News : Sanctions
- Published: Wednesday, 28 January 2015
By INU staaff
INU- As CNN reported on Tuesday, Robert Menendez and some of his fellow Democratic senators agreed to halt their push for a bill that would outline sanctions to be triggered by the failure to reach a final agreement ion negotiations over Iran’s nuclear program. The change of tack comes amidst the Obama administration’s insistence that such legislation would destroy any change of a diplomatic solution, and it puts an end to Republican legislators’ hopes that they would be able to override the promised presidential veto of that bill.
Menendez announced his apparent change of heart in a Senate Banking Committee hearing, wherein he and other congressmen questioned Deputy Secretary of State Anthony Blinken and other senior Obama administration officials over the current status of negotiations and Iran’s nuclear program. In prepared remarks at the hearing, published on the State Department website, Blinken explained the administration’s opposition to the Nuclear Free Iran Act by saying that the announcement of new sanctions would drive Iran away from the talks and would not even be necessary because the existing sanctions regime is already having an adverse impact on the Iranian economy.
“Virtually the entire sanctions architecture remains in place,” Blinken said. “Indeed, throughout the existence of the JPOA [the interim agreement governing negotiations between Iran and six world powers], sanctions pressure on Iran has not decreased – it has increased.” He added that the announcement of new sanctions at this point is unnecessary because in the event that Iran fails to compromise to formulate a deal or in the event that it is caught cheating on a deal, the president could work with Congress to “impose additional measures in a matter of hours.”
Supporters of the Nuclear Free Iran Act have previously responded to the latter argument by saying that the bill is nonetheless necessary to exert more pressure on Iran by making it clear that the US is serious about the talks and that there would be immediate, damning consequences for Iran’s refusal to cooperate. Furthermore, Blinken’s notion of the current effectiveness of sanctions is disputed by other credible authorities. In their view, the announcement of triggered sanctions is the very least that US policymakers can do to realistically expect a final agreement.
In an editorial published on Tuesday in the National Interest, Mark Dubowitz and Jonathan Schanzer argue that the current modest sanctions pressure on Iran has actually diminished the impact of other pressures on the nation’s economy. Specifically, the recent 60 percent drop in the global price of oil has been widely cited as a reason why Iran would be likely to compromise amidst current conditions in order to receive large scale sanctions relief from the US and its allies.
But Dubowitz and Schanzer that because Iran’s access to its oil export earnings is limited by sanctions, the government has learned how to balance its finances in absence of those funds. Meanwhile, sanctions relief under the JPOA has allowed Iran to obtain 700 million dollars per month of oil revenues that have already been held in escrow, putting the nation on track to receiving a total 12 billion dollars’ worth of relief by the anticipated end of talks on June 30. Last week, Washington Examiner reported this figure as 20 billion dollars.
All of this comes, according to Dubowitz and Schanzer, at a time when Iran’s overall economy is becoming somewhat more stable. “If economic leverage has any chance of bending Khamenei’s nuclear will towards compromise,” they conclude, “it will take crippling sanctions, not just falling oil prices, to once again reanimate the fear the regime felt in 2012 and 2013 when it narrowly escaped potential economic collapse.”
Al Monitor adds that the JPOA has further blunted the effects of falling oil prices by lifting sanctions on Iran’s petrochemical and manufacturing sectors, thus opening them up as alternatives sources for some of the oil revenue that currently accounts for 50 percent of the national budget. However, Al Monitor adds the caveat that the viability of these alternatives is not assured. “Most of these industries have already been operating below their full output capacity due to the shortage in required feedstock,” the article says, adding that another challenging requirement is the attraction of foreign investment to kick-start these industries.
This helps to explain the motives behind Iran’s start of fundraising on Tuesday for its first index exchange-traded fund, which constitutes a bet by some domestic investors on the increase of foreign investment demand in coming months. If the bet proves correct, it may help to reverse the recent decline in the value of the Iranian stock market – a decrease of 21 percent during the year 2014. But this is very much in doubt, and would be more so in the face of serious threats of new US-led economic sanctions and financial penalties.
Critics of the current Western approach to dealing with Iran’s nuclear program have frequently expressed worry that a seemingly conciliatory tone may be decreasing international support for the current sanctions regime. However, a report published Monday by US News and World suggests that some of the evidence for this may have been manufactured by Iran as part of a propaganda campaign to oversell the viability of foreign investment in the country.
The report finds that some Europe-based joint ventures announced in Iranian media appear to have been invented outright, being supported by vague references to persons who aren’t affiliated with specific businesses and cannot be found in relevant commercial registries.
Signaling that Iran may secretly agree that significant European investment is actually rather unlikely, Business Insider reported on Tuesday that Iran appears to be taking serious steps away from using the US dollar as is customary in most foreign trade transactions. This possibility has been warned of by economic analysts in the past, with reference not only to Iran but also to other Asian countries, as specifically other rivals of the West such as Russia and China.
Iranian Central Bank Deputy Governor Gholami Kamyab claims that Iran is now exchanging its own currency for those of these and other countries. Business Insider suggests that this may be one small part of a larger trend toward strong economic, diplomatic, and military ties within an anti-Western Asian bloc. This highlights some of the possible threats that some opponents of the Iranian regime see as existing in addition to the threat of Iran’s nuclear progress. And this in turn contributes to the justification for maintaining strong pressure on the regime, contrary to Tuesday’s announcement that Congress is letting up somewhat.
An article published Tuesday in the Jerusalem Post argues that the feared consequences of letting up pressure are somewhat overblown because “at this stage, it doesn't appear that Washington is showing signs of capitulating” in nuclear talks. But the article also adds that the main obstacle to progress in those talks comes from Iranian Supreme Leader Ali Khamenei, whose well-known intransigence must soften for compromise to be possible.
That intransigence contributes to the perception that Iran is still pursuing progress in its nuclear program – a perception that is shared even by the Obama administration, according to the Washington Free Beacon’s report upon testimony in the Senate Banking Committee hearing in which Democratic support for the Nuclear Free Iran Act was partially withdrawn.
In response to questioning by Senator Richard Shelby, Deputy Secretary Blinken acknowledged that “there’s no doubt Iran is seeking to continue other [work on] centrifuges,” and that they are tinkering with centrifuges and attempting to build new ones. In his prepared remarks, Blinken also pointed out that there are four potential pathways to a nuclear weapon that Iran could pursue – uranium pathways at the Natanz and Fordow sites, a plutonium pathway at the Arak site, and “a potential covert pathway.”
But such a covert pathway may exist at multiple sites, including in Syria, where Iran is reported to be contributing to the building of nuclear facilities. This may suggest that the State Department is under-selling the current danger, as well as the current effectiveness of the sanctions regime. The Free Beacon contributes to this perception by reporting that “Iran has also enriched enough uranium to fuel two nuclear bombs in the past year, according to experts.”
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