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Round Three with Iran

Prepared by: Lionel Beehner
Updated: July 10, 2007


The economic noose around Iran may be tightening. Domestically, the government’s plan for gas rationing, in a country that exports the second-largest amount of crude oil, sparked protests and chants of “Ahmadinejad should be killed!” (This Backgrounder explores Iran’s poorly run energy sector). Iran’s economy has also felt the effects, notes the Guardian, as inflation and unemployment rates soar close to 30 percent. Externally, a financial squeeze caused by sanctions, in addition to more general U.S. Treasury pressures on international banks, has hurt Iran’s standing and crippled its financial sector. The sanctions, contained in UN Security Council Resolutions 1737 and 1747, are to encourage Tehran to suspend its uranium-enrichment program, which outside powers believe is a ruse to develop a nuclear bomb, something Iran denies. The passage of the two UN resolutions, Matthew Levitt of the Washington Institute for Near East Policy writes in the Wall Street Journal Europe, “made the country’s professional classes, which are proud of Iran’s integration in the international system, feel the sting of diplomatic and economic isolation.”

A third round of proposed sanctions looms. Projections of what they will include run the gamut. Levitt recommends a two-way arms embargo (banning imports and exports). Mike Jacobson, also of the Washington Institute, suggests an independent monitoring team (JPost), which has proven successful for past sanctions regimes imposed against Sudan, Somalia, and Liberia. Tougher travel bans against select Iranian officials should also be put in place, Jacobson argues. Others suggest tougher inspections of Iranian cargo for nuclear material and/or freezes of more Iranian assets overseas.

The issue turns up these days on the political agenda in Washington, too. The House of Representatives just approved legislation that would deny U.S. nuclear cooperation to countries that aid Iran’s nuclear program. The bill also would label Iran’s Revolutionary Guard Corps a terrorist organization.

The goal of the bill, says Rep. Tom Lantos (D-CA), is “zero foreign investment” (VOA) in Iran. Candidates in the 2008 presidential race, meanwhile, debate how tough a stance to take against the Islamic Republic. Democrats like Bill Richardson advocate talks with Tehran with “no preconditions” and say that refusal to engage Iran was “counterproductive.” On the Republican side, most candidates do not support bilateral talks and favor a further squeeze. Mitt Romney, for instance, called on the private sector to divest from Iran and “cut off the resources Iran uses to fuel terror.”

But Russia and China can blunt the effectiveness of such ideas. “Iran is adept at identifying rifts in the international community,” writes the Carnegie Endowment for International Peace’s Karim Sadjadpour, “and diplomatic efforts will unravel if each country approaches Iran with a different redline.” Some signs of hope emerged from the recent talks in Maine between President Bush and Russian President Vladimir Putin that the two countries might forge a “common message” ( on Iran.

It still remains uncertain if Iran might agree to a temporary freeze in its enrichment activities and demands by the International Atomic Energy Agency (IAEA) to come clean on activities some suspect may be linked to a clandestine weapons program. In a July 9 report, IAEA Director-General Mohamed ElBaradei said recent inspections revealed “a slowing in the process of commissioning new cascades.” Yet satellite imagery from the Institute for Science and International Security shows that Tehran is constructing new tunnels (PDF) near its Natanz nuclear reactor, which suggests the Iranians might be looking to keep sensitive uranium protected in the event of an aerial attack. CFR’s Gary Samore tells Bernard Gwertzman “there is pressure in Iran to try to reduce the economic penalty the Security Council is imposing. Both the talks with the IAEA and slowing down the installation of centrifuge machines might be intended for that purpose.”

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