What purpose is pursued through CAATSA?
The US bill of sanctions, CAATSA, is particularly aimed at putting economic pressure on the Iranian people, because of Iran's support of suppressed nations in the [Middle Eastern] region. Another feature that the bill implements, is the complexity of the imposed sanctions: this can be derived from the frequent references in the bill to previous sanctions. One can conclude, based on overall references to laws and executive orders on sanctions against Iran, that the purpose of these sanctions consists of two main implications:
1. The law’s direct impact on Iran;
2. Usage of the law, forming future laws.
Another point represents the US Congress' use of a sanctions model for Iran, also against Russia. This sanctions bill is designed to influence Iran, Russia and North Korea. Another point that is, particularly, conspicuous is the evident increase of the president's authority within the framework of this bill. The new sanctions bill has made many sanctions permanent. Within this plan, which has targeted a broader range by imposing sanctions on more persons and entities, the Islamic Revolutionary Guard Corps (IRGC) is for the first time the target of sanctions; whereas, beforehand, only the Quds Force was targeted by American sanctions.
What are the items sanctioned?
Under the mother of all sanctions many economic restraints, including the freezing of Iranian government assets, in the US, and prohibiting banking services to sanctioned individuals and entities, are put in place. From the American perspective, CAATSA must lead to "sanction phobia" and intensify "self-sanctioning" in Iran; in other words, the American government wants to create a condition through which "sanction phobia" severs the relationship between American individuals and entities, especially banking relations, with individuals and entities under CAATSA (IRGC and others).
Article 105, of CAATSA, obliges the US president to impose "terrorism-related" sanctions in respect to foreign persons that are recognized as officials, agents or affiliates of the IRGC—within ninety days—after the enactment of the act.
CAATSA has features that makes it fundamentally different from other sanctions
Firstly, it has been written down extensively: very rare in U.S. law writings, even for sanctions against Iran and adversaries of the U.S.
Secondly, the main feature that makes this Act different, is that not only the mentioned entities in the Act (like IRGC) are subject to comprehensive financial, monetary, banking transactions and other sanctions, but the Act also applies to multinational persons, entities, governments or corporations that cooperate with those under sanction. Whereas, in the previous Acts that imposed sanctions on Iran, cooperation with sanctioned entities faced a fine, but would not be included on the blacklist!
For this reason, CAATSA is also called a sanctions black hole. It leads to internal self-sanctioning. In the sense that many American or European banks, before being identified or fined, avoid any cooperation with Iran because they are afraid of being placed on the list.
An example for understanding CAATSA
If an international or European bank provides ordinary banking services to a company that manufactures industrial components and this company is, for any reason, regarded by the US as affiliated with the IRG, due to the global banking structure and increased control on current relations of banking transactions (FATF)— these services are easily identifiable. However, the point is that the bank will not simply be fined for that transaction. Rather, based on the CAATSA Act, it will also be blacklisted along with other sanctioned entities; and thus, removed from the cycle of the dollar and banking system. As a result, many banks or Iranian companies either panic over the sanctions or are swallowed by the sanctions black hole and are themselves sanctioned.
Hence, even before being identified or fined, several international banks avoid any cooperation with Iran because they are afraid of being blacklisted.
What is the solution?
By creating a psychological atmosphere against Iran, CAATSA has endeavoured to dominate "self-sanctioning" over the Iranian society by applying economic pressure. Indeed, the designers of this Act have tried to, more than actually pressuring Iran, apply self-sanctioning and self-censorship by promoting a particular psychological atmosphere and a feeling of fear among economic and financial actors, especially inside Iran. CAATSA is a sanction Act that tries to trouble Iran in banking and international trade on the pretext of non-nuclear issues so that with the US legal dominance over international banking, which is done mostly in US dollar, European and Asian countries refrain from doing business with Iran for fear of CAATSA.
Nevertheless, it is important to note that what matters now is winning the war of wills, and the winner in this war will be that side which is able to impose its thinking and plan of action on its opponent with a firmer and more resilient will. Thus, one must note that despite complexities and potential threats in CAATSA, the Islamic Republic of Iran has real and possible ways to outmanoeuvre CAATSA.
A correct understanding of CAATSA, the structure and current situation of international banking and finance system, and internal will are the components that, together, make surpassing CAATSA possible.
Bilateral Monetary Agreement
One of the possible solutions is bilateral monetary agreements with countries that have an important trade level with Iran. Countries like China, Russia, Iraq, UAE, India, and Turkey make up an important portion of Iran's foreign trade, and it is possible to reduce transactions in US dollar with these countries through bilateral monetary agreements. This was first done with Turkey recently. Development of diplomatic relations with the world, and trying to get out of the dominance of the US dollar, with bilateral transaction agreements can be one of the essential steps to take.
Today, the major share of Iran's foreign trade is with Turkey, China, India, and South Korea, and if we agree on monetary treaties with these countries, 60% of the country's foreign trade will be easily done through monetary agreements.
One of the issues put forward by the critics of bilateral monetary agreements is that their implementation is dependent upon equilibrium in foreign trade, and to establish the value of currencies the US dollar is again referenced and no problem is solved. However, this can be easily resolved, by taking one of the two countries exports value as the ceiling in the monetary agreement. For instance, Iran’s exports to Iraq are worth 8 billion dollars and its imports $500 million. In a monetary agreement, the ceiling for the exchange of the two countries’ currencies can be set at 500 million dollars.
Another example is Turkey, from which Iran imports 3.4 billion dollars’ worth of goods and exports 8.6 billion dollars to it. In the recent monetary agreement between Iran and Turkey, 3.4 billion dollars is the basis for exchanging the two countries’ currencies. Even by taking this lower value as the ceiling, 60% of the country's foreign trade can be done in currencies of the parties to the transaction.
Increasing the Country's Capabilities
As it is clear, throughout the text of CAATSA, the goal of this sanction is to link resistance of the Islamic Republic of Iran before the domineering powers and Iran's support for the suppressed nations in the [Middle East] region, with challenging the economy and international financial trade of the Iranian banking system. The enemy is counting on the CAATSA puzzle and other pressure tools embedded in the JCPOA or independent of it, such as FATF, to challenge Iran's regional power and the axis of resistance and force a retreat. The antidote for this challenge, turning it into an opportunity instead, is to cure the underlying wound; that is, to solve the country's problem of economic dependence: by omitting reliance on others in the economy. Implementing resilient economy policies, announced by the Leader of the Revolution, can secure Iran against not only CAATSA but also other sanctions and scenarios, to a great extent.
We must insist again, what is crucial is winning the war of wills, and the winner in this war will be that party which is able to impose its thinking and plan of action on its opponent with a firmer and more resilient will. Thus, one must note that despite the complexities and potential threats of CAATSA, the Islamic Republic of Iran has real and possible ways to outmanoeuvre CAATSA.
Besides, because of the complex structure of CAATSA, and its interference with the JCPOA at a time when Trump's administration is especially marginalized, internationally, its precise implementation and persuading all the actors to fully comply, relinquishing their profits in trading with the valuable Iranian market, is very difficult and out of sight.