Sanctions Offer No Sanctuary

Washington’s attempts to halt Iranian enrichment activities through unilateral sanctions have been derailed. The United States must modify its objectives in dealing with Tehran’s nuclear ambitions.

Washington's goal of halting Iranian enrichment activities through unilateral sanctions has been derailed by IAEA reports that Iran has in fact hurdled major technological obstacles and is capable of producing nuclear fuel. Talks between Washington and Tehran scheduled for later this month are meant to deal with the situation in Iraq alone. But Washington may need to modify its objectives in dealing with Tehran to focus on "slowing" Iran's nuclear ambitions, while simultaneously weighing the utility of deepened unilateral sanctions versus a military option.

How the United States might thwart Iran's progress on this rapidly evolving issue has led Congress to consider tightening unilateral sanctions against the Islamic Republic. To examine the probability of these measures The Nixon Center hosted a luncheon discussion entitled "Iran: Will Sanctions Work" on May 17. It featured Kenneth Katzman, specialist in Middle East affairs at the Congressional Research Service, Julia Nanay, senior director of PFC Energy and Michael Eisenstadt, senior fellow and director of the Military and Security Studies Program at the Washington Institute for Near East Policy. Geoffrey Kemp, director of Regional Strategic Programs at The Nixon Center moderated the discussion.

Katzman interpreted the mood on the Hill and highlighted the "legislation in the pipeline", specifically H.R. 1400, introduced by Rep. Tom Lantos (D-CA) to enhance existing unilateral economic sanctions against Iran. The bill extends and broadens the Iranian Libya Sanctions Act (ILSA), passed in response to Iran's nuclear program and continued sponsorship of terrorist organizations on May 6, 1995.

In order to have any substantial impact sanctions must have "bite" from the outset. According to Katzman, H.R. 1400 is a "sweeping bill" with increased import and export restrictions, severed credit lines and investment deals as well as a procurement ban on U.S. corporations' foreign subsidiaries with ties to Iran. U.S. fund managers are required to divest of all Iranian assets. And the President must also choose from a list of six specific sanctions, taking action against all items deemed "sanctionable", excluding food and medical supplies. Washington would reduce its contribution to the World Bank by an equal percentage of funds that the bank lends to Iran; and the U.S. Treasury is urging both American and foreign banks not to finance Iranian deals in dollars, thereby raising transaction costs.

On a side note, Katzman reported there is a debate on whether or not the Islamic Revolutionary Guard Corp, a subsection of Iran's national military, should be designated as a terrorist organization.

Successful sanctions usually have "limited objectives" resulting in limited policy changes. But Eisenstadt spoke on the indirect impact sanctions might have on Iran's conventional military. If successful, sanctions could "cripple" Iranian military build-ups over time, but time is a luxury the United States does not have at this point. Yet, if the president did launch a preventive strike, sanctions targeting reconstruction efforts could be crucial to the success of such an action.

Iran has suspended its program in the past, although under considerably different political circumstances. This, according to Eisenstadt, suggested that the political aspect is also crucial to the outcome in the long run. Economic sanctions must send "symbolic" messages. Eisenstadt referenced the UN Security Council resolutions to sanction Iran through a quasi-arms embargo as an example, suggesting Iranian citizens do not wish Iran to become an isolated pariah state. This illuminates the idea that sanctions are generally most successful if implemented multilaterally as opposed to unilaterally, but nonetheless the psychological effects of either play a significant role.

The most effective sanctions are "targeted" and Iran's oil and gas industries are obviously the largest targets. Of course, the sanctioning of all extractive industries in Iran will further cut-off much needed investment and technology in their fields. But as Nanay pointed out, Iran is considerably self-sufficient and, in this regard, sanctions will have a very limited impact.

With Western companies out of Iran, the national oil companies (NOC) of Asia and Latin America could possibly fill this vacuum-weakening the effects of unilateral sanctions. Iran, with the help of the Chinese or even the Brazilians, could survive the gauntlet thrown down by the United States. And sanctioning NOCs will not be easy, considering they are essentially governmental entities outside of U.S. jurisdiction.

By the same token, Iran's liquid natural gas (LNG) reserves are currently under-developed and domestic consumption is only climbing. Failure to develop these fields has led to increased support of enrichment programs, which gives impetus to the regime to continue Iran's nuclear program, even if the stakes are high.

Nanay also spoke on the growing specter looming over Europe as the future "supply gap" could cause the EU to deviate from UN Security Council resolutions. And sanctions could also mean a decline in Iran's crude oil and LNG production, potentially causing a substantial rise in global energy prices.

Unintended consequences of U.S. unilateral sanctions are not lacking. Past sanctions against Iran have only hardened the regime, allowing conservatives to "dig their heels in" and justify their anti-American stance, Nanay said. In fact, unilateral sanction may fuel a rally around the bomb effect to be exploited by Iranian hardliners.