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Western Sanctions Threaten European Economy, while Iran Side-steps them with Crypto
Back in 1998, the Brookings Institution described American economic sanctions this way:
Economic sanctions are increasingly being used to promote the full range of American foreign policy objectives. Yet all too often sanctions turn out to be little more than expressions of U.S. preferences that hurt American economic interests without changing the target’s behavior for the better.
In order to bolster it’s fatally flawed Ukraine war, the US and Europe have imposed substantial energy sanctions on Russia. The result? Poles line up for days at a time to acquire coal to heat their homes:
"Toilets were put up today, but there's no running water," he said, after three nights of sleeping in his small red hatchback in a crawling queue of trucks, tractors towing trailers and private cars.
"This is beyond imagination, people are sleeping in their cars. I remember the communist times but it didn't cross my mind that we could return to something even worse."
Many Germans are preparing to heat their homes this year not by burning Russian gas, but by burning wood harvested from the country’s historic forests. And, the price of energy in Europe continues to skyrocket as Europeans begin to anticipate winter.
Sanctions are not only self-defeating, they’re easily bypassed by their target, and cryptocurrency will aid that process, for better or for worse.
Iran just passed a new law permitting the use of crypto for purchasing certain imports. Local businesses, for example, can now use crypto to import cars, according to the quasi-state media agency Tasnim. Historically, those assets would have been purchased with US dollars or Euros.
Iran labors under severe Western sanctions related its nuclear power program. With more than $100B USD frozen in foreign banks due to these sanctions, Iran faces highly restricted access to foreign exchange reserves. This move, Cointelegraph reports, elegantly allows Iran to side-step the sanctions on imports.
According to local news reports, Trade Minister Reza Fatemi Amin confirmed that detailed regulations have been approved outlining the use of cryptocurrencies for trade and supplying fuel and electricity to Bitcoin (BTC) and crypto miners in the country.
Amin outlined the regulatory change at an automotive industry exhibition on Sunday, just a week after the country had placed a first-ever import order for vehicles to the tune of $10 million, using cryptocurrency as a payment method. The Iranian trade ministry had previously indicated that the use of cryptocurrencies and smart contracts would be widely used in foreign trade by September 2022.
Iran has since shifted its attention to adopting cryptocurrencies as a means to address and potentially bypass sanctions for imports, given the decentralized nature of public blockchains like Bitcoin and Ethereum, which are not controlled by government or central authorities.
The Iranian Industry, Mines and Trade Ministry granted operating licenses to 30 crypto mining centers in the country in June 2021, while more than 2,500 permits were approved for the establishment of new mining operations. In the months that followed, the government also cracked down on illegal mining operations and even imposed a three-month ban on mining to alleviate pressure on its national grid.
Developments in both Europe and Iran demonstrate the futility of US sanctions against both unfriendly foreign powers and against the crypto industry. This technology is rapidly becoming a popular alternative to dollar trade, whether US lawmakers and regulators like it or not. The sooner the US normalizes both policies, the better off Americans will be.