Nobody believes that United Nations sanctions
will make Iran’s leaders do anything they don’t want to
do. And yet, the step taken by the United States and our allies on
Dec. 23 to impose sanctions on Iran was tremendously significant for
its economic, political and psychological impact.
On the economic front, Iran is extremely vulnerable. While its GDP
has grown to around $180 billion thanks to the spike in oil prices,
this is spread across a growing population of close to 70 million and
comes to just $2,770 per
capita. That puts the Islamic Republic on
a par with Pakistan, Belarus and Albania – a pitiful
performance, especially when compared to Iran’s ranking in the
late 1970s during the final years of the Shah.[1]
Today Iran imports an estimated 43% of all
refined oil products its citizens use, thanks to investment
disincentives and high government subsidies. Forecasts from the
Energy Information Agency, a U.S. government body, suggest that Iran’s
oil exports could decline by half within five years, and cease
altogether by 2015, if the regime doesn’t pump huge amounts of
capital and foreign technology into its ageing oil fields.
That vulnerability creates tremendous potential leverage, and at
least one man in the U.S. government has shown he knows how to use
it.
Since taking office in July, Treasury Secretary Henry Paulson has
been meeting face to face with the chairmen of major international
banks, arguing that they have an interest in making sure the banking
system can’t be used by Iran to fund international terror
groups and WMD programs.
In London, Paris, Rome and at the September
Asian financial conference in
Hanoi,¬ÝPaulson has been briefing his counterparts on the
“deceptive tactics” Iran has employed to exploit the
international financial system for their terrorist ends.
Undersecretary Stuart Levey has been leading Treasury’s
financial intelligence efforts for some time. Since taking office,
Paulson has beefed up Levey’s shop and given him new powers,
which Levey has put to good use.
On September 8, for example, Levey announced¬Ýthat
Treasury was placing new restrictions on so-called “U-Turn
transactions,” that allowed the Iranian government’s Bank
Saderat to use other international banks as covers to fund terrorist
groups worldwide.
Iran has been using Bank Saderat to funnel money to Hezbollah, Hamas,
the PFLP-GC and the Palestinian Islamic Jihad. “For example,
since 2001, a Hizballah-controlled organization received $50 million
directly from Iran through Saderat,” Levey said. “Hizballah
uses Saderat to send money to other terrorist organizations as well.”
Through quiet, back-door cajoling, Paulson, Levey and other Treasury
Department officials have convinced major international banks over
the past year to cut-off new lending to Iran and in some cases scale
back outstanding loans. Credit Suisse First Boston and Switzerland’s
UBS bank announced they would not do any new business with Iran.
Holland’s Holland’s ABN Amro bank and Britain’s
HSBC bank have also said they would scale back their business in
Iran.
While not as dramatic as seizing a ship full of Iranian-made weapons
heading for Palestinian terrorists in Gaza (as Israel did in 2002),
these financial steps represent tangible successes in the war on
terror.
By choking off access to international financial markets, Levey says
that Treasury’s newly-created Office of Terrorism and Financial
Intelligence has actually caused terrorist cells to complain they are
“having difficulty raising money or paying salaries or
benefits.”
In one recent case, Levey said the U.S. has seen “at least one
instance of what we look for most - a terrorist organization
indicating that it cannot pursue sophisticated attacks because it
lacks adequate funding.”
While the impact on Iran’s missile and nuclear programs has yet
to be seen, the quiet pressure from the U.S. Treasury could prove to
be a more effective tool than other, more visible efforts.
On the political front, the UN sanctions – if they are enforced
– will require that Russia and China make a choice between
continued support for Iran and their relationship to the United
States and the West.
China has inked a number of mega oil and natural gas deals with Iran
in recent months that clearly run counter to the Iran Sanctions
Act.
In November, Sinopec signed a $100 billion oil development contract
with Iran (with Shell taking a 20% stake) that the United States has
so far refused to sanction. In early December, Iran announced that
CNOOC had signed a preliminary $16 billion deal to develop natural
gas exports from Iran’s South Pars field. On December 21,
PetroChina announced that it intended to buy large quantities of
liquefied natural gas from in the coming years.
So far, no foreign company has faced U.S. sanctions for investing in
Iran’s oil and gas sector, despite a clear call for such
sanctions in the Iran Sanctions Act. After the Chinese deals were
announced, Tom Lantos (D, CA), the incoming chairman of the House
International Relations committee, said he would hold hearings on the
deals to “examine whether this agreement activates United
States law requiring sanctions against companies involved in Iranian
energy development.” Such hearings are long overdue.
Iran’s leaders are taking the UN sanctions seriously, and are
behaving as if they were under siege.
''From Sunday morning, we will begin activities at Natanz -- the site
of 3,000-centrifuge machines -- and we will drive it with full speed,”
said Ahmadinejad’s top nuclear advisor, Ali Larijani, just one
day after the UN Security council vote. Accelerating the nuclear
program “will be our immediate response to the resolution,'' he
said.
Ahmadinejad also warned that the UN action was compelling Iran to
accelerate its nuclear development program, and hinted that his
regime “will celebrate our atomic achievements in February,”
well ahead of earlier boasts of unveiling a nuclear surprise in late
March 2007.
The United States must press its economic, political, and
psychological advantages on the Iranian regime, and couple them with
concrete measures to undercut the legitimacy of Tehran’s
rulers, if we to have any hope of avoiding a full-scale confrontation
with Iran at a moment of Iran’s choosing.
But we mustn’t have any illusions that sanctions and economic
pressure will motivate the Iranian regime to change its behavior in
the ways that we seek. What these steps will do, however, is increase
the likelihood that Ahmadinejad and his Revolutionary Guards
supporters will make a dramatic miscalculation, and strike out
against us before they are fully prepared, just as Saddam Hussein did
when he invaded Kuwait before his nuclear bomb-makers had completed
their work.
Now is the time for the Bush White House to build the international
coalition it will need to confront Iran when that day arrives.
[1] It baffles me why
the CIA World
Factbook¬Ýcan take these same
figures, and arrive at an estimated¬Ýper capita income
for Iran of $8,400. But then, this is the same CIA that still
believes Iran is 5-10 years away from the bomb.
Click
Here to support
Frontpagemag.com.
Kenneth R. Timmerman is the author of Countdown to Crisis:
the Coming Nuclear Showdown with Iran (Crown Forum, New York),
and Executive Director of the Foundation
for Democracy in Iran.
Original;