Iran: the politics of sanctions

Since the imposition of a new round of stringent sanctions, attention has been focussed on Iran's capacity to cope with the fresh attempts by the West to enforce its economic isolation. Led by the United States, Iran was confronted with three sets of sanctions in quick succession. The fourth round imposed by the United Nations Security Council on June 9 has been followed by a stringent set of economic measures, slapped unilaterally by the U.S. and the European Union.

The purpose of the sanctions is apparently to promote the international non-proliferation agenda. By causing Iran economic pain, the West hopes to discourage it from pursuing a path of acquiring atomic weapons. In other words, the economic route is being pursued to achieve a political objective — of persuading Tehran to relinquish such measures that may take it closer to acquiring nuclear weapon capability. Unlike the Bush administration, which flashed “regime change” as its call sign, the new mantra in Washington is about changing “regime behaviour.” Applied to Iran, it means enforcing a change in its nuclear policy by confronting it with the prospect of severe economic deprivations.

In seeking to deny Iran atomic weapons, the Security Council's focus so far has been on curbing uranium enrichment. Uranium, when enriched above a 90 per cent level, can be used for making atomic weapons. Iran has enriched most of its uranium to a level of five per cent. However, since February, it has begun enrichment to a 20-per cent level. The Iranians argue that they need a 20-per cent level to eventually fabricate the nuclear fuel necessary to produce medical isotopes required for treatment of cancer.

Unsurprisingly, a string of resolutions passed by the five permanent members of the Security Council and Germany has called upon Iran to halt uranium enrichment — a demand it has refused to meet. The global powers have been especially alarmed at Iran's 20 per cent enrichment for, they fear that unless checked, this could be a stepping stone for Tehran purifying uranium to a weapon-grade level. As for the five per cent uranium stockpile, there has been a concerted attempt, led by the West, to remove the bulk of this material to locations outside Iran.

Will the heavy sanctions be weighty enough to persuade Tehran to sufficiently rein in its atomic programme? Given the level of suffering they are likely to cause, it is unlikely that sanctions alone would be severe enough to exhort Iran to significantly re-orient its atomic programme. However, there is a subtle but powerful political message in the new set of sanctions that Iran may find difficult to ignore, and which could encourage a dialogue in the future.

Among the latest sanctions, those imposed unilaterally by the Americans and the Europeans strike at the very foundations of Iran's economy — its oil and gas sector.

For instance, EU sanctions ban the sale, supply or transfer of equipment and technology that Iran can use for refining, exploration and production of oil. The ban covers liquefied natural gas as well. The U.S. sanctions hope to target Iranian petrol imports. While Iran is one of the world's largest producers of crude, it lacks sufficient refining capacity. Consequently, nearly 40 per cent of its petrol requirements are met through imports, although the figure may have declined to 30 per cent if Iranian official estimates are to be believed. A Reuters report quoting the Oil Ministry said Iran's daily consumption of gasoline since March stands at 63.1 million litres. Of this, 45 million litres is produced domestically, which means Iran requires to import 18 million litres a day. Taking advantage of Iran's dependence on imports, the U.S. on June 24 passed its sanctions legislation, which not only imposed restrictions on its own companies but also targeted the international firms that supply petrol and petroleum products to Iran. Under the new law, firms violating the sanctions will face denial of access to the U.S. financial system or contracts.

The significantly tightened sanctions have begun to take effect. In July, Iran reportedly received four shipments of petrol, far short of the 11 monthly cargoes of around 45 million litres each it normally requires at this time of the year. Of these, three were provided by the Turkish refining firm Tupras and China's Unipec, trading arm of Chinese refiner Sinopec. Venezuela was expected to provide the fourth gasoline cargo to Iran. Selling petrol to Iran has become all the more difficult as Lloyds of London, a trendsetting firm, has since July 9 decided that it would not insure or reinsure petroleum shipments bound for that country.

Though the petroleum and financial sanctions have hit Iran hard, it may not find it unbearable to shoulder the burden. Iran has adopted a three-pronged strategy to meet its gasoline shortfall. First, it has decided to slash consumption. In the coming days, Tehran is expected to cut subsidies on gasoline. Second, it expects that friends such as China, Turkey and Venezuela will continue to support it with their petroleum supplies. While supporting the U.N. sanctions, China publicly rejected the imposition of unilateral sanctions by the U.S. and the EU which severely target Iran's oil and gas sector. Third, Iran plans to rapidly expand its domestic refining sector to acquire self-sufficiency within the next few years.

While Iran may be prepared to face the economic hardship, it is the political challenge posed by the sanctions that may make it uneasy. Notwithstanding the dismissive rhetoric, it is unlikely that Tehran would have missed the political signal sent by the sanctions — that the West may be running out of non-military options to curb its nuclear programme. The latest round of sanctions, in other words, may have brought war closer to Iran's doorstep than ever before.

A combination of factors — the retirement of the former head of the International Atomic Energy Agency, Mohamed ElBaradei, a vocal critic of military action in the region; and the re-emergence of the hawkish Israeli Prime Minister, Benjamin Netanyahu, and his powerful partners in New York and Washington — has hardened the anti-Iran mood in large sections of the U.S. establishment. Combined with the intense exertions of the non-proliferation crowd within the American bureaucracy, Washington's intolerance of an independent Iranian nuclear programme has been further re-energised. Some of the rich Gulf Arab petro-monarchies are also doing their bit to exhort the West to curb Iran's atomic programme.

Those opposing the Iranian nuclear programme argue, unfairly, that once armed with atomic weapons, Iran would be well positioned to destabilise West Asia. In the West, there are also fears that after acquiring atomic weapons, it would emerge as a regional heavyweight, impossible to contain. A nuclear Iran, it is feared, would become a mighty counterweight to Israel, a key anchor well positioned to defend core western interests in large parts of West Asia. Iran's emergence as Israel's potent rival would, therefore, change the pro-West balance of power in the region. Once in command of a nuclear deterrent and insulated from a military attack, Iran, it is believed, would also have the capacity to impede vital western interests on two other fronts.

First, Iran would be unrestrained to tamper at will with the flow of international energy shipments through the Strait of Hormuz, a move that would have a disastrous impact on the global oil industry. Second, a nuclear Iran would be well positioned to cause instability in some of the neighbouring oil rich Gulf countries, with significant Shia populations. For Saudi Arabia, a nuclear Iran is the ultimate nightmare for, most of the Shia population is concentrated in the country's eastern provinces, where much of the Saudi oil and related infrastructure is located. Iran would therefore emerge as a significant threat not only to the Kingdom but also to the global economy because the world's largest oil reserves are located in Saudi Arabia.

From an Iranian standpoint, the latest round of sanctions signals a time for serious circumspection, followed by a sharp focus on dialogue to ease nuclear tensions with the West. The promise of the revival of Iran's talks in September with the Vienna group, comprising the U.S, Russia, France and the IAEA, presents an opportunity for nuclear confidence-building measures which neither Iran nor the global powers can afford to miss. Iran's position supporting the involvement of Turkey and Brazil in talks with the global powers is also logical, and maybe necessary, in order to prevent the standoff between Tehran and the West from heading towards the brink of war.