Iran Sanctions Debate, Part 3

By Matthew Levitt

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

This is the third and final post for this debate, posted October 18. The full debate can be accessed here. Weigh in on this debate by emailing the editors at letters@cfr.org.

Mr. Crail [my debating partner] and I seem to agree that sanctions are working, even if they have not yet solved the Iran problem. That caveat should not surprise, since the graduated and targeted financial measures now being employed have only been in effect a relatively short period of time. But where Mr. Crail concludes it is time to alter course, I conclude sanctions can be improved.

Recognizing that Iran is actively seeking alternative investment partners to compensate for those that it lost, Treasury Deputy Secretary Robert Kimmitt recently warned (FT) China, Russia, and other countries not to step into this void, and to respect the Iran sanctions regime. Both Russia and China are members of FATF [Financial Action Task Force], giving still greater significance to the statement by the premier standard-setting body that Iran represents a “significant vulnerability within the international financial system” (PDF). Iran is the only country FATF has publicly identified as a significant vulnerability. FATF announced it is also working on a study of the trends and techniques involved in WMD [weapons of mass destruction] proliferation and financing activity, and has already issued new guidance (PDF) on implementing financial prohibitions to prevent Iranian WMD proliferation.

This week the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) also issued an advisory on the increasing money-laundering threat posed by illicit Iranian activity (PDF).

There is no denying, however, that the multilateral UN sanctions process has bogged down. It is therefore important that action be taken soon to lay the groundwork for substantive sanctions before the year’s end, following Iran’s report to the International Atomic Energy Agency next month on its past nuclear activities. French officials have already stated that if there are no new UN sanctions by the end of the year, the European Union (EU) should “look at more individual kinds of sanctions.”

The United States could also lead by example, as it did with Bank Sepah, which was designated unilaterally by the United States before being multilaterally designated under UN Security Council Resolution 1747. For example, the United States could unilaterally designate an Iranian bank like Bank Melli, which was implicated in the December 2005 fine of ABN Amro for using the Dutch bank’s Dubai office to conceal its role in illegal bank transfers to Iran. Speaking to the Washington Institute in May 2007, Mr. Kimmitt stated that if the United States found an Iranian bank engaged in illicit activity, “We’ll go after them.” (Audio file)

As Washington Post columnist David Ignatius put it, “these new, targeted financial measures are to traditional sanctions what Super Glue is to Elmer’s Glue-All.” Addressing deficiencies within the program of targeted financial measures to make them more effective is most likely to create the leverage for diplomacy and avoid a military confrontation. Short of creating such leverage, negotiation and diplomacy alone will not convince Iran to give up its nuclear program.

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