Iran Sanctions: Difficult But Necessary Now

By Victor Comras

The UN Security Council is scheduled this week to take up Iran�s continuing defiance of its NPT and IAEA obligations. When Iran acted earlier this year to break the monitoring seals at three of its nuclear facilities and to move ahead on uranium enrichment it knew that it would provoke a new international crisis. Iran's leaders had decided to gamble that the very tight international oil market and America�s growing imbroglio in Iraq will insulate Iran from any effective international response. They calculate that the international community is not likely to risk cutting off the flow of Iranian oil by imposing sanctions and count on China and/or Russia to hold up any really effective UN mandated action. They have reportedly hardened their key nuclear facilities against possible missile strikes, and believe that the US, already overextended militarily in Iraq, Afghanistan, and elsewhere, and given current public attitudes, is unlikely to launch a sustained military operation to take the facilities down. They also count on support from within the Islamic community which may view Iran�s nuclear program as an effective response to Israel�s presumed nuclear capabilities.

All indications are that they are right that the Security Council will steer clear of recommending new sanctions on Iran at this time. Secretary Rice and Ambassador Bolton have already cautioned the Media not to expect any firm action from the Security Council at this time. Bolton has suggested that the Security Council must first throw its weight behind the IAEA and give Iran further time to reconsider. Rather than raise the ante and call Iran�s bluff, the Security Council will merely reiterate its future determination to stop Iran from acquiring nuclear weapons. Much firmer Security Council action will be needed to convince Iran�s leaders to abandon their Uranium enrichment plans. And the longer we wait, the harder it will become to get Iran�s leaders to change course. .

The Question is can the West, barring military action, get Iran to back down? The answer may lie in coming up with some innovative sanctions measures.

Iran�s economy is quite fragile and vulnerable to trade restrictions. Oil accounts for around 80 to 90 percent of Iran�s total exports and 40-50% of the government�s budget. Despite high oil prices, Iran�s economy has softened considerably since President Ahmadinejad took office. Unemployment is rampant and new investment in Iran�s industry and infrastructure has stalled. Substantial new foreign capital investment is also needed to modernize its petroleum infrastructure and to meet growing domestic energy demands while maintaining revenue producing oil exports. Iran's leaders can ill-afford to aggravate Iran's economic distress further.

But, getting the Security Council to act will not be easy. Iran accounts for about 5% of the world�s oil exports. And with international spot oil prices over $65.00 a barrel, even threatening to cut off Iranian crude from the market could cause international oil prices to spike. This, alone, is likely to give hesitation to imposing comprehensive UN trade sanctions. China is a major importer of Iranian oil and traditionally reluctant to impose sanctions measures. Russia also has developed a lucrative market as a supplier to Iran's nuclear reactor program and for Iran's oil industry. Yet, both countries must share the same deep concerns as the West about Iran's gaining nuclear weapons status.

Even if we can't get the Security Council to adopt comprehensive sanctions, it's critical that we press quickly for measures that at least demonstrate that the Security Council will not countenance Iran's uranium enrichment program. We must, at a minimum, press for accelerating sanctions aimed at first isolating Iran and cutting off its access to goods and services, including financial services. Technical support and supplies for Iran's overall nuclear program and investment and technical support for its oil production, exploration and development projects should be halted immediately. Iran�s overseas accounts should be frozen and targeted Iran business entities and regime supporters cut off from participating in international transactions. A UN resolution should also encourage other oil producing countries to act to rationalize the oil market in anticipation of further sanctions against Iran. Further measures, including a ban on oil exports, should be envisaged if Iran continues to resist compliance with IAEA norms.

Alone the United States has little sanctions leverage left on Iran. The US has barred most trade and investment with Iran, including the purchase of Iranian oil since 1995. But, we must press Europe and our other friends and allies to act with us together to bring home to Iran our opposition to its uranium enrichment program. Working with our European allies, Japan and other countries, targeted trade sanctions, even in the absence of a Security Council Resolution, can have a substantial impact. Iran's business community is heavily dependent on goods and services from Europe and Japan. In fact, imports from Europe and Japan have more than offset oil export�s to them two out of the last five years. Concerted action on such sanctions now, may still dissuade Iran from its current course. In the face of real sanctions, Iran might choose to re-think its position and take up Russia�s offer to provide alternative, and safeguarded, uranium enrichment services. Further debate and delay will only encourage Iran to move ahead with its enrichment program, leaving no options other than military action.

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