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U.S. Sanctions Chinese, UAE, Singapore Firms for Iran Dealings

January 13, 2012 | 12:52am

Under the Amended Iran Sanctions Act, the United States on Jan. 11 sanctioned three companies for doing business with Iran's energy sector, expanding the range of punitive American action on the international stage. The following is the State Department announcement.

 
Secretary of State Hillary Rodham Clinton imposed sanctions on three companies under the Iran Sanctions Act, as amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), for conducting business with Iran’s energy sector.  These three firms are Zhuhai Zhenrong Company (Zhenrong), Kuo Oil (S) Pte. Ltd. (Kuo), and FAL Oil Company Limited (FAL). 
 
The United States is working with international partners to maintain pressure on the Government of Iran to comply with its international nuclear obligations.  UN Security Council Resolution 1929 recognized the potential connection between Iran’s revenues derived from its energy sector and the funding of its proliferation sensitive nuclear activities.  In recognition of that connection, the United States adopted CISADA, which makes sanctionable certain activities in Iran’s energy sector, including the provision of refined petroleum products to Iran.  The European Union, Japan, the Republic of Korea, Canada, and Australia have also adopted their own sanctions that target Iran's energy sector.  The result of these actions has been an unprecedented international sanctions effort aimed at convincing Iran to change its behavior.  The sanctions announced today are an important step toward that goal, as they target the individual companies that help Iran evade these efforts. 
 
Zhenrong is based in China, and is the largest supplier of refined petroleum product to Iran.  The United States has determined that Zhenrong brokered the delivery of over $500 million in gasoline to Iran between July 2010 and January 2011, with individual deals entered into worth significantly more than the $1 million threshold under U.S. law and the total value of the transactions well above the $5 million threshold for sanctionable activities within a 12-month period. 
 
Kuo is an energy trading firm based in Singapore.  The United States has determined that Kuo provided over $25 million in refined petroleum to Iran between late 2010 and early 2011, worth significantly more than the $1 million threshold under U.S. law and the total value of the transactions well above the $5 million threshold for sanctionable activities within a 12-month period.
 
FAL is a large independent energy trader based in the UAE.  The United States has determined that FAL provided over $70 million in refined petroleum to Iran over multiple shipments in late 2010, with individual deliveries worth significantly more than the $1 million threshold under U.S. law and the total value of the transactions well above the $5 million threshold for sanctionable activities within a 12-month period.
 
Under the sanctions imposed today, all three companies are barred from receiving U.S. export licenses, U.S. Export Import Bank financing, and loans over $10 million from U.S. financial institutions.  These sanctions apply only to the sanctioned companies, and not to their governments or countries.

 

Tags: Sanctions
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Part 3: Key Quotes on Strait of Hormuz

January 11, 2012 | 9:38am

Annika Folkeson

Tension has increased between Iran and the United States over the past weeks following new U.S. sanctions and Iran’s threat to close the Strait of Hormuz. The following are quotes on the tensions between Tehran and Washington. 
IRAN
 
Vice president, Mohammad Reza Rahimi on Dec. 27
"If they impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,''
 
Navy Commander Admiral Habibollah Sayari on Dec. 29
"Shutting the strait for Iran's armed forces is really easy—or as we say [in Iran] easier than drinking a glass of water."
 
Iranian Revolutionary Guards commander Hossein Salami on Dec. 29
"Any threat will be responded by threat ... We will not relinquish our strategic moves if Iran's vital interests are undermined by any means."
 
"Americans are not in a position whether to allow Iran to close off the Strait of Hormuz."
 
Commander of Iran’s Armed Forces Major General Ataollah Salehi on Jan. 3
“We advise, recommend, and warn them that this aircraft carrier (should) not return to its previous place in the Persian Gulf, because we are not used to repeating a warning and give a warning only once,”
 
Defense Minister Ahmad Vahidi on Jan. 4
“We have said that the presence of extra-regional powers in the Persian Gulf is unhelpful and damaging and their presence has no result other than turbulence in the region”

“Therefore we have always been saying that they (should) not be present in this waterway.”
 
 
UNITED STATES
 
U.S. Navy’s Fifth Fleet spokeswoman Lt. Rebecca Rebarich on Dec. 29
"Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated." 
 
Pentagon press secretary George Little on Jan. 3
"The deployment of US military assets in the Persian Gulf region will continue as it has for decades,"
 
"These are regularly scheduled movements in accordance with our longstanding commitments to the security and stability of the region and in support of ongoing operations."
 
Defense Secretary Leon Panetta on Jan. 8
“We made very clear that the United States will not tolerate the blocking of the Strait of Hormuz,”
“That's another red line for us and that we will respond to them.”
 
Chairman of the Joint Chiefs of Staff Army Gen. Martin Dempsey on Jan. 8
“They’ve invested in capabilities that could, in fact, for a period of time block the Strait of Hormuz,”
 
“We’ve invested in capabilities to ensure that if that happens, we can defeat that.”
 
 
 
Tags: Strait of Hormuz
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Part 2: Key Facts on Iranian Oil

January 11, 2012 | 9:32am

Annika Folkeson

Tension has increased between Iran and the United States over the past weeks after the United States imposed new sanctions and Iran threatened to close the Strait of Hormuz. The following are key facts on Iranian oil.

  • Iran holds the world’s fourth-largest proven oil reserves and the world’s second-largest natural gas reserves. International sanctions and unfavorable investment terms, however, have impeded developments across the energy sector.
  • Iran is OPEC’s second-largest oil producer and the third-largest crude oil exporter in the world.
  • Iran has an estimated 137 billion barrels of proven oil reserves, 9.3 percent of the world's total reserves and over 12 percent of OPEC reserves.
  • Saudi Arabia, which has been producing about 10 million barrels per day, has an overall production capacity of over 12 million barrels per day and is widely seen as the only OPEC member with sufficient spare capacity to offset major shortages.
  • But Iran — the world’s fourth largest producer — pumps about 4 million barrels per day, suggesting that other Gulf states would also have to up their output to offset the decline.
  • Iran relies on crude sales for about 65 percent of its of its public revenues, and sanctions or even a pre-emptive measure by Tehran to withhold its crude from the market would batter its already flailing economy.
  • China, which bought 11 percent of its oil from Iran during the first 11 months of last year, has cut its January purchase by about 285,000 barrels per day, more than half of the close to 550,000 bpd that it bought through a 2011 contract.[1]
  • China, Japan, India and South Korea together import more than 60 percent of Iranian oil exports.[2]
Tags: Oil, Strait of Hormuz
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Part 1: Key Facts on Strait of Hormuz

January 11, 2012 | 9:20am

Annika Folkeson

Tension has increased between Iran and the United States over the past weeks after the United States imposed new sanctions and Iran threatened to close the Strait of Hormuz. The following are key facts on the Strait.

  • The Strait of Hormuz is the world's most important chokepoint with an oil flow of almost 17 million barrels per day in 2011, up from between 15.5-16.0 million bbl/d in 2009-2010.
  • Flows through the Strait in 2011 were roughly 35 percent of all seaborne traded oil, or almost 20 percent of oil traded worldwide.
  • On average, 14 crude oil tankers per day passed through the Strait in 2011, with a corresponding amount of empty tankers entering to pick up new cargos. More than 85 percent of these crude oil exports went to Asian markets, with Japan, India, South Korea, and China representing the largest destinations.
  • About three-quarters of Japan's oil imports and about 50 percent of China's pass through this strait.[1]
  • At its narrowest point, the Strait is 21 miles wide, but the width of the shipping lane in either direction is only two miles, separated by a two-mile buffer zone. The Strait is deep and wide enough to handle the world's largest crude oil tankers, with about two-thirds of oil shipments carried by tankers in excess of 150,000 deadweight tons.
  • Closure of the Strait of Hormuz would require the use of longer alternate routes at increased transportation costs.
  • Alternate routes include the 745 mile long Petroline, also known as the East-West Pipeline, across Saudi Arabia from Abqaiq to the Red Sea. The East-West Pipeline has a nameplate capacity of about 5 million bbl/d. The Abqaiq-Yanbu natural gas liquids pipeline, which runs parallel to the Petroline to the Red Sea, has a 290,000-bbl/d capacity.
  • Additional oil could also be pumped north via the Iraq-Turkey pipeline to the port of Ceyhan on the Mediterranean Sea, but volumes have been limited by the closure of the Strategic pipeline linking north and south Iraq.
  • The United Arab Emirates is also completing the 1.5 million bbl/d Abu Dhabi Crude Oil Pipeline pipeline that will cross the emirate of Abu Dhabi and end at the port of Fujairah just south of the Strait. Other alternate routes could include the deactivated 1.65-million bbl/d Iraqi Pipeline across Saudi Arabia (IPSA), and the deactivated 0.5 million-bbl/d Tapline to Lebanon.
  • The U.S. Navy’s Fifth Fleet consists of 20-plus ships supported by combat aircraft, with 15,000 people afloat and another 1,000 ashore.[2]

Source: U.S. Energy Information Administration (EIA)

 

Tags: Oil, Strait of Hormuz
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Israel and Iran: A Dangerous Rivalry

January 10, 2012 | 2:05pm
The Rand Corporation issued a report in December entitled “Israel and Iran: A Dangerous Rivalry” by Dalia Dassa Kaye, Alireza Nader, and Parisa Roshan. Alireza Nader is a contributing author to “The Iran Primer.” Excerpts from the summary are posted below, with a link to the entire report.
 
The Israeli-Iranian Rivalry Could Lead to Direct Military Conflict
Once de facto allies, Iran and Israel now view each other as rivals for power and influence in the region. The Iranian regime views Israel as a regional competitor bent on undermining its revolutionary system; Israel sees Iran as its predominant security challenge posing grave strategic and ideological challenges to the Jewish state. Israeli concerns that the Arab uprisings may benefit Iran and enhance its regional influence have only deepened Israeli alarm, even if the reality of enhanced Iranian influence may be questionable.

The emergence of a nuclear-armed Iran in the future could increase the prospects for direct armed conflict between the two nations. Israel might choose to preemptively strike Iranian nuclear facilities in an effort to thwart or delay such a development. A nuclear-armed Iran may view Israel as its primary regional competitor and could demonstrate its nuclear capability in the event of an armed conflict. Even if Iran has no intention to use nuclear weapons against Israel, the possibilities of miscalculation as regional crises escalate are high. The lack of direct communication between the two countries could potentially lead to misinterpreted signals and confusion regarding each actor’s intentions and red lines. Even those who are optimistic about the ability of Israel and Iran to create a stable nuclear deterrence relationship may recognize that developing and stabilizing such a relationship is going to take time. Arguably, this transition period could be particularly dangerous.

Despite the Current Animosity, Israel and Iran Have Not Always Been Rivals
Israel and Iran are not natural competitors and are not destined for perpetual conflict. Indeed, these two regional powers do not have territorial disputes nor do they compete economically. Each country has traditionally maintained distinct regional zones of interest (the Levant for Israel and the Persian Gulf for Iran). Arab governments regard each with great suspicion.
 
Relations between the two nations were often based on shared geopolitical interests, leading to years of cooperation both before and after Iran’s 1979 revolution. Iran’s last monarch, Mohammad Reza Shah Pahlavi, viewed a de facto alliance with Israel as a counterweight to Iran’s Arab neighbors. Tacit Iranian cooperation with Israel continued even after the Shah’s fall in 1979. Both the Iranian regime and Israel saw Saddam Hussein’s Iraq as the greatest obstacle to their respective national security interests. Iran desperately needed modern weaponry; Israel clung to the old periphery doctrine, which maintained that non- Arab states such as Iran could counter Israel’s most committed foes.
 
Some post-revolutionary Iranian leaders also pursued more pragmatic policies toward Israel. This was particularly the case under the presidencies of Hashemi Rafsanjani (1989–1997) and Mohammad Khatami (1997–2005). The two aimed to reform Iran’s moribund economic, social, and political system by lessening its international isolation, leading to hints of easing of tensions with Israel. But these efforts were met with the resistance of reactionary figures within Iran with nonnegotiable views of Israel, and Israeli leaders largely ignored such gestures from Iranian reformists.

Only in the Last Decade Have Israel and Iran Come to View Each Other as Direct Rivals
As late as the 1990s, Israel’s security establishment did not consider Iran as its predominant security challenge. Yet today, Israelis view nearly every regional threat through the prism of Iran. Israel’s threat perceptions of Iran stem in part from expanding Iranian missile capabilities and nuclear advances. But just as critical is Israel’s view that Iranian regional influence is on the rise, infringing on core Israeli interests and threatening stability in areas bordering Israel. Israeli leaders worry that if Iran acquired a nuclear weapons capability, its influence would only increase, severely limiting both Israeli and U.S. military and political maneuverability in the region.

The rise of Iranian principlists (fundamentalists) has also increased Iranian hostility toward and threat perceptions of Israel. This is due to the evolving nature of Iran’s political system, including the rise of the Revolutionary Guards and the principlists under President Mahmoud Ahmadinejad (2005– ). The current configuration of the regime has produced an intense ideological hostility not seen since the early days of the revolution.

Moreover, the Middle East’s geopolitical transformation over the last decade has intensified the rivalry. The U.S. invasion of Iraq in 2003 eliminated a common adversary of both Israel and Iran. Iran began to see itself as the Middle East’s ascendant power, a view shared by many of Israel’s political and military elite. Other events such as the 2006 war between Hizballah and Israel—in which Iranian tactics and arms were seen as effective against Israel—reinforced the viewpoint of Iran as the region’s great power. The Arab uprisings of 2011 have further fed Israeli concerns, although that turmoil has also created some new vulnerabilities and limitations for Iranian influence. The new regional landscape has enhanced Israeli fears of continued Iranian penetration into contested arenas close to home (particularly Gaza and Lebanon) and Iranian perceptions of the United States as a declining power.

Rifts Are Emerging Within Israel’s Strategic Community About the Value of a Military Strike Option
Differing cost-benefit assessments of a military strike option against Iran exist among both Israeli officials and security analysts. Those arguing in favor of this option believe that the political and military consequences of such a strike may be exaggerated and that even a delay in Iran’s program would justify an attack if the alternative is a nuclear- armed Iran. Those arguing against a military strike believe that it could lead to a wider regional war without effectively halting the Iranian pro- gram. Divisions within Israel’s strategic community on Iran policy cut across party lines and government institutions, residing largely with individual personalities. Israeli views on the effectiveness of sanctions and sabotage efforts as well as the U.S. position could affect these internal debates.

Looking to the future, if Iran acquires nuclear weapons, and particularly if it assumes an overt posture, Israel may reassess its own nuclear posture of ambiguity. Israel may also seek additional security assurances from the United States, although it may be reluctant to forge a formal security pact because that may undermine the credibility of its own deterrence and limit its military and diplomatic freedom of action.

The Emergence of a New Regime in Iran Could Reshape the Rivalry
A different set of Iranian leaders with less hostile views of Israel could diminish the rivalry between the two nations. The political and economic interests of reformists and pragmatic conservatives could lead to a lessening of tensions if these groups were to gain power in the future. The potential emergence of a secular democratic Iran may entirely obviate the need for a continued rivalry with Israel. Conversely, the complete militarization of Iranian politics under the Revolutionary Guards could lead to a heightening of tensions and Iranian adventurism.
 

To view the full report, click here.

Tags: Reports
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The Islamists Are Coming

The Islamists Are Coming, edited by Robin Wright, surveys the rise of Islamist groups in the wake of the Arab Spring. Often lumped together, the more than 50 Islamist parties with millions of followers now constitute a whole new spectrum—separate from either militants or secular parties. They will shape the new order in the world’s most volatile region more than any other political bloc. Yet they have diverse goals and different constituencies. Sometimes they are even rivals.

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