• 9 November 2011
  • Posted By David Elliott
  • 0 Comments
  • Congress, Sanctions

Congress Playing Dangerous Game on Iran Sanctions

Are Congress and the White House on a collision course over Iran?  That’s looking increasingly likely, as Congressional proponents of the “nuclear option” of sanctions — sanctioning the Central Bank of Iran (CBI) — try to force President Obama to pull the trigger.  But the White House has reportedly decided against the nuclear option, saying it would ”disrupt oil markets and further damage the U.S. and world economies.”

The news came shortly after the Treasury Department’s top sanctions enforcer finished a tour of our major European allies – the United Kingdom, France, Germany and Italy.  The message he received is obvious enough.  It seems Europe isn’t interested in weighing down its economy at the moment; it’s a bit preoccupied with containing the Eurozone debt crisis that’s imperiling the very future of Europe’s economic union.

As this makes clear, the U.S. is running out of things to sanction, except for ourselves and our allies.

So Central Bank sanctions are out, at least for now.  And the administration may be realizing that with a full year left before the next election, it needs to engage in serious, tough diplomacy now to convince the Iranian regime to implement the additional protocol and to adopt the transparency measures that are critical to addressing the very serious concerns raised IAEA in today’s IAEA report.

That isn’t sitting well with many members of Congress.  In August, 92 Senators sent a letter calling on President Obama to sanction the CBI, and Senator Mark Kirk (R-IL) warned the President that he would introduce legislation to force his hand if he didn’t comply.

Now, Kirk is looking to make good on that threat.  No less than three days after the LA Times reported Central Bank sanctions are no longer an option, Kirk announced that he’s introducing legislation that would require the President to sanction the Central Bank.  And given the idea’s support in Congress, there is a very real chance the Senate will vote to do exactly that, possibly as soon as this week.  So what would be the effect on the global economy, our alliances, the Iranian people, and the regime if the Congress were to do this?  Let’s examine:

 

Impact on energy prices, the U.S. and the global economy:

“…U.S. officials have decided that such sanctions could disrupt oil markets and further damage the U.S. and world economies.” – L.A. Times

U.S. and European officials “fear sanctioning Bank Markazi risks sharply driving up global energy prices, as Tehran could find itself unable to execute oil sales.” – Wall Street Journal

 

Impact on global efforts against Iran:

“European countries reportedly oppose such a sanction as an extreme step with potential humanitarian consequences.” – Congressional Research Service

“U.S. officials have worried that unilateral Americans sanctions against Bank Markazi might not be respected by even some American allies. This could place Washington into the difficult position of either backing down or theoretically trying to ban important foreign companies and governments from using the U.S. financial system.” – Wall Street Journal

“Some U.S. officials have pointed out in internal discussions that the step could risk the cooperation of a number of countries that have been less enthusiastic about past international sanctions, including some of the most important developing nations.” –L.A. Times

 

Impact on humanitarian situation in Iran:

The oil embargo of Iraq, which was accomplished in part by sanctioning the Central Bank of Iraq, contributed to the deaths of half a million Iraqi children according to UNICEF estimates and failed to depose Saddam Hussein or prevent war. – UNICEF

Sanctioning the CBI would cause massive secondary effects, such as preventing the import of food and medicine into Iran. Even without CBI sanctions, “Americans who broker sales of food and medical items to Iran report difficulties in finding third-country banks to process the transactions,” according to the Atlantic Council.  When the U.S. and the international community sanctioned Libya’s central bank, AFP reported, “Although some essential goods could be imported under the current sanctions regime, they cannot be paid for because … foreign banks are refusing to do business with Libyan entities.”

 

Impact on Iranian regime:

Iranian government officials discount the effects of sanctions on the government’s finances since the sanctions and regional tensions also increase concern about global oil supplies and thus increase the price of Iran’s oil exports –  Bijan Khajehpour, Iranian economist

“These sanctions have given an excuse to the Iranian government to suppress the opposition by blaming them for the unstable situation of the country. Look at Cuba and North Korea. Have sanctions brought democracy to their people? They have just made them more isolated and given them the opportunity to crack down on their opposition without bothering themselves about the international attention.” – Mehdi Karroubi, Green Movement

“[Sanctions’] basic effect has been to weaken civil society and strengthen the state — the opposite of what we should be trying to do in that country.” – Fareed Zakaria, CNN


Effectiveness and precedent

Sanctions have failed to achieve their objectives in 95.7% of case since World War I, and sanctions are more than three times more likely to end in military conflict than success. – Dr. Robert Pape, Harvard’s Journal of International Security

Though the UN Security Council has imposed central bank sanctions against Iraq and Libya, which ultimately ended in war, the U.S. has never imposed unilateral, extraterritorial sanctions on a central bank.

Posted By David Elliott

David Elliott is the Assistant Policy Director at the National Iranian American Council.

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