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UN Sanctions May Sting Iran's Guard

Interviewee: Kenneth Katzman, Specialist for Middle East Affairs, Congressional Research Service
Interviewer: Bernard Gwertzman, Consulting Editor, CFR.org
April 1, 2010

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According to recent reports, a UN Security Council resolution on Iran sanctions is being drawn up by all permanent members--including Russia and China--and Germany. A consensus seems to be growing for a resolution punishing the economic activities of Iran's Islamic Revolutionary Guards, which control much of Iran's domestic and foreign economic activity, says Kenneth Katzman, an expert on Iran sanctions. He also says the Obama administration is working closely with Congress to produce new U.S. sanctions against Iran that would curtail U.S. companies from being involved in sales of gasoline or refining equipment to Iran.

You've been closely following discussions about new sanctions against Iran. What does the situation look like now?

There's an increasing level of specificity that I'm hearing about in terms of specific revisions, specific wording, and usually that signals that it's close to being a "cooked product." That means it's gotten beyond the issue of concepts. Once it gets to specific language, it's been my experience that usually a resolution results fairly soon. That's what I think generated President Obama's comments about "weeks, not months" after he met with President [Nicolas] Sarkozy of France. The U.S. side is feeling increasingly confident after the United States has made some substantial concessions in terms of air cargo operations and searching Iran's shipping lines. There were some early ideas about banning investment in Iranian government bonds, and that's apparently been cast aside.

Could you be specific on what the steps are?

There is a consensus on a major expansion in the number of Iranian Revolutionary Guard entities whose assets would be frozen. That could harm Iran, because if the Islamic Revolutionary Guard Corps' companies can't do business anywhere then it's much more expensive, and some of these entities could even be put out of business if they can't get parts and financing from abroad.

What does the Revolutionary Guard do, besides its military role?

There's an increasing level of specificity that I'm hearing about in terms of specific revisions, specific wording, and usually that signals that it's close to being a "cooked product."

I wrote a book on the Revolutionary Guards in 1993, The Warriors of Islam. It's a military force when Iran is at war, but when it's not at war the Guards are a political force designed to keep the regime in power, and they work abroad to promote the regime's foreign policy goals by supporting pro-Iranian movements in the neighborhood. Domestically, it obviously gets a substantial part of its budget from the government. But while it is a formal armed force, it also earns money through corporate affiliates. It runs various businesses, some of them simple, some of them larger, such as telecommunications companies, airport operations, port operations. It has expanded over the years its corporate dimension, which helps it earn extra funds, with which it can buy weapons, give bonuses, and pay its commanders.

It's almost a government within the government?

In many ways it's comparable to the People's Liberation Army (PLA) in China, which has served that function in doing many of the same things. The Chinese army is an armed force and also a political power and also has a corporate arm. The Guard, uniquely I would say, has this external foreign policy arm, the Quds Force, which is operating in Iraq, Afghanistan, Lebanon, and at one time in the Sudan. They are in the Persian Gulf area. They've got tentacles all over.

So these are sanctions aimed at these economic entities run by the Revolutionary Guard?

They are corporations, but these corporations are believed to be part or totally owned by Guard members, or the Guard itself.

The House of Representatives had passed a resolution for sanctions on gasoline exports, right?

Crisis Guide: IranThe concept of unilateral U.S. sanctions is a wholly different concept. What I've been discussing is UN international sanctions. The Congress is discussing, basically, a package of sanctions that were passed in 1996 that sought to sanction firms that are investing in Iran's energy sector. The congressional legislation would expand that authority to also sanction companies that are selling gasoline to Iran, or selling Iran machinery, equipment, services, with which Iran can expand its own oil refining capacity to make its own gasoline.

Has that passed the entire Congress?

There are two versions. The House has passed a version, and the Senate has passed a version, so now the next step is that the two chambers will get together in a conference and agree on a single version.

Is the president likely to sign such a bill?

Well, the administration has been very active in trying to shape it. It seems as though the administration would allow it to proceed. They're still, at this point, trying to shape it in the conference. I'm not hearing about a veto threat.

In the UN Security Council, the question marks have always been Russia and China. What do you hear lately on that?

Some of the objections have been overcome, through modifying the draft resolution, by taking out some of these provisions that were earlier floated, like banning investment in Iranian bonds [and] the broad authority to search and impound Iran shipping lines. Russia and China felt that these were directed at the civilian economic sector of Iran and would harm the population and were too punitive, went beyond the mission of really preventing a nuclear Iran. Russia and China are agreeing to help prevent a nuclear Iran. What they are not signed on to do is to punish Iran or try to squeeze the population and promote some sort of pressure on the government. So, that was their objection. A lot of those objections seem to have been overcome, which is why we're now at the level of talking about specific revisions in this new resolution that might be passed.

There are some critics who think sanctions are not the way to go. Is there a consensus in the Iranian expert community on this?

Russia and China are agreeing to help prevent a nuclear Iran. What they are not signed on to do is to punish Iran or try to squeeze the population and promote some sort of pressure on the government.

There's a consensus that there is a role for sanctions--to enfranchise those still within the regime who believe that Iran needs to maintain contact with the outside world, that Iran should not isolate itself, should not be seen as a pariah state. The difference among experts that I sense is whether to give up on the idea of engagement and to simply pursue sanctions and punishment and containment, or whether, simultaneous with sanctions, you should still be looking for ways to engage the current regime, and look for common ground, and look for a deal if there is one. Sanctions can lay the groundwork for successful diplomacy.

President Obama, with much less fanfare than last year, sent another message to Iran on the occasion of Nowruz, the Iranian New Year.

It was a much harder line this year.

Iranians still haven't reacted to his offer to open a dialogue, have they?

No they haven't. Within the administration, from what I'm hearing, there is quite a bit of frustration, because the administration feels that they were sincere. This came out in Obama's comments yesterday. He said, "We did have a new track, it was a clear policy, we were trying a new approach, and it just didn't resonate in Iran." Now some of the problem may be that Iran got hit with the domestic opposition movement. The domestic political situation in Iran, following the disputed elections last June, is a new factor in everybody's calculations. That was not there when President Obama was inaugurated and formulated his new approach. Although the opposition movement is a little bit quiescent these past couple of months, it is still a factor. And you are seeing it certainly in congressional legislation against Iran.

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