Resolution 1747, passed unanimously by the U.N. Security Council on Mar. 24, asking countries to restrict travel, arms sales, and financial assistance to Iran, is only one part of a campaign being waged by the U.S. against the Islamic Republic. -- From the financial and economic point of view, the U.N. resolution is much less significant than other fronts the U.S. government is pursuing. -- One is the enlistment of "more than 40 major international banks and financial institutions" to end or reduce lending to Iran. -- This effort has been more successful than anticipated, the Washington Post reported Monday. -- While justified as a way to impede Iran's nuclear program, the campaign is really an effort to achieve the long-held goal of regime change in Iran. -- The U.S.-led offensive is now intensifying. -- Some of the impetus is coming not from the Bush administration but from newly elected Democratic Congress. -- On Mar. 21, the New York Times reported that "the United States has never used a potentially potent tool in its arsenal — penalties on foreign companies that assist Iran in producing oil and natural gas." -- A bill sponsored by Tom Lantos (D-CA 12th) and backed by Speaker Nancy Pelosi (D-CA 8th) would "strip the president of the ability to waive sanctions on Iran on national security grounds" and "appears to be moving quickly to pass," Steven Weisman reported. -- "Mr. Lantos says he is confident he can persuade lawmakers to pass his bill with a big enough majority to override a presidential veto." -- An analysis by Peter Symonds on the WSWS web site explained that the Lantos bill would "require the publication of a list of all U.S. and foreign entities that have invested more than $20 million in Iran’s energy sector since 1996. U.S. pension funds would be given 30 days to divest for any entity listed, particularly impacting on corporations in Europe, Russia, and Japan." -- Democrats are largely on board in the anti-Iran offensive. -- Symonds noted, for example, that "the Democratic Party leadership in the House of Representatives this month scrapped a proposed legislative measure to require the Bush administration to seek Congressional approval for any war on Iran. If economic sanctions do not force Tehran to capitulate to Washington’s demands, the Democrats have given a carte blanche to the White House to take military action." -- The international community is providing implicit support to Washington: none of the other P-5 countries "has openly challenged the U.S. allegations against Iran or pointed to the predatory motives behind the Bush administration’s actions. By backing the U.N. resolutions, all have provided a measure of legitimacy to the Bush administration’s drive to war against Iran." -- This is what U.N. Security Council Resolution 1747 was principally about: public relations.&nbps; -- "While it wanted bans on the sale of conventional arms to Iran and tough travel restrictions on Iranian officials, the U.S. settled for weaker clauses calling for U.N. members to exercise 'vigilance and restraint' on these issues," Symonds wrote last week. -- "In the final analysis, the Bush administration’s main aim in securing a second resolution is to lend weight to its claim to be acting in the name of the 'international community.'” -- For a Jan. 10, 2007, Financial Times piece on the U.S. economic campaign against Iran, see here. -- See also a May 29, 2006, Washington Post article on the early stages of this campaign (which Monday's Wash. Post article misreports as having begun in September)....
IRAN FEELS PINCH AS MAJOR BANKS CURTAIL BUSINESS
By Robin Wright
** U.S. Campaign Urges Firms to Cut Ties **
March 26, 2007
More than 40 major international banks and financial institutions have either cut off or cut back business with the Iranian government or private sector as a result of a quiet campaign launched by the Treasury and State departments last September, according to Treasury and State officials.
The financial squeeze has seriously crimped Tehran's ability to finance petroleum industry projects and to pay for imports. It has also limited Iran's use of the international financial system to help fund allies and extremist militias in the Middle East, say U.S. officials and economists who track Iran.
The U.S. campaign, developed by Treasury Secretary Henry M. Paulson Jr. and Secretary of State Condoleezza Rice, emerged in part over U.S. frustration with the small incremental steps the U.N. Security Council was willing to take to contain the Islamic republic's nuclear program and support for extremism, U.S. officials say. The council voted Saturday to impose new sanctions on Tehran, including a ban on Iranian arms sales and a freeze on assets of 28 Iranian individuals and institutions.
"All the banks we've talked to are reducing significantly their exposure to Iranian business," said Stuart Levey, Treasury's undersecretary for terrorism and financial intelligence. "It's been a universal response. They all recognize the risks -- some because of what we've told them and some on their own. You don't have to be Sherlock Holmes to see the dangers."
The new campaign particularly targets financial transactions involving the Iranian Revolutionary Guard Corps, which is now a major economic force beyond its long-standing role in procuring arms and military matériel. Companies tied to the élite unit and its commanders have been awarded government contracts such as airport management and construction of the Tehran subway. The practice has increased since the 2005 election of Iranian President Mahmoud Ahmadinejad, U.S. officials say. The Revolutionary Guard -- of which Ahmadinejad is a former member -- is part of the hard-line leader's constituency.
"The Revolutionary Guard's control and influence in the Iranian economy is growing exponentially under the regime of Ahmadinejad," Levey said in a speech in Dubai this month.
The campaign differs from formal international sanctions -- and has proved able to win wider backing -- because it targets Iran's behavior rather than seeking to change its government. "This is not an exercise of power," Levey said in the interview. "People go along with you if it's conduct-based rather than a political gesture."
Iranian importers are particularly feeling the pinch, with many having to pay for commodities in advance when a year ago they could rely on a revolving line of credit, said Patrick Clawson, a former World Bank official now at the Washington Institute for Near East Policy. The scope of Iran's vulnerability has been a surprise to U.S. officials, he added.
The financial institutions cutting back business ties are mainly in Europe and Asia, U.S. officials say. UBS last year said it was cutting off all dealings with Iran. London-based HSBC (which has 5,000 offices in 79 countries) and Standard Chartered (with 1,400 branches in 50 countries) as well as Commerzbank of Germany have indicated they are limiting their exposure to Iranian business, Levey said. The rest have asked the United States not to publicize their names.
Ahmadinejad's rhetoric -- from denying the Holocaust to comparing Iran's stock exchange to gambling -- has helped, experts say. "There is very little foreign investment in Iran not because of sanctions, but because of the atmosphere created by Ahmadinejad's crazy statements," said Jahangir Amuzegar, former Iranian finance minister and executive director of the International Monetary Fund.
Paulson kicked off the effort to warn major financial institutions and government officials about the long-term costs of doing business with Iran during the annual International Monetary Fund and World Bank meetings in Singapore in September. Paulson, Levey and Treasury Deputy Secretary Robert M. Kimmitt have all held dozens of meetings with banks to explain how Iran is using dummy companies and deceptive practices through banks to finance its non-traditional or illicit business activities, U.S. officials say. [NOTE: In fact, such an effort was reported in May 2006, even before Paulson became secretary of the Treasury. --J.R.]
Both the Iranian government and the private sector have increasingly tried to persuade financial institutions to keep the name of "Iran" or the originating bank in Iran off transactions so they are not traced to the Islamic republic, U.S. officials say.
In a related effort, the Bush administration has warned "relevant companies and countries" about the risks of investing in Iran's oil and gas sector, R. Nicholas Burns, undersecretary of state for political affairs, said in congressional testimony Wednesday. Washington is generally trying to drive home to Tehran that its policies will lead to serious "financial hardship," he said.
In December, Iranian oil minister Kazem Vaziri Hamaneh acknowledged that Tehran was having trouble financing petroleum development projects. "Currently, overseas banks and financiers have decreased their cooperation," he told the oil ministry news agency Shana.
The Bush administration has taken several other actions in recent months to contain Iran, including deploying two Navy carrier strike groups near the Persian Gulf, arresting operatives of the Revolutionary Guards' al-Quds Force in Iraq, and pressing for two U.N. resolutions to punish Iran for not suspending its uranium enrichment program.
U.S. CAUTIONS FOREIGN COMPANIES ON IRAN DEALS
By Steven R. Weisman
New York Times
March 21, 2007
WASHINGTON -- For all its efforts to apply economic and political pressure on Iran over its nuclear program, the United States has never used a potentially potent tool in its arsenal -- penalties on foreign companies that assist Iran in producing oil and natural gas.
That may be about to change. The Bush administration has quietly been warning energy companies, including Shell, Repsol, and SKS, the Malaysian oil company, as well as the governments of China, India, Pakistan, and Malaysia, that penalties are possible if they pursue energy deals with Iran.
As a result, several huge projects planned for Iran could be vulnerable. These include one possible $10 billion project by Royal Dutch Shell and the Spanish oil company, Repsol YPF, to develop a natural gas field offshore in Iran, and a $20 billion venture by SKS Ventures of Malaysia to produce natural gas in Iran’s Golshan and Ferdows fields.
In recent months, the administration has tried to avoid diplomatic or political controversies as a result of its jawboning. But the potential for sanctions is posing a quandary for the administration by setting up a possible fight with Europe if it proceeds with them or a fight with Congress if it does not.
One factor behind the warnings, administration officials acknowledge, is that the Democratic-controlled Congress appears to be moving quickly to pass a law that would make sanctions mandatory out of concern about Iran’s suspected nuclear arms program and support for terrorism.
“What we’re trying to do is create multiple points of pressure on Iran in both the private and public sector,” said R. Nicholas Burns, the under secretary of state for political affairs. “These companies also need to know that the attitude of Congress on their activities in Iran is hardening.”
But in orchestrating all this pressure on Iran, President Bush and his aides have been careful to avoid any kind of boycott or other threat that might cause oil and gas prices to soar and strangle the economies of the West.
Short of a cutoff, the administration clearly wants to make it harder for Iran to tap into its oil and gas reserves to increase exports in the future. Iran’s energy output has lagged in recent years, and many experts say the country faces the possibility of not having enough oil to export within as little as 10 years.
Last month, the United States ambassador to Spain, Eduardo Aguirre Jr., met with Repsol executives in Madrid to advise them against going forward with a deal to develop Iran’s South Pars field, which contains one of the world’s biggest natural gas deposits. The ambassador was told that the deal was not yet final, according to American and Repsol officials.
“No investment is being made at present,” said a Repsol spokesman in Madrid, who asked not to be identified by name. “There will not be a decision on this until next year.”
The messages to oil companies mark the latest episode in a long campaign of pressure that reached a turning point in December, when the administration won approval of a United Nations Security Council resolution designating 10 Iranian companies and a dozen individuals as off-limits for international financial dealings.
Another resolution designating an additional 15 individuals and 13 Iranian government and business groups, including a leading Iranian bank, could be approved later this week. The administration, using the Security Council list, wants virtually all of the world’s banks and businesses to boycott all of these Iranian entities.
Despite the stepped-up American pressure, some Democratic leaders in Congress are complaining that the administration has not gone far enough.
They want Mr. Bush to invoke a statute enacted in 1996 that obliges the United States government to punish any foreign energy company doing business with Iran unless the president waives the sanction on national security grounds.
“This administration has done nothing to punish Iran,” said Representative Tom Lantos, a Democrat of California who is chairman of the House Foreign Affairs Committee. “The method I don’t favor on Iran is to bomb their nuclear facilities. The method I favor is to starve them of resources, which can only be done through sanctions.”
After the bill passed a decade ago, European governments and companies vehemently objected, charging that it amounted to a brazen case of extra-territoriality, the term for one nation imposing its laws on foreign companies and sovereign nations.
At the time, President Bill Clinton, acting to avoid a confrontation with Europe and in part to send a conciliatory message to Iran when moderates seemed to be vying for power, waived the sanctions on several European companies, including Total, the leading French oil concern.
Recalling that precedent, Mr. Lantos said his bill would strip the president of the ability to waive sanctions on Iran on national security grounds. The Bush administration opposes that provision as a weakening of presidential prerogatives in foreign policy.
A spokesman for House Speaker Nancy Pelosi said that she supported Mr. Lantos’s bill. Mr. Lantos says he is confident he can persuade lawmakers to pass his bill with a big enough majority to override a presidential veto.
The existing sanctions law gives Washington the option to choose among several penalties, including denial of government credits to companies that deal with the foreign oil company, denial of export licenses, and a ban on United States government procurement or imports from these companies.
Administration officials say the reason no decisions have been made on whether to invoke or waive sanctions is that the energy exploration deals by Shell, Repsol, China, Malaysia, China, and Pakistan are all still in an embryonic stage and that it is better to head them off by using persuasion than penalties.
But they also say that the administration does not want to take any action now that would divide the United States from its allies in Europe on Iran, or to provoke China, India, and Pakistan, whose support Washington needs for other foreign policy objectives.
A senior European envoy involved in discussions over Iran said that Europeans would be unhappy with American sanctions against private oil companies, but that they also understood the importance of pressing the Tehran government. “As long as we want to avoid a war with Iran, we have to try sanctions,” he said.
The steps being contemplated are part of a web of pressures, American and European officials say, which could be invoked in coming months. These include plans to sanction more Iranian banks, beyond the two that have already been hit by sanctions and barred from obtaining dollars from American banks.
The aim, American officials say, is to prevent Iran from obtaining dollars, the world’s reserve currency, for use in the purchase of goods or services. Iranian leaders have said that American sanctions are forcing them to sell oil for euros or other currencies, even though oil is traded on the international markets in dollars.
In a separate set of actions, American and European officials say that recent pressure on European governments has led several to reduce or to pledge to reduce their government-backed credit guarantees for deals with Iran.
Germany had $6.2 billion in outstanding export credits to Iran as of 2005, according to figures circulating at the United Nations. But Germany reported recently that after cutting back credits by 60 percent in the last two years, it planned further cutbacks this year.
Japan, which had $1.9 billion in credits as of 2005, has also informed the United States that it has granted no medium- or long-term credit insurance since last June and has cut short-term credits. American officials say they have received similar pledges from Italy and France to cut back their export credits.
--Sabrina Pacifici contributed reporting.
News & analysis
BUSH ADMINISTRATION STEPS UP ECONOMIC PRESSURE ON IRAN
By Peter Symonds
World Socialist Web Site
March 22, 2007
Even as the U.N. Security Council debates a punitive new resolution against Iran, the Bush administration is threatening to impose unilateral sanctions against foreign corporations and banks engaged in investment and trade with Tehran. The measures to cripple the country economically are accompanied by ongoing U.S. military preparations in the Persian Gulf for an attack on Iran.
An article in yesterday’s New York Times reported that the U.S. “has quietly been warning energy companies, including Royal Dutch Shell, Repsol, and SKS, as well as the governments of China, India, Pakistan, and Malaysia, that sanctions are possible if they pursue deals with Iran.” All these corporations and countries are involved in multi-billion oil and gas deals with Iran.
The Bush administration is threatening for the first time to invoke the 1996 Iran and Libya Sanctions Act, which provides for a range of penalties against any foreign company that invests more than $40 million in the development of Iranian energy reserves. The White House is under pressure to act. Senior Democrats are demanding a more aggressive stance on Iran and proposing legislation that would remove the president’s option of waiving penalties under the act.
Democrat Tom Lantos, chairman of the House Foreign Affairs Committee, told the media: “This administration has done nothing to punish Iran. The method I don’t favor on Iran is to bomb their nuclear facilities. The method I favor is to starve them of resources, which can only be done through sanctions.” His proposed legislation would not only make penalties mandatory, but end Iranian exports to the U.S. and bar nuclear cooperation with any countries involved in Iran’s nuclear programs.
Lantos is also backing a divestment bill introduced by the ranking Republican on the committee, Ileana Ros-Lehtinen. The legislation would require the publication of a list of all U.S. and foreign entities that have invested more than $20 million in Iran’s energy sector since 1996. U.S. pension funds would be given 30 days to divest for any entity listed, particularly impacting on corporations in Europe, Russia and Japan.
While Lantos declares that he does not “favor” bombing Iran, the belligerent tone of his criticism makes clear he has no fundamental opposition to such an attack. Significantly, the Democratic Party leadership in the House of Representatives this month scrapped a proposed legislative measure to require the Bush administration to seek Congressional approval for any war on Iran. If economic sanctions do not force Tehran to capitulate to Washington’s demands, the Democrats have given a carte blanche to the White House to take military action.
The U.S. targeting of Iran’s oil and gas reserves underscores its real purpose behind the escalating confrontation. The Bush administration has a lengthy list of unsubstantiated accusations: that Tehran is building nuclear weapons, supplying arms to anti-U.S. insurgents in Iraq, supporting “terrorists” throughout the Middle East and so on. These are convenient pretexts to disguise Washington’s ambitions to secure a dominant position in Iran and control its energy resources at the expense of its European and Asian rivals.
The economic stakes are substantial. In early February, Royal Dutch Shell and the Spanish corporation Repsol signed a $10 billion deal to develop a Liquefied Natural Gas project based on Iran’s South Pars Field. The Malaysian corporation SKS has a $20 billion venture planned to exploit the Golshan and Ferdows gas fields. India and Pakistan agreed in 2005 to build a $7 billion gas pipeline from Iran. Last December, China’s largest offshore oil producer, CNOOC, signed a preliminary deal with Iran worth an estimated $16 billion to develop the North Pars gas field.
The U.S. is threatening to take action over these and other deals. The U.S. ambassador to Spain, Eduardo Aguirre Jr., met with Repsol executives in Madrid last month to urge them to cancel the South Pars agreement. Repsol is obviously seeking to avoid conflict with the U.S., insisting the deal is not final. “No investment is being made at present. There will not be a decision on this until next year,” a company spokesman told the New York Times.
A NEW U.N. RESOLUTION
U.S. economic measures against Iran already go far beyond the sanctions that would be imposed under the U.N. Security Council resolution currently under discussion. The Security Council passed a resolution last December imposing penalties and demanding that Iran shut down its uranium enrichment facilities and end construction of a heavy water research reactor within 60 days. The U.N. sanctions targeted companies and individuals directly associated with Iran’s nuclear programs and banned the export to Iran of ballistic missiles and technology used in uranium enrichment or reprocessing.
The Iranian regime has continued to declare that it has no nuclear weapon programs and to insist on its right under the Nuclear Non-proliferation Treaty (NPT) to engage in uranium enrichment to produce fuel for its planned nuclear power reactors. After the 60-day deadline lapsed last month, the U.S. pushed for a second resolution in meetings with the other permanent members of the U.N. Security Council -- Britain, France, Russia, and China -- as well as Germany. The text of the new resolution was finally agreed last week.
Russia and China in particular have expressed reservations about the imposition of harsh new penalties on Iran. Foreign Minister Sergei Lavrov declared yesterday that Russia would not back “excessive” sanctions against Tehran. Neither Germany nor any of the permanent members, however, has openly challenged the U.S. allegations against Iran or pointed to the predatory motives behind the Bush administration’s actions. By backing the U.N. resolutions, all have provided a measure of legitimacy to the Bush administration’s drive to war against Iran.
Russia especially is playing a two-faced game. The New York Times reported this week that Moscow had intensified the pressure on Tehran by refusing to provide nuclear fuel for Iran’s nearly completed power reactor at Bushehr unless it shuts its uranium enrichment facilities. The article drew protests from Russian officials, who denied any such ultimatum had been given. They continued to maintain that transparent ruse that the hold-up was due to Iran’s overdue contractual payments. Russia is obviously exploiting the issue as a bargaining chip in its relations with Washington and possibly as a pretext to withdraw Russian technicians from the area in advance of any U.S. attack.
The proposed new U.N. resolution would block Iran’s overseas arms sales, impose a moratorium on trade credits, and extend the list of prohibited Iranian companies and individuals. Bank Sepah, a major state-owned financial institution, as well as officials and companies connected to the Iranian Revolutionary Guards, have been specifically blacklisted. The U.S. took action against Bank Sepah in January, alleging it had been involved in illicit missile sales -- a claim the bank vigorously denied. Washington is targeting the Revolutionary Guards, which are closely associated with Iranian President Mahmoud Ahmadinejad, in the belief that the move will further its aim of “regime change” in Tehran.
While it wanted bans on the sale of conventional arms to Iran and tough travel restrictions on Iranian officials, the U.S. settled for weaker clauses calling for U.N. members to exercise “vigilance and restraint” on these issues. In the final analysis, the Bush administration’s main aim in securing a second resolution is to lend weight to its claim to be acting in the name of the “international community.”
The resolution is being discussed in the U.N. Security Council, where South Africa, which holds the rotating chair, has objected to being treated as “window dressing” and proposed amendments that would suspend all sanctions for 90 days to allow for negotiations. There is little doubt that South Africa will withdraw its symbolic protest and bow to U.S. pressure for a unanimous vote on the original resolution.
Iran has already declared that it will ignore the U.N. resolution. The country’s supreme leader Ayatollah Ali Khamenei again insisted that the Security Council was flouting Iran’s rights under the NPT. He declared that if the U.N. took “illegal actions” then “we too can take illegal actions and will do so” -- hinting that Iran may withdraw from the NPT altogether. Khamenei also warned the U.S. that Iran would respond in kind if it were attacked.
While insisting it is seeking a “diplomatic solution,” the Bush administration has refused to negotiate directly with Iran or take the military option off the table and continues its menacing build-up. Two aircraft carrier battle groups are in the Persian Gulf for the first time since the 2003 invasion of Iran, and U.S. warplanes have intensified patrols along Iraq’s border with Iran. At the same time, the U.S. is strengthening its allies in the region. Last weekend the U.S. and Israel conducted joint operations to test Israel’s anti-missile defense systems. The White House is also seeking congressional approval for a batch of arms sales to the Gulf states.
At best, the Bush administration is engaged in a strategy of reckless brinkmanship that threatens to plunge the entire region into conflict. At worst, it has already adopted plans for an all-out military assault on Iran.