West May Seek Alternative Sanctions on Iran

Peter Crail

With an Oct. 20 discussion among the permanent members of the UN Security Council (China, France, Russia, the United Kingdom, and the United States) and Germany demonstrating little chance of additional sanctions against Iran, some Western countries have indicated that they will seek stronger punitive measures outside of that forum.

Division amongst the council’s members led to a compromise agreement at the end of September with the adoption of Resolution 1835. (See ACT, October 2008.) This resolution reiterated international demands that Iran suspend its sensitive nuclear fuel cycle activities but did not impose additional sanctions. The council has levied sanctions on Iran on three occasions since December 2006 for failing to meet the same demands. China and Russia continue to oppose additional international sanctions on Iran by the council.

Nonetheless, following the adoption of Resolution 1835, the French Foreign Ministry issued a statement Sept. 30 indicating that Paris would “work with its partners on new sanctions to increase the pressure on Iran” if Tehran did not abide by international demands to halt its sensitive nuclear work.

The UN sanctions imposed on Iran thus far have primarily targeted Iranian persons, entities, and banks that council members determined were involved in Iran’s nuclear and missile programs (see page 47). Some Western governments are seeking to expand trade restrictions to cover Iran’s critical oil and gas sector.

British officials have specifically raised the prospect of unilateral sanctions on Iran’s energy sector. Foreign Minister David Miliband told Parliament Oct. 7 that oil and gas sanctions on Iran remained “an important part of our agenda both within the European Union and internationally.” Prime Minister Gordon Brown stated a goal to limit financial and energy investment in Iran in November 2007.

Berlin also appears to be preparing to curtail its business dealings with Tehran. The German magazine Der Spiegel reported Oct. 20 that, during an Oct. 13 interministerial meeting, Berlin decided to hold discussions with trade associations in order to pressure German firms not to do business with Tehran. According to the report, the German government particularly wanted firms in its financial and energy sectors to curtail any investment in Iran.

German officials made similar calls earlier this year as the country’s trade with Iran rebounded in 2008. During an Aug. 6 press conference, German Chancellery spokesperson Thomas Steg urged companies to exercise restraint given the “extremely sensitive nature” of business with Tehran.

Germany remains Iran’s most significant Western trading partner. Despite a 16 percent decline in German exports to Iran in 2007, trade with Iran has climbed by about 14 percent since the beginning of this year. However, German companies and officials have expressed concern that as German firms have stopped doing business with Iran, Russian and Chinese firms have taken their place.

Germany came under particular fire from Israel this summer following Berlin’s approval of a $160 million deal for the German energy firm Steiner Prematechnik Gastec to sell equipment to Iran to assist its natural gas exports. A German diplomat told Arms Control Today Oct. 22 that Berlin did not have the legal means to challenge this sale.

The United States has maintained substantial sanctions against Iran for well more than a decade. U.S. law also allows the president to take punitive measures against foreign entities investing at least $20 million in Iran’s energy sector. This provision has never been used.

Moreover, both of the leading candidates in November’s presidential election have called for further efforts to sanction Iran’s energy sector. Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.) support measures to ban the export of refined petroleum to Iran and to encourage divestment from firms doing business with Iran’s energy industries.

Iran’s economy is highly dependent on such energy exports. According to a June International Monetary Fund report on Tehran’s economic outlook, although Iran has substantial oil and natural gas reserves, “its capacity to increase hydrocarbon production is limited…due to insufficient investment.” The report also noted that if the price of oil dropped to $75 per barrel, Iran would be subject to “unsustainable” deficit spending due to its limited access to international financial markets.

Since reaching a high of about $148 per barrel this summer, oil prices had declined to about $71 per barrel on Oct. 20.

Moscow May Withhold Air Defense System From Iran

Although Moscow has not cooperated with the West in pushing for additional sanctions, it does appear to have demonstrated a willingness to respond to concerns about its military ties with Tehran.

Amid speculation over the past year Iran might acquire an advanced variant of the S-300 air defense system from Moscow, Russia has recently repeated its claim that it would not deliver such a system to Iran. When asked whether Russia promised Israel that it would not provide the S-300 to Iran, Russian Foreign Ministry spokesperson Andrei Nesterenko told reporters Oct. 9 that Russia “will not supply such weapons to countries located in what we call volatile regions.” He added that Moscow makes decisions regarding whether or not to sell its weapon systems “with due account of regional stability and security.”

The S-300 is a sophisticated surface-to-air missile platform designed to counter aircraft at a range of 195 kilometers and ballistic missiles at a range of up to 50 kilometers. Such a capability would make the prospect of military action against Iran by Israel or the United States riskier and more difficult.

Tehran has previously suggested that it would receive the system from Russia, but Moscow has denied that any agreement has been made to that effect. Iran’s semiofficial Fars News Agency quoted Iranian Defense Minister Mustafa Najjar Dec. 26 stating that “the S-300 air defense system will be delivered to Iran on the basis of a contract signed with Russia in the past.”

Shortly thereafter, Rosoboronexport, the federal agency that oversees Russia’s military exports, rejected Najjar’s claim. It issued a statement Dec. 28 declaring that transferring the S-300 to Iran “is not being considered and is not being discussed at this time with the Iranian side.”

The latest Russian denial comes just days after outgoing Israeli Prime Minister Ehud Olmert visited Russia Oct. 6-7 to urge Russian President Dmitry Medvedev to refrain from providing Iran and Syria with advanced weapons technology. Olmert told his cabinet Oct. 12 that his talks with Russia were “encouraging.”

Russia’s assurance that it would not provide advanced weapons systems to unstable regions such as the Middle East may be tied to an agreement it reached with Israel to refrain from transferring arms to each other’s adversaries.

Israeli Foreign Ministry Deputy Director-General for Russia and the Commonwealth of Independent States Pinhas Avivi told reporters Oct. 6 that there is a “covert agreement” that Israel would not provide offensive weapons to Georgia and that Russia would not provide offensive arms to Iran and Syria. He noted that the two countries hold permanent consultations in which they decide what weaponry may be called offensive or defensive.

Moscow has reserved the option to provide air defense systems to Iran in the past, however, declaring that such systems do not harm the strategic balance in the region. Announcing the delivery of 29 Tor M1 short-range air defense systems to Iran, Russian Minister of Defense Sergey Ivanov told reporters Jan. 16, 2007, that the weapons were “intended solely for defense” and do not “destabilize the situation in the region.” He added that “[i]f the Iranian leadership has a desire to purchase more defense weapons, we would do that.”