Iran Sanctions Debate, Part 2

By Matthew Levitt

CFR Debate: Can Sanctions Be Effective in Halting Iran's Nuclear Program?

This is the second of three posts for this debate. My first post is available here. The full debate can be accessed here.  Weigh in on this debate by emailing the editors at letters@cfr.org. To view other online debates click here.

The IAEA process illustrates that Iran is less than forthcoming, and certainly not forthright, in negotiations over its nuclear program.  As our European partners have insisted, a direct negotiation process with Iran without the precondition that Iran comply with the UN Security Council’s orders would only enable Tehran to buy more time for its nuclear program.  In any event, sanctions don’t undermine diplomacy; they create leverage for effective diplomacy.  Our diplomatic position vis-a-vis Iran, whether focused on the limited issue of security in Iraq or larger issues, is severely undermined when Iran is able to pursue its nuclear ambitions, support terrorist groups, and undermine security in Iraq and Afghanistan without consequence.

To be sure, international consensus for multilateral sanctions is difficult to come by.  That’s one of the reasons UN resolutions 1737 and 1747 (and most recently the FATF announcement) were so powerful - China and Russia signed on.

So far, two rounds of targeted and graduated sanctions have had a significant impact on Iran but have failed to change Iran’s nuclear calculus enough, though they have led Iran to reluctantly promise to ultimately answer long-standing IAEA questions.  To be more effective, and minimize the likelihood of military conflict, subsequent rounds of sanctions should target additional Iranian banks and focus on Revolutionary Guard companies, especially those involved in the oil and gas sectors. We cannot know in advance what will be the tipping point, but we can say with certainty that the international economic sanctions with the greatest impact on Iran’s economy would be those targeting Iran’s oil and gas industries.

It should also be said that while multilateral sanctions are preferable, regional or unilateral sanctions are also very effective.  The EU is now debating whether that body should impose its own sanctions targeting Iran.  The German and French governments have announced that they are advising their firms not to invest in Iran. And the impact of unilateral U.S. sanctions, such as those under Executive Order 13382, still have multilateral implications; major international financial institutions incorporate U.S. Treasury designation lists into their due diligence databases. The OECD raised its risk-rating for Iran, and within months Iran’s oil minister acknowledged Iran was having trouble financing oil projects.

To be sure, our strategy must include carrots, not just sticks.  The West should clearly communicate the incentives Iran would enjoy in return for full cooperation on its nuclear program even as it continues to sanction Iran as long as the regime continues to engage in illicit activities.  Sure, Iran has reacted to sanctions with bellicose statements and attempts at “facts on the ground,” but the evidence is that sanctions are working. 

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