Date: Wed Dec 17 2008 - 21:42:27 EST
Overhauling the Iran Sanctions Act
Peter Doran | 16 Dec 2008
As President-elect Barack Obama's national security team prepares to take
office in January, the Turkish government is readying to outflank the
U.S.'s Iran policy on a vast scale, having signed a milestone agreement in
November to invest $12 billion in Iran's energy sector. The move presents
an immediate conflict between Washington's efforts to contain Iran's
nuclear ambitions and its desire to wean Europe from Russian energy
dependence. As a result, the Obama administration will be forced to choose
between overhauling American efforts to isolate Iran or inviting a sour
demonstration of America's waning influence among close allies.
As part of the announced deal, Turkey will expand Iran's production
capacity and ultimately gain access to 13 billion cubic meters a year of
Iranian natural gas -- enough to cover the current imports of Greece,
Romania and Bulgaria combined. The deal advances Turkish Prime Minister
Recep Erdogan's efforts to transform his country into a vital energy hub
for Europe and sends an alarming signal to Washington: the old diplomatic
tools are not working.
The Turkey-Iran agreement comes at a time when many EU members,
particularly in Central Europe, grow wary of their dependence on Russian
energy imports. This vulnerability became apparent in July 2008, when
Russia halved its oil deliveries to the Czech Republic on the day it signed
a key missile defense agreement with the United States. Unfortunately, most
EU members lack immediate alternatives to Russian energy. This has led
countries like Germany to accept the uncertainty of a devil's bargain with
the Kremlin rather than risk expected gas shortages in the future.
In response, the United States and EU have supported alternatives to
Russia's energy monopoly, with particular interest focusing on the
multinational Nabucco pipeline. On paper, Nabucco could undercut Moscow's
ability to use energy as a weapon by diversifying Europe's supply of
natural gas. To date, however, Nabucco is largely a political pipeline
without the patronage of a high-profile commercial champion or secure
access to upstream supplies.
Despite its strong support for the project, Washington is partly to blame
for this shortfall. Currently, America's Iran policy creates barriers to
that country's vast supplies of natural gas -- the largest outside Russia
-- and stifles commercial efforts to bring this non-Russian gas to Europe.
The Iran Sanctions Act (ISA) directly links foreign investment in Iran's
energy sector with Tehran's ability to support terrorism and WMD
proliferation. While America remains tied to the mast of the ISA, a
resurgent Russia has used the sanctions regime to lock in European
customers and force Central Asian producers to use Kremlin-controlled
pipelines. As a result, the U.S.'s Iran policy has inadvertently
strengthened Russia's leverage over Europe, at a time when the Kremlin is
increasingly in conflict with America's security objectives in the region.
Worse yet, the ISA may not even work. A December 2007 report by the U.S.
Government Accountability Office, for example, noted that the effectiveness
of Iran sanctions was "difficult to determine," since "State, Treasury, and
Commerce officials said that they do not measure the overall impact of [the
Iran] sanctions they implement."
When Turkey signed an earlier energy deal with Iran in 1998, the Clinton
White House declined to impose sanctions against Ankara, on the grounds
that any imported gas would really originate from Turkmenistan. When Turkey
began to import gas directly from Iran in 2001, the Bush White House did
nothing, since the alternative would have been to punish a long-standing
NATO ally for sponsoring terrorism and WMD proliferation in Iran, as
required under law.
Thus, policy-makers in Washington have given the State Department the worst
of all the possible tools -- a muddled policy -- with which it might
discourage allies from engaging Iran on energy. If this approach fails, as
in the case of Turkey, Washington lacks an effective alternative in its
diplomatic arsenal with which to dissuade them. This sends dangerously
conflicting signals to allies, limits incentives for them to bandwagon with
America, and undermines Europe's attempts to lighten the Russian energy
The Obama administration has a unique political moment in which to push
through an ambitious overhaul of the well-intentioned ISA. If that fails,
it can still issue waivers to the ISA on a case-by-case basis, which would
allow European allies access to a massive reserve of non-Russian gas in
Iran, invite a parade of commercial champions to Nabucco and offer Central
Asian gas producers an alternative to Moscow's transport monopoly -- all
steps needed to diversify Europe's supply of energy away from Russian
A revision or repeal of the ISA also offers the new administration an
attractive incentive to offer Iran in exchange for a breakthrough on
nuclear nonproliferation. However, in order for the new president to
approach engagement with Tehran from a position of strength, the offer must
include tough penalties for inaction. Practical options include a more
robust ban on Iran's international banking transactions, a broader freeze
on its foreign financial assets, expanded limits on foreign travel for
state officials, and a sweeping ban on international insurance for
Iranian-owned or contracted tankers.
The net effect of these measures would dramatically increase Tehran's
transaction costs, severely cripple the regime's ability to convert foreign
currency, and limit its efforts to move money, personnel, or oil tankers
around the globe. Moreover, it would make the ISA overhaul incentive all
the more attractive, particularly if the threat of military intervention
remains on the table.
European support for these measures will be key. In recent years, the
German government, in particular, has been reluctant to pursue multilateral
action against Iran without United Nations' approval. When the incoming
administration meets with German officials, it must push for their support
for tougher penalties against Tehran, even if Berlin cannot deliver on
other White House priorities such as an expanded troop commitment in
Clearly, Barack Obama's historic election does not ensure an equally
historic presidency. But by rationalizing the Iran sanctions regime to
allow increased access to Iran's critical energy reserves, the incoming
president has the opportunity get ahead of the Iran dilemma and begin the
restoration of America's global influence. The alternative is to preside
over its hazardous drift.
Peter B. Doran is the lead researcher for energy security at the Center for
European Policy Analysis in Washington, DC.
----[This List to be used for Eritrea Related News Only]----