U.S. sanctions: financial firewall for Iran, Syria?

By Alistair Lyon, Special Correspondent - Analysis

BEIRUT (Reuters) - Syria and Iran, both targeted by U.S. sanctions, proclaim that their "independent" economies will suffer less than others from global financial turmoil.

But economists in the region say neither Tehran nor Damascus will be immune from the credit crunch spreading from the United States, or from any ensuing world economic downturn.

Some argue that the cost of sanctions greatly outweighs any unforeseen benefits Syria or Iran might gain by being denied access -- and direct exposure -- to U.S. financial markets.

The United States has long enforced unilateral measures against Iran, and has toughened them while seeking to tighten U.N. sanctions over Tehran's nuclear program. It imposed sanctions on Syria in 2004, accusing it of sponsoring terrorism.

"Sanctions are very damaging to their economies," said Louis Hobeika, an economics professor at Lebanon's Notre Dame University, saying they further isolated both countries from the potential gains of globalization, as well as its occasional shocks.

It's true that Syrian investors have experienced no wild swings on the local stock market -- they don't have one.

And the head of Tehran's bourse told Reuters its lack of links with the outside world was a "strong point" when asked why Iranian shares had so far escaped the panic in markets elsewhere.

Iran's all-share index has gained some 20 percent this year -- although inflation has run even faster. Total capitalization climbed to $70 billion in August from $40 billion in January 2007, said Ali Rahmani, the stock exchange's managing director.

OIL PRICE THREAT TO IRAN

President Mahmoud Ahmadinejad said Iran would survive better than others because its economy had grown more independent since the 1979 Islamic revolution that toppled the U.S.-backed Shah.

He said falling oil prices, which have tumbled partly due to the weakening U.S. economy, the world's biggest consumer, would have an impact, but would not derail Iran's economic plans.

Yet Iran, the world's fourth-largest crude exporter, relies heavily on oil revenue to fund its budget and is showing concern at volatility that has seen U.S. crude plunge to around $93 a barrel on Friday, more than $50 below its $147 record in July.

"$100 or below is not suitable for oil producers or oil consumers," Oil Minister Gholamhossein Nozari said on Saturday.

An Iranian economist, who declined to be named, said no country could emerge unscathed from global financial chaos.

"This credit crunch is everywhere in the world. The Iranian banks are also exposed to refinancing lines of credit," he said.