or to destabilize it.

[A]

Another example would be how the banking crisis in 2007 and 2008 destabilized the world economies and caused markets to crash.

[B]

The next word today is the noun regime, which comes from the same sentence as destabilize. A regime means a government that is in power or a style or method of governing. In the story, Skip talks about the regime or government that is in power in Iran at the moment.

[A]

A further example of that would be the regime of separation Silvio Berlusconi in Italy, which was often described as corrupt and not representing the needs of the people.

[B]

Very true.

[A]

Okay. Our last word today is the verb to intensify, which means to make greater or to strengthen in some way. In the story, I predict that the crisis will likely intensify or become worse over the next few weeks and months.

[B]

I was watching a technology show the other day and they were saying that competition in the computer tablet market will likely intensify as Toshiba and Sony have some very promising new entries.

[A]

The iPad will still rule though. That is my prediction.

[B]

I would be inclined to agree with you.

[A]

Thank you. And that is about all the time we have for vocabulary today. We hope that you found today's report interesting and that you will go to our website and download the audio script for the show. The website address is downtobusinessenglish.com once again, down to businessenglish.com and while you are there, please sign up for the newsletter.

[B]

The newsletter is a great addition to the podcast as it contains background information on stories covered, as well as some additional stories that we just couldn't fit into the podcast.

[A]

And by the way, Des, Happy Golden Anniversary.

[B]

What? How can I have been married for 50 years? I'm still single and proud of it.

[A]

Oh Dez, don't you know this is the 50th episode of down to Business English.

[B]

I totally forgot. So it is too bad we couldn't

[A]

get together to celebrate maybe for the Centennial episode. Thanks for listening everyone, and I hope you stay safe over there.

[B]

Des, I can hear those planes again. I'm sure they're heading this way from Iran.

[A]

Okay, goodbye everyone.

[B]

Bye everyone. It was nice knowing you.

[A]

Oh dear. The music in today's show comes from Mi Vio's Music Alley. Check it out at music.mevio.com.