Diplomacy: Dollars and sense - the good news about torpedoing Teheran

Ironically, the world financial crisis might assist in US-EU efforts to step up sanctions against Iran.

By HERB KEINON
wall street plummets 224.88 (photo credit: AP)
wall street plummets 224.88
(photo credit: AP)
You don't often hear good news about efforts to stop the Iranian nuclear program. On the contrary, what is generally heard is a steady, depressing drumbeat of the inevitability that President Mahmoud ("Israel is a filthy microbe") Ahmadinejad will pass the nuclear threshold as a weak-kneed world stands by and does little. In the last month alone, we have heard Brig.-Gen. Yossi Baidatz, Military Intelligence's head of research, tell the cabinet that Iran is half way to its first nuclear bomb; International Atomic Energy Agency head Mohammed ElBaradei actually admit that Iran may be running clandestine nuclear programs; and numerous commentators and analysts argue that with the US bogged down in Iraq, Afghanistan and now on Wall Street, the chances of either an American military action to stop Iran, or a US nod to Israel to take action, are almost nil. And, if that were not gloomy enough, Ahmadinejad continues his anti-Israel tirades, even as he boasts that his country's centrifuges continue enriching uranium. Yet, in recent weeks - almost imperceptibly - some satisfaction has been expressed in Jerusalem that significant economic sanctions Iran will actually feel are on their way, and indeed already being implemented - measures led by the US, Britain and France. This is taking place at a time when, as the bazaar strikes last week over the imposition of a 3 percent value added tax indicated, the economic situation in Iran - despite the huge oil-price windfall - is anything but sterling. Inflation is running at an estimated 29%, unemployment is high and gasoline is rationed. While Ahmadinejad runs off at the mouth, his subjects are running low on cash and basic commodities. Even before the last very anemic resolution on Iran in the UN Security Council in September, a resolution made fangless because of the Russian-US tension over the Georgian crisis, the US, together with France and Britain, came to the conclusion that if they stuck only to the sanctions track at the UN Security Council, the chances of stopping Iran would be very slim. "There is common wisdom that the Georgian crisis scuttled substantive cooperation on the Security Council track," one government source in Jerusalem said. "There are those who even feel that if the purpose of the last resolution was to show solidarity and international consensus, it may have shown the opposite, in its lack of progress on punitive measures." But ironically, the source said, that resolution seemed to "sound the bells" for those who still believed cooperative international sanctions were possible, and who woke up to realize that more substantive sanctions needed to be implemented in parallel to the UN track - and quickly. What has emerged, therefore, has been work on sanctions that would hurt Iran, imposed by the US and like-minded European countries, even if Russia and China do not cooperate. FOR INSTANCE, one measure that is being discussed - and, to a certain degree, has been implemented - is for insurance companies, which are almost exclusively connected to companies in the West, to stop insuring Iranian shipping lines, making it much more difficult for Teheran to import sensitive equipment. And then there is the Iranian oil industry. It is a well-known irony that the world's fourth largest oil producer actually has to import refined oil products, because it does not have its own independent refining capacities. It is trying to develop those, and is largely dependent for that technology on the West. While older refining technology could be found elsewhere, Iran needs the West for up-to-date technology. And one of the steps being considered is to forbid the sale of that technology to Teheran. The idea behind these types of sanctions is that they would be effective without Chinese or Russian cooperation, because here the Russians and Chinese could not easily fill in the gaps. These types of sanctions are an extension of financial sanctions against Iranian banks and the country's financial sector that have been spearheaded - with not insignificant success - since 2007, by Stuart Levey, US undersecretary of the treasury for terrorism and financial intelligence. Two of the largest Iranian banks - Melli and Saderat - have been isolated from the international banking community, and efforts are under way to keep up the pressure on the Iranian banking system. "All know that Iran's Achilles' heel is the energy sector, and its links and lifeline to the outside world," said the government source in Jerusalem. "These measures have a direct impact on that." Some of the measures have been announced, and others are taken by various companies without much fanfare. And while Israel is by no means behind this campaign, Jerusalem is being consulted, to a certain extent, because of information that has accumulated here on what companies are doing business with Iran and where. "In 20/20 hindsight, everyone knew a couple of years ago that these types of sanctions would at some point become necessary," the source said. "The decision in the past was to accept lowest-common-denominator measures in the UN to maintain an international consensus. But, unfortunately, those did not have the intended bite." It was a given, he said, that in going down the UN track, "you were going to give up true bite in the sanctions, in the hope that you would build up international momentum against Iran." But, he said, the Iranians have managed to keep the gap between their technological progress and the international community's attempts to stop it sufficiently wide. Which is why the different measures are called for. THE SENSE in Jerusalem is that while not all European companies are willing to take steps, some large companies in Europe are much more cautious now regarding business with Iran, including development of its gas and oil fields. For instance, huge French energy companies like Shell and Total, which began work in Iran, have either cancelled or frozen contracts in recent months. The assessments in Jerusalem are that, given the current financial crisis, large companies will now consider investment in Iran even more carefully, because they will be less keen on entering into investments in an unstable region. And this is where the global financial crisis could actually have some positive residual effect. While it is much too early to judge the impact of the global financial meltdown on Iran or its decisions, one clear thing is that the fall of oil prices significantly hurts Teheran. "The decrease in oil prices will remove the cushion that Iran has enjoyed for the longest time," the government official said. "The high price of oil provided it with reserves to beat back the bite of those financial and economic measures that were taken in the past, so that the Iranian citizens wouldn't feel them too much." He explained that as the Iranian economy has been severed from the intentional community, the government had to take measures to cushion the fall. "But when the vast reserves they have from oil become less, they won't be able to dip down into the coffers and smooth things over for the public as they have in the past. The less money the government has to play with, the more the Iranian public will feel what has been going on in the outside world for the last year or two." And considering all the bad news that comes out of Iran, that in itself is slightly encouraging, giving some Israeli and Western officials a degree of hope that the sanctions, together with the world financial crisis and the steep fall in oil process, could possibly lead Teheran to reconsider whether continuing to enrich uranium is worth the huge economic price.