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U.S. Pushing Harsh New Measures to Isolate Iran

Kenneth R. Timmerman
Thursday, March 22, 2007

 WASHINGTON -- As bargaining continues at the United Nations Security Council over a new sanctions resolution on Iran, top officials from the Treasury and State Departments revealed yesterday that they have won support behind the scenes for even harsher measures intended to isolate Iran and force its leaders to back off from developing nuclear weapons.

 The U.S. has been working with its allies overseas to impose "new targeted sanctions," directed at "individual bad actors," Treasury Undersecretary Stuart Levey told the Senate Banking committee on Wednesday.

 The U.S.-backed measures are aimed at "specific individuals, key members of the [Iranian] government, front companies, and financial institutions," Levey said. "Some require financial institutions to freeze funds and close the accounts of designated actors." Others include "bans on travel or arms transfers."

 Only five of the 19 companies and individuals who have been subjected to these latest Treasury Department sanctions have been included in U.N. Security Council Resolution 1737, enacted in December. But Levey insisted that the lack of UN support for the U.S.-led effort against Iran has not made it less effective.

"I have traveled all over the world, sharing our list of Iran-related designations with foreign government counterparts and private sector representatives," he said. As a result of those talks, the U.S. list has been "incorporated into the compliance systems at major financial institutions worldwide."

 The Iranians have gone to great lengths to conceal their activities. Front companies are used to disguise the purchase of weapons-related materials as benign commercial transactions, he said.

"We have also seen Iranian banks request that other financial institutions take their names off of U.S. dollar transactions when processing them in the international financial system," he said. "This practice is used even by the Central Bank of Iran."

 The new, targeted sanctions the U.S. has devised are aimed at stopping Iran's covert procurement activities, as well as its use of the international financial system to transfer funds to terrorist groups, he said. [Click here to view Levey's prepared testimony]

 But Democrats pressed the administration to do more.

 Banking committee chairman Sen. Chris Dodd, D-Conn., displayed a chart at the hearing identifying investments totaling $126 billion in Iran's oil and gas industry in recent years. Those investments occurred despite U.S. laws intended to prevent them.

 "We've given you very specific tools that allow you to do much more than just ask people to do things," Dodd said. Instead, the U.S. has not invoked the sanctions even once.

 Undersecretary of State Nicholas Burns argued that sanctions such as those contained in the Iran Sanctions Act, which target foreign oil and gas companies, could bring about the collapse of two years of efforts to build an international coalition to increase pressure on Iran. "We want the pressure of the sanctions on Iran itself and not on our allies," he said.

 Burns pointed out that many of the 14 deals cited by Dodd have been put on hold, for fear of U.S. displeasure. Top U.S. officials have been "jawboning Shell, the Chinese, and the Malaysians . . . We've gone to their CEOs and said, ‘this is a bad idea.'" Burns said.

 In the U.N. talks, Burns said the United States was trying to get the Security Council to impose a "specific set of sanctions against the Islamic Revolution Guards Corps (IRGC)," because of its involvement in terrorism and Iran's nuclear weapons program.

 Congressionally-mandated sanctions, such as those contained in new legislation introduced earlier this month by Rep. Tom Lantos, D-Calif., and Ileana Ros-Lehtinen, R-Fla., "might break up our coalition," Burns argued. "We need some help from our allies."

 In 2005, the European Union approved $22 billion in export credit guarantees, to support sales to Iran by European companies, Burns acknowledged. "We'd like to see that come down," he said. [Click here to read Burns' prepared statement. Click here to read testimony from Acting Undersecretary of Commerce for Industry and Security, Mark Foulon]

 Top European companies such as DaimlerChrysler AG, Shell, or TotalFinalElf, continue to do extensive business in Iran. But the threat of U.S. or U.N. sanctions is beginning to have some impact.

In February, DaimlerChrysler announced it would scale back its Iranian-based businesses, which include the assembly of Mercedes Benz E-class vehicles, an interest in a truck plant, and a factory to make truck and bus engines.

 In 2004, DaimlerChyrsler sold through a Saudi affiliate 270 Mercedes Benz commercial vehicles to Iran in a $22 million contract. Those vehicles have since been used by law enforcement authorities in Iran for riot control. A German prosecutor in Stuttgart opened an investigation into the sale.

 A number of U.S. companies continue to do business in Iran through overseas subsidiaries.

 Under the U.S. trade embargo on Iran, it is illegal for U.S. companies to trade directly with Iran. Earlier this month, the Treasury Department fined two U.S. firms for violating the trade embargo.

 Guidant Corporation of Indianapolis, Ind., agreed to pay $277,017 for selling medical equipment to Iran through third countries, while Varian, Inc. of Palo Alto, Calif., paid $114,958 to settle allegations of embargo-busting stemming from sales of U.S.-origin software.

Both companies voluntarily disclosed their activities, a Treasury Department statement said.

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