The Sanctions on Iran Are Working

Ignore the false debate in Washington over which measures to pressure the Islamic Republic are the "smart" ones. Tehran is already feeling the heat.

BY MARK DUBOWITZ | FEBRUARY 10, 2010

After months of fruitless efforts to engage the regime in Tehran, and a raging Washington debate about "targeted" versus "broad-based" sanctions, or "smart sanctions" vs. "crippling sanctions," Barack Obama's administration has finally moved to punish Iran for failing to come clean about its suspicious nuclear program. The U.S. Treasury Department announced Wednesday that it has designated the four subsidiaries of a major engineering and construction firm, as well as the firm's commander, Islamic Revolutionary Guard Corps (IRGC) Gen. Rostam Qasemi.

So it seems the Obama administration is carrying out its threat to target Iran's leaders, but not enact broad sanctions on the country that could harm its population, right?

Not so fast. The firm in question, Gharargah Sazandegi-ye Khatam al-Anbia, or Ghorb, which was first designated by the Treasury Department in 2007 because of its role in supporting the proliferation of weapons of mass destruction (WMD) and terrorism, is a major player in the Iranian economy, including in its energy sector. In 2006, Ghorb received more than $7 billion in contracts including, as reported by International Oil Daily, a $2 billion contract to oversee the development of the South Pars gas project and a $1.3 billion no-bid contract for a gas pipeline running from a Persian Gulf port near South Pars to the border with Pakistan.

These designations will give further pause to the international companies partnering with Ghorb and its affiliates, including in the energy sector, now that the Treasury Department has put them on notice that their business, in the words of sanctions chief Stuart Levey, "ultimately benefits the IRGC and its dangerous activities."

Treasury relies on these "smart sanctions" that focus on actors engaged in dangerous or illicit activity that violates international law norms. Since 2006, under Levey's guidance, it has designated more than 40 Iranian entities involved in supporting the regime's WMD-related and terrorist activities, including state-owned banks.

The more than 80 foreign financial institutions that terminated or reduced their business with Iran over the past three years were not legally bound to comply with U.S. sanctions. But after Treasury revealed Iran's extensive use of deceptive financial practices and front companies, foreign bankers did so anyway. The benefits of their Iranian business were outweighed by the costs of being linked to bad actors, as well as the real risk of losing access to U.S. financial markets.

Treasury's move against Ghorb and its subsidiaries is a good start. To have any meaningful impact on the activities of the Revolutionary Guards, targeted sanctions must focus on the Guards' leaders and other front companies active in Iran's energy sector, which is the lifeblood of the regime. Oil alone provides about 80 percent of Iran's export earnings and half of government revenue. Given the dominance of the Revolutionary Guards in the country's energy sector, Asian and European companies might find it difficult, as a result of Treasury's actions, to do business in the energy sector without transacting with designated entities.

The U.S. Congress also is moving aggressively against Iran's energy sector and the Revolutionary Guards by targeting what some have called Iran's economic "Achilles' heel" -- the regime's need to import, by some estimates, between 30 to 40 percent of its gasoline from foreign companies. In December, the House of Representatives passed the Iran Refined Petroleum Sanctions Act by a 412-12 vote; in January, the Senate unanimously passed an even more comprehensive companion bill. The two bills now go to conference committee, where they will be reconciled for a final vote and sent to Obama for his approval.

The legislation would extend the 1996 Iran and Libya Sanctions Act to provide the president with the authority to sanction foreign companies involved in selling refined petroleum to Iran or helping Iran improve its domestic refinery capacity. The House version of the legislation also would require the administration to report to Congress every six months on international companies doing business with the Revolutionary Guards and their affiliates involved in this trade.

ATTA KENARE/AFP/Getty Images

 

Mark Dubowitz is executive director of the Foundation for Defense of Democracies and director of its Iran Energy Project.

ANTIMKO

6:52 PM ET

February 10, 2010

You say: "... they will be

You say:

"... they will be once again facing off against the Revolutionary Guards. In the end, "smart" sanctions are those that can cripple the Iranian energy sector -- the lifeblood of the men who rule Iran."

crippling Iranian energy sector also threatens the average Iranian. While the guards can do buisiness with the Chinese or in the black market easily, the average Iranian will have to rely on the guards even further to make ends meet. And how do you expect them to come out and protest when they dont have food on their tables? Or when they lose their jobs to another man willing to obey the laws of the land?

This article is nothing but wishful thinking and full of Idiotic policies.

 

NOAHCHESTNUT

8:16 PM ET

February 10, 2010

It is wishful thinking to remain idle

Re: Ordinary people will suffer more

Assuming sanctions were not enacted against the IRGC, "the average Iranian will [still] have to rely on the guards even further to make ends meet" in the status quo. Announcing today's sanctions, Stuart Levy noted that, "the IRGC [is] consolidat[ing] control over broad swaths of the Iranian economy, displacing ordinary Iranian businessmen in favor of a select group of insiders." It is a common and situationally accurate criticism to protest sanctions because they risk hurting those they are designed to help. Relying on this generic criticism in this instance dangerously ignores the IRGC's aggressive and ruthless drive to expand their economic and political reach.

If sanctions are not the answer, then what action should be taken?

Re: China/ nation will conduct business with the IRGC

From a practical perspective, it is not clear that China has the refining capacity to meet's Iran's needs. Furthermore, well designed comprehensive sanctions will make it difficult for any nation to get the necessary insurance to cover shipping petroleum to Iran. This is an argument for designing better sanctions.

From a moral perspective, this argument is bankrupt. Why even help the green movement knowing that it may cause the regime to violently crack-down? It is necessary to evaluate risk, but we are at a juncture where the regime's behavior must no longer be tolerated. If, after sanctions, China decides to become further involved with the Iranian regime, then they are opening themselves up to international scrutiny and possible punishment. Two things the PRC wants to avoid. This is also something that should be addressed when the problem arises.

-Noah Chestnut
Foundation for Defense of Democracies

 

JOHNM

4:31 AM ET

February 11, 2010

Moral bankruptcy & Foundation for Defense of Democracies

It seems the only reason Mark Dubowitz/Noah Chesnut favor unilateral US sanctions on Iran is because they agree with Treasury's Stuart Levey, who says "the IRGC [is] consolidat[ing] control over broad swaths of the Iranian economy, displacing ordinary Iranian businessmen in favor of a select group of insiders."
Why it's anyone's business outside Iran how Iran decides to organize its political economy is unclear.
Iran's alleged engagement in "dangerous or illicit activity that violates international law norms," which includes support for "WMD-related and terrorist activities" cannot be a reason, at least not a serious one, because these are allegations for which Treasury has not made public any supporting evidence. Without evidence, it's just ad hominem. Without some further clarification from these two defenders of democracy, I hesitate -- but only slightly -- to say that ad hominem is enough for them to urge pressing forward with sanctions (financial and energy).
One other possible reason is that D/C simply like Treasury-style sanctions, which are based on threatening companies that do business with Iran either with denied access to the US market or an international smear campaign. These sanctions only work because non-Iranian actors want to avoid the punishing hand of Washington. But this is just an exercise in raw power. It has nothing to do with principle or moral action.
Lastly, D/C don't mind mixing in a little false empathy for Iranians. So let's clarify: Dubowitz likes "energy sanctions" because they "are an extension of a comprehensive economic warfare strategy designed" in part to "feed the flames of discontent" in the only way possible: increasing the suffering of the Iranian people. As for the impact of energy sanctions on the Revolutionary Guards, see my "Why it's anyone's business" comment above.
Chestnut charges a commenter with moral bankruptcy. Perhaps the shoe fits elsewhere.

 

NOAHCHESTNUT

9:24 AM ET

February 11, 2010

Some further reading

The Foundation for Defense of Democracies' research on Iran's energy sector and the role of sanctions has been ongoing for years. I recommend reading going to IranEnergyProject.org for more information and in particular, please read the Iran Energy Monitors for our most up to date research.

For recent scholarship by the Foundation for Defense of Democracies, please consider reading the following:

"Iran, Beacon of Liberty?" by Reuel Marc Gerecht, New York Times, 2/11/2010
"Iran's Unhappy Anniversary," by Clifford D. May, Scripps Howard News Service, 2/11/2010
"Terror Finance and the Transatlantic Relationship," by Jonathan Schanzer, The Henry Jackson Society, 2/10/2010

As to why it is anyone's business to get involved, I'll quote Reuel Marc Gerect from today's New York Times:

"In the Middle East, the Iranian Revolution catapulted Islamic fundamentalism into the foreground. An Iranian democratization couldn’t help but shake Sunni fundamentalists who, too, have wrestled with the tension between the Holy Law and voting. Sunni Arabs often like to pretend that they live in a different world from their Shiite Iranian cousins, but the truth is the opposite: cross-fertilization has been enormous. With Iranian democracy growing, liberal Arabs and Sunni Islamists would become much bolder in their demands.

Iran’s transformation would also remind Turkey’s ruling Islamist Justice and Development Party, whose commitment to democratic values has been increasingly shaky, that an authoritarian path creates revolt. And an Iranian democracy would powerfully affect Iraq, whose elected government has struggled with its own Tehran-backed demons. A democratic Iran would have little sympathy for Iraqis who prefer autocracy and religious militancy.

A democratic Tehran would also likely reduce its aid to Hezbollah in Lebanon and the Baathist dictatorship in Syria. Palestinian fundamentalists who now receive substantial Iranian financing would also likely be a subject of heavy debate in a free Parliament, as would aid to other radical Sunni groups throughout the Middle East and Tehran’s disconcerting contacts with Al Qaeda (which were detailed by the 9/11 commission report). Iran could easily become what Ayatollah Khomeini had wished — the model that transforms the Middle East — albeit not in the manner he hoped for."

 

ALIMOSTOFI

5:55 AM ET

February 11, 2010

China and Wal-Mart

Actually there is a much easier way to cripple the mullahs. The answer is right at the US's doorstep. Tell companies like Wal-Mart, and HSBC, "make a choice, deal with China who get almost free oil that provides the energy for Wal-Mart's suppliers in China.

The arguments we get are, "oh but no one can argue with the Chinese, because they own all those US Bonds", which is nonsense. If the US wants to, they can tell Wal-Mart to make a choice.

 

NOAHCHESTNUT

9:26 AM ET

February 11, 2010

An interesting point

Would you recommend a book, article or website for where I can learn more about this idea? Thank you.

 

FREETRADER

3:51 AM ET

February 12, 2010

Well,

What you are suggesting is that we wage economic war on Wal-Mart indirectly by forcing US business to not deal with China. That means declaring economic war on China. The issue is not the bonds, which are China's problem, not the US's, but the question of whether you really want to destroy America's most important economic relationship over a third country. And do you really think that HSCB, which, by the way, stands for the "Honkong and Shanghai Banking Corporation" and which is headquartered in Hong Kong, is going to get out of China to please the US government? I don't think you've really thought this one through.

 

DUTCH JUSTICE

5:03 AM ET

February 12, 2010

really...

The bonds are China's problem? How exactly? Do tell.

 

FREETRADER

4:07 AM ET

February 13, 2010

The bonds certainly aren't a

problem for the US. The US government owes the holders the money, payable at a fixed rate, in dollars that can be made to depreciate (which is one reason the PRC clings so desperately to its currency peg; the other reason is to artificially improve its competitiveness). They can depreciate the currency either by the US printing money or by the PRC letting its currency float to a market rate. The PRC can't unload the bonds, so is dependent on the 'faith and credit' of the US government. It is the flip side of the currency peg, and is the price China has implicitly agreed to pay for its underpricing of its own currency. All well and good, but as has been said, if you owe the bank $1 million, the bank owns you, if you owe the bank $1 Billion, you own the bank.

 

ALIMOSTOFI

9:36 AM ET

February 11, 2010

Sorry

But I sort of connected the dots myself years ago.

 

ALEXANDER SYNGE

1:10 PM ET

February 11, 2010

false friends

I opened the link to the article and expected to find 90 billion reasons why nobody should attack Iran. What I got, however, reads more like a sporting column, and a shoddily written one at that.
Anyway. who sad you can’t apply sanctions to a country AND attack it or indeed BEFORE you attack it? I don’t know why, but Japan comes to mind.
The header itself is a real giveaway. If sanctions are working, logically, there must be a villain to this piece (no guessing who…), and indeed that is the baseline message. It says Iran is, or intends to, violate NPT.
Consider this quote from “Iran's Nuclear Program” by Muhammad Sahimi (readily available in Internet, published in Payvand):
“If Iran has violated certain aspects of the Safeguards Agreement by not reporting to the IAEA what it has been doing (which is still a matter of debate), it has not been the LONE violator. (…) the IAEA has reported that South Korea, Taiwan, and Egypt have, at various times, violated the provisions of the NPT by secretly engaging in experiments on uranium enrichment AND EVEN BOMB MAKING. Brazil (…) refused, for a long time, granting permission to the IAEA to visit and inspect its uranium enrichment facilities under construction. Where is the international outcry over these violations?” (my emphasis)

There have been spats between Iran and the IAEA, of course, but remember, spats don’t automatically translate into violations on Iran’s part, nor need we presume the IAEA is always right.

Consider the following instance, provided again by Sahimi:
“On Friday September 12, 2003, the 35-member governing board of the IAEA gave Iran an ultimatum until October 31 to prove that her nuclear program is strictly for peaceful purposes, by providing all the details of her nuclear program. Iran's reaction was mixed: On one hand, she reacted with indignation, calling the ultimatum "premature" and "unfair," while stating, on the other hand, that she will continue working with the IAEA. It should be pointed out that even Ms. Melissa Fleming, the spokeswoman for the IAEA, conceded that the ultimatum was "highly unusual" in that it was adopted WITHOUT A VOTE.” (Sahimi’s emphasis).
The author therefore concludes, “ (…) much of the dispute with the IAEA is political, rather than scientific or technological.” To cap it all, Iran has to prove a negative, and proving negatives is a tiring business for anybody. No, no. No due process here!
Just two thinks before I sign off: 1) the game looks like trying to get Iran to opt out of NPT and expose itself to any accusation under the sun (Powell docet). 2) We’re taking about sanctions actually “working”, are we!? Am I supposed to be greatly relieved and thankful to the author of this article for his valuable information? The fact is, I have yet to learn of even one unequivocal violation of NPT on Iran’s part - and I would have (as would we all) had this actually been the case. There may be a lot of umming and aahing going on, but that’s the way of the world and absolutely nothing to get excited about.
FP pundit Steve Walt writes that Israel has many false friends. So has peace, FP among them.
The debate needs upping. That’s up to you media folks.

 

ARMCHAIRFIREBRAND

5:41 PM ET

February 11, 2010

Tyranny in Tehran

The Green Movement’s defiant legions remain undaunted in the face of brutal repression. Daily Beast contributor Jason Shams defines the group’s motto as, “Each Iranian is a media outlet.” And they practice what they preach.

As Shams observes, “the computer students are all over the place with their backpacks filled with flash drives and proxy programs, always a step ahead of the bearded dinosaurs and their dying ideologies.”

Moreover, while Americans generally use Facebook and Twitter to pour over the excruciating minutae of modern life, the Greens employ these social networking websites to disseminate information, plan operations and mobilize their organization.

Armed with camera phones, laptops and an iron will, these courageous individuals communicate their message to the world even without the journalists imprisoned by Ahmadinejad’s repressive regime.

Read more @ http://armchairfirebrand.wordpress.com/

 

BLUND

6:03 PM ET

February 11, 2010

abaut abd

i think; the usa cant stop to iran.
sex videolar?

 

DIPLO.MATE

7:27 PM ET

February 11, 2010

Yes, the sanctions are working, but on the Iraninan...

middle/working class pocketbooks and their prospect for keeping their jobs, not on the regime!
Mr. DubowItz's affiliation with an organizations made up of an extremist group of neo-cons, Likudniks and Israel-firsters, that has pushed the US into war in Iraq by using lies, forged documents and pure spin, indicates that the author has no qualms to hurt the Iranian people no matter what. The author and the treacherous clique he belongs to have used sanctions and wars of choice to kill as many Iraqis they can, loot their resources and now they are after the Iranian people's country and resources.
Just like the sanctions advocate and pushed by the gangs like the one Mr. Dubowltz belongs to cause the death and economic misery for numerous Iraqi kids and other civilians while Saddam and his cronies made millions, these sanctions will hurt the Iranian middle/working class in the pocketbook while leaving the regime bigwigs to enrich themselves.
Sanctions will cause price hikes and unemployment among the people who are engaged in a serious uprising against the Iranian regime. At the same time, the sanctions will provide perfect excuses for the regime to blame the US and the West for bringing unemployment and misery to the people. As the result the Iranian people will have no choice other than looking to the regime to help them feed their families.
The American people have been deceived by the likes of Mr. DubowItz before, their sons and daughters have perished in Iraq and now Afghanistan for very little positive results; the US national interests have be sacrificed for the hegemonic interests of the Israeli Apartheid regime for nothing and this clique seems to be working on pushing the US towards another war slowly but surely.
These traitors must be exposed and stopped before it is too late.

 

FREETRADER

3:55 AM ET

February 12, 2010

Hey Diplo.mate...

How's it going over there at the Iranian Governmental News Agency? Do you enjoy your work? I must say, this is a more sophisticated technique than simply shouting "Death to America!"

 

JOEY BATZ

5:29 AM ET

February 12, 2010

With all due respect to the

With all due respect to the two individuals from the Foundation for Defense of Democracies, I see nothing in the article nor in Noah Chestnut's comments that gives me any comfort whatsoever.

They both are so willing to support sanctions, and the argument seems to be centered over whether or not sanctions will work and what types of sanctions should we use. But neither answers the question of why we should even put sanctions on Iran, or interfere with that part of the Middle East.

Iran has never attacked nor threatened the United States. Sure, it's threatened to retaliate if attacked by the United States, but that is completely different from threatening to launch a first strike (in fact, retaliation or defense from foreign attack is the rightful responsibility of any government). Have they attacked US soldiers in Iraq? I'm sure they have, but remember that Iran and the USA have been enemies for half a century. America has troops in Iraq and Afghanistan, both of which border Iran. Iran probably--and probably rightfully--sees those American troops as a threat to its national security (our constant threats and presidential candidate John McCain's "Bomb Iran" song probably didn't help much). As for the threat of an Iranian nuclear bomb, the 2007 US National Intelligence Estimate found that Iran gave up its nuclear weapons program in 2003 and has since showed no signs pursuing a new one. Ignoring such intelligence is no different than the Bush Administration ignoring intelligence suggesting that Iraq didn't have WMDs before the Iraq War. And even if Iran did get a nuke, why wouldn't deterrence work like it did with the Soviet Union for half a century?

So why must we go after Iran? To protect Israel? A country with the highest military spending and largest (meaning "only") nuclear arsenal in the Middle East? Israel should be responsible for its own defense (as if it would ever come to ours). Putting our country between Iran and Israel only makes us a target for those who would otherwise not wish to do us harm. American citizens should not be put at risk to defend Israel or any other foreign nation.

The individuals from the FDD do not seem to realize that sanctions are considered an act of war, and yet are applied to other countries so casually by our government.. Actually, the author of the article does seem to realize it:

"Energy sanctions are an extension of a comprehensive economic warfare strategy designed to weaken the Revolutionary Guards and feed the flames of discontent."

The scary part is he sees this as a GOOD thing. Mr. Chestnut also champions "Iranian democratization", which is simply a positive-sounding euphemism for "war" (and I seriously doubt either men lack the intelligence to realize this). Their belief is that for the "crimes" of the Iranian government--and the Iranian government has certainly committed crimes, but against their own people rather than the United States--we should punish and inflict suffering upon the Iranian people! This is the same mentality Al Qaeda terrorists have when attacking American civilians in retaliation for our foreign policy! Perhaps we should go all the way, adopting the Saudi legal system and punishing rape victims for their own rapes!

The very notion that the Obama Administration should engage in sanctions that punish innocent people abroad is more than just foolish; it is immoral and unethical.

It is also dangerous for the American people. The author states that the Iranian people wouldn't rally around the flag, but rather target the current regime. That's quite the assumption. The "rally 'round the flag" concept has been observed numerous times throughout the history to the point where it's one of the first things taught in any low-level Political Science course. If the Iranian people's suffering is coming from an outside source (namely America), to think that they wouldn't direct their anger and hate towards that source is foolish. But even if the flames of discontent are fed, the idea that they would suddenly open their arms to America is even more foolish. Even disregarding the history of US-Iranian relations (including deposing a democratically elected leader, supporting the dictator Shah, and supporting Saddam Hussein during the Iraq-Iran War, all of which many Iranians certainly remember quite vividly), the fact is that any action taken by the United States against Iran will drive the Iranian people to resent and hate the US more, if it doesn't completely drive the populace to support the current regime. Sowing the seeds of hatred can be dangerous, as we saw on 9/11.

In short, economic sanctions are a bad idea. Sure they feed the flames of discontent, but those people will hate America as much as their current regime. There is also no reason for us to conduct any type of warfare.against Iran (and indeed Article 2 Section 2 of the Constitution requires Congress to declare war before such warfare begins. Perhaps these two individuals would like to rethink their support for sanctions, if only for the sake of support the rule of law and the Constitution which is the highest law of the land). This is a country that has never attacked nor threatened the United States nor is in any place to do so. The fact that the regime is oppressive matters not.

Perhaps the two gentlemen from FDD ought to rethink their unbridled support for endless war in the Middle East. Perhaps peace with these countries would better serve our interests. Mr. Chestnut writes:

"If sanctions are not the answer, then what action should be taken?"

The answer is to keep the American government out of Iran and the Middle East. Let individuals, investors, and businesses engage peacefully with their people in a free market environment.

 

JOEY BATZ

5:37 AM ET

February 12, 2010

Freetrader: 1) What's wrong

Freetrader:

1) What's wrong with what Diplomate posted? Most of it is correct. Why don't you respond by refuting the evidence instead of taunting? Speaking of refuting evidence:

2) HSBC is a British bank, not a Chinese one. It's headquarters are in London and they do business all over the world.

 

FREETRADER

4:01 AM ET

February 13, 2010

Joey,

2.) HSBC was founded in Hong Kong and recently moved its HQ back there. It is deeply embedded in China both historically and currently, and its only US operations are loss making; so politely asking it to put itself out of business to help out the US government is a pretty silly idea.

1.) Diplomate's only rational argument is the one that posits that putting sanctions on Iran will hurt the middle class more than the government. Of course, the same argument was made about sanctions on South Africa, and more dramatically, one could make that argument about the citizens of any rouge state -- from North Korea to Nazi Germany, so in sum, it is a poor argument.

The rest of Diplomate's rant is pretty much beneath contempt and does, indeed, read like a press release from the Abamenidjad camp. I was being facetious about that, but again, you never know. "Punish the criminals" indeed.

 

KENNETH SORENSEN

9:52 AM ET

February 12, 2010

ATTENTION ALL : Dubowitz is part of The Israel Lobby

A quick look at the website of his organization will show you that is a front company in the war against Israels enemies, being waged on American ground. You will on the frontpage of that website find references to some of the most ardent neo-conservatives like Michael Ledeen and Reuel Marc Gerecht .
He also quotes the "Under Secretary for Terrorism and Financial Intelligence
"r Stuart Levey, who from his Washington office conducts his own undeclared war against Iran. Both are American citizens acting for a foreign government (Israel) - something that is illegal according to the US Constitutions. Anf they do it so srewdl as to try to convince Americans that their interests are the same as Israels.

Burt a brief look (CLICK) at this article , will tell you that the ones that Levey targets -- "Palestinian extremists.", Hezbollah, Iranian banks, [ and his personal idea:International banks that deal with Iran (he has personally met with 5 dozen] and now Iran's Republican Guard -- are jexactly the same as Israel has an interest in targetting.

 

DALEGIVENS

5:23 AM ET

March 8, 2010

The ourpose...

HSBC was founded in Hong Kong by the Scots and moved its registered office to London. It is British, I should know I worked for them.

Anyway back to sanctions - what is our desired outcome. If we focused on that and the problems we are trying to address, rather than the process we might start to develop a better plan and bring our allies with us.