EU okays Iran energy sanctions

US works to stamp out front companies aiming to evade restrictions.

UN Security Council 311 (photo credit: courtesy)
UN Security Council 311
(photo credit: courtesy)
WASHINGTON – The European Union, for the first time, approved energy sanctions as part of a package of strong steps imposed against Iran Thursday, adding to US efforts to build on the recent passage of a UN resolution penalizing the country over its nuclear program.
“New restrictive measures have become inevitable,” an EU statement put out following a meeting of the European Council declared, referring to Iran’s evasion of international demands concerning its nuclear program.
Those measures include sanctions on banking, insurance, shipping and the “prohibition of new investment, technical assistance and transfers of technologies, equipment and services” in the gas and oil sector, according to the statement. The details of which companies, technologies and people will be targeted are due to be compiled before the next council meeting in July.
The move was welcomed by the US Thursday but harshly criticized by Russia, which approved the more limited UN Security Council sanctions voted on last week.
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The EU has taken a different approach than the US when it comes to isolating the Iranian energy sector, but both add pressure and focus on the industry widely considered the Achilles’ heel of the Iranian economy.
While the EU is unveiling measures to restrict key energy technologies, the US on Wednesday announced a list of 22 energy and insurance companies it has connected to the government of Iran.
Mark Dubowitz, a sanctions expert with the Foundation for Defense of Democracies, called the list a “warning” to international corporations that they could likely be sanctioned if they continued to work with these Iranian entities, under legislation making its way through Congress.
US lawmakers have long focused on the energy sector as the best way to inflict a cost on Iran – and not simply limiting sanctions directly to illicit nuclear and terror activity – but the US Treasury has not pursued that path until now.
Dubowitz said the recent UN resolution was helpful in focusing on energy since it referenced the sector in its preamble, if not its binding text, in contrast to three earlier resolutions.
“It provides political cover for the US, EU, Canada and other allies to move forward with their own energy sanctions,” he explained.
In the past, the Treasury has focused on the financial sector, insurance and shipping, all of which were also targeted Wednesday. In addition to publicizing the list of Iranian energy companies, the Treasury designated an Iranian bank, individuals who work for the Iranian Revolutionary Guard and entities involved in the country’s missile program as proliferators. It also added 90 names used by maritime carriers to try to evade earlier sanctions designations.
In announcing the additional designations, Treasury officials noted that significant efforts were now being focused on stamping out front companies and other means of challenging previous sanctions. The Treasury has access to the 16 US intelligence bodies in tracking down fake names, dummy companies and other means of trying to game the system.
“We know that officials in Iran have been anxious about this new round of sanctions,” Stuart Levey, Treasury under-secretary for terrorism and financial intelligence, noted Thursday. “If the Iranian government holds true to form, it will scramble to identify work-arounds, hiding behind front companies, doctoring wire transfers, falsifying shipping documents.”
He argued that Iran’s efforts only helped America make its case to international corporations, as the US is capitalizing on corporate concerns that their companies will be exposed to risk, reputation damage and even sanctions.
“They then see that Iran is taking action that has a risk of bringing them into illicit activity, and it reinforces this dynamic where they continue to shun Iran,” he said.
Dubowitz acknowledged that the sanctions regime had created a booming industry for groups that didn’t mind risking US sanctions, but said that that enterprise was less significant than the extent to which it drove up the cost of doing business to Iran.
He said that those who criticized the approach as “whack-a-mole,” whereone front company simply replaced another, were forgetting that thearcade game could be won with “relentless efforts to whack down thosecompanies.”
That pressure is set to increase in Congress, with expectations that acompromise House and Senate bill on Iran sanctions will be done by theend of the month and perhaps as early as next week.
In the meantime, the administration is warning Iran that there is more to come.
“In the coming weeks, we will continue to increase the financialpressure on Iran,” stressed Treasury Secretary Tim Geithner. “We willcontinue to target Iran’s support for terrorist organizations. We willcontinue to focus on Iran’s Revolutionary Guard. We will continue toexpose Iran’s efforts to evade international sanctions.”