Sanctions Relief for a Nuclear-Free Iran?

Sanctions Relief for a Nuclear-Free Iran?

Mark Dubowitz Summer 2012
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As the P5+1—the five permanent members of the UN Security Council and Germany—travel from country to country, holding talks with Iran on its nuclear program, Obama administration officials are making a tough case for relieving some of the pressure the international community has placed on Iran in recent years. Administration officials have made it clear that they see talks with Iran—such as this year’s gatherings in Istanbul and Baghdad—as part of a process that will require confidence-building measures and reciprocal concessions. According to Secretary of State Hillary Clinton, the White House will “respond accordingly” to “what they [the Iranians] bring to the table” during scheduled negotiations.

To be meaningful to Tehran, concessions from the West will have to come in the form of sanctions relief, as oil market and financial sanctions are threatening the Iranian regime’s oil wealth, and potentially even its survival, in ways not seen since the Iran-Iraq War. But taking the pressure off Iran at this time as an American goodwill gesture will only perpetuate the situation and increase the likelihood that Israel will feel forced to attack Iran’s nuclear facilities—an outcome Western leaders undoubtedly wish to avoid.

The West’s Underwhelming Approach

The West’s current approach to Tehran’s nuclear ambitions is to sanction the country as an alternative to war. Western negotiators hope that sanctions are causing Iran enough pain and believe that if they threaten more, Iran’s Supreme Leader Ali Khamenei will have no choice but to view nuclear weapons as harmful to his rule. President Obama and his Western European counterparts have adopted a strategy of quasi-regime change: They don’t really intend to overturn Khamenei’s dominion, but they want Tehran’s power players to think they will.

Given how advanced Iran’s nuclear program is, the West’s focus on sanctioning Iran as punishment for its nuclear transgressions seems wildly underwhelming. As the tactician Anthony Cordesman recently noted, “the threat Iran’s nuclear efforts pose [is] not simply a matter of its present ability to enrich uranium to 20 percent. . . . [The regime] can pursue nuclear weapons development through a range of compartmented and easily concealable programs without a formal weapons program, and even if it suspends enrichment activity.” If the West cannot stop Iran’s technological advances in centrifuge production—and it remains unclear whether Western intelligence services know where the Iranian regime is manufacturing these machines—then even shutting down the known enrichment facilities at Natanz and Fordo at best offers a pause. Increasingly proficient centrifuges will allow for much smaller, hard-to-detect facilities that can rapidly process low-enriched uranium into bomb-grade material.

Given the enormity of the task, one would think that war-averse Western leaders would go in one of two directions. They would try to bribe Iran’s ruling elite with really big, sanctions-ending “carrots.” This approach, while likely to fail, would at least match the scope of the challenge with the reward. Or they would crater the Islamic Republic’s economy and then offer to negotiate, presuming that financial desperation would perhaps match the determination and duplicity of Iran’s pro-nuke elite.

But the West once again appears poised to take the easy way out by backing off Iran in two ways without receiving real concessions in return: loosening the sanctions regime against Iran and consenting to Iran’s enrichment of uranium up to 5 percent, despite UN Security Council resolutions that demand the opposite.

Reciprocal Concessions?

Supreme Leader Khamenei badly needs to relieve the economic pressure that sanctions have wrought on Iran. He is seeking to buy his country enough hard currency from oil sales to withstand soaring inflation, now estimated to be as high as 40 percent per year, and a crumbling currency, at one point by almost 50 percent from December 2011. Khamenei also seeks to use the P5+1 negotiations to buy more time to reach breakout capacity, which would enable him to build—or credibly threaten to build—a nuclear weapon within a few months. Despite five resolutions by the United Nations Security Council requiring Iran to suspend all of its enrichment activities, it is clear that Iran sees the negotiations with the P5+1 as an opportunity to force the international community to accept its enrichment activities.

According to Hamidreza Taraghi, an adviser to Khamenei, Iran has succeeded with a strategy to “bypass the red lines the West created for us,” including building the Bushehr reactor, constructing the Arak heavy-water facility, and building an extensive enrichment program, including at the Fordo complex near Qom constructed to withstand an attack by the United States or Israel. Indeed, despite tough sanctions, and a Western commitment to stop Iran from crossing well-established redlines, as The New York Times noted, Iran’s “carefully crafted strategy has helped move the goal posts in their favor by making enrichment a reality that the West has been unable to stop—and may not be willing, however, grudgingly, to accept.” As Taraghi puts it, “But here we are, enriching as much as we need for our nuclear energy program.”

Khamenei likely will continue this strategy of playing for time by dangling some incremental nuclear concessions before the negotiators, such as the cessation of 20 percent uranium enrichment, while maintaining Iran’s right to continue enrichment at lower levels. This concession will be portrayed as an important confidence-building measure, putting pressure on the Obama administration and its P5+1 partners for a similar gesture of goodwill in return, to help keep the negotiations moving forward. Such a gesture by Obama and Europe may include relieving the pressure of sanctions behind closed doors and away from public scrutiny. This can be accomplished by Washington deciding not to strictly enforce sanctions on financial transfers between banks, technical assistance to the energy industry, shipping, insurance, and imports of Iranian crude—all of which are sanctions already on the books. The Europeans could significantly diminish their embargo, which took effect on
July 1, by ignoring “reflagged” Iranian crude shipped to Europe via Chinese-owned and insured tankers. These steps could save Iran billions of dollars; they would clearly signal that the West wants the negotiations to continue.

But Iran’s ability to build its 5 percent stockpile and its centrifuge development is the real key to an undetectable breakout and therefore it shouldn’t be an option on the trading table. According to Olli Heinonen, former deputy director of the International Atomic Energy Agency (IAEA), allowing Iran to enrich uranium to 5 percent puts the regime two-thirds of the way towards making bomb-grade uranium. Drawing the red line on enrichment at the higher level of 20 percent will leave Tehran with about 13,000 pounds of low-enriched uranium today, enough to make five nuclear weapons.

As eager as President Obama is for a deal that will get Iran off the front pages—and all but eliminate the possibility of an Israeli strike ahead of the November election—he cannot take the political risk of offering too much relief for too few concessions. Once sanctions start to unravel, the fear of U.S. penalties that held them together will become difficult to reestablish, and the multilateral sanctions regime—the centerpiece of the president’s Iran strategy—will be gone. This may also persuade the Israelis that the time for diplomacy has passed and only military action can stop Iran’s development of nuclear weapons.

Tighten the Noose

The recommended course is for President Obama to engage openly with the American people, Congress, and with key allies like Israel during the negotiation process with Iran. The Obama administration should resist the urge to offer sanctions relief. Just the opposite, President Obama and Congress should work together to quickly move forward with a plan to intensify sanctions against Iran.

There are numerous ways the administration can tighten the noose around Tehran’s neck. First, Washington can pass measures to establish the U.S. as an Iranian oil-free zone to provide U.S. leverage in enforcing the EU oil embargo. The idea would be to penalize any European refinery selling refined petroleum to the United States, which contains any Iranian crude. Congress should close the loophole in U.S. law that allows refined petroleum made from Iranian crude to enter the U.S. market even though Iranian crude itself is prohibited. This would force refineries, which are tempted to circumvent the EU embargo, to risk losing access to the lucrative U.S. market (where European refineries are the largest exporters of refined petroleum to the U.S.), in addition to any penalties they would face from European authorities.

In addition, Congress could pass expanded measures against Iran’s Islamic Revolutionary Guard Corps (IRGC). The Iran Threat Reduction Act and The Iran Sanctions, Accountability and Human Rights Act both contain a very effective provision targeting the IRGC, which plays a dominant role in the Iranian economy. The provision would call on the administration to accelerate the designation of IRGC entities, causing international companies to seriously reconsider their trading relationships with Iranian companies. Many would be loath to export goods and services to entities involved in terrorism and nuclear proliferation, and their departure would cause considerable economic trouble for Iranian leaders. This approach would greatly restrict exports to Iran’s commercial sector, with the exception of food and humanitarian goods, exacerbating the shortages that Iran is experiencing across its economy.

Washington can also impose an insurance embargo on Iran for any company providing insurance or reinsurance services for any sanctionable activity, declaring Iran’s energy sector a zone of proliferation concern and prohibiting any energy-related transaction except those permissible under section 1245 of the National Defense Authorization Act (NDAA), declaring Iran’s telecommunications and technology sectors as zones of electronic repression, and imposing sanctions on any company, including the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and Clearstream, which provides services to an Iranian financial institution.

In another idea, if sanctions relief is a must for the White House, Washington can exercise the National Interest Waiver. Section 1245 of the NDAA provides a way to provide sanctions relief on a transparent basis while keeping the pressure on Iran with the threat of resumed sanctions. If Iran agrees to a first interim step, such as halting all uranium enrichment at 20 percent, closing the Fordo enrichment facility at Qom, and shipping all 20 percent enriched uranium outside Iran, for example, the president could exercise a national interest waiver under NDAA 1245, which waives all sanctions against the Central Bank of Iran (CBI) for 120 days.

The president must make clear that this is all based on a commitment by Iran to take the second step within 120 days—halting all enrichment activities in compliance with United Nations Security Council resolutions, agreeing to fully account for its nuclear weapons activities, and an agreement to the Additional Protocol of the Nuclear Non-Proliferation Treaty, which requires extensive inspections. If Iran does not take this second step, CBI sanctions resume automatically. If Iran complies, the president can promise to extend CBI sanctions for another 120 days until the IAEA can report to the UN Security Council that Iran is fully in compliance. At that point, the president could pledge to fulfill a commitment to provide Iran with nuclear fuel rods for its Tehran Research Reactor and request that Congress repeal sanctions.

Relief is a Reward

The administration should only offer sanctions relief and concessions of its own in response to meaningful concessions made by the Iranians, as stipulated in multiple UN Security Council resolutions, IAEA reports, executive branch demands, and Congressional legislation. These concessions must include, at a minimum, the complete suspension of Iran’s enrichment activities, the exporting of its stockpiles of enriched uranium out of the country, the full accounting of its past and current nuclear weapons activities, and its agreement to intrusive inspections as outlined in the Additional Protocol to the Nuclear Non-Proliferation Treaty.

Nevertheless, the time for a negotiated settlement is almost over and there is no evidence to date that sanctions have changed Khamenei’s risk reward calculus with respect to the development of an atomic weapon. He quickly needs to be put to a choice between regime survival and a nuke. Sanctions must immediately be intensified. Now is the time for fear inducing, not confidence building, measures. The West has almost exhausted all peaceful alternatives.

Mark Dubowitz is the Executive Director of the Foundation for Defense of Democracies in Washington DC, where he leads projects on sanctions, nonproliferation, and countering electronic repression.

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