EU approves harsh new sanctions against Iran

By Andrei Fedyashin

Iranian flag


The European Union and the United States apparently find it easier to take on the Iranian nuclear problem than the global financial crisis. On June 17, EU government chiefs agreed to new sanctions against Iran at a Brussels summit. U.S. President Barack Obama was no doubt pleased to hear the news, even though the U.S. and the EU had most likely coordinated the sanctions in advance.

The EU sanctions go far beyond the sanctions approved by the UN Security Council. The vote was just short of unanimous: 12 members, including Russia and China, voted in favor, 2 against and 1 abstained. The latest EU sanctions and the additional sanctions imposed by the U.S. -- which are much harsher on third countries -- are designed to create a nearly impenetrable barrier around Iran, blocking trade, financial transactions, imports and exports (of energy, military and industrial products), and visas.

By the end of July, EU technical and legal experts are to develop rules for applying the sanctions as well as compile a list of Iranian companies to be targeted. This will be an immense challenge for the EU, as relations with Iran differ from one country to the next. Here is just a glimpse of the challenge they are faced with.

On June 16, the United States added several dozen Iranian individuals and organizations to its sanctions blacklist. The Times wrote on Wednesday that BP has significant joint-venture projects with some of the companies on the list, such as a 50-50 joint partnership in a North Sea natural gas field that produces 1% of the United Kingdom's daily consumption. This is a fresh blow to the British company already hobbled by the Gulf of Mexico disaster.

It will be more difficult for European countries to sever ties with Iran than for the United States, whose trade with Iran is limited to non-prohibited medicines, pharmaceuticals and, until recently, black caviar. Iran's annual trade with the 27 EU countries amounted to $30 billion as of early 2010. France, Italy and Germany have always been Iran's key trading partners in Europe.

Energy resources such as oil, natural and liquefied gas and refined hydrocarbons account for 90% of Iran's exports to the EU. Iran's imports from Europe include engineering and manufacturing goods, transportation equipment, and industrial and chemical products.

The new EU sanctions are clearly not limited to Iran's nuclear research and its military and missile programs. In a month, the EU will begin blocking banking and insurance transactions with Iran and prohibiting Iranian aircraft and vessels controlled by state companies and the private firms of the Islamic Revolutionary Guards Corps (IRGC) from entering the EU air space and territorial waters. The EU will stop issuing visas to anyone connected with the IRGC and freeze the assets of companies suspected of having ties to that organization.

European companies will be prohibited from selling Iran equipment and technology used in oil refining and gas liquefaction and transportation. Essentially the only thing the EU sanctions do not prohibit is the supply of gasoline, because Iran is short of refining facilities and imports a third of its gasoline. But this is unlikely to help ordinary Iranians much.

Since large companies in Europe - let alone the United States - have not conducted any business in Iran for a long time, these sanctions will primarily affect small and medium-sized oil refining firms in Europe that supply equipment and services to Iran. Fuel shortages in Iran are inevitable.

The United States, which announced its sanctions a day before the EU, has prohibited all U.S. citizens and companies from conducting business with any of the 71 blacklisted Iranian firms.

Treasury Undersecretary Stuart Levey has said that private companies will avoid doing business with Iran because of the risk of being dragged into illicit activity.

This could be taken as a threat that the United States will punish any foreign company it suspects of violating its unilateral sanctions.

The new sanctions imposed by the U.S. and EU are proof that the Obama administration will not honor the UN sanctions, which were significantly watered down by Russia and China. The United States agreed to these weaker sanctions in order to prevent Russia and China from vetoing the Security Council resolution, which was intended to provide legal cover for the U.S. to impose unilateral sanctions against Iran that go far beyond the resolution.

This is logical, as toothless sanctions will not put any pressure on Iran. U.S. and EU officials say their additional sanctions will increase Iran's economic and political isolation. They are primarily designed to force Iran back to the negotiating table, but there are also secondary objectives, such as discouraging Israel from launching a pre-emptive strike against Iran's nuclear facilities, calming Iran's Arab neighbors who fear the "nuclear ayatollahs" as much as Israel, and demonstrating to other countries with nuclear ambitions that they will pay dearly for pursuing the bomb.

Australia, Japan and South Korea plan to impose their own sanctions against Iran.

However, European and American diplomats acknowledge off the record that these sanctions may not be enough to force Iran to resume talks on its nuclear program. Many skeptics in Europe fear that China will gladly fill the void left by the United States and Europe in Iran. Meanwhile, Turkey is boosting its trade and investment in Iran, while Iran is pursuing broader economic ties with India, Pakistan and Venezuela.

It appears Iran can find a way to overcome the trade barrier being erected around it.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
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