On Sept. 28, the foreign ministers of the permanent members of the UN Security Council and Germany, as well as the high representative of the European Union, adopted a joint statement indicating they intended to move forward on a third UN sanctions resolution unless Iran shows progress on two tracks. Meanwhile, the United States has sought to tighten the economic pressure on Iran by reducing Iran’s access to the international financial system.
In addition to Washington’s effort to pursue sanctions on Iran, the White House has recently stepped up its rhetoric regarding the consequences of failing to prevent Iran from acquiring the capability to produce nuclear weapons. During an Oct. 17 press conference, President George W. Bush suggested that Iran must be prevented from acquiring the knowledge necessary for building nuclear weapons in order to avoid “World War III.” Days later, at an Oct. 21 speech to the Washington Institute for Near East Policy, Vice President Richard Cheney insisted that “[t]he Iranian regime needs to know that if it stays on its present course, the international community is prepared to impose serious consequences.”
U.S. Seeking Greater Economic Pressure on Tehran
Iran has refused to comply with Security Council demands to suspend its uranium-enrichment-related and plutonium reprocessing activities. Both processes can be used for peaceful purposes or to produce material for nuclear weapons. These demands were first imposed by Security Council Resolution 1737, adopted in December 2006, and reiterated by Resolution 1747, adopted March 24. The deadline for Iran to suspend its sensitive nuclear activities under Resolution 1747 was May 24.
Since Iran failed to meet this deadline, the United States, joined by several European countries, has sought to impose an additional set of sanctions. (See ACT, June 2007.) The push for new sanctions has met strong resistance from Russia and China, which want to wait to see if progress would be made in Iran’s discussions with the International Atomic Energy Agency (IAEA) to resolve outstanding questions surrounding Iran’s nuclear program. The IAEA and Iran agreed Aug. 21 on a timetable to answer these questions. According to the Russian News and Information Agency, Russian Foreign Minister Sergey Lavrov recently reiterated Russia’s hesitation, stating, “Until the IAEA reports on what is going on in Iran, until we receive these answers, it would be irresponsible to make any radical movements.”
The seven countries agreed in the Sept. 28 joint statement that action on a resolution will await reports to be provided by EU High Representative Javier Solana regarding his negotiations with Iran on a package of incentives in return for Tehran’s suspension of sensitive nuclear activities and by IAEA Director-General Mohamed ElBaradei on Iran’s cooperation with his agency.
In the meantime, the United States has continued to pursue punitive measures against Iran outside the Security Council. On Oct. 25, Secretary of State Condoleezza Rice and Secretary of the Treasury Henry Paulson announced wide-ranging sanctions against 23 Iranian entities and individuals. Twenty-one entities and individuals were designated as proliferators of weapons of mass destruction under Executive Order 13382, which provides the authority to freeze the assets of designees and prohibits any transactions between them and U.S. persons. The designations included two state-owned banks, Melli and Mellat, and elements of the Iranian armed forces, including the Islamic Revolutionary Guards Corps (IRGC) and the Ministry of Defense and Armed Forces Logistics.
The IRGC is comprised of approximately 150,000 individuals and oversees Iran’s ballistic missile program as well as elements of its nuclear program. The IRGC also controls an array of commercial enterprises.
In addition to these proliferation-focused sanctions, two entities, Bank Saderat and the Qods Force, a subdivision of the IRGC, were sanctioned under Executive Order 13224, which authorize financial restrictions for entities and individuals designated as supporting terrorist organizations. Bank Saderat was previously cut off from the U.S. financial system in September 2006.
These new sanctions follow a year of U.S. efforts to enhance financial restrictions on Iran and Iranian entities. In an Oct. 2 commentary for the Wall Street Journal, Undersecretary of the Treasury for Terrorism and Financial Intelligence Stuart Levey stated that last year the Department of the Treasury “launched a world-wide effort to inform the public, government partners and private-sector leaders about the danger Iran’s financial deception poses to the international financial system.”
Part of this initiative to expand participation in financial sanctions on Iran has been conducted through the Financial Action Task Force (FATF), a grouping of 34 states established in 1989 to address illicit financial activities such as money laundering and, more recently, terrorism and proliferation financing. On Oct. 12, FATF adopted guidelines for its members on implementing the financial sanctions on Iran related to Resolution 1737. These guidelines followed a statement issued Oct. 11 that advised the financial institutions of FATF members to take into account the risks related to Iran’s lack of money-laundering and terrorism-financing controls.
Following these steps by FATF, the finance ministers and central bank governors of the Group of Seven (G-7) major industrialized states issued a statement Oct. 19 that praised the intergovernmental body for taking steps against illicit financial activities by Iran. Highlighting the issue of proliferation concerns regarding Iran, the G-7 stated, “[I]n the wake of two unanimous UN Security Council Resolutions addressing Iran’s nuclear and ballistic missile programs, and the FATF’s actions identifying the risks of illicit finance associated with Iran, financial institutions are advised to take into account these risks.”
Over the last year, several major financial institutions have reduced or halted their investment in Iran. (See ACT, October 2007.) Speaking in regard to the foreign banks that have cut off their financial relations with Iran during a Sept. 25 press conference, Iranian Central Bank chief Tahmasb Mazaheri said, “Such a decision is unacceptable. It is a political decision and we told them that we will not forget and we will give an adequate response…when these banks want to come back to Iran.”
Due to the lack of private financing, major energy firms have curtailed or discontinued development projects. Although such actions have primarily been limited to Western energy firms, the Russian oil firm Lukoil recently canceled its development of one of Iran’s oil fields. Lukoil Vice President Leonid Fedun said Oct. 22, “We opened the largest field in Iran, but we can’t work there because the U.S. State Department has banned third countries from investing more than $20 million.” U.S. law requires the president to impose at least two out of a set of six sanctions on any firm investing more than $20 million into Iran’s energy sector, although the White House has routinely taken advantage of the statute’s waiver provision.
In response to its decreasing access to capital for developing its energy sector, Iran has sought investment from non-Western states, such as China, India, and Turkey. Chinese firms have entered into a number of oil and gas deals with Iran over the last year, and Ankara is considering self-financing a $3.5 billion Iranian gas project after failing to find foreign financing.
Putin in the Spotlight on Iran
On Oct. 16, Russian President Vladimir Putin traveled to Tehran for the second Caspian Sea summit to meet with the leaders of the four other states bordering the sea—Azerbaijan, Iran, Kazakhstan, and Turkmenistan. It was the first time Moscow’s head of state has visited Tehran since Joseph Stalin attended the Tehran Conference in 1943.
Although the summit focused on legal and economic issues related to the Caspian Sea region, the 25-point declaration issued by the five leaders included two points largely related to concerns over Iran’s nuclear program. The declaration recognized that all nuclear Nonproliferation Treaty signatories have the right to develop nuclear energy for peaceful purposes and agreed that “under no circumstances will they allow the use of their territories by other countries to launch aggression or other military action against any of the member states” of the region.
In addition to attending the summit discussions on Caspian Sea issues, Putin met with Iranian Supreme Leader Ayatollah Ali Khamenei. According to the Fars news agency, Iran’s chief nuclear negotiator Ali Larijani indicated Oct. 17 that “Putin put forward a special suggestion during his meeting with the supreme leader,” adding that part of the proposal addressed Iran’s nuclear program. The state-run Islamic Republic News Agency (IRNA) quoted Khamenei telling Putin that “we will ponder your words and proposal.” Iranian President Mahmoud Ahmadinejad, however, told the reporters Oct. 18, “There was no nuclear proposal. Rather, he had brought the message of friendship and all-out cooperation.”
One of the key bilateral issues between Moscow and Tehran has been the construction of Iran’s first nuclear reactor at Bushehr. As recently as last year, completion of the reactor was scheduled for this fall, but construction has been consistently delayed. Russian subcontractors recently indicated that completion is not likely before the fall of 2008. (See ACT, September 2007.)
In an interview with IRNA, Putin indicated that the contractual arrangements between the state-owned Russian construction firm and Iran must be amended due to the failure of partners in other states, including South Korea, to deliver equipment in line with their contractual obligations. In order to speed up the work, he explained, “we need to understand clearly what to do about the fact that we have old equipment alongside the new technology that the Russian subcontractors are using today.”
Putin also assured Iran that Russia intended to fulfill its commitments to construct and deliver fuel for the reactor.
Iran, IAEA Discuss Iran’s Centrifuge Program
The IAEA held two rounds of talks in Tehran, on Oct. 9-11 and beginning Oct. 20, with Iranian nuclear officials as part of the Aug. 21 action plan for resolving verification questions. These talks were aimed at clarifying Iran’s efforts to acquire and the scope of its work with P-1 and P-2 centrifuges. IRNA reported Oct. 11 Iran’s deputy nuclear negotiator, Javad Vaeedi, as stating, “In these long talks, the Iranian side presented an additional explanation about its P-1 and P-2 centrifuges to remove remaining ambiguities and questions.”
According to the work plan, the target date for resolving the questions related to Iran’s P-1 and P-2 centrifuge programs is November 2007.
The centrifuges that Iran has installed at its uranium-enrichment plant are based on the P-1 design, which Iran acquired through the Abdul Qadeer Khan network. Iran also acquired the more-advanced P-2 centrifuge design from the Khan network, which can enrich uranium about twice as fast as the P-1.
Since the IAEA began its investigation into Iran’s nuclear program in 2003, Iran has provided some accounting of its acquisition of P-1 centrifuge technology through documentation and access to individuals involved in discussions with the Khan network. (See ACT, December 2005.) However, according to reports by the IAEA director-general, Iran has not provided an explanation of discrepancies between its assertion that no contacts were made with the network between 1987 and mid-1993 and the contrary statements made by “key members of the network.” The IAEA has also sought clarification regarding Iran’s acquisition of 500 sets of P-1 centrifuge components in the mid-1990s. Iran previously indicated that it was unable to provide information or documentation about its acquisition efforts for these components.
In regard to P-2 centrifuge technology, Tehran originally explained that its intermediaries had only supplied drawings of P-2 centrifuge components and that it had not conducted work on the more-advanced centrifuges between 1995 and 2002. As in the case of its P-1 centrifuge acquisition efforts, the agency received conflicting information from a source within the Khan network who suggested that Iran received P-2 centrifuges components during this time frame. The IAEA has also sought clarification regarding work Iran conducted with P-2 centrifuges after 2002, as well as additional information on its efforts to procure magnets for its P-2 centrifuge program between 2002 and 2003.
Iranian Head Nuclear Negotiator Resigns
Iran’s government spokesman Gholam Hossein Elham announced Oct. 20 that Larijani had resigned his position as secretary of Iran’s Supreme National Security Council. Larijani was replaced by Saeed Jalili, the deputy foreign minister for European and American affairs. Elham asserted that, in spite of Larijani’s resignation, “Iran’s nuclear policies are stabilized and unchangeable. Managerial change won’t bring any changes in [those] policies.” The spokesman also indicated that previous resignation attempts by Larijani were not accepted by Ahmadinejad.
In reference to disagreements between Larijani and Ahmadinejad, former vice president and vocal critic of the current president Mohammed Hashemi stated Oct. 23, “It is very disappointing that the government does not tolerate even views of a person like Mr. Larijani and eliminates him in such a manner.” Iran’s Jaam-e Jam newspaper reported Oct. 23 that, in response to Larijani’s resignation, 183 members of the Iranian parliament signed a letter praising his efforts as lead nuclear negotiator.Despite Larijani’s resignation, he accompanied Jalili to a pre-scheduled meeting with Javier Solana in Rome Oct. 23. Larijani remains a member of the Supreme National Security Council as a representative of Khamenei.