While no doubt painful for Tehran, U.S. sanctions are riddled with exemptions and may be in place mostly to sideline hawks, writes Robert Dreyfus.
Like the fairy-tale Big Bad Wolf, the United States and the European Union continue to huff and puff and say that economic sanctions will blow Iran’s house down.
Referring to new U.S sanctions that can be levied against third-party purchasers of Iranian oil and to the ban, imposed July 1, by the EU against Iranian exports to Europe, Secretary of State Hillary Clinton declared, “Iran’s leaders will understand even more fully the urgency of the choice they face.” Stretching for an historical analogy, the New York Times compared oil sanctions against Iran to the pre-World War II U.S. embargo on oil shipments to Japan, adding, in case anyone forgot, that in response Japan opted to “strike before they were weakened.”
But while the new sanctions will inflict a significant measure of pain against Iran’s already struggling economy, virtually no one in Washington believes that they will compel Iran to make unilateral concessions at the bargaining table over its nuclear enrichment program. And, experts say, Iran can get along fine for the foreseeable future with a little belt-tightening.
“Consider the Iranian economy, which is nowhere near collapse,” wrote Hossein Mousavian, former spokesperson for Iran’s nuclear negotiating team and the author of The Iranian Nuclear Crisis, A Memoir, and Mohammad Ali Shabani, a political analyst in Tehran, in The National Interest. “The reality is not that ‘Iran is on the verge of a choice between having a nuclear program or an economy,’ as Cliff Kupchan, a senior analyst on the Middle East at the Eurasia Group, insists. [The] Islamic Republic will still rake in an estimated $40 billion from oil this year. That’s roughly twice as much as when Mohammad Khatami was president a decade ago.”
The only way sanctions against Iran make sense is not as policy, but politics.
Since 2009, when the first round of talks stalled between Iran and the United States, Russia, China, Britain, France and Germany, the so-called P5+1, the Obama administration has used economic sanctions as a way of kicking the can down the road. Rather than make real concessions to Tehran, including recognition of Iran’s right to enrich, if Iran accept air-tight international oversight by the International Atomic Energy Agency, the White House used the sanctions as a way of deflecting pressure from neoconservatives, hawks, and right-wing backers of Israel in the United States who demanded confrontation with Iran. Inside the administration, few if any officials actually believe that sanctions will work as intended, namely, to force Iran to comply with UN Security Council resolutions that demand a stop to enrichment. Since 2009, President Obama has opposed, deflected, and tried to weaken sanctions legislation enacted by Congress. Were sanctions too draconian, and were the United States to move overtly toward military confrontation with Iran, the P5+1 coalition would instantly shatter and both Moscow and Beijing would align more closely with Tehran.
So, even as it huffs and puffs, the United States last week took steps to undermine the very sanctions it cites as pressure against Iran. Using a loophole in the law, the administration simply exempted China, Singapore and other countries from heavy financial penalties that might be levied against nations that buy Iranian oil. On June 28, Hillary Clinton announced that the U.S. had “made the determination that two additional countries, China and Singapore, have significantly reduced their volume of crude oil purchases from Iran” and so the law “will not apply to their financial institutions for a potentially renewable period of 180 days.”
That, of course, was a polite fiction. As a July 2 editorial in the Wall Street Journal succinctly summarized the toothless nature of the sanctions law: “It's so weak, in fact, that all 20 of Iran's major trading partners are now exempt from them. We've arrived at a kind of voodoo version of sanctions. They look real, insofar as Congress forced them into a bill President Obama had to sign in December. The Administration has spoken incantations about their powers. But if you're a big oil importer in China, India or 18 other major economies, the sanctions are mostly smoke.”
Indeed, perhaps one of the reasons why the United States failed to cite China and other countries in Asia under the law is that the sort of secondary sanctions against Iran that the United States wants may even be illegal under the rules of the World Trade Organization. In any case, by sanctioning China the United States would set off a full-blown diplomatic row that, at the very least, would propel China out of the P5+1 and lead Beijing to escalate its Iranian oil imports.
To be sure, Iranian oil exports to Asia, including China, have steadily declined in 2012 as several Asian importers sought to deflect American attention on their economic ties to Iran. As Reuters reported, “Imports by Japan, China, India and South Korea from Iran fell 25 percent in May alone to 999,230 bpd [barrels per day] from 1,338,193 bpd a year earlier, according to Thomson Reuters calculations from the Asian countries' customs data.” Even so, despite the law, China’s imports from Iran have once again quietly begun to rise after a gradual decline during much of this year. Erica Downs, a Brookings Institution expert writing for the U.S. Institute of Peace, notes that a great deal of the decline in China’s imports was the result of a diplomatically convenient “contract dispute,” and she adds: “The contract dispute, which began in late 2011, was resolved in March 2012. As a result, China’s oil imports from Iran began to rise in April, and by May, China’s oil imports from Iran were back to 2011 levels of more than 500,000 bpd.”
In the United States, anti-Iran hardliners fumed over the seeming futility of the sanctions policy and the exemptions granted to China, India and other countries in Asia. Patrick Clawson, an Iran specialist at the Washington Institute for Near East Policy (WINEP), laid out a detailed argument explaining why economic sanctions won’t work, and he concluded bluntly that success “may require a profound shock of some sort, be it remarkably tough sanctions, more-complete political isolation, or military action.” His WINEP colleague, Michael Eisenstadt, chimed in. “If nuclear diplomacy with Tehran is to succeed, Washington must be prepared for the kind of brinkmanship it has not engaged in since the Cold War,” wrote Eisenstadt, in a paper entitled, “Not By Sanctions Alone.” And uber-hawks William Kristol and Jamie Fly of the Foreign Policy Institute, a neoconservative think-tank, writing in the hawkish Weekly Standard, exclaimed, “It’s time for Congress to seriously explore an Authorization of Military Force (AUMF) to halt Iran’s nuclear program.”
It’s precisely to head off such critics that the Obama administration has adopted its curious hybrid policy of ‘negotiations-plus-pressure’. And, for the same reason, it’s very unlikely that the Obama administration will make any concessions to Iran in order to win tit-for-tat concessions from Iran in 2012. Better, they calculate, to stall, look tough, and if need be engage in a military buildup in the Persian Gulf now and then.
That U.S. and E.U. sanctions against Iran aren’t likely to force Iran to back down doesn’t mean that Tehran isn’t feeling the pain. Problem is, in order for Ayatollah Ali Khamenei, Iran’s Supreme Leader, to be forced into concessions, he’d have to conclude that the very survival of the clerical regime was threatened by a popular revolt triggered by economic crisis, and there’s no sign that Iran is anywhere close to that. Though the Iranian rial has fallen about 40 percent and oil exports have dropped from 2.5 million barrels a day to about 1.5 mbd, Iran is not on the verge of an internal crisis.
According to the Tehran Times, Iran’s Ambassador to the UN, Mohammad Khazaee, told a press conference in New York on June 30, the day before the new sanctions were scheduled to take effect, that sanctions would only be counterproductive in getting talks to move forward.
“The U.S.A. and some Europeans have said they are going to increase their pressure and sanctions against us,” he said. “This by itself indicates that they are not willing to engage with us in a meaningful dialogue. At the same time it is clear to us that some members of the 5-plus-1, for whatever reasons, obviously and mainly political reasons, are not forthcoming and serious enough for finding a solution. If the talks do not proceed as they should, we are going to have another standoff in the talks. Therefore, we can say that we are at a critical point in our talks with some members of the 5-plus-1.”
He added: “We have learned how to cope with these problems. Sanctions may be intended to harm the Iranian nation but they will not bring Iranian(s) to their knees to accept illegitimate, I should say, expectations from the other side.”
Photo Credit: Via Wikimedia Commons
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Piotr Berman
Sanctions will not work for several reasons.
One is exactly what the article describes: if the importers of Iranian oil do not agree with the current US policy toward Iran, there is really not much US can do. Granting "exemptions" pastes over American (relative) impotence. If American negotiating positions are unreasonable, it will be noticed and treated as such.
The second reason is that oil revenue is not necessary for the economy, and forcing the economy to operate will less oil revenue may be beneficial if done right. Primarily, the country can develop more labor intensive non-oil export and do some import substitution, thus stimulating domestic industries and employment. The outcome can be that consumption will go down (ouch) but employment may go up (good). Iran also cannot use international banking much, bwahaha! As we know, stimulating domestic consumption with loans can lead to collapse. Investing oil revenue abroad can lead to huge losses, basically, wasted oil. Financial autarchy has some benefits of gold standard (not a good idea, but with some common sense elements, as huge tides of electronic money create cycles of speculation and depressions).
Import substitution may have its own pitfalls,
George Archers
USA/EU's plan to get out from the financial mess is by pirating /controlling of middle east oil–all of it. Iran's oil booty is the cherry topping. Snice 1900s middleast has been invaded countless times–for control of it's oil.
WWI WWII –look hard–find both started for sole purpose of controlling middle east oil wealth :^(
Dantes
Sanctions will not work, when a nuclear weapon is within Iran's grasp. If anything, this will embolden them to push ahead. Once they go nuclear then what? Sanctions will be dropped. As for Obama, pretty much everything he does is a ruse or worse, which is why Iran loves to taunt the US so much.
Andrew
This is why the Obama administration cannot be trusted to do what is needed about Iran and why Israel can only rely on itself. When Iran retaliates after an Israeli strike by firing missiles at US bases, its hand will be forced.
Brad
This article severly underplays the effect that the sanctions are having on Iran. Oil production has already been cut by 1/3 because they have nowhere to put the excess and no one to sell it to. They are renaming and repainting their oil tanker to make people think they are new ones when really they are just being used to store extra oil while they sit at the harbor with no orders for the oil the ship holds. Esitmates are that 2/3 of the Iranian commercial fleet is just being used for storage right now and some ships are even starting to loose their crews.
Please tell me how that has "little effect" on the overal economic picutre in Iran.
Mark Thomason
One of Iran's biggest problems internally has been its fantastically expensive subsidy of gasoline. This will allow the government finally to limit that problem. It will eliminate the need to import so much refined product gasoline.
No doubt it is inconvenient, but it is not unmixed with blessing for them. It closes the biggest hole in their budget and the largest problem of their oil industry.
USA
On this earth, ONLY the USA has the ability to co-ordinate effectively its political, diplomatic, military policies like no other nation on the planet. It is a truly an advanced country in most ways!
John Chan
Romans thought the same way too even before its collapse.