Western states step up sanctions on Iran

WASHINGTON Mon Nov 21, 2011 6:26pm EST

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WASHINGTON (Reuters) - The United States, Britain and Canada announced fresh plans on Monday to sanction Iran's financial and energy sectors, steps analysts said would raise pressure on Tehran but were unlikely to halt its atomic program.

The United States named Iran as an area of "primary money laundering concern," a step designed to isolate its banking sector; blacklisted 11 entities and individuals suspected of aiding its nuclear programs; and expanded sanctions to target companies that help develop its oil and petrochemical industries.

The United States stopped short, however, of targeting Iran's central bank, a step that could have cut it off from the global financial system, sent oil prices skyrocketing and jeopardized U.S. and European economic recovery.

Britain on Monday banned dealings with Iranian banks including the central bank and France called for measures on an "unprecedented scale" over Tehran's nuclear program.

Canada said it would ban the export of all goods used in Iran's petrochemical, oil and gas industry and "block virtually all transactions with Iran," including with its central bank, with an exception for Iranian-Canadians to send money home.

The steps come in response to a November 8 report by the International Atomic Energy Agency that presented intelligence suggesting Iran had worked on designing an atomic bomb and may still be secretly carrying out related research. Iran says its nuclear work is entirely peaceful.

NOT THE STRAW THAT BREAKS THE CAMEL'S BACK

Analysts said they did not believe the steps would change the Iranian calculation on its nuclear program, which Washington and its allies suspect is a cover for seeking nuclear arms.

"Is this the straw that will break the camel's back? No," said George Perkovich, director of the Nuclear Policy Program at the Carnegie Endowment for International Peace, a Washington think tank.

"The administration is testing the proposition as to whether there is a point at which the sanctions can lead the Iranians to a tipping point, recognizing that the likelihood is low," said Rob Danin of the Council on Foreign Relations.

The range of unilateral steps planned by Western powers reflects the difficulty of persuading Russia and China not to veto further measures at the U.N. Security Council, where they have supported four previous sanctions resolutions.

While Britain ordered its financial institutions to stop all business with Iran, a source familiar with the sanctions said the steps would not directly target trade in Iranian oil.

"We believe that the Iranian regime's actions pose a significant threat to the UK's national security and the international community. Today's announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons," said British finance minister George Osborne.

The U.S. decision to name Iran as a money laundering concern has no direct effect -- U.S. banks are already barred from transactions with Iranian financial institutions -- and seemed more a warning about the risks of dealing with Iran.

EU governments could reach a preliminary deal on Tuesday to add about 190 Iranian people and entities to a list of those targeted by asset freezes and travel bans, diplomats said.

But France called for much stronger action.

"As Iran steps up its nuclear program, refuses negotiation and condemns its people to isolation, France advocates new sanctions on an unprecedented scale to convince Iran that it must negotiate," said a statement from President Nicolas Sarkozy's office.

"France therefore proposes to the European Union and its member states, the United States, Japan and Canada and other willing countries to take the decision to immediately freeze the assets of the Iranian central bank (and) stop purchases of Iranian oil," it added.

The new EU measures will likely target industries such as shipping and will be formalized at a meeting of EU foreign ministers on December 1, but discussions on possible further steps could take place in the coming days, diplomats said.

'SANCTIONS ARE A LOSE-LOSE GAME'

U.S. sanctions have already made it extremely difficult for many global oil companies and traders to obtain bank financing to trade Iranian crude, of which less than a third goes to Europe with the rest flowing to China and India.

In Tehran, Trade Minister Mehdi Ghazanfari said sanctions were hitting the Iranian economy but warned Western countries they were harming their own interests.

"Sanctions are a lose-lose game in which both sides make a loss. If they don't invest in our oil projects, they will lose an appealing market," Ghazanfari told a news conference before the British and U.S. announcements.

Iranian President Mahmoud Ahmadinejad has often said sanctions have little effect and in some cases make the economy stronger by making Iran find domestic solutions to challenges.

Ghazanfari reiterated that Iran had found alternatives to Western imports and investments but did not deny the downside.

"Facing hardship in a fight is inevitable. I admit projects will get harder as our trading costs will go up, delays will hit projects and money transfer will get harder," he said.

(Additional reporting by Fiona Shaikh in London; Ramin Mostafavi in Tehran; Peter Apps, Yeganeh Torbati and Dmitry Zhdannikov in London; David Ljunggren in Ottawa; Leigh Thomas in Paris; Justyna Pawlak in Brussels; and David Lawder in Washington; writing by David Stamp, Jon Hemming and Arshad Mohammed; editing by Janet Lawrence and Mohammad Zargham)

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Comments (3)
crbob wrote:
Russia will simply step in and supply Iran with whatever it needs as it has in their nuclear program, most of it was built by Russia according to many news reports……….

Nov 21, 2011 6:25pm EST  --  Report as abuse
scythe wrote:
(quote) “the difficulty of persuading Russia and China not to veto further measures at the U.N. Security Council”.

No, China and Russia (SCO, Shanghai Co-operation Organisation) are too embedded in ECO (Economic Co-operation Organisation – Turkey, Iran, Pakistan) to be concerned with vetoing Iran. And Turkey wants to simultaneously belong to ECO and the EU. The “western state” sanctions are meaningless with the strategic alliances already established between Iran, Turkey, Pakistan, China and Russia.

President Gul of Turkey attended the 2009 ECO 10th Summit in Tehran to formulate strategies with Iran to deal with the global financial crisis. The subsequent Teheran Declaration included the creation of banking and foreign currency arrangements and the possibility of creating a common world currency for stabilizing financial and economic systems (the ECO Trade & Development Bank is based in Turkey). Gul is currently visiting Britain to promote Turkey’s EU bid and trade. However the 2015 Free Trade Agreement between Turkey and Iran will nullify the impact of the sanctions.

ECO also has the China–Middle East–Europe Corridor along the so called Silk Route. Turkey is the final node in China’s ambition to gain overland access to the Mediterranean and the Middle East via Eurasian corridors. Better China relations with Iran may also be understood in this context.

(1) ECO 10th Summit Declaration – Tehran Declaration 2009
http://www.ecosecretariat.org/ftproot/Documents/Declarations/10sum_dcl_.htm

(2) ECO Free Trade Area 2015: Turkey, Iran Pakistan solidify ties
http://www.pakistanpatriot.com/2010/12/24/eco-free-trade-area-2015-turkey-iran-pakistan-solidify-ties/

(3) Turkey-Pakistan Ties: India’s Loss is China’s Gain
http://www.defence.pk/forums/world-affairs/89021-turkey-pakistan-ties-indias-loss-chinas-gain.html

Nov 21, 2011 8:14pm EST  --  Report as abuse
Life1 wrote:
@crbob: we don’t need news reports as Russia itself openly admits to having built it, as it should. It’s one of its duties as an NPT signatory to provide nuclear fuel technology to other members.

The US, Britain, and France are in direct breach of these same duties under the NPT, but nobody seems to be too bothered about that are they…

Nov 21, 2011 8:40pm EST  --  Report as abuse
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