Timeline of sanctions and negotiations
There are many possible non-military strategies that the international community could implement to halt Iran’s nuclear program. With Iran’s economy dependent on foreign trade and investment, a comprehensive program of economic sanctions, combined with divestment programs, could persuade Iran to take definitive action to stop its nuclear program.
Such non-military strategies would stigmatize countries and companies that do business in or with Iran would serve as a stumbling block to the Iranian goal of increased global power and influence. They would also send a message that Iran’s attainment of nuclear weapons is unacceptable and heighten public awareness of Iran’s belligerent ideology and behavior.
However, while many countries have stepped up their rhetoric on Iran, very few have taken real steps that will ultimately curb Iran’s nuclear ambitions. In fact, at the same time that world powers and the EU are looking to more forcefully strengthen sanctions against Iran for its refusal to stop producing enriched uranium, as mandated by the United Nations, many of these same countries are currently forging new business deals with the Islamic Republic. The EU, for example, continues to be Iran’s largest trading partner, with $39 billion in imports and exports in 2006.
Other examples of this blatant double standard are:
* Germany is Iran's most important trade partner in the West and 2008 looks to be a record year. Export volume grew by 13.6 percent in the first quarter; 1,926 business deals with Iran were recorded by the end of July, 63 percent more than in 2007. German exports to Iran increased by approximately 18 percent from January to April 2008;
* On April 21, 2007, Iran signed a major gas development and production agreement with Austrian energy group OMV. State television described it as Iran's biggest such contract with Europe, and some Iranian media put its total value at up to $30 billion over 25 years, including the sale of billions of cubic meters of natural gas to the continent. Iran's ambassador to Austria stated that the trade volume between Tehran and Vienna had reached $1 billion dollars;
* Russia’s trade with Iran more than doubled between January and September 2007, reaching $2.2 billion, according to Russian officials;
* Germany’s Federal Office of Economics and Export Control (BAFA) has granted German company Steiner Prematechnik Gastec an export license to provide Iran high-tech gas plants. The deal is worth $146 million (€100 million);
* On June 4, 2008, Swiss energy group EGL (Elektrizitäts-Gesellschaft Laufenburg AG) completed a 25-year deal with Iran’s NIGEC (National Iran Gas Export Company) to deliver 1,453 gallons (5.5 billion cubic meters) of gas per year to Europe. Foreign Minister Micheline Calmy-Rey went to Tehran, where she ingratiated herself to President Ahmadinejad and attended the ceremony at which a $42 billion gas supply contract, slated to begin in 2011, was signed with the Swiss EGL company;
* Trade exchanges between Italy and Iran reached €6 billion in 2007. The Italian state's export credit agency, known as SACE, has €4.1 billion at risk in Iran. That's about 15 percent of all its exposure worldwide, and SACE's highest concentration of risk anywhere. In 2000, Italian energy group ENI has signed a $3.8 billion contract with Iran for the extraction of gas in the Gulf. The contract gives ENI a 60% share in a project to develop gas fields in the South Pars region. The deal puts Italy among Iran’s leading partners in the energy sector;
* British-Dutch oil company Royal Dutch Shell is sponsoring Iran's second gas conference, which is scheduled to take place Oct. 4-5, 2008, in Tehran. According to the conference Web site, only two foreign companies are major sponsors: Royal Dutch Shell and Austria's OMV.
Despite such foreign investment and trade, Iran’s oil industry is struggling, and its government is besieged with accusations of economic mismanagement. A significant decrease in economic activity between Iran and the rest of the world would have an enormous impact on the Iranian economy.
International Efforts to Impair the Iranian Economy
Currently, the U.S. government prohibits economic relations with Iran’s military and state-owned financial institutions. In an effort to make doing business with Iran riskier for foreign financial institutions, the sanctions include tight monitoring of any transactions, including those outside the U.S. that are conducted with U.S. dollars. Other countries, and particularly the European Union, could demand similar restrictions on the use of their currencies in transactions with Iran.
The U.N. Security Council, in three resolutions passed between December 2006 and March 2008, banned arms exports from Iran and the import or export of “nuclear materiel and equipment” and froze the assets of several specific individuals and entities who had acted in support of Iran’s nuclear program. The weak sanctions allowed, for example, a German company to provide Iran with the equipment necessary to liquefy natural gas.
Although oil revenues make up half of the Iranian government’s budget, the industry is in trouble. Iran produces 300,000 barrels less than the quota set by the Organization of the Petroleum Exporting Countries (OPEC). Iran has not been able to develop enough refined oil and relies on foreign imports to meet internal demand, which is growing every year. Last year, oil rationing led to internal riots and arson.
Potential tactics the international community could undertake to pressure to the Iranian regime include:
* Naval blockades: Blockading Iranian ships wouldn’t violate international law. It could be done either by blacklisting Iranian merchant ships to prevent them from going to foreign ports or by blacklisting non-Iranian merchant ships that come from Iranian ports. Another tactic is a physical blockade of Iranian ships through the narrow Straits of Hormuz – a path used by Iran’s maritime trade. Iran’s economy would be greatly affected by a naval blockade because of the country’s strong dependence on exports and imports.
* Pipeline deals: There are a number of major pipeline deals with Iran which will provide nations with natural gas to transfer and sell to Europe. The Nabucco pipeline is one such agreement. The proposed 2,050-mile (3,300 km) pipeline, expected to cost $6.5 billion (€4.5 billion), would be based in Iran. This agreement and others are worth billions and seriously erode the impact of economic sanctions that could halt Iran’s nuclear program.
* Freezing bank assets: In June 2008, all of the EU's 27 member states had agreed to freeze any assets held in their jurisdictions by Bank Melli, Iran's largest state-owned bank. The new measures signal growing impatience with what they see as Iranian foot-dragging in negotiations over halting uranium enrichment.
* Denying shipping insurance: UN Security Council Resolution 1803 calls on all states to "exercise vigilance" with regard to companies that do business with Iran in order to avoid financing Iran's proliferation activities. The resolution specifically cautions states to be wary of granting insurance to businesses trading with Iran, as well as focuses on export credits and loan guarantees Insurance companies, could increase the cost of doing business in or with Iran by reassessing their rates given Iran’s questionable stability. Transit insurance could also be raised for ships and merchandise passing through Iran.
Pending Sanctions Legislation
Prohibit Refined Oil Petroleum Products to Iran: U.S. House Concurrent Resolution 362, co-sponsored by 252 members of Congress, proposes prohibiting all refined petroleum exports to Iran, as well as imposing sanctions on banks and companies that do business with Iran, including energy companies that invest significantly in Iran’s oil sector and banks that do business with Iranian banks and inspecting any person or item entering or leaving Iran.
Impose Stringent Individual Inspections: U.S. House Resolution 362 proposes establishing stringent inspections on any person or item entering or leaving Iran and prohibiting Iranian officials, except for nuclear negotiators, from international travel.
Trade with Russia, China, EU Countries Hinder Sanctions
Russia and China, permanent members of the U.N. Security Council, have opposed efforts to broaden sanctions,  and the EU has been reluctant to join the U.S. in imposing stronger sanctions on Iranian oil.
Russia recently sold Iran sophisticated anti-aircraft missiles capable of protecting Iranian nuclear facilities against strikes. Prime Minister Ehud Olmert expressed concern over Russia's continuing supply of sophisticated weaponry to Syria and Iran during a meeting with Russian Foreign Minister Sergey Lavrov in Jerusalem on March 20, 2008. Olmert stressed Israel's fear that these weapons, including advanced anti-tank weapons and anti-aircraft missiles, could find their way into the hands of the Lebanon-based guerilla group Hezbollah, supported by Syria and Iran, which has threatened to destroy Israel. A German company’s technology is being used in an Iranian nuclear power plant, despite such transactions being illegal under German law. U.S. and sympathetic countries could use their political and economic leverage with these countries to press them to adopt more stringent sanctions.
A poll conducted by Public Opinion Strategies in 2007 indicated that 73 percent of the U.S. public would support tougher sanctions on Iran, even if that meant a 20 percent increase in the price of gas.
Potential and Proven Measures to Pressure Iran
U.S. states and investors are taking the lead in incorporating “terror-free” investing principles. The FTSE Group and the Conflict Securities Advisory Group provide an index of publicly traded companies that do business with Iran and other state sponsors of terror. The Center for Security Policy’s Divest Terror campaign, modeled after the successful divestment from South Africa in the 1980s, asks Americans to demand that their pension plans, college endowments and other investments do not include companies that support Iran.
Currently, about a dozen U.S. states have passed divestment legislation, including California, where $2 billion of the $400 billion in public employees’ pension funds were invested in Iranian oil. Divestment targets include large businesses owned by European countries such as France-based Alcatel-Lucent and Royal Dutch Shell. The Iran Sanctions Enabling Act, co-sponsored by Democratic presidential nominee Sen. Barack Obama would, if passed, protect state divestment campaigns from legal challenges by businesses. Missouri and New Jersey have gone a step further by divesting from companies that invest in terrorism emanating from any country, including Sudan, Syria and North Korea.
Both Sen. Obama and presumptive Republican presidential nominee Sen. John McCain have indicated they support divesting from Iran.
On the first day of the Democratic National Convention Aug. 25, Obama said, "My job as president would be to try to make sure that we are tightening the screws diplomatically on Iran, that we've mobilized the world community to go after Iran's program in a serious way, to get sanctions in place so that Iran starts making a difficult calculation. We've got to do that before Israel feels like its back is to the wall."
A couple of months earlier, during a speech in Washington, D.C., McCain called for a wide range of sanctions and a “South African-style worldwide divestment strategy” to bring about an end to Iran’s pursuit of nuclear weapons. The U.S., he said, may have to take a strong role in leading the international community to carry out such measures.
"Should the Security Council continue to delay in this responsibility, the United States must lead like-minded countries in imposing multilateral sanctions outside the UN framework," McCain said.
Diplomatic as well as economic measures could help prevent Iran from achieving its stated goal of global and regional dominance. Using a strategy of isolation, countries could recall their ambassadors from Iran or even cancel diplomatic relations. Those officials who do meet with the Iranian leadership could insist on discussing Iran’s nuclear program and human rights violations; international diplomats’ trips to Iran could include meetings with Iranian dissidents. Iranian leaders are responsible under the Geneva Conventions for incitement to genocide and could be tried under that clause.
Former U.S. Secretary of State Madeleine Albright cites the success of talks with North Korea as a reason to negotiate with Iran. However, international leaders have said the Iranian regime negotiates only to buy time to complete its nuclear program.
In July 2008, the U.S. sent a high-ranking State Department official to participate in talks between Iran and the P5+1 - the five permanent members of the UN Security Council - Britain, France, the U.S., China and Russia along with Germany. The meeting was led by EU policy chief Javier Solana. The talks ended in deadlock because Iran refused to address the critical global concern that it suspend its uranium enrichment program. Shortly afterward, Ahmadinejad announced that Iran had doubled its store of centrifuges capable of uranium enrichment, though he maintained that they are to be used for peaceful purposes.
According to Yossi Kuperwasser, head of Israeli military intelligence’s research division, Iran will not give up its nuclear program because that would mean “forgoing the ambition to become a regional let alone a global power…In today's Iran…the nuclear issue has taken the place of the revolutionary fervor of the early days of the revolution, so that totally relinquishing the program is unthinkable.”
The EU3 – Britain, France and Germany – began negotiations with Iran in October 2003. In June 2008, the P5+1 countries proposed a set of incentives as a prelude to negotiations with Iran. Iran, however, has been steadfast in refusing to negotiate under the precondition that it suspend its uranium enrichment.
Iran’s largest bank, Melli, and a number of Iranian companies were reprimanded via sanctions (June 23, 2008) for refusing to adhere to the Nuclear Non-Proliferation Treaty (NPT) restrictions. The sanctions were approved by the EU as part of its “carrot and stick” approach to encourage Iran to halt its nuclear ambitions.
Before a July 19 meeting in Geneva with EU officials and the P5+1 to discuss Iran’s nuclear program, Ahmadinejad announced that he would not agree to any conditions to halt his regime’s nuclear ambitions. Despite efforts to provide Iran incentives to agree to stop its uranium enrichment, Iran has refused the terms.
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