The better idea is to form a coalition of the willing outside the U.N. that, among other things, bars companies around the world that do business with Iran from access to Western capital markets. This is likely to get Beijing’s attention in a way that more diplomatic pleading never will. ~The Wall Street Journal

This is straight from Danielle Pletka’s playbook, and it is just as foolish the second time around. There are so many companies from both developed and emerging-market countries that do business with Iran that it is difficult to imagine how Washington could ever get all of the relevant governments to sign on to such a proposal. If you think it is hard to get China to agree to stricter measures against Iran, imagine herding the dozen European and Asian governments in question over the cliff to financial disaster. The absurdity of this idea is fairly easy to demonstrate. For example, Pletka complained in her earlier op-ed:

Consider that in the last two years, Brazil’s Petrobras, China’s Sinopec, Italy’s Eni, Japan’s Mitsui Petrochemical and Norway’s Statoil have all reportedly made deals worth more than $10 million each in Iran’s energy sector

There are many more companies than these that would have to be de-listed from all the major exchanges (not to mention all of the ETFs that may own shares in one or more of these companies), and this process would be legally questionable in itself, but just consider what would be involved here. Washington would need to persuade Italian, Japanese and other European governments to bar companies, including their own, from their stock exchanges. They would be asked to penalize Western companies that have not violated any laws and have been engaged in peaceful commerce with another country with which their governments maintain diplomatic relations. All of these governments are supposed to do this to undermine a government most of them recognize for the sake of an anti-proliferation obsession that relatively few of them take seriously. Furthermore, these governments are expected to do this in a shaky economic climate in which renewed investor confidence has been one of the few bright spots. To comply with this insane proposal, this “coalition of the willing” would have to be willing to create tremendous uncertainty in their markets, outrage a large part of their respective business classes and encourage massive capital flight to those exchanges where these companies would still be traded. The flaw in this proposal is the basic flaw in all sanctions regimes: the states (or in this case the markets) that refuse to participate benefit enormously from the self-imposed isolation of the rest. There will always be states and markets willing to take advantage of others’ withdrawal from commerce and trading. Sanctions have to be universal and binding, or they aren’t going to come close to accomplishing their objectives. All that it would take to defeat this effort would be an exchange in Brazil or India (or China!) that does not go along, and that exchange would become an even larger center of trading very quickly.

What is all the more amazing about this proposal is that it comes from a paper whose editors are normally fanatical free traders opposed to almost any and all restrictions on the movement of capital or labor. Alarmism over Iran’s nuclear program is apparently more important to them than even this otherwise unquestionable article of faith. Once again, the best ideas of the anti-regime Iran hawks are little more than junk.

P.S. On top of all this, the price paid by the barred companies would be relatively small, it would not discourage them from doing business with Iran, and so it would have essentially no effect on the revenues of the Iranian government. China would not be unduly bothered if Western exchanges barred these companies, as it would simply make trading in Hong Kong that much more attractive to Western investors, so China would not be moved to change its position on sanctioning Iran. Even if Washington could assemble its “coalition of the willing,” it would change nothing with respect to Iran.