Chapter Three: Sanctioning Iran

Abstract

Economic sanctions are becoming increasingly central to shaping strategic outcomes in the twenty-first century. They afford great powers a means by which to seek to influence the behaviour of states, to demonstrate international leadership and to express common values for the benefit of the international community at large. Closer to home, they can also offer a ‘middle way’ for governments that apply them, satisfying moderates and hardliners alike. For some great powers in the multipolar world order, however, they pose a threat to trading relationships. They may also serve as a prelude to military action. With China's international voice growing in prominence and Russia asserting its renewed strength, often in opposition to the use of sanctions, it will be ever more difficult to reach a consensus on their application.

Against this backdrop, knowing what kind of measures to take and in which scenarios they are most likely to work is invaluable. This Adelphi focuses on the different sanctions strategies of the United States, China, Russia, Japan and the EU, with regard to the unfolding nuclear crises in Iran and North Korea. It examines how these measures, designed to marginalise the regimes in both countries and restrict their ability to develop nuclear weapons, have also influenced the sanctioning states’ international partners. As such, they are not just a tool of statecraft: they are potentially an important facet of grand strategy.

Notes

International Atomic Energy Agency, Board of Governors, ‘Implementation of the NPT Safeguards Agreement and Relevant Provisions of Security Council Resolutions 1737 (2006), 1747 (2007), 1803 (2008) and 1835 (2008) in the Islamic Republic of Iran’, 18 February 2009, p.9.

‘Obama Says US Developing New Sanctions for Iran’, CBS News, 9 February 2009.

Michel Comte, ‘EU Sanctions against Iran “Days or Weeks” Away: Finland's FM’, Agence France Presse, 12 February 2009.

Cited in Mark Landler, ‘US Envoys Head Out on a Mission to Rally Iran's Neighbours’, New York Times, 13 February 2009.

Anna Fifield and Daniel Dombey, ‘US Uses Iran Nuclear Report to Push Case for Sanctions’, Financial Times, 19 February 2009.

Robert J. Samuelson, ‘China's “Me First” Doctrine’, Washington Post, 15 February 2009.

David Ignatius, ‘Putting the Squeeze on Iran’, Washington Post, 7 March 2009.

Mark Fitzpatrick, The Iranian Nuclear Crisis: Avoiding Worst-case Outcomes, Adelphi Paper no. 398, (Abingdon: Routledge for the International Institute for Strategic Studies, 2008), p. 14.

United Nations Security Council Resolution 1696, Adopted by the Security Council at its 5500th meeting on 31 July 2006, http://www.un.org/Docs/sc/unsc_resolutions06.htm.

United Nations Security Council, Resolution 1737, Adopted by the Security Council at its 5612th meeting on 23 December 2006, http://www.un.org/Docs/sc/unsc_resolutions06.htm.

United Nations Security Council, Resolution 1747, Adopted by the Security Council at its 5647th meeting on 24 March 2007, http://www.un.org/Docs/sc/unsc_resolutions07.htm.

National Intelligence Council, ‘Iran: Nuclear Intentions and Capabilities’, November 2007, http://www.dni.gov/press_releases/20071203_release.pdf.

United Nations Security Council, Resolution 1803, Adopted by the Security Council at its 5848th Meeting on 3 March 2008, http://www.un.org/Docs/sc/unsc_resolutions08.htm.

The first ‘test case’ for this waiver provision occurred in May 1998, when on ‘national interest’ grounds the Clinton administration waived the application of ILSA sanctions against a French company and its Russian and Malaysian partners who were engaged in a $2bn project to develop the South Pars gas field. In return for Clinton's exercise of this waiver, the EU committed to deepened counterterrorism and counter-proliferation cooperation with the US. For further reading on the history of US sanctions against Iran see O'Sullivan, Shrewd Sanctions: Statecraft and State Sponsors of Terrorism, pp. 45–103.

See Sanger, ‘US Penalizes 6 Asian Firms For Helping Iran Arm Itself’, New York Times, 4 July 2003; and Freda Wan, ‘US Punishes Firms for Iran Missile Exports’, South China Morning Post, 4 April 2004.

The President, ‘Executive Order 13382 – Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters’, Federal Register, vol.70, no.126, 1 July 2005.

Daniel Dombey, Hugh Williamson and Najmeh Bozorgmehr, ‘US Bypasses UN with Iran Sanctions’, Financial Times, 25 October 2007.

Dombey, ‘US Applies Sanctions to Third Iran Bank’, Financial Times, 13 March 2008.

Reuters, ‘Treasury Expands Iran Sanctions’, New York Times, 13 August 2008.

Dombey, ‘US Imposes Fresh Sanctions on Iran’, Financial Times, 11 September 2008.

For further reading see Kenneth Katzman, Iran Sanctions, CRS Report for Congress, Congressional Research Service, Washington DC, 9 July 2009.

Ibid, p. 7.

See Eli Lake, ‘Siemens Risks Losses Due to Iran ties; Los Angeles to Vote on Transit Contracts’, Washington Times, 17 July 2009.

‘Money Talks against Terrorism; States Should Divest from Outlaw Regime’, The Washington Times, 11 May 2009.

Craig Karmin, ‘Pension Funds Gain Leeway On Terror Laws – Lawmakers Ease Stance on Divestment Push as Credit Crisis Pinches’, Wall Street Journal, 15 April 2008.

Europa, ‘Irish Presidency and Commission Protested to the US Administration against the Iran/Libya Sanctions Act’, Press Release, 9 August 1996.

Statement by Commissioner for External Relations Chris Patten, ‘EU Regrets Extension of US Sanctions Law against Iran and Libya’, Brussels, 31 July 2001.

‘US and EU One on Iran’, Straits Times, 19 March 2005.

Dombey, ‘EU Paper Outlines Tough Action on Tehran’, Financial Times, 10 April 2006.

Daniel Dombey, Roula Khalaf and James Blitz, ‘US Pushes EU to Shut Down Iranian Banks’, Financial Times, 12 February 2008.

‘Council Common Position 2007/140/CFSP of 27 February 2007 Concerning Restrictive Measures against Iran,’, Official Journal of the European Union, no. L 61, 28 February 2007, pp. 49–55.

‘Council Common Position 2007/246/CFSP of 23 April 2007 Amending Common Position 2007/140/CFSP Concerning Restrictive Measures against Iran’, Official Journal of the European Union, no. L 106, 24 April 2007, pp. 67–75.

‘Council Common Position 2008/479/CFSP of 23 June 2008 Amending Common Position 2007/140/CFSP Concerning Restrictive Measures against Iran’, Official Journal of the European Union, no. L 163, 24 June 2008, pp. 43–9.

‘Council Common Position 2008/652/CFSP of 7 August 2008’, Official Journal of the European Union, no. L 213, August 2008, pp. 58–70.

Louis Charbonneau, ‘EU Aims to Offer Iran Atomic Plants, Fuel – Diplomat’, Reuters News, 20 May 2006.

Ibid.

The E3+3 is also referred to, usually by American commentators, as the P5+1.

Helene Cooper, ‘US is Offering Deals on Trade To Entice Iran’, New York Times, 6 June 2006.

Molly Moore, ‘EU Nations to Impose Limited Sanctions on Iran; Sale of Nuclear-Related Material Banned’, Washington Post, 13 February 2007.

Dombey, Khalaf and Blitz, ‘US Pushes EU to Shut Down Iranian Banks’.

Peter Crail, ‘EU Levies Sanctions on Iran’, Arms Control Today, vol. 38, issue 6, 1 July 2008, p. 39.

Tony Barber, ‘Respect Iran Sanctions’, Financial Times, 12 October 2007.

John F. Burns, ‘Britain Takes Tougher Stance on Sanctions Against Iran’, New York Times, 13 November 2007.

Dombey, Khalaf and Blitz, ‘US Pushes EU to Shut Down Iranian Banks’.

Xinhua News Agency, ‘EU Proposes Limited Sanctions on Iran’, 11 April 2006.

Najmeh Bozorgmehr, Daniel Dombey and Hugh Williamson, ‘Merkel Resists Pressure for New Iran Sanctions’, Financial Times, 8 November 2007.

Dombey, Khalaf and Blitz, ‘US Pushes EU to Shut Down Iranian Banks’.

Ibid.

Guy Dinmore and David Pilling, ‘Japan Ready to Join US in Imposing Sanctions on Iran over nuclear dispute’, Financial Times, 24 June 2006.

Bruce W. Jentleson, Sanctions Against Iran: Key Issues, A Century Foundation Report (New York: The Century Foundation, 2007), p. 31.

Peter Alford, ‘Japan the Sushi in Sandwich Between the US and Tehran’, The Australian, 8 February 2006, p. 40.

See Yoichi Funabashi, ‘Japan Mustn't Lose its Footing in Politics of Oil’, Asahi Shimbun, 7 July 2003.

Government officials at the time insisted that this was a strictly commercial decision and did not represent the official position of the Japanese government. See Carola Hoyos, ‘Japan Curbs Oil Imports over Nuclear Concerns’, Financial Times, 15 March 2006.

Guy Dinmore, ‘Japanese Banks Put Pressure on Iran’, Financial Times, 24 June 2007.

Ibid.

George Perkovich, ‘The Iran Nuclear Challenge: Asian Interests and US Policy Options’, in Ashley J. Tellis, Mercy Kuo and Andrew Marble (eds.), Strategic Asia 2008-09 (Seattle: The National Bureau of Asian Research, 2008), pp. 442–43.

Shen Dingli, ‘Can Sanctions Stop Proliferation?’, The Washington Quarterly, vol. 31, no. 3, Summer 2008, p. 63.

Josephine Ma, ‘China Backs Push to Void Nuclear-linked Sanctions’, South China Morning Post, 26 November 2004.

Cheong Suk-Wai, ‘China Backs New Sanctions against Iran, Says US official’, Straits Times, 4 December 2007.

Cited in Robert D. Blackwill, ‘The Three Rs: Rivalry, Russia, ’Ran’, The National Interest, issue 93, January–February 2008, p. 73.

Jentleson, ‘Sanctions Against Iran: Key Issues’, pp. 29–30.

Thomas E. Graham, ‘The Friend of My Enemy’, The National Interest, issue 95, May–June 2008, p. 37.

John Pomfret, ‘Oil, Ideology Keep China From Joining Push Against Iran’, Washington Post, 30 September 2009.

‘China shrugs off US flak over Sinopec deal with Iran’, Wall Street Journal Asia, 12 December 2007.

Pomfret, ‘Oil, Ideology Keep China From Joining Push Against Iran’.

Graham, ‘The Friend of My Enemy’, p. 39.

In late September 2009 following revelations of a second Iranian uranium enrichment facility, for instance, Russian President Dmitry Medvedev controversially indicated that sanctions may well be imposed if other possibilities to resolve the situation were exhausted. See James Blitz and Geoff Dyer, ‘Moscow Hardens stance towards Tehran’, Financial Times, 26 September 2009.

Philip Pan and Karen DeYoung, ‘Russia Signaling Interest in Deal on Iran, Analysts Say; Still, Obama Faces Obstacles’, Washington Post, 18 March 2009.

Graham, ‘The Friend of my Enemy’, p. 39.

Mark Turner, ‘Fresh drive for sanctions on Iran’, Financial Times, 9 December 2006.

David Pierson, ‘China's links to Iran a snag for sanctions’, Los Angeles Times, 16 October 2009.

Xinhua News Agency, ‘China firmly opposes US sanctions on Chinese companies’, 28 December 2005.

Xinhua News Agency, ‘China in firm opposition to US sanctions on 4 Chinese firms’, 15 June 2006.

Clifford J. Levy, ‘Warmer US-Russia Relations May Yield Little in Action Toward Iran’, New York Times, 28 September 2009.

For further discussion on the motives underpinning Iran's pursuit of a nuclear weapons capability see Fitzpatrick, The Iranian Nuclear Crisis: Avoiding worst-case outcomes, p. 14.

For further reading see Crail, ‘Secret Iranian Enrichment Facility Revealed’, Arms Control Today, vol. 39, issue 8, 1 October 2009, p. 40.

Suzanne Maloney, ‘Sanctioning Iran: If Only It Were So Simple’, The Washington Quarterly, vol. 33, no. 1, January 2009, p. 143.

‘Iran: Country Profile 2008’ (London: Economist Intelligence Unit, 2008), p. 20.

Steven Lee Myers, ‘Pact With Iran On Gas Sales Is Possible, Putin Says’, New York Times, 2 February 2007.

Thomas Catan and Roula Khalaf, ‘Oil groups shun Iran over fears of embargo’, Financial Times, 17 March 2006.

Claudio Gatti and John Eligon, ‘Iranian Dealings Lead to a Fine for Credit Suisse’, New York Times, 16 December 2009.

Katzman, Iran Sanctions, pp. 6–7.

Najmeh Bozorgmehr, Jamil Anderlini and Richard McGregor, ‘Chinese banks put curbs on Iran’, Financial Times, 5 December 2007.

Fitzpatrick, The Iranian Nuclear Crisis: Avoiding worst-case outcomes, p. 45.

Anna Fifield, Roula Khalaf and Najmeh Bozorgmehrin, ‘Syria and Iran consider joint bank venture’, Financial Times, 13 October 2008.

Fitzpatrick, The Iranian Nuclear Crisis: Avoiding worst-case outcomes, p. 30.

Daniel Dombey, Simeon Kerr and Roula Khalaf, ‘Dubai getting message on Iran sanctions’, Financial Times, 21 December 2007.

Bozorgmehr, ‘Iran signs $1.7bn China oil deal’, Financial Times, 15 January 2009.

Fifield, ‘Fair thumbs its nose at sanctions’, Financial Times, 17 April 2008.

Daniel Dombey, Anna Fifield and Haig Simonian, ‘Iran-Europe gas deals anger Washington’, Financial Times, 30 April 2008.

Jentleson, ‘Sanctions against Iran: Key issues’, p. 13.