BERLIN - The significance of international sanctions on Iran took on
new prominence this week, after a group of US senators sent a letter on
Tuesday to Catherine Ashton, the EU's chief diplomat, urging the
27-member EU group to implement an oil embargo against Tehran.
fast-moving nuclear events in Iran, including Tehran's decision to
develop high-grade weapons uranium at its deep underground Fordow
facility, appears to have prompted the EU to meet on January 23 instead
of the slated January 30 foreign ministers meeting. The EU tentatively
agreed last week to pull the plug on its imports of Iranian crude oil.
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EU nears agreement on Iran oil embargo details
US Senators Joe Lieberman (I-Connecticut), Mark Kirk (R-Illinois) and
Charles Schumer (D-New York) wrote Ashton that "we believe that both
[steps] are absolutely necessary if we are to prevent the Iranian regime
from acquiring nuclear weapons and thereby foreclose either a regional
war or a cascade of nuclear proliferation in the Middle East." Senators
Robert Menendez (D-New Jersey), Jon Kyl (R-Arizona), Bob Casey
(D-Pennsylvania), Marco Rubio (R-Florida) and Kirsten Gillibrand (D-New
York) also signed their names to the letter.
The two steps the
senators refer to in the letter are cutting ties with the Central Bank
of Iran and an oil embargo. Iran's main financial artery - the CBI -
processes the bulk of the country's foreign energy payments.
pressing question is: Can oil sanctions contribute to a radical change
in Iran's recalcitrant behavior? In a show of defiance on Wednesday,
Iran's Atomic Energy Organization said in a statement, "We will continue
our [nuclear] path without any doubt... our path is irreversible."
EU move to sever ties with Iran's oil industry would have been largely
unimaginable a year ago. A deeply anchored EU strategy of engagement
with the Islamic Republic coupled with an annual bilateral trade volume
of over 25 billion euros with Tehran impeded tough action from Brussels.
The EU countries import roughly 500,000 barrels per day of Iran's 2.6
million bpd export production. Only Saudi Arabia produces more oil than
Iran, with a daily turnout of 3.5 million bpd.
With a view toward
not rattling oil markets and jolting fragile EU economies like Greece,
Spain and Italy, which depend on vast amount of Iranian crude, the EU
laid out on Thursday a staggered oil sanctions plan to take place over
the next six months.
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The view from European experts is
optimistic. But the need to raise the financial and diplomatic sanctions
bar remains on the table.
Daniel Schwammenthal, the director of the AJC Transatlantic Institute in Brussels, told The Jerusalem Post
Wednesday, that "we welcome that the EU has in principle decided to
impose an oil embargo on Iran. But we hope that when foreign ministers
meet later this month, they will impose that ban immediately and apply
it to existing contracts." Schwammenthal, however, wants the EU to
further ratchet up the pressure.
"In addition, we urge European
leaders to sanction Iran's Central Bank, as Great Britain and the US
did. It is this combination of energy and financial measures that can
create the sort of 'crippling sanctions,' to use the words of US
Secretary of State Hillary Clinton, that may still have a chance to stop
Iran's nuclear weapons program peacefully," said Schwammenthal. "After
years of Iranian deceptions and lies, nothing short of Tehran's total
isolation, which should include travel bans for all regime officials,
can convince the Islamic Republic of Iran that it's simply too costly to
continue ignoring their international obligations."
EU countries and US Treasury officials were initially concerned about
oil sanctions spiking Iran's revenues and hurting economies, a surgical
set of punitive measures targeting Iran's main source of income, its oil
and gas sector, has produced the right efficacy.
The strategy of
inflicting laser-like oil sanctions on Iran without disrupting global
energy markets, and thereby reducing Iran's oil profits, was first
developed by Mark Dubowitz, executive director of the Foundation for
Defense of Democracies (FDD) and Reuel Marc Gerecht, a former CIA officer
and senior fellow at FDD.
In a series of articles in The Wall Street Journal
and The New York Times
last year, Dubowitz and Gerecht outlined their approach.
Writing in the Times
in November, the FDD experts argued "effective energy sanctions don't
have to raise oil prices; they can actually do the opposite. Washington
just has to learn how to leverage greed."
They continued that
"With fewer buyers to compete with, the Chinese companies would have
significant negotiating leverage with which to extract discounts from
Tehran. The government could lose out on tens of billions of dollars in
oil revenue, loosening its hold on power. This approach may seem
distasteful to some, because it does, in a sense, reward bad Chinese
behavior. But the objective of sanctions is to cause real economic pain
in Tehran, not to make Americans feel moral." A telling result of the
Dubowitz and Gerecht smart sanctions approach was cited in last week's International Herald Tribune
to the paper, "China, which imports about 11 percent of its oil from
Iran, has actually reduced its daily purchases of Iranian crude,
although estimates of the cutback range from as little as 15,000 barrels
a day, or 3% of Chinese imports from Iran, to considerably more than
that. It was hard to know whether Beijing was making a political
statement or merely trying to buy the oil on better terms." Dubowitz
told the Post
on Wednesday that
"the EU oil embargo, even if it contains waivers and a slower than
desirable implementation schedule, will be a critical first step. It is
already setting off a cascade of oil market behavior as Japan and South
Korea decrease their purchase of Iranian oil in order to be in
compliance with US central bank sanctions, and China forces the Iranians
to offer price discounts to compensate their refineries for the added
political and legal risk of continuing their purchases of Iranian oil."
continued that "Saudia Arabia, Kuwait, the UAE and other oil producers
are increasing their supplies to give Japan, South Korea, India and
China the cushion to reduce their purchases and drive ruthlessly for
price discounts. The goal of US sanctions and the EU embargo is to
target Iranian oil revenue which is Khamenei's lifeblood.Countries
should be considered as cooperating under US law if they help to
decrease Iranian oil revenue through cuts in purchases of the oil,
reductions in the price that they pay for every barrel, or both. This
helps to calm oil markets as traders realize that sanctions are designed
not to take 2.3-2.5 million barrels of Iranian oil immediately off the
market, but to replace some of that oil with supplies from other
sources, and to put downward price pressure on the remaining Iranian
The next step in ratcheting up the oil sanctions
pressure on Iran will be the vital Asian and Indian markets. The Saudis
have agreed to supply 4 million barrels more to India in January, about
a 23-24% increase, which is designed to replace Iranian oil. Indian
Foreign Minister SM Krishna, however, gave no indication of reducing his
country's import of Iranian crude oil during his visit this week to
Israel.Benjamin Weinthal is a research fellow with the Foundation for Defense of Democracies.
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