More pressure on Iran in the works

Article by Elise Labott.


It appears the international community will usher in the new year with new pressure points in the campaign against Iran’s developing nuclear program.

Both the United States and the European Union are considering going after Iran’s oil profits, which account for more than half of the regime’s revenue, diplomats and U.S. officials said.  Profits from Iranian crude, U.S. officials and diplomats say, have offset the pain of increased American and European sanctions on Iran’s financial sector and are the one thing still allowing Iran to pursue its nuclear ambitions.

The challenge, they say, is how to go after Iran’s oil without causing a spike in worldwide oil prices.

The main target in the approach is Iran’s Central Bank, which countries must deal with to buy petroleum. On Capitol Hill, Congress is pushing legislation that would prevent foreign financial institutions that do business with the Iranian Central Bank in Tehran from operating in or doing business with the United States.

At first, the Obama administration balked at the bill, concerned the measures could drive up oil prices and wreak havoc on jittery world markets. Officials were also mindful the move could backfire by increasing the value of Iranian oil sales, boosting the regime’s coffers and allowing it to continue funding its nuclear program.

But the administration may now be willing to play ball, administration officials tell CNN, after adjustments were made to the legislation to provide President Obama with greater flexibility in implementing the law. Now, foreign central banks would be penalized only if they fail to reduce their purchases of Iranian oil in the face of alternative supplies. The president can also waive the sanctions on the basis of national security. State Department spokeswoman Victoria Nuland said the administration is reviewing the legislation and consulting with Congress.

For its part, the European Union is looking at a ban on Iranian oil imports, an idea which Western diplomats say is gaining momentum.

Diplomats say the EU has generally been willing to take an economic and commercial hit by weaning itself off Iranian oil. The problem, they say, is that some EU members with shaky economies, like Greece, Spain and Italy, import a large share of their crude from Iran.

If implemented, the measure could be devastating to the Iranian regime. Europe, along with South Korea and Japan, account for 50% of Iranian oil exports. Both Japan and South Korea might be persuaded to abandon Iranian oil over concern about how their companies could be affected.

Finding alternate supplies will be key. As one Western diplomat put it, “If you can convince a country to turn away from Iran, the question is how that will affect supply. And there are as many views on this as there are people.”

For now, diplomats say Saudi Arabia remains the alternative supplier of choice. Intense discussions are taking place with Saudi rulers about picking up the slack. Saudi Arabia’s disdain for Iran (remember the famous WikiLeaks cable in which King Abdullah urged the United States to “cut the head off the snake”) gives diplomats confidence Riyadh will step up.  There is also hope that increased production in Libya and Iraq over the next year will help compensate for the loss of Iranian oil.

Dennis Ross, who until recently was Obama’s chief adviser on Iran, said it’s all about timing and trying to keep oil prices stable. The administration, he said, wants to move gradually to avoid a sharp increase in oil prices.

“If you create a spike in the price of oil, they’re still going to be able to benefit because they’re selling oil,” he told an audience Tuesday at the Washington Institute for Near East Policy. “But if you can phase it in in a way that there is a reduction in the amount of oil that they can sell and it doesn’t produce an increase in the prices, then they are suffering even greater pressure and suffering even greater loss.”

In his first post-administration address, Ross said the greatest danger posed by a nuclear Iran would be the increased likelihood of a nuclear war in the Mideast.

Unlike the Cold War, where the United States and the Soviet Union had channels of communication, Ross said the complete lack of communication between Israel and Iran makes the potential for a dangerous miscalculation “enormous.”

“You are not going to have a stable situation where anyone can feel that they are going to wait,” he said. “If there is the slightest indication that Iran is changing its readiness, can Israel wait?”

Ross said that when Obama says he is committed to preventing Iran from going nuclear he means it, just like he made good on his promise to capture or kill Osama bin Laden. And that includes by military means.

“The administration prides itself on a certain reality that it does what it says,” he said, adding that when Obama “says all options remain on the table, it doesn’t mean that force is his first choice, but it means that that’s an option that he intends to exercise.”

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