Congress Weighs Iran Sanctions, Diplomacy

Peter Crail

Congressional committee leaders are prepared to delay consideration of new legislation intended to stiffen existing sanctions aimed at Iran's energy sector in order to allow time for the Obama administration's diplomatic efforts to resolve the Iranian nuclear issue to make progress, according to public and private statements from Capitol Hill.

Introducing the legislation April 30, House Foreign Affairs Committee Chairman Howard Berman (D-Calif.) said in a statement, "I fully support the Administration's strategy of direct diplomatic engagement with Iran, and I have no intention of moving this bill though the legislative process in the near future." He added that "should engagement with Iran not yield the desired results in a reasonable period of time, we will have no choice but to press forward with additional sanctions," including those contained in his bill.

Senate sources also indicated in May that a nearly identical companion bill to Berman's legislation, which 25 senators introduced April 28, is not likely to proceed for several months. A Democratic Senate staffer said in a May 18 e-mail that the Senate is unlikely to move on its own petroleum sanctions bill until the fall because senators want "to give the administration time for their diplomatic strategy to work." The staffer added, "[T]his is partly political posturing, partly the 'good cop-bad cop' routine between the Executive Branch and the Congress."

It is unclear how long congressional committee leaders may decide to hold up the legislation, which has considerable bipartisan support. Several lawmakers who have expressed support for the Obama administration's diplomatic strategy with Iran have also urged a limited time frame for negotiations with Tehran. Sen. Evan Bayh (D-Ind.), who introduced the Senate version of the new sanctions legislation, said in an April 28 press release that talks with Iran "should be time-limited to avoid a scenario where Iran stalls while continuing its [uranium-]enrichment activities and moving closer to possession of a nuclear weapon."

Seven House Democrats called for a more specific time frame for talks in a March 26 letter to the president. Although President Barack Obama has rejected the notion of establishing "an artificial deadline" for talks, he indicated in May that the administration would review progress in any negotiations by the year's end. During a May 18 press conference with Israeli Prime Minister Binyamin Netanyahu, he said the United States "should have some sense as to whether or not these discussions are starting to yield significant benefits" by the end of the year. He added that he expected discussion to begin "shortly after the Iranian elections," which are scheduled for June 12.

The seven U.S. House members, including Berman, said in their letter that "Iran must verifiably suspend its uranium enrichment program within at most a few months of the initiation of discussions." Previously, the Bush administration demanded that Iran suspend such activities, as required by UN Security Council resolutions, prior to negotiations.

Uranium enrichment can be used to produce low-enriched fuel for nuclear reactors or highly enriched material used in the explosive core of nuclear weapons.

Measuring Progress

The enrichment suspension might not be the only factor the administration uses to gauge progress in the negotiations. The Wall Street Journal reported May 15 that Washington and its European allies are considering other possible benchmarks to assess Iran's cooperation in the negotiations. Potential benchmarks reportedly include allowing international inspectors to carry out "snap inspections" at additional Iranian nuclear facilities, an authority provided to inspectors under the International Atomic Energy Agency's (IAEA) 1997 Model Additional Protocol. The IAEA has frequently stated that it cannot provide assurance that there are no undeclared nuclear activities in Iran without such a measure in place.

Iran signed an additional protocol in 2003 and agreed to implement it provisionally until the Iranian parliament ratified the measure. Tehran stopped adhering to the protocol in 2005 after the IAEA Board of Governors determined that Iran acted in noncompliance with its safeguards obligations.

Another potential benchmark reported by the Journal is Tehran's agreement to institute a "freeze-for-freeze." This notion entails a pledge by Iran not to expand its uranium-enrichment program in return for an agreement on the part of the world powers not to pursue additional UN sanctions. (See ACT, July/August 2008.)

U.S. officials have suggested that if Iran did not demonstrate cooperation in the negotiations, such as agreeing to the benchmarks, the United States would pursue harsher sanctions. However, they have focused on the prospect of strengthened international measures, rather than unilateral U.S. ones. Secretary of State Hillary Rodham Clinton told the Senate Foreign Relations Committee May 20, "We already have a lot of sanctions on the books, but the most effective ones are the ones that we have been able to persuade a lot of our partners to pursue as well."

About 100 co-sponsors have signed on to a House bill entitled the Iran Refined Petroleum Sanctions Act, while nearly half the Senate has co-sponsored that chamber's version of the bill, which has been referred to the Committee on Banking, Housing, and Urban Affairs. Sen. Christopher Dodd (D-Conn.), who chairs that committee, is not a co-sponsor.

Both bills amend the 1996 Iran Sanctions Act and, if enacted, would broaden the conditions under which the president could penalize firms that contribute "directly and significantly" to the development of Iran's petroleum resources, opening up the potential for additional types of sanctions.

The Iran Sanctions Act authorizes the president to impose at least two of a choice of six different types of penalties on firms that invest at least $20 million in Iran's ability to develop its petroleum sector. The new legislation, which is focused particularly on refined petroleum products rather than oil extraction, would apply sanctions to firms that supply refined petroleum to Iran or help it to construct petroleum refineries.

The expansion appears to resolve a potential discrepancy in the interpretation of the 1996 law. According to a March 9 Congressional Research Service (CRS) report, it is not clear whether the existing sanctions apply to planned Iranian investments to help build oil refineries in China, Indonesia, Malaysia, Singapore, and Syria. The report also said that no administration has yet indicated that it interpreted the law as applicable to assistance in the construction of oil refineries in Iran.

Proponents of the legislation argue that Iran's petroleum sector is particularly susceptible to economic influence. Introducing the Senate bill April 28, Sen. Evan Bayh (D-Ind.) said Iran is in a period of "unique vulnerability," in part because of its need to import a significant percentage of its gasoline.

During the presidential campaign, Obama endorsed the notion of targeting Iran's refined petroleum imports. In a presidential debate last October, he said, "If we can prevent [Iran] from importing the gasoline they need and the refined petroleum products, that starts changing their cost-benefit analysis."

Key suppliers of Iranian refined petroleum include the Swiss firms Vitol and Trafigura, France's Total, India's Reliance, and British Petroleum. Sen. Jon Kyl (R-Ariz.) told reporters April 28 the United States must give companies a choice: "you can do business with Iran's $250 billion economy or our $13 trillion economy, but not both."

Supporters of the strengthened sanctions also argue that the legislation enhances the diplomatic approach outlined by the Obama administration. Administration officials appear skeptical of that view, citing concerns about harming broader multilateral efforts on Iran.

Multilateral Efforts Emphasized

Asked about the efficacy of the sanctions Congress is considering, Acting Assistant Secretary for Near Eastern Affairs Jeffrey Feltman told the Senate Foreign Relations Committee May 14 that the administration did not want a situation "that could make it harder for us to strengthen the international coalition that's focused on Iran."

Clinton appeared to echo this concern during her May 20 testimony, stating, "Until we have tested, within the time period set forth by the president, where we think this engagement is going, I am not sure that adding new unilateral sanctions is really that helpful."

Moreover, the Bush administration in recent years successfully lobbied against the passage of legislation that similarly tightens sanctions on companies doing business with Iran's energy sector. (See ACT, July/August 2006.) U.S. allies in Europe also have lobbied Congress against passing such laws, complaining that such sanctions amount to an extraterritorial application of U.S. law. (See ACT, September 2007.)

Iran does appear to be taking steps to reduce its reliance on foreign suppliers of refined petroleum. The state-owned National Iranian Oil Refining and Distribution Co. announced last year that it is building seven oil refineries, in addition to the nine it currently operates, in order to become self-reliant for its refined petroleum needs. According to a February analysis by the U.S. Department of Energy, Tehran's planned expansion of its refining capacity "could eliminate the need for imports by 2012."

The March CRS report also said that the gasoline rationing system Iran instituted in 2007 reduced its dependence on foreign oil from 40 percent to between 25 and 30 percent.

However, difficulties in obtaining foreign capital for its refinery projects appear likely to delay Iran's self-sufficiency. The Iranian daily newspaper Hamshahri May 15 quoted the project manager for the construction of Iran's Khuzestan refinery as saying the project has fallen behind schedule because of a lack of foreign financing.

Difficulties in securing foreign investment might be due to increasing international pressure in recent years. Although some firms continue to do business with Iran's energy sector, Western governments have been pressuring their firms against making such investments. (See ACT, November 2007.)

In spite of such economic pressure, Tehran maintains that it would not reconsider its uranium-enrichment program. During a May 4 press conference, Iranian Foreign Ministry spokesman Hassan Qashqavi said "sanctions and threats will not stop Iran from continuing its nuclear work."