Counterterrorism Blog

Time has run out on a negotiated settlement with Iran on its nuclear enrichment program. The latest responses from Iran are no more than ploys to extend the August 31 deadline set by the UN Security Council for possible imposition of sanctions. Iran. Some reports now speculate that Iran, if it continues on its present course, may be able to achieve nuclear weapons capability by as early as 2009. The geopolitical implications of this are staggering! But, getting the Security Council to impose effective sanctions against Iran still appears doubtful. Iran accounts for about 5% of the world’s oil exports. And with international spot oil prices over US$65.00 a barrel, there is concern in Europe and elsewhere that even threatening to cut off Iranian crude from the market would cause international oil prices to spike back over $75 a barrel. .

EU negotiators are already out on a limb with offers that would allow Iran some type of closely monitored enrichment activity. And the United States has indicated a willingness to join the talks with Iran, if Iran accepts the EU's proposed compromise. But Iran’s answer, which came August 22nd., and has been repeated since, continues to leave out the key element necessary for further negotiations – a commitment to halt further uranium enrichment pending these negotiations.

Barring military action, can the West force Iran to back down? The answer depends on our ability to put together a credible mix of coercive measures and incentives that can serve to convince Iran that it really has no other choice.

 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 move beyond limited financial sanctions will not be easy,. 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. Russia is now suggesting that it may be willing to consider some sanctions on Iran as a way of defusing possible future military action. But it is still unclear whether they would be willing to agree to amything more than a limited asset freeze and travel ban. Targeting Iran’s Mullah’s with financial sanctions and travel bans, as now contemplated by Russia and some of the other Security Council members, certainly won’t be enough to convince Iran to change course. Broader measures, including clear threats to cut off Iranian oil exports, are required.

The P-3 (US, UK and France) must, at a minimum, press the Security Council for accelerating sanctions aimed at isolating Iran and cutting off its access to goods and services, including, but not limited to, 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 must be halted immediately. Iran’s overseas accounts must be frozen and targeted Iran business entities and regime supporters cut off from participating in international transactions. And Iran must be put on notice that further restrictions on Iran’s oil exports will follow unless Iran complies with UN Security Council Resolution 1696. The Security Council should also now call on all other oil producing countries to act to rationalize the oil market in anticipation of future international restrictions on Iran’s oil exports.

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. This gives us few options. We must either 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, or consider more forceful unilateral measures. Working with our European allies, Japan and other countries, stringent 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, suspend enrichment, sit down and talk, and eventually accept the very attractive incentives being offered by Europe. Further debate and delay will only encourage Iran to move ahead with its enrichment program, leaving no options other than military action. And, that, undoubtedly, will also have its impact on the world oil market and on international peace and security.