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Middle east

International sanctions and Iran

Text by Mehdi Chebil

Latest update : 2010-06-09

For several years the international community has steadily intensified pressure on Iran over its nuclear program, without much success. Below is a detailed review of current sanctions and other potential measures that could be adopted.

The UN suspects Iran of conducting a clandestine military nuclear program in violation of its international obligations. Since 2006, three successive UN sanction regimes have been established to pressure Tehran to cease its uranium enrichment activities.

UN sanctions

Adopted in December 2006, Resolution 1737 prohibits the transfer of all nuclear-related technologies and materials to Iran, and establishes an export ban on arms and related material from the country. It also freezes foreign assets owned by Iranian companies and individuals involved in Iran's nuclear program.
These sanctions were reinforced by Resolution 1747 in March 2007, with the UN imposing an arms embargo on Iran and financial sanctions on 28 new Iranian companies and individuals. This list includes institutions suspected of financing the Iranian nuclear effort, such as the Sepah Bank, as well as businesses linked to the regime’s ideological army, the Revolutionary Guards.

Passed in March 2008, Resolution 1803 tightens travel bans and extends financial sanctions to 12 new companies and 13 executives. Melli Bank, Iran's largest financial institution with many foreign branches, felt the blow particularly hard.

The latest UN resolution condemning Iran came in September 2008. However, absent agreement from Russia and China, who both possess veto power on the UN Security Council, no new sanctions have been adopted as of yet. 

US sanctions

US sanctions targeted Iran's energy sector. The Iran Libya Sanctions Act of 1996 threatens any foreign firm that invests over 20 million dollars a year in Iran's energy sector with financial repercussions. These measures have prompted Western companies to gradually abandon Iran, and in July 2008 French oil group Total became the last major Western company to throw in the towel. Its chairman, Christophe de Margerie, justified the decision at the time by citing "excessively high political risk" in an interview with the Financial Times.
The U.S. Treasury also imposed financial sanctions upon the Iranian banks Mellat, Saderat and Melli in October 2007. These sanctions were progressively extended to encompass companies close to the Revolutionary Guards, and enabled the U.S. in February 2010 to block all financial transactions involving Khatam al-Anbiya, an Iranian group led by senior Guards officer General Rustum Qasemi.

U.S. sanctions have resulted in record fines for several major western financial institutions. In January 2009, the British bank Lloyds paid a 350 million dollar fine for facilitating bank transfers between Iran and the United States. In December 2009, Credit Suisse was fined 536 million dollars for effecting illegal payments.
Petrol imports in the crosshairs?

So far, no action has yet succeeded in deterring Tehran from pursuing its uranium enrichment program.

In response to this intransigence, the U.S. Congress is currently preparing legislation that will penalize foreign companies supplying refined oil products to Iran. A bill to that effect was passed by the U.S. House of Representatives, which has set a deadline of 28 May 2010 to reach agreement with the Senate on the law.

According to U.S. lawmakers, this measure would allow them to strike at Iran’s Achilles’ heel, given that Russian and Chinese influence will probably limit the scope of future UN sanctions. Iran is a major crude oil producer and in dire need of refining capacity: it imports about 40% of its petrol.

Date created : 2010-05-05