Will U.S. and EU Sanctions Halt Tehran's Nuclear Ambitions?

January 27th, 2012

While Iran claims its nuclear ambitions are benign—Tehran continues to maintain it is perusing nuclear power for “energy purposes”—the rest of the world has remained skeptical. For years, the international community has grown increasingly alarmed by Tehran’s growing ambitions. Mostly they watch, sometimes they speak, and occasionally they act with adequate decisiveness.

Among OECD countries, the United States has been the most willing to act. In fact, the United States has maintained some kind of sanctions on Iran—with varying degrees of severity—since the Islamic Revolution in 1979.[1] These have, largely, been to no avail. Analysts generally agree that previous sanctions “have not prevented Iran from making progress in its nuclear program.”

In response to an escalating threat, the United States has escalated its response. In March, Obama administration cautiously pursued economic sanctions against Iran’s oil. These have efforts have been complicated by political realities in both countries, however. In the United States, President Obama has worried excessively harsh sanctions could affect the price of oil, a political reality he is particularly sensitive of so close to an election.  Washington has also worried sanctions would undermine Iran’s opposition Green Movement.

So the Obama administration decided to implement new “sanctions gradually over the next six months with…considerable flexibility to avoid undercutting the global economic recovery.” And in a heartening move, on Monday, European Union foreign ministers agreed to “impose an oil-import embargo on Iran and an asset freeze on the country’s central bank.” These sanctions will also be staggered to mitigate their negative effect on EU markets.

So the new question is: will this time be any different?

To work, sanctions must have two characteristics (these requirements are necessary, but not sufficient): (1) they must inspire enough economic damage that they also result in political damage and (2) they must be universally implemented.

To be damaging economically the impact of the sanctions must be felt economy-wide, not on a single industry. These sanctions may fit that bill. On Monday, after the EU announcement, the Iranian currency, the rial, tumbled in black market trading to a new record low against the dollar. As the dominant component of the Iranian economy, if exports of the commodity plummet, so will the nation.

To have this profound economic effect, sanctions must also be imposed by the entire international community (or at least those with a critical market), without violation. It’s an enormous help that the Europeans have joined their American allies in these efforts. But the EU’s decision to place restrictions on the Central Bank of Iran fall short of the U.S. and British measures to sever all ties with Iran’s major bank. And even if they did pursue harsh restrictions, Iran has found ways around financial sanctions with a subversive relationship with Venezuelan banks, which it uses to gain access to U.S. financial markets. And these sanctions are far from universal. Neither China nor India has cut ties with Iran’s energy sector. Iran can market its oil elsewhere.

Unfortunately, because of these realities, even these new harsher sanctions will not be enough to halt Tehran’s nuclear ambitions. The world’s options are dwindling fast.

[1] These have included: freezing of Iranian assets, bans on investment inIran, and prohibition of the export to Iran of certain products

Written by Ann Hollingshead

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