The history of sanctions efforts to change the behavior of rogue regimes is mixed. For nearly 30 years, the Iranian regime has been restricted from doing some business with the world, most specifically the United States. Nevertheless, during that period of time, Iran has grown into the world’s premier sponsor of terrorism, while seeking both nuclear weapons and ballistic missiles to provide them the top-cover under which they conduct their murderous business.
One of the positives of the past year is that some of our allies have come to understand the Iranians are the primary problem, and that previous failures to secure a negotiated settlement of Iran’s violations of the NPT were not the fault of the United States or our allies. While engagement probably has failed, it took a year of such efforts to convince some of our important allies that the United States really was interested in “making a deal”.
So in the absence of a deal, what are the prospects for sanctions – of whatever nature – to work, to bring about a deal that diplomacy without pressure cannot deliver? Here the story is good, and bad and ugly!
The Good
According to the American Foreign Policy Council, the Dutch parliament blacklisted the IRGC, the revolutionary guard corps in Iran. The European Union is also examining adopting "as a whole" additional Iran sanctions for 2010. On the American books is Executive Order 13382, issued in 2005 that bans entities involved in Iran's nuclear proliferation from the U.S. banking and financial system. The Administration could thus seek to cut-off Iran from the international bankingsystem, and designate Iran's central bank as a terrorist supporting entity without any new authority.
Two German firms, Munich Re and Allianz, in the insuranceand reinsurance business, have announced they are leaving Iran while refined gasoline sellers BP, Reliance and Glencore have terminated direct sales to Iran. In Australia, the government blocked shipments to Iran because of concern the cargo was destined for Tehran's nuclear program.
In America, some states such as Maryland are among at least 20 states that have passed legislation divesting theirpublic pension funds of stocks of companies that do business with Iran, and other state sponsors of terrorism. Some states only ban individual stock transactions as opposed to those involving index or mutual funds, but the effort is gathering steam. In Maryland, for example, some $365 million from the state public pension fund has been divested.
However, efforts to secure similar action from college and university endowments may be more difficult. In 2008, a colleague of mine wrote to 50 of the nation's top universities and colleges and asked what their policies were re: divestment of Iranian related stocks and the funds in their endowments. Forty-nine replies received said "mind your own business."
It is not as if such efforts could not have a serious impact. According to a former senior White House official and a former Treasury official with responsibility in this area, the U.S. Government was successful in cutting off financing for the North Korean regime. Although not directly applicable, the idea is the same: cut-off the financial lifeline of the regime in Tehran by, in part, pressuring companies not to do business there.
For example, "In September 2005, as part of a strategic pressure campaign, the Treasury Department ordered U.S. financial institutions to close correspondent accounts for a private bank in Macau – Banco Delta Asia. This bank was facilitating money laundering, proliferation and counterfeiting on behalf of the North Korean regime.
"The regulation cut the bank off from the U.S. financial system. More important, the unilateral regulation unleashed the global financial furies against North Korea. Banks in China, Asia and Europe stopped doing business with North Korea, denying it access to the international financial system. North Korean bank accounts were closed, its transnational commercial transactions were canceled, and officials' financial activities were carefully scrutinized.
"The U.S. has relevant regulatory and executive powers created post-9/11 to address specific money-laundering and proliferation threats and to target relevant sanctions to individuals and entities; the Treasury has created an international financial coalition focused on the problem of proliferation and has built credibility with the private sector regarding the protection of the financial system.
"This smart financial power, which falls in the space between diplomacy and military force, is no silver bullet, but it is one of the few effective national security tools that give teeth to our diplomacy. It is a lever on which the Obama administration will rely heavily when dealing with…other rogue regimes that appear beyond the reach of traditional tools of statecraft. In addition, it is a tool that it should rely on now, to unleash again a pressure campaign against North Korea and send a clear message to the regime that it's dangerous recalcitrance will be met with real and painful actions to stop it." [Although Juan Carlos Zarate, former deputy national security advisor for combating terrorism from 2005 to 2009, is primarily referencing North Korea in the above article, there is no reason these measures cannot be brought against Iran.]
The German Foreign Minister says we will have to talk about "new measures" if the Iranians refuse to "join the negotiations." Patruschev, the Secretary of the Security Council of Russia, says doubts about the Iranian nuclear program are "well-founded", and thus consideration of additional sanctions should be on table. The British Prime Minister Brown says, "This is a matter of serious concern to the international community and it does make the case for moving further on sanctions."
All these comments are consistent with the recent conclusion of the U.S. Secretary of State that as for engagement, U.S. overtures to Iran have persuaded other countries "that all options short of more sanctions have been exhausted." This echoed her statement in late 2009 that "I don't think anyone can doubt that our outreach has produced very little in terms of any kind of positive response from the Iranians.”
More and more firms appear to have come to the same conclusion. The Austrian firm OMV has withdrawn from a project to ship natural gas from Iran to India, Pakistan and Europe. Siemens has terminated all activities in Iran as well. China's plans to build ten refineries and five nuclear plants in Iran are apparently in limbo, while Spain, Austria, Greece, Dubai and Malaysia are beginning to "review" their policies.
In the view of some analysts, Europe and not Iran holds all the leverage. “Two-way trade between the Islamic Republic and EU states is set to surpass $10 billion this year, and Iran is estimated to import nearly 40% of its high technology from Europe. Serious curbs on this commerce could have a devastating effect on Iran's already-flagging economic fortunes, dramatically ratcheting up the costs to Iran's ayatollahs of their nuclear endeavor," says Ilan Berman, the Vice President of the American Foreign Policy Council.
Even previous opponents of widespread sanctions may be changing their mind. G. Seib in theWall Street Journal of February 9, 2010 says: "There is a new way of thinking about sanctions with a broad impact on the Iranian people and economy so as to compel Iranians to grow more angry at the regime." Already says Cliff Kupchan, an Iran analyst with the New York-based Eurasia Group, "The decision by European companies and Reliance to stop supplying Iran with (petroleum products) will force Iran into secondary and less-efficient markets in order to obtain petroleum, which will increase Iran's transaction costs."
The Bad
However, despite this apparent "progress," there remain formidable obstacles. "To talk about sanctions at the moment will complicate the situation and might stand in the way of finding a diplomatic solution..." says Chinese Foreign Minister Yang Jeichi. A week later, in mid-February, Admiral Mullen, the Chairman of the JCS in Israel February 14, 2010 said, "We have not yet reached the limits of diplomacy." At the same time, the "The Obama administration [was] pressuring Congress to exempt China from the sanctions bill, a carve-out that won't work", according to Investor's Business Daily.
Even Iran got into the act, saying it welcomes ..." that there is no hard-and-fast deadline for starting nuclear dialogue," while on the same day, the Chinese UN Ambassador Yesui said, "This is not the right time or moment for sanctions... diplomats need more time and patience," a point echoed by the Chinese Foreign Minister: "We should push for progress in the dialogue and negotiations."
Unfortunately, the “bad” news comes with the good news. For example, Iranian front companies are buying refined gasoline elsewhere including Dubai, Abu Dhabi and Iraq to skirt the decisions of oil traders, which reminds us that US sanctions have encountered similar problems for three decades: reluctance in Europe to follow-suit and a host of elusive trading companies eager to sell gasoline and other goods to Iran at inflated prices.
There is also pressure to continue "engagement", to keep our European allies aligned with the U.S., but this raises the obvious question of "aligned to do what?" There is also the unfortunate belief that others will provide security for us. In Virginia last year, the majority leader of the Senate prevented a divestment bill from coming to a vote in Committee because he said "Israel" will do what is necessary and this was not the job of the United States.
Catherine Ashton, the EU high representative for foreign affairs and security policy, expressed EU's "deep concern" about the Congressional sanctions bills because they envision extraterritorial application of US legislation and contrary to an agreement in 1998 that such sanctions would not apply to the EU in light of the EU commitment to work with the US to counter Iran's threat. This, of course, raises the obvious question of how long does "work with" extend and at what point do we agree our policies have to change.
Apparently, the U.S. and three of its allies have dropped a proposal to prohibit business with Iran's central bank as part of a potential fourth UN Security Council sanctions resolution. Instead, the resolution would encourage member nations to exercise "vigilance" in dealing with Iran. This can be used for the basis of restrictions adopted by each individual country if they wish to but it has been precisely this existing standard that has allowed countries to evade compliance with even the "spirit" of the sanctions, to say nothing of the letter of the law.
Though the news is mixed, Moscow according to Global Security News rejected the new proposals while the Chinese Foreign Minister has said that "sanctions and pressure cannot fundamentally solve this issue". One report says "The five permanent members of the UN Security Council might not be required to comply with penalties against Iran now, being considered by the United States." According to the Washington Post, the exemption effort might "prompt Beijing to seek the weakest possible UN penalties and commit more money to Iran's energy sector," not exactly what many have in mind when we seek to stop Iran's search for nuclear weapons.
On the other hand one Ambassador to the UN is reportedly to have noted that a "...New UN resolution would demonstrate the international community is united behind a diplomatic resolution to Iran's nuclear issue and stave off any pre-emptive moves", or translated into plain English: Yes, united [to keep up appearances) to pursue measures (too weak to be effective] that will stave-off pre-emptive moves (prevent anything from being done which disrupts business as usual).
The Ugly
That brings us to the “ugly” of our story. "No wonder that Tehran doubts the collective resolve of world powers", says Congressman Jeff Fortenberry: "It is not difficult to see why. European counties continue to do business with Iran.” And thus the administration may be "wasting its time with the Sisyphean task of getting the Russians and the Chinese to agree to UN measures that actually will end up not impeding the quest for nuclear weapons by Iran" says R.M. Gerecht of the Foundation for Defense of Democracy. The Iranians will not stop enrichment unless the regime's survival is threatened, when "Khamenei is on his knees" says Gerecht. To work, he says, sanctions must complement the one thing that has terrified the regime, the pro-democracy Green movement.
Moreover, that brings us to the question of whether we would rather make a deal with the regime in Tehran or a new government willing to abide by international norms of civilization. And that in turn brings us to the question that has yet to be seriously addressed: Are we bringing sanctions against Iran to pressure the current regime to enter negotiations and make a deal, a regime we do not trust and we know wants to destroy us? Or are we bringing sanctions to end the regime and help bring to Iran the freedom and liberty its nearly 100 million people crave?
The Chinese and Russians may indeed join a fourth round of sanctions at the UN. But they will be so watered down according to the Wall Street Journal that additional measures will be to enforce existing sanctions as opposed to new sanctions such as denying Iran shipping and air over-flight rights, insurance services, (critical to the flow of petroleum and other key products), and access to certain international banking transactions. As Dr. Brzezinski, former President Carter’s National Security Adviser predicted, the new sanctions will be sufficient to garner the support of China and Russia, but will be too weak to change Iran’s behavior. We will be told by much of the drive-by and state-owned media that such measures show the “unity of the international community”, while the Iranians will know it shows no such thing. Our next essay, “Dr. Strangelove in Tehran” discusses the nature of the regime in Iran, how that fits into global jihad and the nuclear weapons program it pursues.
FamilySecurityMatters.org Contributing Editor Peter Huessy is President of GeoStrategic Analysis, a defense consulting company in Potomac, Maryland.
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