Documentation
Addressing Iran’s Nuclear Ambitions – Sanctions, Allies, and the U.S. Domestic Debate
Overview: Dealing with the Iranian Nuclear Program
by Bidjan Tobias Nashat, August 2007
This paper highlights some of the intricacies of the Iranian nuclear crisis facing the international community in general and the transatlantic partnership in particular. The international crisis over Iran’s nuclear program is one of the most complex current conflicts. In recent years, the Middle East region has undergone dramatic changes. With the end the regime in Iraq and the downfall of the Taliban in Afghanistan, two of Iran’s worst enemies have been replaced by relatively weak and friendly governments. Tehran’s increasingly aggressive rhetoric in foreign policy mirrors its growing self-esteem and its demand for respect and international recognition as a powerful regional player.
The U.S. in particular has suspected Iran’s nuclear aspirations to be aimed at developing a nuclear weapons capacity. It has long demanded that Iran suspend its nuclear enrichment and has sanctioned the country until it suspends its nuclear enrichment efforts. Iran, as a member of the International Atomic Energy Agency (IAEA) and signatory to the Nuclear Non-Proliferation Treaty (NPT), claims to be within all international legal boundaries. Its government has so far been unimpressed by the largely Western incentives, diplomatic pressure and unilateral and even United Nations sanctions. In retrospect, after more than four years of international negotiations, its leaders were at no point in time seriously interested in giving up nuclear enrichment technology for any Western incentive. This is partly due to the fact that the Iranian government has so far skillfully mastered the ability to identify and exploit rifts in the international community and in the IAEA. The current challenge for the transatlantic community in dealing with Iran's nuclear aspirations is thus to articulate and stick to a common position. In light of a possible third United Nations Security Council resolution on Iran, the paper addresses the following questions:
- Which kinds of sanctions have been effective and are realistic under the current circumstances circumstances?
- What role are Russia and China playing?
- What are the latest positions in the U.S. domestic debate?
Sanctions on Iran
Iran is facing a variety of international and unilateral sanctions. Some of the unilateral sanctions have been in place since the establishment of the Islamic Republic in 1979 – other multilateral sanctions have been enforced just recently, after the IAEA referred the case of the Iranian nuclear program to the United Nations Security Council in 2006. Most of the sanctions have been put in place either to punish the Iranian government for its foreign policy (e.g. its support for terrorist organizations abroad) or to hinder progress in its military and nuclear programs. In order to assess the likelihood of success of future unilateral and multilateral sanctions, it is helpful to discuss the effectiveness of the current measures and differentiate between the impact on their target and the initial aims.
Are Unilateral Sanctions Effective?
Currently, Iran is subject to a number of sanctions directed at its economic, financial and military sectors. A 2006 report on U.S. unilateral sanctions by USA*Engage, a Washington-based organization, maintains that up to 22 different sanctions target. In 1995, President Clinton issued two Executive Orders banning U.S. investment in Iran. At the same time members of Congress, with input from the Clinton Administration, developed legislation to sanction the export of military technology and technology and investment in the Iranian energy sector by foreign companies (now called Iran Sanctions Act (ISA)). ISA only will come to an end if Iran ceases its efforts to acquire WMD and is removed from the U.S. list of state sponsors of terrorism. In 2006, ISA was renewed until 2011 and extended with some modifications intended to increase pressure on Iran, third countries, and companies investing in Iran.
Notwithstanding these unilateral attempts to curb investment in the Iranian energy sector, the Congressional Research Service estimates that there are more than $100 billion in energy investments in Iran since 1999 by foreign firms like France's Total, Royal Dutch Shell Plc, Italy's ENI and Japan's Inpex Holdings Inc. Indian, Chinese, and Malaysian firms in particular, have concluded long-term multi-billion dollar deals to invest in the Iranian gas and oil sector with the potential to significantly enhance Iran’s energy export prospects. Due to the existence and repeated use of a Presidential waiver, none of these firms have to this date been sanctioned under ISA, especially after the EU threatened counteraction in the World Trade Organization (WTO) in the late 1990s.
However, since 2006 the Bush Administration has gone great lengths to increase the informal pressure on third country companies, banks and export credit agencies dealing with Iran. Germany, as the country with the largest export volume in trade with Iran, has been a primary target. Several German and international banks have severed their business ties to Iran in response to visits by Treasury Department officials. These informal measures in the international financial world have been felt by Western companies. An expert on German-Iranian trade relations points out that it has indeed become much more difficult for German companies to do business with Iran.
This informal pressure on the international financial world has had visible effects on the Iranian economy alike. Iranian importers find it increasingly difficult to open letters of credit in foreign banks, and Western export guarantees have been restricted substantially. The Iranian oil minister has expressed his concern about the lack of foreign investment in the Iranian gas and oil sector. However, all of the experts, interviewed for this paper, agree that the flawed economic policies of the Ahmadinejad administration (e.g. the sacking of able technocrats into the middle management echelons) had at least the same detrimental effect on the Iranian economy. They argue that the Ahmadinejad Presidency has to date been more or less able to cover flawed policies due to the high oil prices. In addition, Karim Sadjadpour of the Carnegie Endowment for International Peace argues that the current sanctions have not been effective since they failed to reach the Iranian government and its powerful domestic allies –
some of which actually benefit economically from increased isolation and sanctions. According to a German Middle East expert who recently visited Iran, the economic sanctions brought about by the U.S. unilaterally seem to have hurt the middle class rather than bring about a change in the regime's behavior. Opposition politicians in Iran lament the fact that the increasing economic pressure on their constituents makes it much harder for them to confront the regime over its failed international approach. (read on...)
