The Iran Primer

 

The Islamic Republic of Iran’s possible pursuit of a nuclear weapons capability presents a serious challenge to U.S. interests in the Middle East. The U.S. strategy to dissuade Iran from developing a nuclear weapons capability has relied heavily on international sanctions, in addition to diplomatic engagement with the Islamic Republic.

 

No other country is as critical in this effort as the People’s Republic of China. Winning China’s cooperation on sanctions has been difficult, in large part due to the broad and deep partnership between China and Iran. In the past decade, China has become Iran’s number one trading partner. Collaboration between Beijing and Tehran centers on China’s energy needs and Iran’s abundant resources but also includes significant non-energy economic ties, arms sales and defense cooperation, and geostrategic balancing against the United States.

 

Understanding the nature and range of Chinese-Iranian cooperation is important to crafting a successful U.S. strategy toward Iran. China’s policies have hampered U.S. and international efforts to shape Iran’s decisions on its nuclear program, and continued ChineseIranian cooperation will hinder U.S. attempts to pressure Iran.

 

The United States has limited options to influence China’s relationship with Iran. Some observers have proposed that the United States use positive inducements to reduce Chinese cooperation with Iran, such as significantly enhancing bilateral relations with China or trading key U.S. interests. However, these policy moves would involve costly trade-offs and are probably politically unfeasible. The United States could also use negative inducements, such as sanctions against Chinese firms, though such measures are also of limited use given China’s economic power. A third approach has been to build a broad international sanctions coalition against Iran, which has raised the diplomatic pressure on China to stop doing business with Iran but increased Iran’s incentive to reach out to Beijing. While China may decrease business ties with Iran, it will nevertheless continue to see Iran as a central actor shaping Chinese interests in the Middle East. The increasing U.S.-Chinese competition in the Pacific region will also have a direct impact on China’s willingness to cooperate with the United States on Iran.

 

Nevertheless, China and Iran face divergent interests across a number of issues, which could provide opportunities to contain their growing relationship. While some in China see value in leveraging Iran to tie the U.S. down strategically, China is generally reluctant to embrace Iran too tightly for fear of precipitating an open break in ties between China and the United States. Many Iranians perceive China to be exploiting Iran economically while backing an increasingly brutal and repressive regime.

 

Finally, neither country is destined to remain an authoritarian state forever. Democratic forces in either country could precipitate the emergence of regimes less hostile to the United States—a more democratic Iran that may not pursue nuclear weapons or a China less interested in balancing against the United States. Given that such changes may be far in the future, the United States should continue to forestall an Iranian nuclear weapons capability and pressure China to reduce ties to Iran.

 

Today the President signed an Executive Order (E.O.), “Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria,” providing the U.S. Treasury Department with a new authority to tighten further the U.S. sanctions on Iran and Syria.

 

This E.O. targets foreign individuals and entities that have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions against Iran or Syria, or that have facilitated deceptive transactions for persons subject to U.S. sanctions concerning Syria or Iran. With this new authority, Treasury now has the capability to publicly identify foreign individuals and entities that have engaged in these evasive and deceptive activities, and generally bar access to the U.S. financial and commercial systems.

 

“The foreign sanctions evaders E.O. provides Treasury additional means to impose serious consequences on foreign persons who seek to evade our sanctions and undermine international efforts to bring pressure to bear on the Iranian and Syrian regimes. Whoever tries to evade our sanctions does so at the expense of the people of Syria and Iran, and they will be held accountable,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen.

 

Upon Treasury’s identification and listing of a foreign sanctions evader, U.S. persons will generally be prohibited from providing to, or procuring from, the sanctioned party goods, services, or technology, effectively cutting the evader off from the U.S. marketplace. This provides Treasury with a powerful new tool to prevent, deter, and respond to the risks posed by sanctions evaders to the U.S. and global financial system. It also will help prevent U.S. persons from unwittingly engaging in transactions with foreign individuals and entities that pose a particular risk of running afoul of U.S. sanctions concerning Iran or Syria.

 

The foreign sanctions evaders E.O. is the latest in a broad-based and escalating series of steps taken by the United States and its international partners targeting the governments of Iran and Syria with respect to their abuse of human rights, support for terrorism, and proliferation and development of weapons of mass destruction. The foreign sanctions evaders E.O. follows by one week the Executive Order Blocking The Property And Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria via Information Technology (the “GHRAVITY E.O.”), which targeted the provision and use of information and communications technology to facilitate computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria.

 

The United States has already blocked (i.e., frozen) property and interests in property of the Government of Iran, its agencies and instrumentalities, and all Iranian financial institutions, including the Central Bank of Iran. In all, the Treasury Department has announced over 400 Iran-related designations and identifications of individuals and entities supporting various illicit actions of the Government of Iran, including human rights abuses, support for terrorism, and WMD proliferation. For more information, please see http://www.treasury.gov/ofac.

 

Similarly, the Administration has blocked the property and interests in property of the Government of Syria and its agencies and instrumentalities, including the Central Bank of Syria. The Treasury Department also has designated major Syrian financial institutions, including the Commercial Bank of Syria. In all, the Treasury Department has designated more than 60 individuals and entities supporting Syria’s human rights abuses and other repressive policies. For more information, please see http://www.treasury.gov/ofac.

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