Breaking U.S. sanctions is a Win-Win

The Wall Street Journal, November 29th,2012; C3
"Standard Chartered Nears Iran Settlement" -Liz Rappaport

Standard Chartered is an U.K. parented bank with broad foreign operations. The U.K. is a member of the United Nations. Iran is currently under U.N. sanctions; these sanctions make it illegal, under international law, for a U.K. bank (or any institution whose host country is a U.N. member) to provide services to the Iranian government or multinationals.

Ok, now that that is clear.....

Investigations have shown that Standard Chartered illegally made over $250 billion worth of transactions with Iran. Court proceedings are coming close to a compromise, with S.C. bank expected to pay roughly $300 million dollars in fines. Now, let's do some math....

-$250 billion dollars worth of transactions with Iran

-Thanks to Yahoo! Finance, I have found that Standard Chartered's return on assets is 0.88%...that means that for every $100 of assets S.C. Bank makes only 88cents..bummer!.

-.88% sounds worse than it is, especially when you consider the volume of business.
BUT, people will argue this measure should not be used, so....let's use the avg. LIBOR rate for the past 3 years: roughly .30%.

$250,000,000,000 in transactions with Iran
@ .30%
------------------------------------------------- 
$750,000,000 
 *I personally do not believe that it is an outrageous assumption that, at least, this spread (LIBOR) was achieved in dealing with Iran. In Fact, I would argue that an even higher spread could have easily been attained given Iran sanctions and lack of access to capital, (they are not in a good position to negotiate for lower terms, being cut off from the rest of the world and all...)

Let's finish this math,

 $750,000,000 in potential profit
-$300,000,000 in fines
----------------------------------
$450,000,000 net after fines


So why not deal with Iran....Banks need only to adjust the premium on loans to Iran to account for the risk of fines equaling roughly $300 million, now that precedent is set. If you are familiar with our legal system then you are familiar with the principle of precedent. Because S.C. was fined $300 million, similar allegations will not bring about charges much farther from this amount.

So, when we are told that the U.N. has placed sanctions on Iran, I picture a metaphorical "Road-Block" complete with orange barricades, barbed wire fences, and do not enter signs preventing access to capital for Iran.

Upon reading this, I see a different picture; not a barricade, but a toll booth. $300 million is not damaging enough to dissuade these types of dealings. But, if our government sets a precedent making it very detrimental to be caught in similar allegations then we would stop seeing so many $300 million dollar checks for "damages"...

CONCLUSION:
                            S.C. makes (>/=) $450 million (theoretically)
                            U.S. gets a check for $300 million

                            *Let's keep it up and we can all make a lot of money!


*I encourage someone to add commentary to contradict my claims here. I know there are people smarter than me and I would love insight into why the way this was analyzed here is wrong or missing a major point. SO LET ME KNOW!