Sadjadpour: New Sanctions Likely to Worry Moscow, Beijing More Than Tehran

Karim Sadjadpour, an Iran political analyst, says the sanctions imposed by Washington on Iran this week are unlikely to have much of a financial impact on Tehran.  

October 26, 2007

To help readers better understand the nuances of foreign policy, CFR staff writers and Consulting Editor Bernard Gwertzman conduct in-depth interviews with a wide range of international experts, as well as newsmakers.

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Karim Sadjadpour, an Iran expert, who has lived in Tehran for the International Crisis Group, says that the sanctions imposed by the United States on Iranian banks and on the Revolutionary Guards (IRGC) and Quds Force, are unlikely to have much of a financial impact on Tehran. “With world demand for oil mounting and oil prices so high it’s very difficult to isolate Iran financially these days,” he says, adding that the sanctions will have more impact in Moscow, Beijing, and European capitals. He adds that “China and Russia are more concerned about the prospect of the U.S. bombing Iran than of Iran getting a nuclear bomb.”

The United States has announced that it is imposing sanctions on three major Iranian banks in an effort to cut off funding for the Revolutionary Guards and other Iranian military units that the Americans have claimed are supporting terrorism and also helping out anti-American insurgents in Iraq. What kind of impact this will have in Iran?

The practical impact on Iran will be minimal. It is not as if Iranian banks or Revolutionary Guard entities were working with JP Morgan or Goldman Sachs. The principal intention of the announcement was to send a signal as much to the Europeans, the Chinese, and the Russians, as well as to the Iranians. The United States wants to alert Moscow, and Beijing, and others that they should not even think about doing business with Iran. But ultimately I don’t think that these measures are going to have much of a financial impact on Iran because the Iranians have been under U.S. sanctions for three decades now. There’s very little economic activity between Iranian banks and U.S. companies and corporations.

Washington must be hoping international banks will shy away from doing business with the Iranians just as international banks did with the banks linked to North Korea when there was a crackdown on alleged counterfeiting by North Korea. But North Korea is much different from Iran.

With world demand for oil mounting and oil prices so high, it’s very difficult to isolate Iran financially these days. All these sanctions, measures, and labeling of the Iranian military groups as terrorist entities actually concerns Russian and Chinese officials more than it concerns Iranian officials. And increasingly China and Russia are more concerned about the prospect of the United States bombing Iran than of Iran getting a nuclear bomb.

Was the U.S. measure a step toward further diplomatic activity or a step toward military action? You can argue this both ways.

I don’t want to paint a picture that is so black and white, that “the hawks want war and the doves want peace.” But for Secretary of State Condoleezza Rice, this is another effort to use diplomacy to pressure Iran to halt its uranium-enrichment program short of military confrontation. But the hawks in the administration believe this helps them get one step further to their goal of trying to force changes in Iran if diplomacy does not work. I also think, however, that for the hawks in the administration this was a step too little. They would have preferred to do as the Senate did in recent days when it passed a resolution which labeled the entire Revolutionary Guards as a terrorist organization.  

Didn’t the administration just do that? Didn’t it call the whole Revolutionary Guards a terrorist organization?

No, just the Quds Force [paramilitary arm of the guards]. The Revolutionary Guards were singled out for trying to produce weapons of mass destruction. So, the administration has actually been to the left of the Senate and to the left of [Sen.] Hillary Clinton [D-NY] who voted to designate the entire IRGC as a terrorist entity.

What’s the difference between the Quds Force and the Revolutionary Guards?

The Quds Force is an elite unit within the Revolutionary Guards. It’s kind of like the Navy SEALs.

When we did an interview in May we talked a great deal about how the Revolutionary Guards have gotten themselves into all sorts of businesses. That’s like having the Defense Department involved in running civilian industries, right? 

Yes, but we do have the equivalent in the United States with the Corps of Army Engineers and things like that. But obviously we don’t have it to the extent that it’s taking place in Iran with IRGC entities and IRGC contractors winning billion dollar oil contracts. The Quds Force was not really a unit of the IRGC that was engaged in these financial activities.

The Quds Force was accused of supplying these IEDs [improvised explosive devices], to the Shiite militias [in Iraq], for use against U.S. troops. Is that what they’re accused of?

Yes, that’s an accusation against the Quds Force, that they’re training Shiite militias in Iraq which are targeting U.S. troops.

Russian President Vladimir Putin has just been to Iran. Some people think perhaps that Russia is trying to become a middle man in this. Did you get any sense of what the Russian position is on all this when you were in Moscow recently?

My impression is that the Russians don’t have much incentive to see the nuclear confrontation with Iran resolved. There are four main reasons. First, the Russians reject this perceived unipolar world order, controlled by the United States, more than they’re concerned about a nuclear-armed Iran. Second, Russia benefits from sitting on the fence, not taking a clear side, because when they stand in the middle, both the United States and Iran will continue to covet them and try to incentivize them to pick a side. Third, as long as this Iranian nuclear issue goes unresolved, the risk premium keeps oil prices high which benefits Russia. And fourth, Russia doesn’t want to see a U.S.-Iran diplomatic reconciliation. They don’t want to see Iran emerge from a self-inflicted isolation. Because then Iranian natural gas will compete with Russian natural gas on European markets. And they want to retain the monopoly they have now.

But many people think the Russians also don’t want Iran to have a nuclear weapon.

They certainly don’t want Iran to have a nuclear weapon but at the moment what concerns Russian officials more is opposing this perceived unipolar world order rather than preventing a nuclear-armed Iran. And I would also argue that at the moment, Russian officials are much more concerned about the United States bombing Iran than Iran getting the bomb.

The United States for the last two years has been working closely with the European Union, primarily Britain, France and Germany, to try to negotiate a deal with Iran to suspend its uranium enrichment in return for a package of incentives. Do you think the Europeans will now feel that the United States is abandoning this joint approach and become disillusioned with cooperating with the United States?

The Europeans are in a very delicate position, because on one hand they fear that the current Security Council sanctions resolutions against Iran may be a slippery slope to military action. At the same time, they’re equally concerned that if they don’t sign on to sanctions and Security Council resolutions, that may actually increase the likelihood that the United States will act on its own militarily. They fear that the hawks within the Bush administration will say: “You see these spineless Europeans; we can’t count on them to be the custodians of our security, we should take matters in our own hand.”

So you think they will stay in the negotiations with Iran?

They will continue pushing negotiations with Iran. And they will continue to sign on to Security Council resolutions that are not going to be significant enough to dissuade Iran from continuing with its nuclear program.

Now by the end of this year, isn’t it right that the International Atomic Energy Agency (IAEA) is supposed to make a judgment as to whether Iran is really turning over information it has requested about its past nuclear activities?

By the end of the year, that’s right.

And if Iran doesn’t turn over the information that’s requested?

Iran at the moment doesn’t really have much incentive to come clean with its past indiscretions because it fears that by being totally transparent, it’s only going to further incriminate itself and provide more ammunition for the United States to pressure them. I don’t think there’s a strong likelihood that this deal with the IAEA is going to work out simply because Tehran has no incentives to admit its past indiscretions.

And of course the Iranian leadership is on the record saying that there’s no give possible, right?

At the moment Iran has strong leverage throughout the Middle East, and with high oil prices and the United States bogged down in Iraq, Iranians say, “We’re not the ones that should be compromising, it is the United States that should be compromising.”

What would Iran ideally like from the United States if Washington said suddenly, “Tell us what you want and we’ll do it”?

Part of the difficulty in dealing with Iran is that there isn’t a consensus in Tehran. So if we were to assemble the top ten Iranian officials in one room and asked them “What do you want from us exactly? What are you hoping to achieve in these nuclear discussions? What do you hope to get in return from the United States?,” we would get ten different answers. President Mahmoud Ahmadinejad has a fundamentally different vision than someone like former President Hashemi Rafsanjani. And the most important individual, the Supreme Leader Ayatollah Khamenei, is really paralyzed with mistrust. He is so mistrustful of U.S. intentions that he presumes nefarious intentions from any moves the United States tries to make.

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