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.

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.

The mere possibility of these sanctions has already persuaded three companies (BP, Glencore, and Reliance) to terminate their direct sales of gasoline to Iran. Most banks have rescinded the lines of credit they had previously offered to finance Iran's gasoline deliveries. Some of the insurance and reinsurance companies that underwrite the trade -- including Lloyd's of London -- already have indicated that they will leave the market when the legislation is signed into law.

This legislation would complicate the business dealings of the remaining companies. Like the Iran and Libya Sanctions Act itself, which has persuaded many international companies to reduce or terminate their investments in the Iranian energy sector, including those that could have helped Iran address its domestic refinery problems, this legislation would act as a sword of Damocles hanging over the refined petroleum trade. Even with the president's authority to waive sanctions against any company found in violation of the act, it would remain a useful deterrent for those companies unwilling to risk the ire of Congress.

Iran's energy partners, gasoline suppliers, and insurers have an additional reason to be concerned. In addition to the risk of legislative sanctions -- through either the Iran Sanctions Act or the Iran Refined Petroleum Sanctions Act -- they also should worry that they might be unwittingly involved in a complex supply chain with front companies linked to the Guards.

Iranian government sources indicate that the Guards are deeply involved in Iran's gasoline trade. This is not surprising, given the strategic importance of imported gasoline to the Iranian economy and military, and the opportunity for lucrative profits from a gasoline trade estimated at $6 billion to $9 billion annually.

The efficacy of these energy sanctions has also been plagued by a bipolar debate. Energy sanctions, particularly gasoline sanctions, have been characterized by some as a silver bullet that would cripple the Iranian economy, inflict a mortal wound on the regime, and drive an angry Iranian public to rally around the flag. Others have deplored the sanctions as a pinprick that would cause a mere flesh wound while enriching Chinese and Russian mercantilists at the expense of Europeans and Americans.

Both views are wrong: Energy sanctions are an extension of a comprehensive economic warfare strategy designed to weaken the Revolutionary Guards and feed the flames of discontent. Whether through denying the Iranian regime much-needed capital and technology, or curtailing Iran's access to the world's banks, the strategy has shown some success. The regime is despised by many Iranians not only for its human rights abuses but also because of the disastrous state of the economy.

Despite the regime's attempts to blame the sanctions policies of the United States for these economic problems, many, if not most, Iranians put the blame squarely on their leaders. For example, in November 2008, a group of 60 Iranian economists criticized President Mahmoud Ahmadinejad for his "tension-inducing" foreign policy that had "scared off foreign investment and inflicted heavy damage on the economy." The economists said the current sanctions had cost Iran billions of dollars by forcing it to use middlemen for exports and imports. Hooman Majd, who served as an advisor and interpreter for Ahmadinejad in New York, wrote in his 2008 book, The Ayatollah Begs to Differ, that "President Ahmadinejad's promises to alleviate Iran's economic woes were no longer believed, and the style of his foreign policy was viewed as having both exacerbated the economic crunch and contributed to the sense of insecurity, even if it continued to defend a nation's rights."

As Iranians mark the 31st anniversary of the Iranian revolution by taking to the streets Thursday to protest against the brutality and illegitimacy of the clerical regime in Tehran, 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. But both the Obama administration and Congress have an important role to play in achieving this goal; it's not a question of one approach or the other.



Al Qaeda's Six Degrees of Separation

When it comes to the world's most infamous terror organization, who decides who's in, and who's out?

In a taped message last month, Osama bin Laden endorsed the attempted Christmas Day bombing of Northwest Airlines Flight 253 and referred to the bomber, Umar Farouk Abdulmutallab, as "heroic." But even with bin Laden's endorsement, were Abdulmutallab's actions an al Qaeda-directed plot? If so, what was al Qaeda's exact involvement? What, if anything, does an association with al Qaeda mean today?

The term "al Qaeda affiliate" has been lobbed not just at Abdulmutallab -- who was trained in Yemen by al Qaeda in the Arabian Peninsula -- but at almost every individual linked to the terrorist plots that have unfolded in the past year. Tarek Mehanna, a Boston pharmacology student, studied jihad over the Internet and then tried and failed to contact al Qaeda operatives in Iraq; he was termed an al Qaeda affiliate. So too was the dodgy Detroit imam Luqman Ameen Abdullah, who sought to create a separate state ruled by sharia law, but was eventually killed in an FBI shootout before he reached his goal. Najibullah Zazi and his associates, who plotted an attack on New York City, were described as being connected to al Qaeda, as was Nidal Hassan, the Fort Hood shooter.

But these homegrown radicals' trajectories and levels of association with jihadi groups are so different as to make the term "al Qaeda affiliate" meaningless. Neither Mehanna nor Abdullah ever actually met anyone from al Qaeda. Abdullah was radicalized in prison, far away from hot spots in Afghanistan and Yemen. Syrian recruiters rejected Mehanna when he asked for their help in getting to Iraq for training. Zazi comes closest to being associated with al Qaeda, having been in contact with serious terrorist operatives in Pakistan.

More often than not, Islamist extremists assign the term "al Qaeda affiliate" to themselves -- regardless of whether it is true. Upstart terrorist groups, regional insurgents, and radicalized individuals embrace the name to lift their profile and gain cachet in the jihadi community. But it is not a particularly good indicator of their actual relationship to the al Qaeda organization.

Furthermore, terrorism analysts have been too willing to take individuals at their word when they claim an affiliation with al Qaeda. Take Abdulhakim Muhammad, a Tennessee man who is accused of killing a soldier at an Arkansas military recruiting station last June. He proclaimed the murder an act of jihad, saying he was acting on the orders of al Qaeda in the Arabian Peninsula, the same outfit that recruited and dispatched Abdulmutallab. Although Muhammad did spend time in Yemen, his own father calls his claim of being a part of al Qaeda "make-believe."

Terrorism analysts have not been rigorous enough in their application of labels and definitions -- partly for good reason. In the past eight years, since bin Laden went into hiding, the jihadi landscape has become increasingly fractured. The world of global jihad is so fluid and dispersed that it is almost impossible to capture the true extent of anyone's connection with al Qaeda. Thus they've come to depend on this catchall phrase "al Qaeda affiliate" as a descriptive.

But the term has been abused, used so often as to render it useless. Media outlets and terrorism analysts should view each "al Qaeda associate" skeptically, rather than at his own word or even the word of bin Laden and other high-level al Qaeda officials.

In the coming years, more and more independent terrorists will claim al Qaeda connections, and it will be more and more important to sort out what those connections really mean. High-level members of al Qaeda have been so effectively targeted that al Qaeda has ceded much control to its affiliates. In many cases, it exerts no strategic leadership, let alone operational control, over so-called "al Qaeda plots." As U.S. Defense Secretary Robert Gates recently stated, al Qaeda is now operating within a "syndicate of terrorist operators." According to Gates, "What we see is that the success of any one of these groups leads to new capabilities and a new reputation for all."

As terrorist groups vie with each other for power, prestige, and influence, old stalwarts such as bin Laden will see their reputations diminish accordingly. Terrorists previously quick to claim a connection to al Qaeda might, in fact, no longer need to legitimize themselves by drawing on the organization's bona fides.

We have already seen the beginnings of this shift. Bin Laden is now quicker to claim the works of others as his own. As Middle East analyst Juan Cole recently noted, bin Laden's recent statement claiming credit for the Christmas Day bomb plot was not posted on any of the jihadi websites that traditionally carry al Qaeda missives. According to Cole, "even the jihadis know that this thing is likely a fraud.... If it is Bin Laden [whose voice is heard on the audio tape], it is a pitiful Bin Laden trying to stay relevant by grandstanding and stealing others' thunder."

Both Westerners and jihadi sympathizers have grown accustomed to thinking of bin Laden as the terrorist par excellence and of al Qaeda as the organizational center of his movement. As we struggle to understand the shifting political landscape of the jihadi movement, this intellectual framework may no longer help us explain the threats we face. We must begin preparing ourselves for a world where new organizations form the center of the jihadi world, while new sympathizers on the outside look for a way in.

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