The Axel Maersk, a container ship, leaves Hamburg, Germany, filled with export goods, June 13, 2009. Maersk is the largest container ship operator and supply vessel operator in the world since 1996.

"The Toughest Sanctions"

Op-Ed, Boston Globe

October 11, 2012

Author: Juliette Kayyem, Lecturer in Public Policy

Belfer Center Programs or Projects: International Security

Shipping giant ceases business with Iran, isolating it from the world

Amid all the grandstanding about drawing a "red line" that Iran shouldn't cross in its uranium enrichment program, a different kind of line may have just settled the issue. Maersk Line, the world's largest container shipping company, announced on Tuesday that it will cease all remaining business with Iran, for which it is the leading shipper of commercial and consumer goods. It is a development that has the potential to be both tragic and hopeful; if nothing else, it is indisputably significant. Maersk just closed off a major supply chain to Iran, making its isolation from the world almost complete.

There has been almost no acknowledgement, outside the transportation industry, of Maersk's decision. But the company just admitted what must have been clearly visible from the ocean: Maersk ended all cargo shipments to the Persian Gulf port of Bushehr on Sept. 30, and started refusing all outbound cargo on Sept. 24.

Those dates now seem to have been a precursor to the chaos in Iran last week, when its currency, the rial, plunged and protests against high food prices spread throughout the country. The Iranian regime was finally showing stress after a strict tightening of sanctions begun by the Bush administration and expanded by the Obama administration.

The situation in Iran is too fluid to suggest a cause-and-effect between Maersk's decision and the collapse of Iran's currency, yet the coincidence of timing is worth noting. Maersk is a Fortune Global 500 Danish entity with a long and sometimes nefarious history in Iran. It made an economic decision that the benefits of moving goods to Iran were far outweighed by the risks, aggravation, and potential loss of business elsewhere.

Should conditions in Iran continue to deteriorate, Maersk's withdrawal will be viewed as a game-changer. The company ships commodities to and from destinations around the world, meaning that nations not abiding by the international sanctions no longer have the means to send goods to Iran, or receive any in return.

For years, Western nations have struggled to convince Iran's trading partners such as Russia, China, and India to adopt sanctions. Maersk has made those arguments moot; there can be no trade without access to the supply chain. The sanctions have just gone global.

This is not a victory to cheer about; Iranians will suffer. Maersk had already closed most of its operations in Iran due to the sanctions, but had kept its Bushehr port open so that it could deliver goods to the civilian population. The company was able to do so because the sanctions exclude food and consumer goods. Prohibitions against banks and oil exports are intended to hurt the Iranian regime, but not to unduly penalize the Iranian people, or their children, for the government's mistakes. Now, the distinction between commercial and consumer goods is effectively over; nothing will be delivered.

Imports and exports are the engine of the global economy. Goods ­such as oil, grain, or even home furnishings must get from point A to point B, and they move by ship through major canals (like the Suez or Panama), across vast oceans, to ports lining the shores of every coastal nation.

Companies that manage the transport of all these resources can have tremendous impact on any nation's survival, making the movement of goods across the seas an unrecognized animating force in foreign affairs. The sanctions and the resulting economic crisis made the route through the Strait of Hormuz unsustainable for this major shipping line. "It is with regret that [Maersk] is ceasing these activities," a company spokeswoman said, perhaps recognizing that it is now the Iranian people who will suffer the most.

With those words, Iran's relationship with the world took a dramatic turn. Now, the only question is whether the Iranian regime will respond by agreeing to stop enriching uranium.

Maersk seems to be taking the long view as well. It explained that it would maintain "a dormant business entity" in Iran so that it can restart quickly should the sanctions are lifted. Until then, the Iranian regime will find it increasingly difficult to survive as a power player on the Persian Gulf with so few ships visiting its coast.

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